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STOCK PURCHASE AGREEMENT
DATED AS OF
July 31, 1997
BY AND AMONG
HCC INSURANCE HOLDINGS, INC.,
AND
THE SHAREHOLDERS OF
CONTINENTAL AVIATION UNDERWRITERS, INC.
AND
CONTINENTAL AVIATION UNDERWRITERS, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE I SALE AND TRANSFER OF THE CONTINENTAL COMMON STOCK . . . . . 1
Section 1.1 Sale of Continental Common Stock.. . . . . . . . . . . 1
Section 1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . 1
Section 1.3 Closing Deliveries . . . . . . . . . . . . . . . . . . 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
CONTINENTAL AND SHAREHOLDERS. . . . . . . . . . . . . . . . 3
Section 2.1 Corporate Existence and Power. . . . . . . . . . . . . 3
Section 2.2 Authorization. . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Governmental Authorization . . . . . . . . . . . . . . 4
Section 2.4 Non-Contravention. . . . . . . . . . . . . . . . . . . 4
Section 2.5 Capitalization . . . . . . . . . . . . . . . . . . . . 5
Section 2.6 Subsidiaries and Joint Ventures. . . . . . . . . . . . 5
Section 2.7 Continental Financial Statements . . . . . . . . . . . 6
Section 2.8 Absence of Certain Changes . . . . . . . . . . . . . . 6
Section 2.9 No Undisclosed Liabilities . . . . . . . . . . . . . . 7
Section 2.10 Litigation . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.12 Employee Benefit Plans, ERISA. . . . . . . . . . . . . 9
Section 2.13 Material Agreements. . . . . . . . . . . . . . . . . . 10
Section 2.14 Properties . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.15 Environmental Matters. . . . . . . . . . . . . . . . . 11
Section 2.16 Labor Matters. . . . . . . . . . . . . . . . . . . . . 12
Section 2.17 Compliance with Laws . . . . . . . . . . . . . . . . . 12
Section 2.18 Trademarks, Tradenames, Etc. . . . . . . . . . . . . . 12
Section 2.19 Sale of Continental. . . . . . . . . . . . . . . . . . 12
Section 2.20 Broker's Fees. . . . . . . . . . . . . . . . . . . . . 13
Section 2.21 Investment Representation. . . . . . . . . . . . . . . 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HCCH . . . . . . . . 13
Section 3.1 Corporate Existence and Power. . . . . . . . . . . . . 14
Section 3.2 Corporate Authorization. . . . . . . . . . . . . . . . 14
Section 3.3 Governmental Authorization . . . . . . . . . . . . . . 14
Section 3.4 Non-Contravention. . . . . . . . . . . . . . . . . . . 15
Section 3.5 Capitalization of HCCH . . . . . . . . . . . . . . . . 15
Section 3.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . 16
Section 3.7 SEC Filings. . . . . . . . . . . . . . . . . . . . . . 16
Section 3.8 Financial Statements . . . . . . . . . . . . . . . . . 17
Section 3.9 Absence of Certain Changes . . . . . . . . . . . . . . 17
Section 3.10 No Undisclosed Liabilities . . . . . . . . . . . . . . 18
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TABLE OF CONTENTS (CONT.)
PAGE
Section 3.11 Litigation . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.13 Employee Benefit Plans; ERISA. . . . . . . . . . . . . 19
Section 3.14 Material Agreements. . . . . . . . . . . . . . . . . . 20
Section 3.15 Properties . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.16 Environmental Matters. . . . . . . . . . . . . . . . . 21
Section 3.17 Labor Matters. . . . . . . . . . . . . . . . . . . . . 21
Section 3.18 Compliance with Laws . . . . . . . . . . . . . . . . . 21
Section 3.19 Trademarks, Tradenames, Etc. . . . . . . . . . . . . . 21
Section 3.20 Broker's Fees. . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV COVENANTS OF CONTINENTAL AND SHAREHOLDERS . . . . . . . . . 22
Section 4.1 Conduct of Continental . . . . . . . . . . . . . . . . 22
Section 4.2 Access to Financial and Operational Information. . . . 23
Section 4.3 Other Offers . . . . . . . . . . . . . . . . . . . . . 24
Section 4.4 Maintenance of Business. . . . . . . . . . . . . . . . 24
Section 4.5 Compliance with Obligations. . . . . . . . . . . . . . 24
Section 4.6 Notices of Certain Events. . . . . . . . . . . . . . . 24
Section 4.7 Representation Agreement . . . . . . . . . . . . . . . 25
Section 4.8 Necessary Consents . . . . . . . . . . . . . . . . . . 25
Section 4.9 Regulatory Approval. . . . . . . . . . . . . . . . . . 25
Section 4.10 Satisfaction of Conditions Precedent . . . . . . . . . 25
ARTICLE V COVENANTS OF HCCH . . . . . . . . . . . . . . . . . . . . . 25
Section 5.1 Conduct of HCCH. . . . . . . . . . . . . . . . . . . . 25
Section 5.2 Listing of HCCH Common Stock . . . . . . . . . . . . . 26
Section 5.3 Access to Information. . . . . . . . . . . . . . . . . 26
Section 5.4 Maintenance of Business. . . . . . . . . . . . . . . . 26
Section 5.5 Compliance with Obligations. . . . . . . . . . . . . . 26
Section 5.6 Notices of Certain Events. . . . . . . . . . . . . . . 27
Section 5.7 Employee Matters . . . . . . . . . . . . . . . . . . . 27
ARTICLE VI COVENANTS OF HCCH, SHAREHOLDERS AND CONTINENTAL . . . . . . 27
Section 6.1 Advice of Changes. . . . . . . . . . . . . . . . . . . 27
Section 6.2 Regulatory Approvals. . . . . . . . . . . . . . . . . 27
Section 6.3 Certain Filings. . . . . . . . . . . . . . . . . . . . 27
Section 6.4 Communications . . . . . . . . . . . . . . . . . . . . 28
Section 6.5 Satisfaction of Conditions Precedent . . . . . . . . . 28
Section 6.6 Tax Cooperation. . . . . . . . . . . . . . . . . . . . 28
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TABLE OF CONTENTS (CONT.)
PAGE
Section 6.7 Confidentiality. . . . . . . . . . . . . . . . . . . . 28
ARTICLE VII CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . 29
Section 7.1 Conditions to Obligations of HCCH. . . . . . . . . . . 29
Section 7.2 Conditions to Obligations of Shareholders. . . . . . . 31
Section 7.3 Conditions to Obligations of Each Party. . . . . . . . 32
ARTICLE VIII TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . 32
Section 8.1 Termination. . . . . . . . . . . . . . . . . . . . . . 32
Section 8.2 Effect of Termination. . . . . . . . . . . . . . . . . 33
ARTICLE IX CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.1 The Closing. . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE X INDEMNIFICATION AND REMEDIES, CONTINUING COVENANTS. . . . . 33
Section 10.1 Agreement to Indemnify . . . . . . . . . . . . . . . . 33
Section 10.2 HCCH Agreement to Indemnify. . . . . . . . . . . . . . 34
Section 10.3 Survival of Representations. . . . . . . . . . . . . . 34
Section 10.4 Procedure for Indemnification; Third Party Claims. . . 35
Section 10.5 Appointment of Representative. . . . . . . . . . . . . 35
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.1 Further Assurances.. . . . . . . . . . . . . . . . . . 37
Section 11.2 Fees and Expenses. . . . . . . . . . . . . . . . . . . 37
Section 11.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . 37
Section 11.4 Governing Law. . . . . . . . . . . . . . . . . . . . . 38
Section 11.5 Binding upon Successors and Assigns, Assignment. . . . 38
Section 11.6 Severability . . . . . . . . . . . . . . . . . . . . . 38
Section 11.7 Entire Agreement . . . . . . . . . . . . . . . . . . . 38
Section 11.8 Amendment and Waivers. . . . . . . . . . . . . . . . . 38
Section 11.9 No Waiver. . . . . . . . . . . . . . . . . . . . . . . 39
Section 11.10 Construction of Agreement. . . . . . . . . . . . . . . 39
Section 11.11 Counterparts . . . . . . . . . . . . . . . . . . . . . 39
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
the 31st day of July, 1997 by and among HCC Insurance Holdings, Inc., a
Delaware corporation ("HCCH"), the Shareholders whose names, and share
holdings are set forth on Exhibit "A" hereto and incorporated herein by this
reference (collectively, the "Shareholders" or singularly, a "Shareholder")
of Continental Aviation Underwriters, Inc. ("Continental") a Tennessee
corporation, and Continental.
RECITALS:
A. Shareholders own all of the outstanding stock of Continental, a
Company engaged in the insurance business.
B. HCCH desires to purchase all of the outstanding stock of Continental
and Shareholders desire to sell to HCCH their shares in Continental (being
all of the outstanding stock of Continental) for the consideration and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto do hereby agree as follows:
ARTICLE I
SALE AND TRANSFER OF THE CONTINENTAL COMMON STOCK
SECTION 1.1 SALE OF CONTINENTAL COMMON STOCK.
(a) Subject to the terms and conditions of this Agreement, at the
Closing hereinafter defined, Shareholders shall sell, transfer and deliver to
HCCH, and HCCH shall purchase from Shareholders, all of the outstanding stock
of Continental (the "Continental Common Stock").
SECTION 1.2 PURCHASE PRICE.
(a) At the closing, HCCH shall deliver to Shareholders the purchase
price ("Purchase Price") which shall be equal to $3,318,254 to be paid, as
follows:
(i) $1,820,813 in cash (the "Xxxxxxx Cash Payment") to be
transferred, by wire transfer, to the account designated by Xxxxxxx Xxxxxx
(USA) Inc. ("Xxxxxxx") in subsection (iv) below (the "Account"), in
immediately available funds;
(ii) $976,982 in cash (the "Other Shareholder Payment" which
collectively with the Xxxxxxx Cash Payment, shall hereinafter be called the
"Cash Payment") to be paid to the Shareholders of Continental other than
Xxxxxxx (the "Other Shareholders") as set forth
on Exhibit "B" hereto and to be transferred in immediately available funds
by wire transfer to the Account;
(iii) that number of shares of HCCH Common Stock (the "Share
Payment") equal to (x) $520,459 (y) divided by the HCCH Acquisition Price.
The Share Payment shall be made to Xxxxxxxxx and Saxon, as hereinafter
defined, as set forth on Exhibit "B" hereto, in proportion to their
shareholdings of Continental. As used herein, the HCCH Acquisition Price
means the average of the closing prices of HCCH Common Stock as reported by
the New York Stock Exchange ("NYSE") for the ten trading days ending three
trading days before the Closing Date, hereinafter defined; and
(iv) The Account into which the Cash Payments shall be transferred is:
Fleet Bank of Massachusetts
ABA Routing Number 011 000 138
For Credit to Account of
Xxxxxxxx Xxxxxxx & Xxxxxx
Client Account - IOLTA
Account Number 079 676 3506
(b) No fractional shares of HCCH Common Stock shall be issued and
Xxxxxxxxx and Saxon (hereinafter collectively called the "Other
Shareholders") shall be entitled to receive an additional cash payment equal
to the fractional share of HCCH Common Stock any such Other Shareholder would
otherwise be entitled to receive, multiplied by the HCCH Acquisition Price.
SECTION 1.3 CLOSING DELIVERIES.
At the Closing:
(a) Shareholders shall deliver to HCCH
(i) certificates representing the Continental Common Stock, endorsed
or transferred to HCCH, which shall transfer to HCCH good and indefeasible
title to the Continental Common Stock, free and clear of all encumbrances;
and
(ii) such other documents including officers' certificates and
opinions of counsel as may be required by this Agreement or reasonably
requested by HCCH.
(b) HCCH shall
(i) cause the Cash Payment to be transferred to the accounts
designated by Shareholders in immediately available funds; and
2
(ii) deliver certificates of HCCH Common Stock in the amount of the
Share Payment in the names and to the accounts designated by Xxxxxxxxx and
Saxon. Xxxxxxxxx and Xxxxx agree and understand that such shares of HCCH
Common Stock shall be unregistered and, therefore, restricted as to
transfer and the share certificates shall bear an appropriate legend as set
forth thereon; and
(iii) deliver to Shareholders such other documents, including
officers' certificates and opinions of counsel, as may be required by this
Agreement or reasonably requested by Shareholders.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
CONTINENTAL AND SHAREHOLDERS
Except as disclosed in a document referring specifically to this
Agreement (the "Continental Disclosure Schedule") which has been delivered to
HCCH on or before the date hereof, Continental and each of the Shareholders
(jointly and severally) represent and warrant to HCCH as set forth below.
SECTION 2.1 CORPORATE EXISTENCE AND POWER. Continental is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
(collectively, "Governmental Authorizations") required to carry on its
business as now conducted, except such Governmental Authorizations the
failure of which to have obtained would not have a Material Adverse Effect,
as hereinafter defined, on Continental. Continental has delivered to HCCH
true and complete copies of Continental's Articles of Incorporation and
Bylaws as currently in effect. Continental is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where
the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except where the failure to be
so qualified would not have a Material Adverse Effect on Continental. For
purposes of this Agreement, a "Material Adverse Effect," with respect to any
person or entity (including without limitation Continental and HCCH), means a
material adverse effect on the condition (financial or otherwise), business,
properties, assets, liabilities (including contingent liabilities), results
of operations or prospects of such person or entity and its affiliated
companies and subsidiaries and/or parent corporation and/or corporations
under the same stock ownership, taken as a whole; and "Material Adverse
Change" means a change or a development involving a prospective change which
would result in a Material Adverse Effect.
3
SECTION 2.2 AUTHORIZATION.
(a) Each Shareholder represents and warrants that it has full right,
power and authority to enter into this Agreement, the Representation
Agreements to be entered into by each of them, and each of such other
agreements to be entered into by them in connection with the transactions
contemplated hereby and that this Agreement, the Representation Agreement,
and such other agreements contemplated hereby constitute, or upon execution
will constitute, valid and binding agreements of such Shareholders,
enforceable against each in accordance with their respective terms, except as
such enforcement may be limited by bankruptcy, insolvency or other similar
laws effecting the enforcement of creditors' rights generally or by general
principles of equity.
SECTION 2.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Shareholders of this Agreement, and the consummation of the
transactions contemplated hereunder require no action by Continental or
Shareholders or any filing by them with any governmental body, agency,
official or authority other than in respect of:
(a) compliance with any applicable requirements of the Securities Act of
1933, as amended (the "Securities Act") and the rules and regulations
promulgated thereunder;
(b) compliance with any applicable foreign or state securities or "blue
sky" laws;
(c) compliance with any requirements of any federal, state, foreign or
other insurance or reinsurance or intermediaries or managing general agent
laws, including licensing or other related laws;
(d) such other filings or registrations with, or authorizations,
consents or approvals of, governmental bodies, agencies, officials or
authorities, the failure of which to make or obtain (i) would not reasonably
be expected to have a Material Adverse Effect on Continental, or (ii) would
not materially adversely affect the ability of Continental, each Shareholder
or HCCH to consummate the transactions contemplated hereby and operate their
businesses as heretofore operated.
SECTION 2.4 NON-CONTRAVENTION. The execution, delivery and performance
by Shareholders of this Agreement, and the consummation by Shareholders of
the transactions contemplated hereby and thereby do not and will not:
(a) contravene or conflict with Continental's charter or bylaws;
(b) assuming compliance with the matters referred to in Section 2.3,
contravene or conflict with or constitute a violation of any provision
of any law, regulation, judgment, injunction, order or decree binding upon or
applicable to Continental or Shareholders;
(c) conflict with or result in a breach or violation of, or constitute a
default under, or result in a contractual right to cause the termination or
cancellation of or loss of a material
4
benefit under, or right to accelerate, any material agreement, contract or
other instrument binding upon Continental or any Shareholder or any material
license, franchise, permit or other similar authorization held by Continental
or any Shareholder; or
(d) result in the creation or imposition of any Lien (as hereinafter
defined) on any material asset of Continental,
except, with respect to clauses (b), (c) and (d) above, for contraventions,
defaults, losses, Liens and other matters referred to in such clauses that in
the aggregate would not be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on Continental. For purposes of
this Agreement, the term "Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of such asset.
SECTION 2.5 CAPITALIZATION.
(a) As of May 30, 1997, the authorized, issued and outstanding capital
stock of Continental was 1,000 shares authorized; 131.6 shares issued and
outstanding all of which outstanding shares were owned by Shareholders free
of any Liens or other encumbrances.
(b) All outstanding shares set forth in (a) above have been, or will be
prior to the Closing Date, duly authorized and validly issued and are fully
paid and nonassessable and free from any preemptive rights. Except as set
forth in and as otherwise contemplated by this Agreement, for Continental
there are outstanding (i) no shares of capital stock or other voting
securities, (ii) no securities convertible into or exchangeable for shares of
its capital stock or voting securities), (iii) no options or other rights to
acquire, and no obligation to issue, any capital stock, voting securities or
securities convertible into or exchangeable for its capital stock or other
voting securities (the items in clauses (i), (ii) and (iii) being referred to
collectively as the "Continental Securities"), (iv) no obligations to
repurchase, redeem or otherwise acquire any of Continental Securities and (v)
no contractual rights of any person or entity to include any such securities
in any registration statement proposed to be filed under the Securities Act.
SECTION 2.6 SUBSIDIARIES AND JOINT VENTURES.
(a) For purposes of this Section 2.6, (i) "Subsidiary" means, with respect
to any entity, any corporation of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are directly or
indirectly owned by such entity, and (ii) "Joint Venture" means, with respect
to any entity, any corporation or organization (other than such entity and
any Subsidiary thereof) of which such entity or any Subsidiary thereof is,
directly or indirectly, the beneficial owner of 25% or more of any class of
equity securities or equivalent profit participation interest.
(b) As of the date hereof Continental has no Subsidiaries or Joint
Ventures.
5
SECTION 2.7 CONTINENTAL FINANCIAL STATEMENTS. Continental has
delivered to HCCH Continental's balance sheets as of December 31, 1996 (the
"Balance Sheet Date") and 1995, Continental's income statements for the
annual periods ended December 31, 1996 and 1995 and Continental's unaudited
balance sheets and income statements for the period ending March 31, 1997
(collectively, the "Continental Financial Statements"). The Continental
Financial Statements present fairly in all material respects, substantially
in conformity with generally accepted accounting principles consistently
applied (except as indicated in the notes thereto), the financial position of
Continental as of the dates thereof and results of operations and cash flows
for the periods therein indicated (subject to normal year-end adjustments in
the case of any interim financial statements and the absence of certain
footnotes in the case of unaudited financial statements). Continental has no
material debt, liability or obligation of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that is
not reflected, reserved against or disclosed in the Continental Financial
Statements except for (i) those that are not required to be reported in
accordance with the aforesaid accounting principles; (ii) normal or recurring
liabilities incurred since December 31, 1996 in the ordinary course of
business or (iii) as disclosed in the Continental Disclosure Schedule.
SECTION 2.8 ABSENCE OF CERTAIN CHANGES. Since December 31, 1996,
Continental has in all material respects conducted its business in the
ordinary course and there has not been:
(a) any Material Adverse Change with respect thereto or any event,
occurrence or development of a state of circumstances or facts known to
Continental, which as of the date hereof could reasonably be expected to have
a Material Adverse Effect on Continental;
(b) any declaration, setting aside or payment or any dividend or other
distribution in respect of any shares of capital stock of Continental other
than the declaration, setting aside or payment of dividends in accordance
with its existing dividend policy or practice, which policy or practice is
not inconsistent with Continental's past policy or practice;
(c) any repurchase, redemption or other acquisition by Continental of
any outstanding shares of capital stock or other securities of or other
ownership interests in Continental;
(d) any amendment of any term of any outstanding securities of
Continental;
(e) any damage, destruction or other property or casualty loss (whether
or not covered by insurance) affecting the business, assets, liabilities,
earnings or prospects of Continental which, individually or in the aggregate,
has had or would reasonably be expected to have a Material Adverse Effect on
Continental;
(f) any increase in indebtedness for borrowed money or capitalized lease
obligations of Continental, except in the ordinary course of business;
6
(g) any sale, assignment, transfer or other disposition of any tangible
or intangible asset material to the business of Continental, except in the
ordinary course of business and for a fair and adequate consideration;
(h) any amendment, termination or waiver by Continental of any right of
substantial value under any agreement, contract or other written commitment
to which it is a party or by which it is bound;
(i) any material reduction in the amounts of coverage provided by
existing casualty and liability insurance policies with respect to the
business or properties of Continental;
(j) other than the severance contract with Xxx X. Xxxxxxxxx, Xx. in the
amount of $10,000 ("Xxxxxxxxx Payment"), any (i) grant of any severance or
termination pay to any director, officer or employee of Continental, (ii)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any
director, officer or employee of Continental, (iii) any increase in benefits
payable under any existing severance or termination pay policies or
employment agreements, or (iv) any increase in compensation, bonus or other
benefits payable to directors, officers or employees of Continental, in each
case other than in the ordinary course of business consistent with past
practice;
(k) any new or amendment to or alteration of any existing bonus,
incentive, compensation, severance, stock option, stock appreciation right,
pension, matching gift, profit-sharing, employee stock ownership, retirement,
pension group insurance, death benefit, or other fringe benefit plan,
arrangement or trust agreement adopted or implemented by Continental which
would result in a material increase in cost;
(l) any capital expenditures, capital additions or capital improvements
incurred or undertaken by Continental except in the ordinary course of
business; or
(m) the entering into of any agreement by Continental or any person on
behalf of Continental to take any of the foregoing actions, provided,
however, that Continental shall be entitled to utilize up to $579,000 (the
"Continental Permitted Payment") prior to the Closing Date for payment of the
Xxxxxxxxx Payment, employee and management bonuses, director's fees,
dividends, and management fees to Xxxxxxx.
SECTION 2.9 NO UNDISCLOSED LIABILITIES. There are no existing
liabilities of Continental of any kind whatsoever that are, individually or
in the aggregate, material to Continental, other than:
(a) liabilities disclosed or provided for in the respective financial
statements as of and for the fiscal year ended December 31, 1996 (including
the notes thereto) of Continental;
7
(b) liabilities incurred in the ordinary course of business consistent
with past practice since December 31, 1996;
(c) liabilities under this Agreement or indicated in the Continental
Disclosure Schedule.
SECTION 2.10 LITIGATION. Other than actions, suits, proceedings, claims
or investigation occurring in the ordinary course of business involving
respective amounts in controversy of less than $10,000 each and $30,000 in
the aggregate, there is no action, suit, proceeding, claim or to the
knowledge of Continental or Shareholders, investigation pending against, nor
have Continental or Shareholders received written notice of a claim
threatened against Continental or any of its assets or against or involving
any of its officers, directors or employees in connection with the business
or affairs of Continental, including, without limitation, any such claims for
indemnification arising under any agreement to which Continental is a party.
Continental has not received written notice that it is subject, or in default
with respect, to any writ, order, judgment, injunction or decree which could,
individually or in the aggregate, have a Material Adverse Effect on
Continental.
SECTION 2.11 TAXES.
(a) Continental (i) has filed when due (taking into account extensions)
with the appropriate federal, state, local, foreign and other governmental
agencies, all material tax returns, estimates and reports required to be
filed by it, (ii) either paid when due and payable or established adequate
reserves or otherwise accrued on the Continental's Financial Statements all
material federal, state, local or foreign taxes, levies, imposts, duties,
licenses and registration fees and charges of any nature whatsoever, and
unemployment and social security taxes and income tax withholding, including
interest and penalties thereon ("Taxes") and there are no tax deficiencies
claimed in writing by any Taxing authority and received by Continental or
Shareholders that, in the aggregate, would result in any tax liability in
excess of the amount of the reserves or accruals and (iii) has or will
establish in accordance with its normal accounting practices and procedures
accruals and reserves that, in the aggregate, are adequate for the payment of
all Taxes not yet due and payable and attributable to any period preceding
the Effective Time. The Continental Disclosure Schedule sets forth those tax
returns for all periods that to the knowledge of Continental or Shareholders,
currently are the subject of audit by any federal, state, local or foreign
taxing authority.
(b) There are no material taxes, interest, penalties, assessments or
deficiencies claimed in writing by any Taxing authority and received by
Continental or Shareholders to be due in respect of any tax returns filed by
Continental (or any predecessor corporations). Neither Continental nor any
predecessor corporation, has executed or filed with the Internal Revenue
Service ("IRS") or any other Taxing authority any agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any Taxes.
8
(c) Continental is not a party to or bound by (or will prior to the
Closing Date become a party to or bound by) any Tax indemnity, Tax sharing or
Tax allocation agreement or other similar arrangement. Continental is not a
member of an affiliated group or filed or been included in a combined,
consolidated or unitary Tax return.
SECTION 2.12 EMPLOYEE BENEFIT PLANS, ERISA.
(a) Continental is not a party to any oral or written (i) employment,
severance, collective bargaining or consulting agreement not terminable on 60
days' or less notice, (ii) agreement with any executive officer or other key
employee of Continental (A) the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving Continental of the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee extending for a period longer than one year, or (C) providing
severance benefits or other benefits after the termination of employment of
such executive officer or key employee regardless of the reason for such
termination of employment, (iii) agreement, plan or arrangement under which
any person may receive payments subject to the tax imposed by Section 4999 of
the Code, or (iv) agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, the benefits of which would be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(b) Neither Continental nor any corporation or other entity which under
Section 4001(b) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), is under common control with Continental (a "Continental
ERISA Affiliate") maintains or within the past five years has maintained,
contributed to, or been obligated to contribute to, any "Employee Pension
Benefit Plan" ("Pension Plan") or any "Employee Welfare Benefit Plan"
("Welfare Plan") as such terms are defined in Sections 3(2) and 3(1)
respectively of ERISA, which is subject to ERISA. Each Pension Plan and
Welfare Plan disclosed in the Continental Disclosure Schedule (which Plans
have been heretofore delivered to HCCH) and maintained by Continental has
been maintained in all material respects in compliance with their terms and
all provisions of ERISA and the Code (including rules and regulations
thereunder) applicable thereto.
(c) Continental has no Pension Plan or Welfare Plan.
(d) No "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, resulting in liability to Continental or any
Continental ERISA Affiliate has occurred with respect to any Pension Plan or
Welfare Plan. Each of Continental or Original Shareholders has no knowledge
of any breach of fiduciary responsibility under Part 4 of Title I of ERISA
which has resulted in liability of Continental and Continental ERISA
Affiliate, any trustee, administrator or fiduciary of any Pension Plan or
Welfare Plan.
9
(e) Neither Continental nor any Continental ERISA Affiliate, since
January 1, 1986, has maintained or contributed to, or been obligated or
required to contribute to, a "Multiemployer Plan," as such term is defined in
Section 4001(a)(3) of ERISA. Neither Continental nor any Continental ERISA
Affiliate has either withdrawn, partially or completely, or instituted steps
to withdraw, partially or completely, from any Multiemployer Plan nor has any
event occurred which would enable a Multiemployer Plan to give notice of and
demand payment of any withdrawal liability with respect to Continental or any
Continental ERISA Affiliate.
(f) There is no contract, agreement, plan or arrangement covering any
employee or former employee of Continental or any Continental ERISA Affiliate
that, individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to the terms of Sections
162(a)(I) or 280G of the Code.
(g) With respect to Continental and each Continental ERISA Affiliate,
the Continental Disclosure Schedule correctly identifies each material
agreement, policy, plan or other arrangement, whether written or oral,
express or implied, fixed or contingent, to which Continental is a party or
by which Continental or any property or asset of Continental is bound, which
is or relates to a pension, option, bonus, deferred compensation, retirement,
stock purchase, profit-sharing, severance pay, health, welfare, incentive,
vacation, sick leave, medical disability, hospitalization, life or other
insurance or fringe benefit plan, policy or arrangement.
(h) Neither Continental nor any Continental ERISA Affiliate maintains or
has maintained or contributed to any Pension Plan that is or was subject to
Section 302 of Title IV of ERISA or Section 412 of the Code. Continental has
made available to HCCH, for each Pension Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code, a copy of the
most recent determination letter issued by the IRS to the effect that each
such Plan is so qualified and that each trust created thereunder is tax
exempt under Section 501 of the Code, and Continental is unaware of any fact
or circumstances that would jeopardize the qualified status of each such
Pension Plan or the tax exempt status of each trust created thereunder.
SECTION 2.13 MATERIAL AGREEMENTS.
(a) The Continental Disclosure Schedule includes a complete and accurate
list of all contracts, agreements, leases (other than Continental Property
Leases, as hereinafter defined), and instruments to which Continental is a
party or by which it or its properties or assets are bound which individually
involve net payments or receipts in excess of $25,000 per annum, inclusive of
contracts entered into with customers and suppliers in the ordinary course of
business, or that pertain to employment or severance benefits for any
officer, director or employee of Continental, whether written or oral, but
exclusive of contracts, agreements, leases and instruments terminable without
penalty upon 60 days' or less prior written notice to the other party or
parties thereto (the "Material Continental Agreements").
10
(b) Neither Continental nor, to the knowledge of Continental, any other
party is in default under any Material Continental Agreement and no event has
occurred which (after notice or lapse of time or both) would become a breach
or default under, or would permit modification, cancellation, acceleration or
termination of any Material Continental Agreement or result in the creation
of any security interest upon, or any person obtaining any right to acquire,
any properties, assets or rights of Continental, which, in any such case, has
had or would reasonably be expected to have a Material Adverse Effect.
(c) To the knowledge of Continental, each such Material Continental
Agreement is in full force and effect and is valid and legally binding and
there are no material unresolved disputes involving or with respect to any
Material Continental Agreement. No party to a Material Continental Agreement
has advised Continental or Shareholders that it intends either to terminate a
Material Continental Agreement or to refuse to renew a Material Continental
Agreement upon the expiration of the term thereof. No representation or
warranty is made that all benefits contemplated in the Material Continental
Agreements will be received.
(d) Continental is not in violation of, or in default with respect to,
any term of its Articles of Incorporation or Bylaws.
SECTION 2.14 PROPERTIES. Continental owns no real estate, and all
leases of real property to which Continental is a party or by which it is
bound ("Continental Property Leases") are in full force and effect. There
exists no default under such Continental Property Leases, nor any event which
with notice or lapse of time or both would constitute a default thereunder,
which default would have a Material Adverse Effect. All of the properties
and assets which are owned by Continental are owned free and clear of any
Lien, except for Liens which do not have a Material Adverse Effect.
Continental has good and indefeasible title with respect to such owned
properties and assets subject to no Liens, other than those permitted under
this Section 2.14, to all of the properties and assets necessary for the conduct
of their business other than to the extent that the failure to have such
title would not have a Material Adverse Effect.
SECTION 2.15 ENVIRONMENTAL MATTERS.
(a) For the purposes of this Agreement, the following terms have the
following meanings:
"Environmental Laws" shall mean any and all federal, state, local and
foreign statutes, laws (including case law), regulations, ordinances,
rules, judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and governmental
restrictions relating to human health, the environment or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances
(as hereinafter defined) or wastes into the environment or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation
thereof.
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"Environmental Liabilities" shall mean all liabilities, whether vested
or unvested, contingent or fixed, actual or potential, which (i) arise
under or relate to Environmental Laws and (ii) relate to actions occurring
or conditions existing on or prior to the Effective Time.
"Hazardous Substances" shall mean any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Regulated Activity" shall mean any generation, treatment, storage,
recycling, transportation, disposal or release of any Hazardous Substances.
(b) No notice, notification, demand, request for information, citation,
summons, complaint or order has been received, no complaint has been filed,
no penalty has been assessed and no investigation or review is pending, or to
any such party's knowledge, has been threatened by any governmental entity or
other party with respect to any (i) alleged violation of any Environmental
Law, (ii) alleged failure to have any environmental permit, certificate,
license, approval, registration or authorization required in connection with
the conduct of its business or (iii) Regulated Activity.
(c) Continental has no material Environmental Liabilities and there has
been no release of Hazardous Substances into the environment by Continental
or with respect to any of its properties which has had, or would reasonably
be expected to have, a Material Adverse Effect.
SECTION 2.16 LABOR MATTERS. Continental is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by Continental, nor does it know of any activities or
proceedings of any labor union to organize any such employees.
SECTION 2.17 COMPLIANCE WITH LAWS. Except for violations which do not
have and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, Continental has received no notice that
it is in violation of, or has violated, any applicable provisions of any
laws, statutes, ordinances or regulations or any term of any judgment,
decree, injunction or order binding against it.
SECTION 2.18 TRADEMARKS, TRADENAMES, ETC. Continental owns or
possesses, or holds a valid right or license to use, all intellectual
property, patents, trademarks, tradenames, servicemarks, copyrights and
licenses (collectively "Intellectual Property"), and all rights with respect
to the foregoing, necessary for the conduct of its business as now conducted,
without any known conflict with the rights of others. A schedule of all
Intellectual Property owned, possessed or held by Continental is contained on
Continental's Disclosure Schedule.
SECTION 2.19 SALE OF CONTINENTAL. Except as contemplated by this
Agreement, there are currently no discussions to which Continental or any of the
Shareholders is a party relating to
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(a) the sale of any material portion of Continental's assets, (b) any merger,
consolidation, liquidation, dissolution or similar transaction involving
Continental whereby Continental will issue any securities or for which
Continental is required to obtain the approval of its shareholders, or (c)
the sale of the Continental Common Stock.
SECTION 2.20 BROKER'S FEES. Neither Continental, Shareholders nor
anyone acting on the behalf or at the request thereof has any liability to
any broker, finder, investment banker or agent, or has agreed to pay any
brokerage fees, finder's fees or commissions, or to reimburse any expenses of
any broker, finder, investment banker or agent in connection with this
Agreement.
SECTION 2.21 INVESTMENT REPRESENTATION. The shares of HCCH Common Stock
to be acquired by each of the Other Shareholders pursuant to this Agreement
will be acquired solely for the account of such Other Shareholder, for
investment purposes only and not with a view to the distribution thereof.
The Other Shareholders are not participating, directly or indirectly, in any
distribution or transfer of such HCCH Common Stock, nor are they
participating, directly or indirectly, in underwriting any such distribution
of HCCH Common Stock within the meaning of the Securities Act. The Other
Shareholders have such knowledge and experience in business matters that each
is capable of evaluating the merits and risks of an investment in HCCH and
the acquisition of the shares of HCCH Common Stock, and each is making an
informed investment decision with respect thereto. The Other Shareholders
have been informed by HCCH that the shares of HCCH Common Stock to be issued
pursuant to this Agreement and the documents to be executed in connection
herewith will not be registered under the Securities Act at the time of their
issuance and may not be transferred, assigned or otherwise disposed of absent
registration under the Securities Act or availability of an appropriate
exemption therefrom. The Other Shareholders have further been informed that
HCCH will be under no obligation to register the shares of HCCH Common Stock
under the Securities Act or to take any steps to assist the Other
Shareholders to comply with any applicable exemption under the Securities Act
with respect to the shares of HCCH Common Stock; provided, however, HCCH
shall promptly approve the Other Shareholder's pledge of its HCCH Common
Stock to any national bank having three or more bank locations or state bank
chartered in the State of Tennessee having a minimum deposits of $50,000,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HCCH
Except as disclosed in a document referring specifically to this Agreement
or in a document, exhibit, or appendix filed with the Securities and Exchange
Commission ("SEC") which has been filed on or before the date hereof,
(collectively referred to herein as the "HCCH Disclosure Schedule") which has
been made available to Shareholders on or before the date hereof, HCCH
represents and warrants to Shareholders (it being agreed that the disclosure on
the HCCH Disclosure Schedule of the existence of any document or fact or
circumstance or situation relating to any representation, warranty, covenant or
agreement in any section of this Agreement
13
shall be automatically deemed to be disclosure of such document or fact or
circumstance or situation for purposes of all other representations,
warranties, covenants and agreements in this Agreement):
SECTION 3.1 CORPORATE EXISTENCE AND POWER. HCCH and each of its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its incorporation. Each of HCCH and
each of its Subsidiaries has all corporate powers and all material
Governmental Authorizations required to carry on its business as now
conducted, except such Governmental Authorizations the failure of which to
have obtained would not have a Material Adverse Effect on HCCH. HCCH and
each of its Subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified
would not have a Material Adverse Effect on HCCH. HCCH has delivered to
Continental true and complete copies of HCCH's Certificate of Incorporation
and Bylaws, as currently in effect.
SECTION 3.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by HCCH of this Agreement, and the consummation by HCCH of the
transactions contemplated hereby are within the corporate powers of HCCH and
have been duly authorized by all necessary corporate action. This Agreement
constitutes, or upon execution will constitute, valid and binding agreements
of HCCH enforceable in each case in accordance with their respective terms,
except as such enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity.
SECTION 3.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by HCCH of this Agreement, require no action by or in respect of,
or filing with, any governmental body, agency, official or authority other
than:
(a) compliance with any applicable requirements of the Exchange Act and
the rules and regulations promulgated thereunder;
(b) compliance with any applicable requirements of the Securities Act
and the rules and regulations promulgated thereunder;
(c) compliance with any applicable foreign or state securities or "blue
sky" laws and the rules and regulations of the NYSE;
(d) compliance with any applicable requirements of any insurance
regulatory agency having authority over HCCH and its Subsidiaries; and
(e) such other filings or registrations with, or authorizations,
consents or approvals of, governmental bodies, agencies, officials or
authorities, the failure of which to make or obtain (i) would not reasonably
be expected to have a Material Adverse Effect on HCCH or (ii) would
14
not materially adversely affect the ability of Continental or HCCH to
consummate the transactions contemplated hereby and operate their businesses
as heretofore operated.
SECTION 3.4 NON-CONTRAVENTION. The execution, delivery and performance
by HCCH of this Agreement and the consummation by HCCH of the transactions
contemplated hereby and thereby do not and will not:
(a) contravene or conflict with the Certificate of Incorporation, or
Bylaws of HCCH;
(b) assuming compliance with the matters referred to in Section 3.3,
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to HCCH or any Subsidiary of HCCH;
(c) conflict with or result in a breach or violation of, or constitute a
default under, or result in a contractual right to cause the termination or
cancellation of or loss of a material benefit under, or right to accelerate,
any material agreement, contract or other instrument binding upon HCCH or any
other Subsidiary of HCCH or any material license, franchise, permit or other
similar authorization held by HCCH or any Subsidiary of HCCH; or
(d) result in the creation or imposition of any Lien on any material
asset of HCCH or any Subsidiary of HCCH,
except, with respect to clauses (b), (c) and (d) above, for contraventions,
defaults, losses, Liens and other matters referred to in such clauses that in
the aggregate would not be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on HCCH.
SECTION 3.5 CAPITALIZATION OF HCCH.
(a) The authorized capital stock of HCCH consists of 100,000,000 shares
of HCCH Common Stock. As of March 31, 1997, there were 36,168,185 shares of
HCCH Common Stock issued and outstanding. All outstanding shares of HCCH
Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable and free from any preemptive rights. Except as set forth
in this Section and as otherwise contemplated by this Agreement and except as
disclosed in public filings made by HCCH with the SEC prior to the Closing
Date or on the HCCH Disclosure Schedule and except for changes since December
31, 1996 resulting from the exercise of employee and director stock options
or resulting from other mergers, acquisitions or purchases, there are
outstanding (i) no shares of capital stock or other voting securities of
HCCH, (ii) no securities of HCCH convertible into or exchangeable for shares
of capital stock or voting securities of HCCH and (iii) no options or other
rights to acquire from HCCH, and no obligation of HCCH to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or other voting securities of HCCH (the items in clauses (i),
(ii) and (iii) being referred to collectively as the "HCCH Securities").
There are no outstanding obligations of HCCH or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any HCCH Securities.
15
(b) All shares of HCCH Common Stock issued to Shareholders shall, upon
issuance, be fully paid, validly issued and nonassessable.
SECTION 3.6 SUBSIDIARIES.
(a) Each HCCH Subsidiary is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has all corporate powers and all material Governmental
Authorizations required to carry on its business as now conducted, except
such Governmental Authorizations the failure of which to have obtained would
not have a Material Adverse Effect on HCCH, and is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by HCCH, or
the nature of its activities make such qualification necessary, except for
those jurisdictions where failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on HCCH. All
Subsidiaries and Joint Ventures material to the business of HCCH ("Material
HCCH Subsidiaries") and their respective jurisdictions of incorporation or
organization and HCCH's ownership interest therein are identified in the HCCH
Disclosure Schedule. Other than its investments in its Subsidiaries and
Joint Ventures, and shares of stock in publicly held companies aggregating
less than 10% of such public company's outstanding stock, HCCH does not own,
directly or indirectly, any outstanding capital stock or equity interest in
any corporation, partnership, Joint Venture or other entity.
(b) All of the outstanding capital stock of, or other ownership
interests in, each Material HCCH Subsidiary that is owned by HCCH, is owned
by HCCH, directly or indirectly, free and clear of any material Lien and free
of any other material limitation or restriction on its rights as owner
thereof (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests), other than those
imposed by applicable law. There are no existing options, calls or
commitments of any character relating to the issued or unissued capital stock
or other securities or equity interests (collectively, "HCCH Subsidiary
Securities") of any HCCH Subsidiary.
SECTION 3.7 SEC FILINGS.
(a) HCCH has since October 28, 1992 filed all forms, proxy statements,
schedules, reports and other documents required to be filed by it with the
SEC pursuant to the Exchange Act.
(b) HCCH has made available, and will promptly make available in the
case of any of the following filed with the SEC on or after the date hereof
and prior to the Closing Date, to Continental:
(i) its annual reports on Form 10-K for its fiscal years ended
December 31, 1996, 1995 and 1994;
16
(ii) any current reports on Form 8-K since January 1, 1997 and its
proxy or information statements relating to meetings of, or actions taken
without a meeting by, the shareholders of HCCH held since January 1, 1997;
and
(iii) all of its other reports, including reports on Form 10-Q,
statements, schedules and registration statements filed with the SEC since
December 31, 1996. None of HCCH's Subsidiaries is required to file any
forms, reports or other documents with the SEC.
(c) As of its filing date, no such report or statement filed pursuant to
the Exchange Act contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) No registration statement filed pursuant to the Securities Act, if
declared effective by the SEC, as of the date such statement or amendment
became effective, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading.
SECTION 3.8 FINANCIAL STATEMENTS. The audited consolidated financial
statements of HCCH included in its annual reports on Form 10-K and the
unaudited financial statements of HCCH included in its quarterly reports on
Form 10-Q referred to in Section 3.7 present fairly, in conformity with
generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of HCCH and its consolidated subsidiaries as of the dates thereof
and their consolidated results of operations and cash flows for the periods
then ended (subject to normal year-end adjustments in the case of any interim
financial statements). For purposes of this Agreement, "HCCH Balance Sheet"
means the consolidated balance sheet of HCCH as of December 31, 1996, and the
notes thereto, contained in HCCH's annual report on Form 10-K filed with the
SEC, and "HCCH Balance Sheet Date" means December 31, 1996.
SECTION 3.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the HCCH
Disclosure Schedule, since the HCCH Balance Sheet Date, HCCH and each of its
Subsidiaries have in all material respects conducted their business in the
ordinary course and there has not been:
(a) any Material Adverse Change with respect to HCCH or any event,
occurrence or development of a state of circumstances or facts known to HCCH,
which as of the date hereof could reasonably be expected to have a Material
Adverse Effect on HCCH;
(b) any amendment of any material term of any outstanding HCCH
Securities;
(c) the entering into of any agreement by HCCH or any person on behalf
of HCCH to take any of the foregoing actions.
17
SECTION 3.10 NO UNDISCLOSED LIABILITIES. There are no liabilities of
HCCH or any of its Subsidiaries of any kind whatsoever that are, individually
or in the aggregate, material to HCCH and its Subsidiaries, taken as a whole,
other than:
(a) liabilities disclosed or provided for in the HCCH Balance Sheet
(including the notes thereto);
(b) liabilities incurred in the ordinary course of business consistent
with past practice since the HCCH Balance Sheet Date; and
(c) liabilities under this Agreement or as indicated in the HCCH
Disclosure Schedule.
SECTION 3.11 LITIGATION. Other than actions, suits, proceedings, claims
or investigations occurring in the ordinary course of business or such
actions, suits, proceedings, claims or investigations involving respective
amounts in controversy of less than $100,000 each, there is no action, suit,
proceeding, claim or investigation pending or, to the knowledge of HCCH,
overtly threatened, against HCCH or any of its Subsidiaries or any of their
assets or against or involving any of its officers, directors or employees in
connection with the business or affairs of HCCH, including, without
limitation, any such claims for indemnification arising under any agreement
to which HCCH or any of its Subsidiaries is a party, which could,
individually or in the aggregate, have a Material Adverse Effect on HCCH.
HCCH and each of its Subsidiaries are not subject to or in default with
respect to any writ, order, judgment, injunction or decree which could,
individually or in the aggregate, have a Material Adverse Effect on HCCH.
SECTION 3.12 TAXES.
(a) HCCH and each of its Subsidiaries (i) has filed when due (taking
into account extensions) with the appropriate federal, state, local, foreign
and other governmental agencies, all material tax returns, estimates and
reports required to be filed by it, (ii) either paid when due and payable or
established adequate reserves or otherwise accrued on the HCCH Balance Sheet
all material Taxes, and there are no tax deficiencies claimed in writing by
any Taxing authority and received by HCCH that, in the aggregate, would
result in any tax liability in excess of the amount of the reserves or
accruals, and (iii) has or will establish in accordance with its normal
accounting practices and procedures accruals and reserves that, in the
aggregate, are adequate for the payment of all Taxes not yet due and payable
and attributable to any period preceding the Effective Time. The HCCH
Disclosure Schedule sets forth those tax returns of HCCH (or any predecessor
entities) for all periods that currently are the subject of audit by any
federal, state, local or foreign taxing authority.
(b) There are no material taxes, interest, penalties, assessments or
deficiencies claimed in writing by any taxing authority and received by HCCH
or any of its Subsidiaries to be due in respect of any tax returns filed by
HCCH (or any predecessor corporations) or any of its Subsidiaries. Neither
HCCH nor any predecessor corporation, nor any of their respective
Subsidiaries, has executed or filed with the IRS or any other Taxing
authority any agreement or
18
other document extending, or having the effect of extending, the period of
assessment or collection of any Taxes.
(c) HCCH is not a party to or bound by (or will prior to the Closing
Date become a party to or bound by) any Tax indemnity, Tax sharing or Tax
allocation agreement or other similar arrangement which includes a party
other than HCCH and its Subsidiaries. Neither HCCH nor any of its
Subsidiaries has been a member of an affiliated group other than one of which
HCCH was the common parent, or filed or been included in a combined,
consolidated or unitary Tax return other than one filed by HCCH (or a return
for a group consisting solely of its Subsidiaries and predecessors).
SECTION 3.13 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Each Pension Plan and Welfare Plan maintained by HCCH has been
maintained in all material respects in compliance with their terms and all
provisions of ERISA and the Code (including rules and regulations thereunder)
applicable thereto.
(b) HCCH has made available to Continental for each Pension Plan which
is intended to be "qualified" within the meaning of Section 401(a) of the
Code, a copy of the most recent determination letter issued by the IRS to the
effect that each such Plan is so qualified and that each trust created
thereunder is tax exempt under Section 501 of the Code, and HCCH is unaware
of any fact or circumstances that would jeopardize the qualified status of
each such Pension Plan or the tax exempt status of each trust created
thereunder.
(c) To the knowledge of HCCH, no Pension Plan or Welfare Plan is
currently subject to an audit or other investigation by the IRS, the
Department of Labor, the Pension Benefit Guaranty Corporation or any other
governmental agency or office nor are any such Plans subject to any lawsuits
or legal proceedings of any kind or to any material pending disputed claims
by employees or beneficiaries covered under any such Plan or by any other
parties.
(d) No "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, resulting in liability to HCCH or any HCCH ERISA
Affiliate has occurred with respect to any Pension Plan or Welfare Plan.
HCCH has no knowledge of any breach of fiduciary responsibility under Part 4
of Title I of ERISA which has resulted in liability of HCCH, any HCCH ERISA
Affiliate, any trustee, administrator or fiduciary of any Pension Plan or
Welfare Plan.
(e) Neither HCCH nor any HCCH ERISA Affiliate, since January 1, 1986,
has maintained or contributed to, or been obligated or required to contribute
to, a "Multiemployer Plan," as such term is defined in Section 4001(a)(3) of
ERISA. Neither HCCH nor any HCCH ERISA Affiliate has either withdrawn,
partially or completely, or instituted steps to withdraw, partially or
completely, from any Multiemployer Plan nor has any event occurred which
would enable a Multiemployer Plan to give notice of and demand payment of any
withdrawal liability with respect to HCCH or any HCCH ERISA Affiliate.
19
(f) With respect to HCCH and each HCCH ERISA Affiliate, the HCCH
Disclosure Schedule correctly identifies each material agreement, policy,
plan or other arrangement, whether written or oral, express or implied, fixed
or contingent, to which HCCH is a party or by which HCCH or any property or
asset of HCCH is bound, which is or relates to a pension, option, bonus,
deferred compensation, retirement, stock purchase, profit-sharing, severance
pay, health, welfare, incentive, vacation, sick leave, medical disability,
hospitalization, life or other insurance or fringe benefit plan, policy or
arrangement.
SECTION 3.14 MATERIAL AGREEMENTS.
(a) HCCH has disclosed either in its Disclosure Schedule or in filings
with the SEC a complete and accurate list of all contracts, agreements,
leases (other than HCCH Property Leases, as hereinafter defined) and
instruments to which HCCH or any of its Subsidiaries is a party or by which
it or its properties or assets are bound which individually involve net
payments or receipts in excess of $10,000,000 per annum, inclusive of
contracts that pertain to employment or severance benefits for any officer,
director or employee of HCCH, whether written or oral, but exclusive of
contracts entered into with customers and suppliers in the ordinary course of
business or contracts, agreements, leases and instruments terminable without
penalty by HCCH upon 60 days or less prior written notice to the other party
or parties thereto (the "Material HCCH Agreements").
(b) Neither HCCH, any HCCH Subsidiary, nor, to the knowledge of HCCH,
any other party is in default under any Material HCCH Agreement and no event
has occurred which (after notice or lapse of time or both) would become a
breach or default under, or would permit modification, cancellation,
acceleration or termination of any Material HCCH Agreement or result in the
creation of any security interest upon, or any person obtaining any right to
acquire, any properties, assets or rights of HCCH which, in any such case,
has had or would reasonably be expected to have a Material Adverse Effect on
HCCH.
(c) To the knowledge of HCCH, each such Material HCCH Agreement is in
full force and effect and is valid and legally binding and there are no
material unresolved disputes involving or with respect to any Material HCCH
Agreement. No party to a Material HCCH Agreement has advised HCCH or any of
its Subsidiaries that it intends either to terminate a Material HCCH
Agreement or to refuse to renew a Material HCCH Agreement upon the expiration
of the term thereof.
(d) Each of HCCH, and each HCCH Subsidiary is not in violation of, or in
default with respect to, any term of its Certificate of Incorporation or
Bylaws.
SECTION 3.15 PROPERTIES. To the knowledge of HCCH, all leases of real
property to which HCCH or any of its Subsidiaries is a party or by which it
or any of its Subsidiaries is bound ("HCCH Property Leases") which are
material to the business of HCCH and its Subsidiaries taken as a whole are in
full force and effect. To the knowledge of HCCH, there exists no default
under such HCCH Property Leases, nor any event which with notice or lapse
20
of time or both would constitute a default thereunder by HCCH or any of its
Subsidiaries, which default would have a Material Adverse Effect on HCCH.
All of the properties and assets which are owned by HCCH and each of its
Subsidiaries are owned by each of them, respectively, free and clear of any
Lien, except for Liens which do not have a Material Adverse Effect on HCCH.
HCCH and each of its Subsidiaries have good and indefeasible title with
respect to such owned properties and assets subject to no Liens, other than
those permitted under this Section 3.15, to all of the properties and assets
necessary for the conduct of their business other than to the extent that the
failure to have such title would not have a Material Adverse Effect on HCCH.
SECTION 3.16 ENVIRONMENTAL MATTERS.
(a) To the knowledge of HCCH, no notice, notification, demand, request
for information, citation, summons, complaint or order has been received, no
complaint has been filed, no penalty has been assessed and no investigation
or review is pending, or to HCCH's knowledge, has been threatened by any
governmental entity or other party with respect to any (i) alleged violation
by HCCH or any of its Subsidiaries of any Environmental Law, (ii) alleged
failure by HCCH or any such Subsidiary to have any environmental permit,
certificate, license, approval, registration or authorization required in
connection with the conduct of its business or (iii) Regulated Activity.
(b) To the knowledge of HCCH, neither HCCH nor any of its Subsidiaries
has any material Environmental Liabilities and there has been no release of
Hazardous Substances into the environment by HCCH or any such Subsidiary or
with respect to any of their respective properties which has had, or would be
reasonably expected to have, a Material Adverse Effect on HCCH.
SECTION 3.17 LABOR MATTERS. Neither HCCH nor any of its Subsidiaries is
a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by HCCH or any such Subsidiary, nor do the
executive officers of HCCH know of any activities or proceedings of any labor
union to organize any such employees.
SECTION 3.18 COMPLIANCE WITH LAWS. Except for violations which do not
have and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on HCCH, neither HCCH nor any of its
Subsidiaries is in violation of, or has violated, any applicable provisions
of any laws, statutes, ordinances or regulations or any term of any judgment,
decree, injunction or order binding against it.
SECTION 3.19 TRADEMARKS, TRADENAMES, ETC. HCCH owns or possesses, or
holds a valid right or license to use, all intellectual property, patents,
trademarks, tradenames, servicemarks, copyrights and licenses, and all rights
with respect to the foregoing, necessary for the conduct of its business as
now conducted, without any known conflict with the rights of others.
SECTION 3.20 BROKER'S FEES. Neither HCCH, nor anyone acting on the
behalf or at the request thereof has any liability to any broker, finder,
investment banker or agent, or has agreed
21
to pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS OF CONTINENTAL AND SHAREHOLDERS
From the date hereof until the occurrence of the earlier of (i) the
Effective Time or (ii) termination of this Agreement pursuant to Section 8.1
hereof, Continental and each of the Shareholders agree that, other than
utilization of the Continental Permitted Payment:
SECTION 4.1 CONDUCT OF CONTINENTAL. Continental shall in all material
respects conduct its business in the ordinary course. Without limiting the
generality of the foregoing, from the date hereof until the Effective Time,
except as contemplated by this Agreement:
(a) Continental will not adopt or propose any change in its Articles of
Incorporation or Bylaws;
(b) Continental will not enter into or amend any employment agreements
(oral or written) or increase the compensation payable or to become payable
by it to any of its officers, directors, or consultants over the amount
payable as of December 31, 1996, or increase the compensation payable to any
other employees (other than (i) increases in the ordinary course of business
which are not in the aggregate material, or (ii) pursuant to plans disclosed
in Continental Disclosure Schedule), or adopt or amend any employee benefit
plan or arrangement (oral or written);
(c) Continental will not issue any Continental Securities;
(d) Continental will keep in full force and effect any existing
directors' and officers' liability insurance and will not modify or reduce
the coverage thereunder;
(e) Continental will not pay any dividend or make any other distribution
to holders of its capital stock nor redeem or otherwise acquire any
Continental Securities;
(f) Continental will not, directly or indirectly, dispose of or acquire
any material properties or assets except in the ordinary course of business;
(g) Continental will not incur any additional indebtedness for borrowed
money except pursuant to existing arrangements which have been disclosed to
HCCH prior to the date hereof;
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(h) Continental will not amend or change the period of exercisability or
accelerate the exercisability of any outstanding options or warrants to
acquire shares of capital stock, or accelerate, amend or change the vesting
period of any outstanding restricted stock;
(i) Continental will not (i) change accounting methods except as
necessitated by changes which Continental is required to make in order to
prepare its federal, state and local tax returns; (ii) amend or terminate any
contract, agreement or license to which it is a party (except pursuant to
arrangements previously disclosed in writing to HCCH or disclosed in the
Continental Disclosure Schedule) except those amended or terminated in the
ordinary course of business, consistent with past practices, or involving
changes which are not materially adverse in amount or effect to Continental
individually or taken as a whole; (iii) lend any amount to any person or
entity, other than advances for travel and expenses which are incurred in the
ordinary course of business consistent with past practices, and which are not
material in amount to Continental taken as a whole, which travel and expenses
shall be documented by receipts for the claimed amounts; (iv) enter into any
guarantee or suretyship for any obligation except for the endorsements of
checks and other negotiable instruments in ordinary course of business,
consistent with past practice; (v) waive or release any material right or
claim except in the ordinary course of business, consistent with past
practice; (vi) issue or sell any shares of its capital stock of any class or
any other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities, stock appreciation rights or
other commitments to issue shares of capital stock, or take any action other
than this transaction to accelerate the vesting of any outstanding option or
other security (except pursuant to existing arrangements disclosed in writing
to HCCH before the date of this agreement); (vii) merge, consolidate or
reorganize with or acquire any entity; (viii) agree to any audit assessment
by any tax authority or file any federal or state income or franchise tax
return unless copies of such returns have been delivered to HCCH for its
review prior to such agreement or filing; and (ix) terminate the employment
of any key executive employee; and
(j) Continental and Shareholders will not, directly or indirectly, agree
or commit to do any of the foregoing.
SECTION 4.2 ACCESS TO FINANCIAL AND OPERATIONAL INFORMATION. Continental
and Shareholders will give HCCH, its counsel, financial advisors, auditors
and other authorized representatives reasonable access during normal business
hours to their offices, properties, books and records, will furnish to HCCH,
its counsel, financial advisors, auditors and other authorized representatives
such financial and operating data as such persons may reasonably request and
will instruct its employees, counsel and financial advisors to cooperate with
HCCH in its investigation of the business of Continental and in the planning
for the combination of the businesses of Continental and HCCH following the
consummation of the transactions contemplated by this Agreement; PROVIDED
that no investigation pursuant to this Section shall affect any representation
or warranty given hereunder. In addition, following the public announcement
of this Agreement or the transactions contemplated hereby, Continental will
cooperate in arranging joint meetings among representatives of Continental
and HCCH and persons with whom they maintain business relationships.
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SECTION 4.3 OTHER OFFERS.
(a) Continental and Shareholders will not, directly or indirectly, (i)
take any action to solicit, initiate or discuss any Acquisition Proposal (as
hereinafter defined), or (ii) engage in negotiations with, or disclose any
nonpublic information relating to, Continental or afford access to the
properties, books or records of Continental to, any person or entity that may
be considering making, or has made, an Acquisition Proposal. To the extent
that Continental or any of their respective officers, directors, employees or
other agents, or Shareholders are currently involved in any discussions with
respect to any Acquisition Proposal or contemplated or proposed Acquisition
Proposal, Continental, and Shareholders shall terminate, and shall use their
best efforts to cause, where applicable, their respective officers,
directors, employees or other agents to terminate, such discussions
immediately. The term "Acquisition Proposal" as used herein means any offer
or proposal for, or any indication of interest in, a merger or other business
combination involving Continental or the acquisition of any equity interest
in, or a substantial portion of the assets of, Continental other than the
transactions contemplated by this Agreement.
SECTION 4.4 MAINTENANCE OF BUSINESS. Continental will use its
reasonable best efforts to carry on its business, keep available the services
of its officers and employees and preserve its relationships with those of
its customers, agents, suppliers, licensors and others having business
relationships with it that are material to its business in substantially the
same manner as it has prior to the date hereof. If Continental becomes aware
of a material deterioration or facts which are likely to result in a material
deterioration in the relationship with any customers, supplier, licensor or
others having business relationships with it, it will promptly in writing
bring such information to the attention of the HCCH in writing.
SECTION 4.5 COMPLIANCE WITH OBLIGATIONS. Continental shall use its
reasonable best efforts to comply in all material respects with (i) all
applicable federal, state, local and foreign laws, rules and regulations,
(ii) all material agreements and obligations, including its respective
charter and bylaws, by which it, its properties or its assets may be bound,
and (iii) all decrees, orders, writs, injunctions, judgments, statutes, rules
and regulations applicable to Continental and its respective properties or
assets.
SECTION 4.6 NOTICES OF CERTAIN EVENTS. Continental shall, upon
obtaining knowledge of any of the following, promptly notify HCCH of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with this
Agreement,
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with this Agreement, and
(c) any actions, suits, claims, investigations or other judicial
proceedings commenced or threatened against Continental which, if pending on
the date of this Agreement, would have
24
been required to have been disclosed pursuant hereto or which relate to the
consummation of transactions contemplated by this Agreement.
SECTION 4.7 REPRESENTATION AGREEMENT. Shareholders shall deliver to
HCCH simultaneously with the execution of this Agreement, a written agreement
from each of the Shareholders in form and substance reasonably satisfactory
to HCCH relating to their intent to hold any HCCH Common Stock acquired
pursuant to this Agreement for investment purposes.
SECTION 4.8 NECESSARY CONSENTS. Continental shall use its reasonable
best efforts to obtain such written consent and take such other actions as
may be necessary or appropriate for Continental to facilitate and allow the
consummation of the transactions provided for herein and to facilitate and
allow HCCH to carry on the acquired business after the Closing Date (as
defined in Section 9.1 hereof).
SECTION 4.9 REGULATORY APPROVAL. Continental, and, where required
pursuant to the rules or regulations of any regulatory agency, Shareholders,
will execute and file, or join in the execution and filing, with any
application or other document that may be necessary in order to obtain the
authorization, approval or consent of any governmental body, federal, state,
local or foreign which may be reasonably required, or which HCCH may
reasonably request, in connection with the consummation of the transaction
provided for in this Agreement. Continental and Shareholders, will use
reasonable best efforts to obtain or assist HCCH in obtaining all such
authorizations, approvals and consents.
SECTION 4.10 SATISFACTION OF CONDITIONS PRECEDENT. Continental and
Shareholders shall use their reasonable best efforts to cause the
transactions provided for in this Agreement to be consummated, and, without
limiting the generality of the foregoing to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably required on its
part in order to effect the transactions provided for herein.
ARTICLE V
COVENANTS OF HCCH
From the date hereof until the occurrence of the earlier of (i) the
Effective Time or (ii) the termination of this Agreement pursuant to Section
8.1 hereof, HCCH agrees that, except as otherwise permitted with the written
consent of Shareholders, which consent shall not be unreasonably withheld:
SECTION 5.1 CONDUCT OF HCCH. HCCH and its Subsidiaries shall in all
material respects conduct their business in the ordinary course PROVIDED,
HOWEVER, THAT nothing in this Agreement shall be construed to prohibit or
otherwise restrain HCCH in any manner from acquiring other businesses or
substantially all of the assets thereof. Without limiting the
25
generality of the foregoing, from the date hereof until the Effective Time,
except as contemplated hereby or previously disclosed by HCCH to Shareholders
in writing:
(a) HCCH will not adopt or propose any change in its Certificate of
Incorporation or Bylaws;
(b) HCCH will not take any action that would result in a failure to
maintain the trading of HCCH Common Stock on the NYSE; and
(c) HCCH will not, and will not permit any of its Subsidiaries to, agree
or commit to do any of the foregoing.
SECTION 5.2 LISTING OF HCCH COMMON STOCK. HCCH shall cause the shares
of HCCH Common Stock to be issued hereunder to be approved for listing on the
NYSE within sixty days of the Effective Time.
SECTION 5.3 ACCESS TO INFORMATION. HCCH will furnish promptly to
Shareholders copies of all reports, schedules, registration statements,
correspondence and other documents filed with or delivered to the SEC,
PROVIDED that no investigation pursuant to this Section shall affect any
representation or warranty given by HCCH to Shareholders hereunder. In
addition, if requested by Shareholders following the public announcement of
this Agreement, HCCH will cooperate in arranging joint meetings among
representatives of HCCH and Continental and persons with whom HCCH maintains
business relationships. All requests for information made pursuant to this
Section shall be directed to the President of HCCH or such person as may be
designated by him in writing.
SECTION 5.4 MAINTENANCE OF BUSINESS. HCCH will use its reasonable
efforts to carry on its business, keep available the services of its officers
and employees and preserve its relationships with those of its customers,
suppliers, licensors and others having business relationships with it that
are material to its business in substantially the same manner as it has prior
to the date hereof. If HCCH becomes aware of a material deterioration or
facts which are likely to result in a material deterioration in the
relationship with any material customer, supplier, licensor or others having
business relationships with it, it will promptly bring such information to
the attention of Continental in writing.
SECTION 5.5 COMPLIANCE WITH OBLIGATIONS. HCCH and its Subsidiaries
shall each use its reasonable best efforts to comply in all material respects
with (i) all applicable federal, state, local and foreign laws, rules and
regulations, (ii) all material agreements and obligations, including its
respective charter and bylaws, by which it, its properties or its assets may
be bound, and (iii) all decrees, orders, writs, injunctions, judgments,
statutes, rules and regulations applicable to HCCH and its Subsidiaries and
their respective properties or assets; except to the extent that the failure
to comply with matters in clauses (i), (ii) and (iii) would not have a
Material Adverse Effect on HCCH.
26
SECTION 5.6 NOTICES OF CERTAIN EVENTS. HCCH shall, upon obtaining
knowledge of any of the following, promptly notify Shareholders of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with this
Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with this Agreement; and
(c) any actions, suits, claims, investigations or other judicial
proceedings commenced or threatened against HCCH or any of its Subsidiaries
which, if pending on the date of this Agreement, would have been required to
have been disclosed pursuant to Section 3.11 or which relate to the consummation
of the transactions contemplated by this Agreement.
SECTION 5.7 EMPLOYEE MATTERS. HCCH agrees that all employees of
Continental that remain employed after the Effective Time shall, within a
reasonable time following the Effective Time, be entitled to receive the same
benefits to which other employees of HCCH are entitled to receive and shall
be entitled to participate in HCCH's Employee Benefit Plan provided such
employees have satisfied the plan's eligibility requirements.
ARTICLE VI
COVENANTS OF HCCH, SHAREHOLDERS AND CONTINENTAL
From the date hereof until the occurrence of the earlier of (i) the
Effective Time or (ii) termination of this Agreement pursuant to Section 8.1
hereof, each of the Shareholders, Continental and HCCH agree that:
SECTION 6.1 ADVICE OF CHANGES. Each will promptly advise the others in
writing (i) of any event known to any of its executive officers or
Shareholders occurring subsequent to the date of this Agreement that in its
or their reasonable judgment renders any representation or warranty of such
party contained in this Agreement, if made on or as of the date of such event
or the Closing Date, untrue, inaccurate or misleading in any material respect
and (ii) of any Material Adverse Change in the business condition of the
party.
SECTION 6.2 REGULATORY APPROVALS. Each shall execute and file, or
join in the execution and filing of, any application or other document
that may be necessary in order to obtain the authorization, approval or
consent of any governmental body, federal, state, local or foreign, which may
be requested in connection with the consummation of the transactions
contemplated by this Agreement. Each shall use its reasonable best efforts
to obtain all such authorizations, approvals and consents.
SECTION 6.3 CERTAIN FILINGS. Shareholders and HCCH shall cooperate
with one another:
27
(a) in determining whether any action by or in respect of, or filing
with, any governmental body, agency or official, or authority is required, or
any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement; and
(b) in seeking any such actions, consents, approvals or waivers or
making any such filings, furnishing information required in connection
therewith and seeking timely to obtain any such actions, consents, approvals
or waivers.
SECTION 6.4 COMMUNICATIONS. Neither Shareholders, Continental nor HCCH
will furnish any communication outside of their respective companies, if the
subject matter thereof relates to the transactions contemplated by this
Agreement and is not in the ordinary course of business, without the prior
approval of the other of them as to the content thereof, which approval shall
not be unreasonably withheld; PROVIDED that the foregoing shall not be deemed
to prohibit any disclosure required by any applicable law or rule of the NYSE.
SECTION 6.5 SATISFACTION OF CONDITIONS PRECEDENT. HCCH, Continental
and Shareholders will each use its reasonable best efforts to satisfy or
cause to be satisfied all the conditions precedent that are applicable to
each of them, and to cause the transactions contemplated by this Agreement to
be consummated, and, without limiting the generality of the foregoing, to
obtain all material consents and authorizations of third parties and to make
filings with, and give all notices to, third parties that may be necessary or
reasonably required on its part in order to effect the transactions
contemplated hereby.
SECTION 6.6 TAX COOPERATION. HCCH, Continental and Shareholders shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar taxes or
fees which become payable in connection with the transactions contemplated by
this Agreement that are required or permitted to be filed on or before the
Effective Time.
SECTION 6.7 CONFIDENTIALITY. Between the date of this Agreement and
the Closing Date, each party, and Continental, will maintain in confidence,
and cause its directors, officers, employees, agents, and advisors to
maintain in confidence, and not use to the detriment of another party, any
written or oral or other information obtained in confidence from another
party or Continental in connection with this Agreement or the transactions
contemplated hereby unless such information is already known to such party or
to others not bound by a duty of confidentiality or unless such information
becomes publicly available through no fault of such party, unless the use of
such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transaction contemplated hereby or unless the furnishing or use of such
information is required by or necessary or appropriate in connection with
legal proceedings.
28
If the transactions contemplated by this Agreement are not consummated,
each party will return or destroy as much of such written information as may
be reasonably requested. Whether or not the Closing takes place,
Shareholders waives, and will upon request cause Continental to waive, any
cause of action, right or claim arising out of the access of HCCH or its
representatives to any trade secrets or other confidential information of
Continental except for the intentional competitive misuse by HCCH of such
trade secrets or confidential information.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1 CONDITIONS TO OBLIGATIONS OF HCCH. The obligations of HCCH
hereunder are subject to the fulfillment or satisfaction, on and as of the
Closing Date, of each of the following conditions (any one or more of which
may be waived by HCCH, but only in a writing signed by HCCH):
(a) The representations and warranties of Continental and Shareholders
contained in Article III remain true and accurate in all material respects on
and as of the Closing Date with the same force and effect as if they had been
made on the Closing Date (except to the extent a representation or warranty
speaks specifically as of an earlier date and except for changes contemplated
by this Agreement) and Continental and Shareholders shall have provided HCCH
with a certificate executed by the President and the Chief Financial Officer
of the corporation or individually, as the case may be, dated as of the
Closing Date, to such effect.
(b) Continental and Shareholders shall have performed and complied in
all material respects with all of the covenants contained herein on or before
the Closing Date, and HCCH shall receive a certificate to such effect signed
by the President and Chief Financial Officer of the corporation or
individually, as the case may be.
(c) Except as set forth in the Continental Disclosure Schedule, there
shall have been no Material Adverse Change in Continental since December 31,
1996.
(d) HCCH shall have received from (i) each person or entity it deems
necessary or desirable a duly executed Investment Letter and (ii)
Shareholders, the written agreement contemplated to be entered into by such
person pursuant to Section 4.7 and such agreements shall remain in full force
and effect.
(e) All written consents, assignments, waivers or authorizations, other
than Governmental Authorizations, that are required as a result of the
transaction contemplated by this Agreement for the continuation in full force
and effect of any material contracts or leases of Continental shall have been
obtained.
29
(f) HCCH shall have received the opinion of counsel to Continental and
Shareholders in form and substance satisfactory to HCCH.
(g) All underwriting agreements of Continental in force on the date
hereof shall be in force on the Closing Date, except for such agreements
which have been replaced with agreements of similar like and kind or any
agreements with Reliance Insurance Company or any affiliate thereof.
(h) E. R. ("Xxxxx") Xxxxxxxxx, III ("Xxxxxxxxx") shall be alive and not,
in any way, Disabled. For purposes of this Agreement, Xxxxxxxxx shall be
deemed to be "Disabled" if he is unable to engage in any substantial portion
of his regular duties for Continental by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than 12 months.
(i) Continental shall have received a review opinion of independent
public accountants to Continental on their financial statements for the most
recent fiscal year end.
(j) Continental shall have delivered to HCCH its unaudited balance sheet
and its unaudited income statement for each of the two most recent fiscal
year ends.
(k) Continental shall have earned no less than $156,000 after tax for
the fiscal year ended December 31, 1996 and, assuming that Continental
continued to be operated as it had in the past, on a pro-forma basis, as
reasonably determined by HCCH, be expected to earn at least $280,000 after
tax for the year ended December 31, 1997.
(l) Shareholders shall have transferred all the Continental Common Stock
to HCCH, free and clear of all Liens and encumbrances, with transfer taxes,
if any, paid by Shareholders. No claim shall have been filed, made or
threatened by any person or entity asserting that he, she or it is entitled
to any part of the Purchase Price paid for the Continental Common Stock.
(m) On or prior to the Closing Date, Shareholders or Continental shall
have furnished HCCH with evidence of such consents as Shareholders or
Continental shall know, or HCCH shall determine, to be required to enable
HCCH to continue to enjoy the benefit of any lease, license, permit, contract
or other agreement or instrument to or of which Continental is a party or
beneficiary and which can, by its terms (with consent) and consistent with
applicable law, be so enjoyed after the transfer of the Continental Common
Stock to HCCH. If there is in existence any lease, governmental license,
permit or contract that by its terms or applicable law, expires, terminates
or is otherwise rendered invalid upon the transfer of the Continental Common
Stock to HCCH, and such lease, license, permit, or contract is required in
order for the business of Continental to continue to be conducted following
the transfer of the Continental Common Stock in the same manner as conducted
previously, HCCH shall have obtained, or been furnished by Shareholders an
equivalent of, that lease, license, permit, or contract effective as of and
after the Closing Date.
30
(n) HCCH shall have received resignations of all persons who are
officers or directors of Continental immediately prior to the Closing.
(o) HCCH shall have received general releases in favor of Continental
and HCCH executed by Shareholders and any such other employees, officers or
directors of Continental as HCCH may designate. Those releases will not
relate to rights or obligations arising under this Agreement.
(p) HCCH shall have received possession on the premises of Continental
of all corporate, accounting, business and tax records of Continental.
(q) The form and substance of all actions, proceedings, instruments and
documents required to consummate the transactions contemplated by this
Agreement shall have been satisfactory in all reasonable respects to HCCH and
HCCH's counsel.
SECTION 7.2 CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS. Shareholders'
obligations hereunder are subject to the fulfillment or satisfaction, on and
as of the Closing Date, of each of the following conditions (any one or more
of which may be waived, but only in a writing signed by such party):
(a) The representations and warranties of HCCH set forth herein shall be
true and accurate in all material respects on and as of the Closing Date with
the same force and effect as if they had been made on the Closing Date
(except to the extent a representation or warranty speaks specifically as of
an earlier date and except for changes contemplated by this Agreement) and
HCCH shall have provided Shareholders with a certificate executed by the
President and the Chief Financial Officer of HCCH, dated as of the Closing
Date, to such effect. For the purposes of determining the accuracy of the
representations and warranties of HCCH, any change or effect in the business
of HCCH that results in substantial part as a consequence of the public
announcement or pendency of the intended acquisition of the Continental
Common Stock by HCCH shall not be deemed a Material Adverse Change or
Material Adverse Effect or other breach of representation or warranty with
respect to HCCH.
(b) HCCH shall have performed and complied with all of its covenants
contained herein in all material respects on or before the Closing Date, and
Shareholders shall receive a certificate to such effect signed by HCCH's
President and Chief Financial Officer.
(c) Except as set forth in the HCCH Disclosure Schedule, there shall
have been no Material Adverse Change in HCCH since the HCCH Balance Sheet
Date.
(d) Shareholders shall have received from Xxxxxxxx Xxxxxxxx & Xxxxxx
P.C., counsel to HCCH, an opinion in form and substance satisfactory to the
Shareholders.
(e) HCCH shall have executed and delivered to each of Xxxxxxxxx and
Saxon an Employment Agreement in a mutually agreed to form.
31
(f) The form and substance of all actions, proceedings, instruments and
documents required to consummate the transactions contemplated by this
Agreement shall have been satisfactory in all reasonable respects to
Shareholders and their counsel.
SECTION 7.3 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of the parties hereunder are subject to the fulfillment, on and
as of the Closing Date, of each of the following conditions (any one or more
of which may be waived by such parties, but only in a writing signed by such
parties):
(a) No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, promulgated or enforced (and not
repealed, superseded or otherwise made inapplicable) by any court or
governmental authority which prohibits the consummation of the transaction
contemplated by this Agreement (each party agreeing to use its reasonable
best efforts to have any such order, decree or injunction lifted).
(b) There shall have been obtained any and all Governmental
Authorizations, permits, approvals and consents of securities or "blue sky"
commissions of any jurisdiction and of any other governmental body or agency,
that may reasonably be deemed necessary so that the consummation of the
transaction contemplated by this Agreement will be in compliance with
applicable laws, the failure to comply with which would have a Material
Adverse Effect on HCCH, Continental, or would be reasonably likely to subject
any of HCCH, Continental or any of their respective directors or officers to
penalties or criminal liability.
ARTICLE VIII
TERMINATION OF AGREEMENT
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) By the mutual consent of Shareholders and the Board of Directors of
HCCH.
(b) By the Board of Directors of HCCH or by Shareholders owning at least
85% of Continental if there has been a material breach by the other of any
representation or warranty contained in this Agreement, which in either case
cannot be, or has not been, cured within 15 days after written notice of such
breach is given to the party committing such breach, provided that the right
to effect such cure shall not extend beyond the date set forth in
subparagraph (c) below.
(c) By the Board of Directors of HCCH or by Shareholders owning at least
85% of Continental if all conditions of Closing required by Article VII hereof
have not been met or waived by August 31, 1997, provided, however, that
neither HCCH nor Shareholders, shall be
32
entitled to terminate this Agreement pursuant to this subparagraph (c) if
such party is in willful and material violation of any of its
representations, warranties or covenants in this Agreement.
(d) If any governmental authority shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable.
(e) By the Board of Directors of HCCH, if Xxxxxxxxx shall have become
Disabled or shall have died.
SECTION 8.2 EFFECT OF TERMINATION. Upon termination of this Agreement
pursuant to this Article VIII, this Agreement shall be void and of no effect and
shall result in no obligation of or liability to any party or their
respective directors, officers, employees, agents or shareholders, unless
such termination was the result of an intentional breach of any
representation, warranty or covenant in this Agreement, in which case the
party who breached the representation, warranty or covenant shall be liable
to the other party for damages, and all costs and expenses incurred in
connection with the preparation, negotiation, execution and performance of
this Agreement.
ARTICLE IX
CLOSING MATTERS
SECTION 9.1 THE CLOSING. Subject to termination of this Agreement as
provided in Article VIII above, the closing of the transactions provided for
herein (the "Closing") will take place at the offices of Xxxxxxxx Xxxxxxxx &
Xxxxxx P.C., 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 at 10:00
a.m. (the "Effective Time"), Houston Time on July 31, 1997 or, if all
conditions to Closing have not been satisfied or waived by such date, such
other place, time and date as Shareholders and HCCH may mutually select (the
"Closing Date").
ARTICLE X
INDEMNIFICATION AND
REMEDIES, CONTINUING COVENANTS
SECTION 10.1 AGREEMENT TO INDEMNIFY. Subject to the limitations set
forth in this Article X, from and after the Effective Time, Shareholders will
indemnify and hold harmless HCCH and its respective officers, directors,
agents and employees, and each person, if any, who controls or may control
HCCH within the meaning of the Securities Act (hereinafter referred to
individually as a "Continental Indemnified Person" and collectively as
"Continental Indemnified Persons") from and against any and all claims,
demands, actions, causes of action, losses, costs,
33
damages, liabilities and expenses including, without limitation, reasonable
legal fees, (net of: (i) any recoveries under insurance policies; (ii)
recoveries from third parties; and (iii) tax savings known to Continental
Indemnified Persons at the time of resolution of the claims hereunder) made
against or incurred by Continental Indemnified Persons (hereafter in this
Section 10.1 referred to as "HCCH Damages"), arising out of any material
misrepresentation or breach of or default under any of the representations,
warranties, covenants or agreements given or made in this Agreement or any
certificate or exhibit delivered by or on behalf of Continental or
Shareholders pursuant hereto. The indemnification provided for in this
Section 10.1 will not apply unless and until the aggregate HCCH Damages for
which one or more Continental Indemnified Persons seeks indemnification
exceeds $25,000 in the aggregate, in which event the indemnification provided
for will include all HCCH Damages (a franchise deductible) and shall be
limited in the aggregate to the amount of the Purchase Price (the "Cap").
The Continental Indemnified Persons are only entitled to be reimbursed for
the actual indemnified expenditures or damages incurred by them for the above
described losses not to exceed the Cap. Such Continental Indemnified Persons
are not entitled to consequential, special, or other speculative or punitive
categories of damages. Without limiting the indemnification otherwise set
forth herein, Xxxxxxx agrees to indemnify and hold Continental and HCCH
harmless from any and all liabilities relating to Continental's participation
in the Xxxxxxx, Health and Welfare Benefit Plan with Great-West Life &
Annuity Insurance Company prior to the Closing Date.
SECTION 10.2 HCCH AGREEMENT TO INDEMNIFY. Subject to the limitations
set forth in this Article X, from and after the Effective Time HCCH will
indemnify and hold harmless Continental and Shareholders and their officers,
shareholders, directors, administrators, heirs, personal representatives,
successors and assigns (hereinafter in this Section 10.2 referred to
individually as an "HCCH Indemnified Person" and collectively as "HCCH
Indemnified Persons") from and against any and all claims, demands, actions,
causes of action, losses, costs, damages, liabilities and expenses including,
without limitation, reasonable legal fees (net of: (i) any recoveries under
insurance policies; (ii) recoveries from third parties; and (iii) tax savings
known to HCCH Indemnified Persons at the time of making a claim hereunder)
(hereafter in this Section 10.2 referred to as "Continental Damages") arising
out of any misrepresentation or breach of or default under any of the
representations, warranties, covenants and agreements given or made by HCCH
in this Agreement or any certificate or exhibit delivered by or on behalf of
HCCH pursuant hereto. The indemnification provided for in this Section 10.2 will
not apply unless and until the aggregate Continental Damages for which one or
more HCCH Indemnified Person seeks indemnification exceeds $25,000 in the
aggregate, in which event the indemnification provided for will include all
Continental Damages (a franchise deductible) and shall be limited in the
aggregate to the Cap. The HCCH Indemnified Persons are only entitled to be
reimbursed for the actual indemnified expenditures or damages incurred by
them for the above described losses not to exceed the Cap. Such HCCH
Indemnified Persons are not entitled to consequential, special, or other
speculative or punitive categories of damages.
SECTION 10.3 SURVIVAL OF REPRESENTATIONS. The right to enforce the
breach of each representation, warranty, covenant and agreement set forth in
this Agreement will remain operative and in full force and effect for the
maximum period permitted by applicable law after
34
the Closing (the last date of such applicable period being herein called the
"Final Date"), regardless of any investigation made by or on behalf of the
parties to this Agreement, upon which Final Date such representations,
warranties, covenants and agreements shall expire and be of no further force
and effect. Any litigation or other action of any kind arising out of or
attributable to a breach of any representation, warranty, covenant or
agreement contained in this Agreement, must be commenced prior to the Final
Date. If not so commenced prior to the Final Date, any claims or
indemnifications brought under this Article X will thereafter conclusively be
deemed to be waived regardless of when such claim is or should have been
discovered. Any such claim for indemnification brought under this Article X,
brought before the Final Date, shall survive until a final resolution of such
claim is effective. As set forth herein, no investigation by any party
hereto into the business, operations and conditions of the other party shall
diminish in any way the effect of any representation or warranty made by any
such party in this Agreement or shall relieve any party of any of its
obligations under this Agreement.
SECTION 10.4 PROCEDURE FOR INDEMNIFICATION; THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under this Article X
of notice of a claim against it for indemnification brought under this
Article X (a "Claim"), the indemnified party will, if a claim is to be made
against an indemnifying party, give prompt written notice to the indemnified
party of the Claim, but the failure to promptly notify the indemnified party
will not relieve the indemnified party of any liability that it may have to
any indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudice by the indemnifying
party's failure to give such prompt notice. Such notice shall contain a
description in reasonable detail of facts upon which such Claim is based and,
to the extent known, the amount thereof.
(b) If any Claim referred to in this Article X is made by a third party
against an indemnified party and such indemnified party gives written notice
to the indemnifying party of the Claim, the indemnifying party will be
entitled to participate in the defense of Claim and, to the extent that it
wishes to assume the defense of the Claim and, after written notice from the
indemnifying party to the indemnified party of its election to assume the
defense of the Claim, the indemnifying party shall assume such defense and
will not be liable to the indemnified party under this Article X for any fees
of other counsel or any other expenses with respect to the defense of the
Claim in each case subsequently incurred by the indemnified party in
connection with the defense of the Claim.
SECTION 10.5 APPOINTMENT OF REPRESENTATIVE. Subject to the
successorship provisions of this Section 10.5, Xxxxxxxxx (the "Representative")
is hereby irrevocably appointed as the attorney-in-fact and representative of
the interests of the Shareholders holding Continental Common Stock for all
purposes of this Agreement, and notice is hereby given thereof to HCCH, and,
without independent verification, HCCH may rely upon Representative's
undertakings in such capacity. The Representative shall have full and
irrevocable authority on behalf of the Shareholders, and shall promptly and
completely exercise such authority in a timely fashion to:
35
(a) participate in, represent and bind the Shareholders in all respects
with respect to any arbitration or legal proceeding relating to this
Agreement, including without limitation, all matters relating to any
indemnification under this Section 10.5, taking any action under Section 10.4
including, without limitation, the defense and settlement of any matter, and
the calculation thereof for every purpose thereunder, consent to
jurisdiction, enter into any settlement, and consent to entry of judgment,
each with respect to any or all of the Shareholders;
(b) receive, accept and give notices and other communications relating
to this Agreement;
(c) take any action that the Representative deems necessary or desirable
in order to fully effectuate the transactions contemplated by this Agreement;
(d) execute and deliver any instrument or document that the
Representative deems necessary or desirable in the exercise of his authority
under this Section 10.5; and
(e) waive the fulfillment of any condition or conditions to the Closing.
Those Shareholders who, as of the Closing Date, hold a majority of the
Continental Common Stock may, at any time and by written action delivered to
HCCH, remove the Representative or any successor thereto, but such removal
shall be effective only upon the replacement of such Representative or
successor by a new Representative designated, by written notice delivered to
HCCH, by the holders of a majority of Continental Common Stock, PROVIDED,
however, that any such notice shall be effective upon actual receipt by HCCH.
Any such written notice shall be delivered to HCCH in accordance with the
notice provisions set forth herein. If any Representative shall have died,
become incapacitated or unable to serve, those Shareholders of Continental
Common Stock who, as of the date hereof, hold a majority thereof, shall
promptly designate by written notice delivered to HCCH a replacement
Representative. Any costs and expenses incurred by the Representative in
connection with actions taken pursuant to or permitted by this Section 10.5 will
be borne by the Shareholders and paid or reimbursed to the Representative pro
rata.
The foregoing authorization is granted and conferred in consideration for
the various agreements and covenants of HCCH contained herein. In
consideration of the foregoing, and subject to the successorship provisions
of this Section 10.5, this authorization granted to the Representative shall be
irrevocable and shall not be terminated by any act of any of the Shareholders
or by operation of law, whether by death or incompetence of any Shareholder
or by the occurrence of any other event except the termination of this
Agreement pursuant to the provisions hereof. If after the execution hereof
any such Shareholder shall die or become incompetent, the Representative is
nevertheless authorized and directed to exercise the authority granted in
this Section 10.5 as if such death or incompetence had not occurred and
regardless of notice thereof. The Representative shall have no liability to
any Shareholder for any act or omission or obligation hereunder, provided
that such action or omission is taken by the Representative in good faith and
without willful misconduct.
36
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 FURTHER ASSURANCES. Each party agrees to cooperate
fully with the other parties and to execute such further instruments,
documents and agreements and to give such further written assurances as
may be reasonably requested by any other party to better evidence and
reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement.
SECTION 11.2 FEES AND EXPENSES. Until otherwise agreed by the parties,
each party shall bear its own fees and expenses, including counsel fees and
fees of brokers and investment bankers contracted by such party, in
connection with the transaction contemplated hereby.
SECTION 11.3 NOTICES. Whenever any party hereto desires or is required
to give any notice, demand, or request with respect to this Agreement, each
such communication shall be in writing and shall be effective only if it is
delivered by personal service or mailed, United States registered or
certified mail, postage prepaid, or sent by prepaid overnight courier,
addressed as follows:
HCCH:
HCC Insurance Holdings, Inc.
00000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, President
With a copy to (which shall not constitute notice):
Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
910 Xxxxxx, Suite 1700 (until August 23, 1997- then Xxxxx 0000)
Xxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000 (until August 23, 1997 - then (000) 000-0000)
Attention: Xxxxxx X. Xxxxxx, Esq.
Continental and Representative:
X. X. Xxxxxxxxx, III
000 Xxxxxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
37
With a copy to (which shall not constitute notice):
Xxxxxxxx, Xxxxxxx & Xxxxxx
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq
Such communications shall be effective when they are received by the
addressee thereof. Any party may change its address for such
communications by giving notice thereof to other parties in conformity with
this Section.
SECTION 11.4 GOVERNING LAW. The internal laws of the State of Texas
(irrespective of its choice of law principles) will govern the validity of
this Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto. Any dispute
arising hereunder shall lie exclusively in the state courts of the State of
Texas.
SECTION 11.5 BINDING UPON SUCCESSORS AND ASSIGNS, ASSIGNMENT. This
Agreement and the provisions hereof shall be binding upon each of the
parties, their permitted successors and assigns. This Agreement may not be
assigned by any party without the prior consent of the other.
SECTION 11.6 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances shall continue in full force and
effect and in no way be affected, impaired or invalidated.
SECTION 11.7 ENTIRE AGREEMENT. This Agreement, together with the
Confidentiality Agreement, and any other agreement and instrument referenced
herein constitute the entire understanding and agreement of the parties with
respect to the subject matter hereof and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between parties with respect hereto.
SECTION 11.8 AMENDMENT AND WAIVERS. Any amendment or waiver affecting
the Shareholders shall be valid if consented to in writing by Shareholders.
Any term or provision of this Agreement may be amended, and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a writing signed
by Shareholders. The waiver by Shareholders of any breach hereof or default
in the performance hereof shall not be deemed to constitute a waiver of any
other default or any succeeding breach or default, unless such waiver so
expressly states. At any time before the Effective Time, this Agreement may
be amended or supplemented by Continental, Shareholders or HCCH with respect
to any of the terms contained in this Agreement.
38
SECTION 11.9 NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
SECTION 11.10 CONSTRUCTION OF AGREEMENT. A reference to an Article,
Section or an Exhibit shall mean an Article of, a Section in, or Exhibit to,
this Agreement unless otherwise explicitly set forth. The titles and
headings herein are for reference purposes only and shall not in any manner
limit the construction of this Agreement which shall be considered as a
whole. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
SECTION 11.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against any
party whose signature appears thereon and all of which together shall
constitute one and the same instrument. This Agreement shall become binding
when one or more counterparts hereof, individually or taken together, shall
bear the signatures of all the parties reflected hereon as signatories.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
39
HCC INSURANCE HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxx,
Title: President
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
SIGNATURE PAGE ATTACHED TO STOCK PURCHASE AGREEMENT
DATED AS OF JULY 31, 1997 BY AND AMONG HCC INSURANCE HOLDINGS, INC.
AND THE SHAREHOLDERS OF CONTINENTAL AVIATION UNDERWRITERS, INC.,
AND CONTINENTAL AVIATION UNDERWRITERS, INC.
CONTINENTAL AVIATION UNDERWRITERS, INC.
By: /s/ X. X. Xxxxxxxxx, III
-------------------------------------
Name: X. X. Xxxxxxxxx, III
Title: President
SIGNATURE PAGE ATTACHED TO STOCK PURCHASE AGREEMENT
DATED AS OF JULY 31, 1997 BY AND AMONG HCC INSURANCE HOLDINGS, INC.
AND THE SHAREHOLDERS OF CONTINENTAL AVIATION UNDERWRITERS, INC.,
AND CONTINENTAL AVIATION UNDERWRITERS, INC.
XXXXXXX XXXXXX (USA) INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: Treasurer
SIGNATURE PAGE ATTACHED TO STOCK PURCHASE AGREEMENT
DATED AS OF JULY 31, 1997 BY AND AMONG HCC INSURANCE HOLDINGS, INC.
AND THE SHAREHOLDERS OF CONTINENTAL AVIATION UNDERWRITERS, INC.,
AND CONTINENTAL AVIATION UNDERWRITERS, INC.
/s/ XXXXXX X. XXXXXXXXX, III
----------------------------------------
XXXXXX X. XXXXXXXXX, III
SIGNATURE PAGE ATTACHED TO STOCK PURCHASE AGREEMENT
DATED AS OF JULY 31, 1997 BY AND AMONG HCC INSURANCE HOLDINGS, INC.
AND THE SHAREHOLDERS OF CONTINENTAL AVIATION UNDERWRITERS, INC.,
AND CONTINENTAL AVIATION UNDERWRITERS, INC.
NATIONAL BANK OF COMMERCE, Trustee,
of the Xxxxxx X. Xxxxxxx, Xx. Trust under
Declaration of Trust dated May 14, 1997
By: /s/ Xxxxxxxx Xxxxxxxx
-------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Vice President & Trust Officer
SIGNATURE PAGE ATTACHED TO STOCK PURCHASE AGREEMENT
DATED AS OF JULY 31, 1997 BY AND AMONG HCC INSURANCE HOLDINGS, INC.
AND THE SHAREHOLDERS OF CONTINENTAL AVIATION UNDERWRITERS, INC.,
AND CONTINENTAL AVIATION UNDERWRITERS, INC.
/s/ XXXXXXX X. XXXXXX
----------------------------------------
XXXXXXX X. XXXXXX
SIGNATURE PAGE ATTACHED TO STOCK PURCHASE AGREEMENT
DATED AS OF JULY 31, 1997 BY AND AMONG HCC INSURANCE HOLDINGS, INC.
AND THE SHAREHOLDERS OF CONTINENTAL AVIATION UNDERWRITERS, INC.,
AND CONTINENTAL AVIATION UNDERWRITERS, INC.
/s/ XXXXXX X. XXXXX
----------------------------------------
XXXXXX X. XXXXX
SIGNATURE PAGE ATTACHED TO STOCK PURCHASE AGREEMENT
DATED AS OF JULY 31, 1997 BY AND AMONG HCC INSURANCE HOLDINGS, INC.
AND THE SHAREHOLDERS OF CONTINENTAL AVIATION UNDERWRITERS, INC.,
AND CONTINENTAL AVIATION UNDERWRITERS, INC.
/s/ XXXX XXXXXXX
----------------------------------------
XXXX XXXXXXX
SIGNATURE PAGE ATTACHED TO STOCK PURCHASE AGREEMENT
DATED AS OF JULY 31, 1997 BY AND AMONG HCC INSURANCE HOLDINGS, INC.
AND THE SHAREHOLDERS OF CONTINENTAL AVIATION UNDERWRITERS, INC.,
AND CONTINENTAL AVIATION UNDERWRITERS, INC.
EXHIBIT "A"
CONTINENTAL AVIATION UNDERWRITERS, INC.
SCHEDULE OF SHAREHOLDING INTEREST
SHAREHOLDERS NUMBER AND TAXPAYER
AND PERCENTAGE OF IDENTIFICATION
ADDRESSES SHARES NUMBER
--------- ------ ------
Xxxxxxx Xxxxxx (USA) Inc. 71.0 shares 53.95% 00-0000000
x/x Xxxxx X. Xxxxx, Xxx.
Xxxxxxxx, Xxxxxxx & Xxxxxx
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxxx X. Xxxxxxxxx, III ("Xxxxxxxxx") 17.4 shares 13.22% ###-##-####
000 Xxxxxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxxx, Xx. Trust 12.5 shares 9.50% 00-0000000
Under Declaration of Trust
Dated May 14, 1997 ("Xxxxxxx Trust")
c/o National Bank of Commerce Trust Division
0 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Trustee - National Bank of Commerce
Beneficiary - Xxxxxx X. Xxxxxxx, Xx.
Xxxxxxx X. Xxxxxx ("Xxxxxx") 12.5 shares 9.50% ###-##-####
000 Xxxxxxxx Xxxxx
Xxxxxx Xxxx, XX 00000
Xxxxxx X. Xxxxx ("Saxon") 11.6 shares 8.81% ###-##-####
000 X. Xxxx Xxxx
Xxxxxxx, XX 00000
Xxxx Xxxxxxx ("Xxxxxxx") 6.6 shares 5.02% ###-##-####
000 Xxxx Xxxxx
Xx. Xxxxxx, XX 00000 ---------------------
131.6 shares 100.00%
EXHIBIT "B"
Defined terms are as defined on Exhibit "A"
CASH $ AMOUNT
---- OF HCCH
COMMON STOCK
------------
Xxxxxxxxx $133,853 $312,322
Saxon 89,201 208,137
Xxxxxxx Trust 298,181 -------
Xxxxxx 298,181 -------
Xxxxxxx 157,565 -------
