EXHIBIT 10.330
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AGREEMENT AND PLAN OF REORGANIZATION
dated as of
November 27, 1996
by and among
HCC INSURANCE HOLDINGS, INC.,
MERGER SUB, INC.,
and
NORTH AMERICAN SPECIAL RISK ASSOCIATES, INC.
NASRA TPA, INC.
NASRA CONSULTING, INC.
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
J. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER....................................... 2
Section 1.1 The Merger.................................... 2
Section 1.2 Conversion of Shares.......................... 3
Section 1.3 Exchange of Certificates...................... 3
Section 1.4 Dissenting Shares............................. 4
Section 1.5 Escrow Agreement.............................. 4
Section 1.6 Satisfaction of ▇▇▇▇▇▇▇'▇ Dissenter's Rights.. 4
ARTICLE II THE SURVIVING CORPORATION........................ 5
Section 2.1 Articles of Incorporation..................... 5
Section 2.2 Bylaws........................................ 5
Section 2.3 Directors and Officers........................ 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HOLDCO, AFFILIATED
COMPANIES AND SHAREHOLDERS....................... 5
Section 3.1 Corporate Existence and Power................. 5
Section 3.2 Authorization................................. 6
Section 3.3 Governmental Authorization.................... 6
Section 3.4 Non-Contravention............................. 7
Section 3.5 Capitalization................................ 8
Section 3.6 Subsidiaries and Joint Ventures............... 9
Section 3.7 NASRA Financial Statements.................... 9
Section 3.8 TPA Financial Statements...................... 10
Section 3.9 Consulting Financial Statements............... 10
Section 3.10 Absence of Certain Changes.................... 10
Section 3.11 No Undisclosed Liabilities.................... 12
Section 3.12 Litigation.................................... 12
Section 3.13 Accounting Matters............................ 13
Section 3.14 Taxes......................................... 13
Section 3.15 Employee Benefit Plans, ERISA................. 14
Section 3.16 Material Agreements........................... 16
Section 3.17 Properties.................................... 16
Section 3.18 Environmental Matters......................... 17
Section 3.19 Labor Matters................................. 18
Section 3.20 Compliance with Laws.......................... 18
Section 3.21 Trademarks, Tradenames, Etc................... 18
Section 3.22 Sale of NASRA................................. 18
Section 3.23 Broker's Fees................................. 18
Section 3.24 Investment Representation..................... 18
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TABLE OF CONTENTS (Cont.)
Section 3.25 Total Assets.................................. 19
Section 3.26 Resignation of ▇▇▇▇▇▇▇........................ 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HCCH........... 19
Section 4.1 Corporate Existence and Power................. 19
Section 4.2 Corporate Authorization....................... 20
Section 4.3 Governmental Authorization.................... 20
Section 4.4 Non-Contravention............................. 20
Section 4.5 Capitalization of HCCH........................ 21
Section 4.6 Organization of Merger Sub.................... 22
Section 4.7 Subsidiaries.................................. 22
Section 4.8 SEC Filings................................... 22
Section 4.9 Financial Statements.......................... 23
Section 4.10 Absence of Certain Changes.................... 23
Section 4.11 No Undisclosed Liabilities.................... 24
Section 4.12 Litigation.................................... 24
Section 4.13 Taxes......................................... 24
Section 4.14 Employee Benefit Plans; ERISA................. 25
Section 4.15 Material Agreements........................... 26
Section 4.16 Properties.................................... 27
Section 4.17 Environmental Matters......................... 27
Section 4.18 Labor Matters................................. 28
Section 4.19 Compliance with Laws.......................... 28
Section 4.20 Trademarks, Tradenames, Etc................... 28
Section 4.21 Broker's Fees................................. 28
ARTICLE V COVENANTS OF HOLDCO, ETC......................... 28
Section 5.1 Conduct of Holdco and Affiliated Companies.... 28
Section 5.2 Shareholder Approval.......................... 30
Section 5.3 Access to Financial and Operational
Information.................................. 30
Section 5.4 Other Offers.................................. 31
Section 5.5 Maintenance of Business....................... 31
Section 5.6 Compliance with Obligations................... 31
Section 5.7 Notices of Certain Events..................... 32
Section 5.8 Affiliates Agreement.......................... 32
Section 5.9 Necessary Consents............................ 32
Section 5.10 Regulatory Approval........................... 32
Section 5.11 Satisfaction of Conditions Precedent.......... 33
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TABLE OF CONTENTS (Cont.)
ARTICLE VI COVENANTS OF HCCH AND MERGER SUB................. 33
Section 6.1 Conduct of HCCH............................... 33
Section 6.2 Listing of HCCH Common Stock.................. 33
Section 6.3 Access to Financial and Operation Information. 33
Section 6.4 Maintenance of Business....................... 34
Section 6.5 Compliance with Obligations................... 34
Section 6.6 Notices of Certain Events..................... 34
Section 6.7 Obligations of Merger Sub..................... 35
Section 6.8 Notice to Affiliates.......................... 35
Section 6.9 Employee Matters.............................. 35
Section 6.10 Officers and Directors Insurance.............. 35
ARTICLE VII COVENANTS OF HCCH, HOLDCO AND AFFILIATED
COMPANIES....................................... 35
Section 7.1 Advice of Changes............................. 35
Section 7.2 Regulatory Approvals.......................... 36
Section 7.3 Actions Contrary to Stated Intent............. 36
Section 7.4 Certain Filings............................... 36
Section 7.5 Communications................................ 36
Section 7.6 Satisfaction of Conditions Precedent.......... 36
Section 7.7 Tax Cooperation............................... 37
ARTICLE VIII CONDITIONS TO THE MERGER......................... 37
Section 8.1 Conditions to Obligations of HCCH and
Merger Sub.................................. 37
Section 8.2 Conditions to Obligations of Holdco,
Affiliated Companies and Shareholders........ 39
Section 8.3 Conditions to Obligations of Each Party....... 40
ARTICLE IX TERMINATION OF AGREEMENT......................... 40
Section 9.1 Termination................................... 40
Section 9.2 Effect of Termination......................... 41
ARTICLE X CLOSING MATTERS.................................. 41
Section 10.1 The Closing................................... 41
Section 10.2 Conversion of Certificates.................... 42
ARTICLE XI INDEMNIFICATION AND REMEDIES, CONTINUING
COVENANTS....................................... 42
Section 11.1 Agreement to Indemnify........................ 42
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TABLE OF CONTENTS (Cont.)
Section 11.2 Indemnification with Respect to Jamaica
Lawsuit and Taxes............................ 43
Section 11.3 HCCH Agreement to Indemnify................... 44
Section 11.4 Appointment of Representative................. 44
Section 11.5 Survival of Representations................... 45
Section 11.6 Procedure for Indemnification; Third
Party Claims................................. 46
ARTICLE XII MISCELLANEOUS.................................... 46
Section 12.1 Further Assurances............................ 46
Section 12.2 Fees and Expenses............................. 47
Section 12.3 Notices....................................... 47
Section 12.4 Governing Law................................. 48
Section 12.5 Binding upon Successors and Assigns,
Assignment................................... 48
Section 12.6 Severability.................................. 48
Section 12.7 Entire Agreement.............................. 48
Section 12.8 Amendment and Waivers......................... 48
Section 12.9 No Waiver..................................... 49
Section 12.10 Construction of Agreement..................... 49
Section 12.11 Counterparts.................................. 49
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is entered
into as of the 27th day of November, 1996 by and among HCC Insurance
Holdings, Inc., a Delaware corporation ("HCCH"), Merger Sub, Inc. an Illinois
corporation and a wholly owned subsidiary of HCCH ("Merger Sub"), North
American Special Risks Associates, Inc. ("Holdco" or "NASRA"), an Illinois
corporation, NASRA TPA, Inc. ("TPA"), an Illinois corporation, NASRA
Consulting, Inc. ("Consulting"), an Illinois corporation (TPA and Consulting
being from time to time collectively referred to herein as the "Affiliated
Companies"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), and
J. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇") (▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ being
collectively referred to as the "Original Shareholders" and the Original
Shareholders and any person becoming a shareholder of Holdco subsequent to
the date hereof and on or before the Effective Date who executes a
counterpart signature page in the form attached hereto being collectively
referred to herein as the "Shareholders"). As of the Effective Date, wherever
used herein and in the NASRA Disclosure Schedule (as hereinafter defined),
the term "Affiliated Companies" shall mean "Subsidiaries" (as hereinafter
defined).
RECITALS:
A. The Boards of Directors of each of HCCH, Merger Sub and NASRA have
determined (a) to engage in a transaction pursuant to which (i) prior to the
Effective Date (as hereinafter defined), TPA shall become a wholly owned
subsidiary of Holdco, by means of a contribution to the capital of Holdco by
Mellon, of all of the shares of common stock of TPA held by Mellon in
exchange for 5,382 shares of NASRA Common Stock, (ii) Consulting will merge
into NASRA, with NASRA being the surviving company, and the Original
Shareholders receiving 100 shares of NASRA Common Stock in consideration
therefor, (iii) Merger Sub will merge with and into Holdco (the "Merger"),
(iv) the capital stock of Merger Sub shall be converted into shares of common
stock of Holdco (the "Holdco Common Stock"); and (v) each share of Holdco
Common Stock outstanding immediately prior to the Effective Time shall be
converted into shares of common stock, par value $1.00 per share, of HCCH
(the "HCCH Common Stock") in the manner herein described, all upon the terms
and subject to the conditions set forth herein or (b) if otherwise advised by
counsel, to engage in a transaction involving any alternative structure
whereby the Affiliated Companies will be able to carry out the intent of this
Agreement as agreed upon in a writing signed by each party hereto.
B. The Board of Directors of NASRA has determined that based on the
relative values of their holdings of NASRA, including the detrimental effect
of certain call options relating to the shares of NASRA Common Stock held by
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇, the shares of NASRA held by the Original Shareholders
result in the value of NASRA after consummation of the transactions described
in Recital A above to be held as follows: Mellon - 93.6%; ▇▇▇▇▇▇▇ - 5.3% and
▇▇▇▇▇▇▇▇▇ 1.1%, and the Original Shareholders have agreed to such relative
values.
C. The Boards of Directors of Holdco and the Affiliated Companies have
approved, and the Board of Directors of Holdco has resolved, subject to the
terms of this Agreement, to
recommend that shareholders of Holdco approve the Merger, this Agreement and
the Articles of Merger (as defined herein).
D. The Board of Directors of HCCH has approved the Merger, this
Agreement and the Articles of Merger. HCCH, as the sole shareholder of Merger
Sub, has approved the Merger, this Agreement and the Articles of Merger.
E. The parties intend for the transactions contemplated by this
Agreement to qualify as a plan of reorganization in accordance with the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and to be accounted for as a "pooling-of-interests" for
accounting purposes.
▇. ▇▇▇▇▇▇▇ has informed NASRA that he intends to dissent from agreeing
to the transactions contemplated by this Agreement and the Merger and to
receive the fair value for his shares of NASRA pursuant to the Illinois
Business Corporation Act.
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
THE MERGER
Section 1.1 The Merger.
(a) Subject to the terms and conditions of this Agreement, Merger Sub
will be merged into Holdco in accordance with the laws of the State of
Illinois ("Illinois Law"), whereupon the separate existence of Merger Sub
shall cease, and Holdco shall be the surviving corporation (the "Surviving
Corporation").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, Holdco and
Merger Sub shall file articles of merger, in substantially the form attached
hereto as Exhibit 1.1(b) (the "Articles of Merger"), in the Office of the
Secretary of the State of Illinois, and make all such other filings or
recordings required by Illinois Law in connection with the Merger. The Merger
shall become effective at such time as the Articles of Merger are duly filed
with the Office of the Secretary of the State of Illinois, in accordance with
the relevant provisions of Illinois Law (the "Effective Time"). The date on
which the Effective Time shall occur is referred to herein as the "Effective
Date."
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to
all of the restrictions, disabilities and duties of Holdco and Merger Sub,
all as provided under Illinois Law.
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Section 1.2 Conversion of Shares. At the Effective Time, each share of
common stock, par value $1.00 per share, of Merger Sub outstanding
immediately prior to the Effective Time shall automatically and without any
action on the part of the holder thereof, be converted into one share of
common stock of the Surviving Corporation, and, except as set forth herein in
connection with the payment of cash for ▇▇▇▇▇▇▇'▇ shares in NASRA, shares of
Holdco Common Stock outstanding immediately prior to the Effective Time shall
automatically and without any action on the part of the holder thereof cease
to be outstanding and be converted into the right to receive shares of HCCH
Common Stock as follows:
(a) 7,404.2 shares of Holdco held by Mellon shall be converted into
1,123,200 shares of HCCH Common Stock;
(b) 622.2 shares of Holdco held by ▇▇▇▇▇▇▇ shall be converted into
63,600 shares of HCCH Common Stock; and
(c) 155.6 shares of Holdco held by ▇▇▇▇▇▇▇▇▇ shall be converted into
13,200 shares of HCCH Common stock.
No fractional shares shall be issued and each holder of Holdco Common Stock
shall be entitled to the nearest whole share of HCCH Common Stock rounded
upwards if such fractional share exceeds .5 and otherwise rounded downwards,
provided, however, that HCCH shall under no circumstances be obligated
hereunder to issue shares of HCCH Common Stock in excess of an aggregate of
1,200,000 shares of HCCH Common Stock.
Section 1.3 Exchange of Certificates.
(a) Prior to the Effective Date, HCCH shall appoint KeyCorp Shareholder
Services, Inc. to act as exchange agent (the "Exchange Agent") in the Merger.
(b) At the Effective Time, HCCH shall exchange the shares of HCCH Common
Stock issuable pursuant to Section 1.2 in exchange for all outstanding shares
of Holdco Common Stock (other than for shares of Holdco Common Stock held by
any Shareholder who has elected to accept appraisal rights as contemplated by
Section 1.4).
(c) If prior to the Merger, HCCH recapitalizes either through a split-up
of its outstanding shares into a greater number, or through a combination of
its outstanding shares into a lesser number, or reorganizes, reclassifies or
otherwise changes its outstanding shares into the same or a different number
of shares of other classes (other than through a split-up or a combination of
shares provided for in the previous clause), or declares a dividend on its
outstanding shares payable in shares or securities convertible into shares
(but not cash), the number of shares of HCCH Common Stock into which the
shares of Holdco Common Stock are to be converted will be adjusted in
proportion to such change.
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Section 1.4 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, the
shares of any holder of Holdco Common Stock who has demanded and perfected
appraisal rights for such shares in accordance with Illinois Law and who, as
of the Effective Time, has not effectively withdrawn or lost such appraisal
rights ("Dissenting Shares") shall not be converted into or represent a right
to receive HCCH Common Stock pursuant to Section 1.2, but the holder thereof
shall only be entitled to such rights as are granted by Illinois Law.
(b) Notwithstanding the provisions of subsection (a), if any holder of
shares of Holdco Common Stock who demands appraisal of such shares under
Illinois Law shall effectively withdraw such appraisal demand or fail to
perfect or otherwise lose the right to appraisal, then, as of the later of
the Effective Time and the occurrence of such event, such shareholder's
shares of Holdco Common Stock shall automatically be converted into and
represent only the right to receive HCCH Common Stock, without interest
thereon, upon surrender of the certificate representing such shares.
(c) Holdco shall give HCCH (i) prompt notice of any written demands for
appraisal of any shares of Holdco Common Stock, withdrawals of such demands,
and any other instruments served pursuant to Illinois Law and received by
Holdco which relate to any such demand for appraisal and (ii) the opportunity
to participate in all negotiations and proceedings which take place prior to
the Effective Time with respect to demands for appraisal under Illinois Law.
(d) If holders of Holdco Common Stock entitled to receive an excess of
100,000 shares of HCCH Common Stock demand appraisal rights as provided for
herein and refuse to withdraw such demand prior to the Effective Date, HCCH,
in its sole and absolute discretion, shall have the right to terminate this
Agreement.
Section 1.5 Escrow Agreement. Pursuant to an Escrow Agreement to be
entered into on or before the Closing Date (as hereinafter defined) in
substantially the form of Exhibit 1.5 (the "Escrow Agreement"), among HCCH,
the Shareholders and KeyCorp Shareholders Services, Inc., as Escrow Agent,
HCCH will withhold from the shares of HCCH Common Stock that would otherwise
be delivered to the Shareholders, 10% of the total number of shares of HCCH
Common Stock issued to the Shareholders in the Merger and 10% of the cash
otherwise to be received by ▇▇▇▇▇▇▇ pursuant to this Agreement. On the
Closing Date, HCCH will deposit, or cause to be deposited in escrow pursuant
to the Escrow Agreement, certificates representing the shares and the cash
thus withheld. The shares of HCCH Common Stock represented by the
certificates and the cash deposited in escrow as provided above in this
Section 1.5 (the "Escrow Shares") will be held as collateral for the
indemnification obligations of the Shareholders under Sections 11.1 and 11.2
below and pursuant to the Escrow Agreement pending their release from escrow
in accordance with the terms of the Escrow Agreement.
Section 1.6 Satisfaction of ▇▇▇▇▇▇▇'▇ Dissenter's Rights. At the
Effective Time, HCCH agrees that at the Closing it will pay to ▇▇▇▇▇▇▇ an
amount equal to 63,600 multiplied
4
by the average of the high and low sales price of HCCH Common Stock on the
New York Stock Exchange for the ten (10) trading days ending two trading days
before the Effective Date, and that such amount is the fair value for
▇▇▇▇▇▇▇'▇ shares of NASRA and is in full satisfaction of ▇▇▇▇▇▇▇'▇ right to
dissent from the consummation of the Merger in accordance with Illinois Law.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation. At the Effective Time, the
Articles of Incorporation of Merger Sub as in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation.
Section 2.2 Bylaws. At the Effective Time, the Bylaws of Merger Sub as
in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation.
Section 2.3 Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance
with applicable law, the directors and officers of Merger Sub at the
Effective Time shall become directors and the officers of the Surviving
Corporation. In addition, HCCH shall take all necessary action to cause
Mellon to be appointed Chairman of the Board, Chief Executive Officer and
President of the Surviving Corporation, such appointment to become effective
as of the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOLDCO,
AFFILIATED COMPANIES AND SHAREHOLDERS
Except as disclosed in a document referring specifically to this
Agreement (the "NASRA Disclosure Schedule") which has been delivered to HCCH
on or before the date hereof, each of Holdco, each Affiliated Company and
each Shareholder (severally and not jointly) represents and warrants to HCCH
as set forth below (it being agreed that the disclosure on the NASRA
Disclosure Schedule of the existence of any document or fact or circumstance
or situation relating to any representations, warranties, covenants or
agreements in any section of this Agreement 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. Holdco and each of the
Affiliated Companies is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, and have all
corporate powers and all material governmental licenses, authorizations,
consents and approvals (collectively, "Governmental Authorizations")
5
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 Holdco or such Affiliated
Company. Holdco and each of the Affiliated Companies 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 Holdco
or such Affiliated Company. For purposes of this Agreement, a "Material
Adverse Effect," with respect to any person or entity (including without
limitation Holdco, each Affiliated Company 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. Holdco has delivered to HCCH true
and complete copies of Holdco's and each Affiliated Company's Articles of
Incorporation or Articles of Incorporation, as the case may be, and Bylaws as
currently in effect.
Section 3.2 Authorization.
(a) The execution, delivery and performance by Holdco and each of the
Affiliated Companies of this Agreement and, in the case of Holdco, the
Articles of Merger, and the consummation by Holdco and each of the Affiliated
Companies of the transactions contemplated hereby and thereby including the
execution of the Confidentiality Agreement (as hereinafter defined), are
within Holdco and each Affiliated Company's corporate powers and have been
duly authorized by all necessary corporate action, excluding approval by the
Shareholders in connection with the consummation of the Merger. This
Agreement, the Articles of Merger, and the Confidentiality Agreement
constitute, or upon execution will constitute, valid and binding agreements
of Holdco and each of the Affiliated Companies party thereto, enforceable
against such agreeing party 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.
(b) Each of the Shareholders, severally, represents and warrants that he
has full right, power and authority to enter into this Agreement, the
Affiliates Agreement to be entered into by him, and each other agreement to
be entered into by him in connection with the transactions contemplated
hereby and that this Agreement, the Affiliates Agreement, and such other
agreements contemplated hereby constitute, or upon execution will constitute,
valid and binding agreements of such Shareholder, enforceable against him 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 3.3 Governmental Authorization. The execution, delivery and
performance by Holdco, each of the Affiliated Companies and each Shareholder
of this Agreement, the execution, delivery and performance by Holdco of the
Articles of Merger and the Confidentiality
6
Agreement and the consummation of the Merger by Holdco require no action by
or in respect of, or filing with, any governmental body, agency, official or
authority other than:
(a) the filing of Articles of Merger in accordance with Illinois Law;
(b) compliance with any applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust improvements Act of 1976, as amended (the "HSR Act");
(c) compliance with any applicable requirements of the Securities Act
and the rules and regulations promulgated thereunder;
(d) compliance with any applicable foreign or state securities or "blue
sky" laws;
(e) 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;
(f) 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 Holdco, the Affiliated
Companies or the Surviving Corporation, or (ii) would not materially
adversely affect the ability of Holdco, each Affiliated Company, HCCH or
Merger Sub to consummate the transactions contemplated hereby and operate
their businesses as heretofore operated.
Section 3.4 Non-Contravention. The execution, delivery and performance by
Holdco and each of the Affiliated Companies of this Agreement, the execution,
delivery and performance by Holdco of the Articles of Merger and the
consummation by Holdco and each of the Affiliated Companies of the
transactions contemplated hereby and thereby do not and will not:
(a) contravene or conflict with each such company's charter or bylaws;
(b) assuming compliance with the matters referred to in Section 3.3 and
assuming the requisite approval by the Shareholders of the Merger, 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 Holdco or any of the Affiliated Companies;
(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 Holdco or
any of the Affiliated Companies or any material license, franchise, permit or
other similar authorization held by Holdco or any of the Affiliated
Companies; or
(d) result in the creation or imposition of any Lien (as hereinafter
defined) on any material asset of Holdco or any of the Affiliated Companies,
7
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 Holdco or any of the Affiliated
Companies. 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 3.5 Capitalization.
(a) As of October 31, 1996, the authorized, issued and outstanding
capital stock of each Affiliated Company was as follows:
North American Special Risk Associates, Inc.:
no par value, 100,000 shares Common Stock
authorized; 2,700 shares issued and outstanding
NASRA TPA, Inc.:
no par value, 1,000,000 shares of Class
A Common Stock and 1,000,000
shares of Class B Common Stock authorized;
1,000 shares of Class A issued and outstanding
NASRA Consulting, Inc.:
no par value, 1,000,000 shares Common
Stock authorized; 450 shares issued and outstanding
(b) After giving effect to the merger of Consulting with and into NASRA
and the contribution of the TPA shares of common stock to NASRA by Mellon,
there will be 8,400 shares of NASRA issued and outstanding.
(c) All outstanding shares set forth in (a) and (b) above have been, or
will be prior to the Effective 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 each of
Holdco and each Affiliated Company 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 "NASRA
Securities"), (iv) no obligations to repurchase, redeem or otherwise acquire
any of its outstanding 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.
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Section 3.6 Subsidiaries and Joint Ventures.
(a) For purposes of this Section 3.6, (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. For purposes
of this Agreement, in no event shall "Subsidiary" or "Joint Venture" include
Silver Eagle Agency, Inc., an Illinois corporation; or Mellon Patch, Inc., an
Illinois corporation.
(b) As of the date hereof, neither Holdco nor any of the Affiliated
Companies has any Subsidiaries or Joint Ventures which are material to the
business of Holdco or any of the Affiliated Companies. As of the Closing
Date, as defined herein, the only Subsidiaries of Holdco shall be the
Affiliated Companies and their respective jurisdictions of incorporation or
organization and Holdco's ownership interest therein are identified in
Exhibit 3.6(b). Other than Holdco's investments in its Subsidiaries as of the
Effective Time, neither Holdco nor any of the Affiliated Companies own,
directly or indirectly, any outstanding capital stock or equity interest in
any corporation, partnership, Joint Venture or other entity.
(c) All of the outstanding capital stock of, or other ownership
interests in, each Subsidiary that is or may be owned by Holdco or any
Affiliated Company on the Effective Date, and all of the outstanding stock of
Holdco and each of the Affiliated Companies owned by the Shareholders
directly or indirectly, is or will be owned by Holdco, or the Shareholders,
as the case may be, directly or indirectly, free and clear of any material
Lien and free of any other material limitation or restriction on its or their
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 or this Agreement or the
Affiliates Agreement (defined below). Each Shareholder represents and
warrants only as to his or her individual ownership of Holdco Common Stock
for purposes of this Section.
Section 3.7 NASRA Financial Statements. NASRA has delivered to HCCH
NASRA's unaudited balance sheet as of October 31, 1996 (the "Balance Sheet
Date"), NASRA's unaudited income statements for the six month period ended
September 30, 1996, NASRA's audited balance sheet as of March 31, 1996 and
1995, and NASRA's audited income statement for the fiscal years ended March
31, 1996, 1995, and 1994 (collectively, the "NASRA Financial Statements").
The NASRA 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 NASRA 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). Holdco
and the Affiliated Companies taken as a whole have no material debt,
liability or obligation of any nature, whether accrued, absolute, contingent
or
9
otherwise, and whether due or to become due, that is not reflected, reserved
against or disclosed in the NASRA Financial Statements, except for (i) those
reflected in the TPA Financial Statements (defined below), (ii) those
reflected in the Consulting Financial Statements (defined below); (iii) those
that are not required to be reported in accordance with the aforesaid
accounting principles; (iv) normal or recurring liabilities incurred since
October 31, 1996 in the ordinary course of business or (v) as disclosed in
the NASRA Disclosure Schedule.
Section 3.8 TPA Financial Statements. Holdco has delivered to HCCH TPA's
unaudited balance sheet as of October 31, 1996 (the "Balance Sheet Date"),
TPA's unaudited income statements for the nine month period ended September
30, 1996, TPA's audited balance sheet as of December 31, 1995 and 1994, and
TPA's audited income statement for the fiscal years ended December 31, 1995,
1994, and 1993 (collectively, the "TPA Financial Statements"). The TPA
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
TPA 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).
Section 3.9 Consulting Financial Statements. Holdco has delivered to
HCCH Consulting's unaudited balance sheet as of October 31, 1996 (the
"Balance Sheet Date"), Consulting's unaudited income statements for the nine
month period ended September 30, 1996, Consulting's unaudited balance sheet
as of December 31, 1995 and 1994, and Consulting's unaudited income statement
for the fiscal years ended December 31, 1995, 1994, and 1993 (collectively,
the "Consulting Financial Statements"). The Consulting 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 Consulting 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).
Section 3.10 Absence of Certain Changes. Except as disclosed in the
NASRA Disclosure Schedule, since March 31, 1996 with respect to NASRA and
since December 31, 1995 with respect to TPA and Consulting, each Affiliated
Company 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
Holdco or any of the Affiliated Companies, which as of the date hereof could
reasonably be expected to have a Material Adverse Effect on Holdco or any of
the Affiliated Companies;
(b) any declaration, setting aside or payment or any dividend or other
distribution in respect of any shares of capital stock of Holdco or any of
the Affiliated Companies other than
10
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 the Affiliated Companies' past policy or practice or with
respect to NASRA or Consulting any declaration, setting aside or payment of
distributions or dividends to "S" Corporation shareholders;
(c) any repurchase, redemption or other acquisition by Holdco or any of
the Affiliated Companies of any outstanding shares of capital stock or other
securities of or other ownership interests in Holdco or any of the Affiliated
Companies;
(d) any amendment of any term of any outstanding securities of Holdco or
any of the Affiliated Companies;
(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 Holdco or any of the Affiliated Companies which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on Holdco or any of the Affiliated Companies;
(f) any increase in indebtedness for borrowed money or capitalized lease
obligations of Holdco or any of the Affiliated Companies, except in the
ordinary course of business;
(g) any sale, assignment, transfer or other disposition of any tangible
or intangible asset material to the business of Holdco or any of the
Affiliated Companies, except in the ordinary course of business and for a
fair and adequate consideration;
(h) any amendment, termination or waiver by Holdco or any of the
Affiliated Companies 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 Holdco or any of the Affiliated Companies;
(j) any (i) grant of any severance or termination pay to any director,
officer or employee of Holdco or any of the Affiliated Companies, (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 Holdco or any of the Affiliated Companies,
(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 Holdco or any of the Affiliated Companies, 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
11
fringe benefit plan, arrangement or trust agreement adopted or implemented by
Holdco or any of the Affiliated Companies which would result in a material
increase in cost;
(l) any capital expenditures, capital additions or capital improvements
incurred or undertaken by Holdco or any of the Affiliated Companies, except
in the ordinary course of business; or
(m) the entering into of any agreement by Holdco or any of the
Affiliated Companies or any person on behalf of Holdco or any of the
Affiliated Companies to take any of the foregoing actions.
Section 3.11 No Undisclosed Liabilities. There are no liabilities of
Holdco or any of the Affiliated Companies of any kind whatsoever that are,
individually or in the aggregate, material to Holdco and the Affiliated
Companies, taken as a whole, other than:
(a) liabilities disclosed or provided for in the NASRA audited financial
statements as of and for the fiscal year ended March 31, 1996 (including the
notes thereto);
(b) liabilities of NASRA incurred in the ordinary course of business
consistent with past practice since March 31, 1996;
(c) liabilities disclosed or provided for in the TPA audited financial
statements as of and for the fiscal year ended December 31, 1995 (including
the notes thereto):
(d) liabilities of TPA incurred in the ordinary course of business
consistent with past practice since December 31, 1995;
(e) liabilities disclosed or provided for in the Consulting unaudited
financial statements as of and for the fiscal year ended March 31, 1996
(including the notes thereto);
(f) liabilities of Consulting incurred in the ordinary course of
business consistent with past practice since March 31, 1996; and
(g) liabilities under this Agreement or indicated in the NASRA
Disclosure Schedule.
Section 3.12 Litigation. Except as set forth in the NASRA Disclosure
Schedule and 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 $100,000 in the aggregate, there
is no action, suit, proceeding, claim or investigation pending or, to the
knowledge of Holdco, any of the Affiliated Companies or the Original
Shareholders, overtly threatened, against Holdco or any of the Affiliated
Companies or any of their assets or against or involving any of their
officers, directors or employees in connection with the business or affairs
of Holdco or any of the Affiliated Companies, including, without limitation,
any such claims for indemnification arising under any agreement to which
Holdco or any of the Affiliated Companies is a party. Neither Holdco nor any
of the Affiliated
12
Companies 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 Holdco or any of the Affiliated Companies.
Section 3.13 Accounting Matters. Except for all actions disclosed to and
approved by HCCH, neither Holdco, any of the Affiliated Companies, nor any of
the Shareholders knowingly has taken or agreed to take any action that
(without giving effect to any action taken or agreed to be taken by HCCH or
any of its affiliates) would prevent HCCH from accounting for the business
combination to be effected by the Merger as a pooling-of-interests. Upon
execution of this Agreement, each of Holdco, NASRA, TPA and Consulting will
have received a letter from its independent public accountants to the effect
that if the Merger were to be consummated on the date of this Agreement, each
of Holdco, NASRA, TPA and Consulting qualifies as an entity that may be a
party to a business combination for which the pooling-of-interests method of
accounting would be available.
Section 3.14 Taxes.
(a) Each of Holdco and each of the Affiliated Companies (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, with
respect to Holdco, NASRA, TPA and Consulting, accrued on the NASRA Financial
Statements, TPA Financial Statements or Consulting 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 an Affiliated
Company 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 NASRA Disclosure Schedule sets forth those tax returns of
each of the Affiliated Companies (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 any
of the Affiliated Companies to be due in respect of any tax returns filed by
any of the Affiliated Companies (or any predecessor corporations). Neither
any of the Affiliated Companies nor any predecessor corporation, has executed
or filed with the 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.
13
(c) No Affiliated Company is a party to or bound by (or will prior to
the Effective Date become a party to or bound by) any Tax indemnity, Tax
sharing or Tax allocation agreement or other similar arrangement. No
Affiliated Company has been a member of an affiliated group or filed or been
included in a combined, consolidated or unitary Tax return.
(d) Consulting has maintained a valid subchapter S election pursuant to
the Code, and there is no corporate income tax due from Consulting.
Section 3.15 Employee Benefit Plans, ERISA.
(a) Neither Holdco nor any of the Affiliated Companies is 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 Holdco or any
of the Affiliated Companies (A) the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving Holdco or any of the Affiliated Companies 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 Holdco, any Affiliated Company 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 Holdco or any
Affiliated Company (a "NASRA 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 NASRA Disclosure Schedule (which Plans
have been heretofore delivered to HCCH) and maintained by NASRA 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) No Pension Plan or Welfare Plan is currently subject to an audit or
other investigation by the Internal Revenue Service ("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.
14
(d) No "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, resulting in liability to Holdco, or any Affiliated
Company, or any NASRA ERISA Affiliate has occurred with respect to any
Pension Plan or Welfare Plan. Each of Holdco, each Affiliated Company or
Original Shareholder has no knowledge of any breach of fiduciary
responsibility under Part 4 of Title I of ERISA which has resulted in
liability of Holdco, any Affiliated Company, and NASRA ERISA Affiliate, any
trustee, administrator or fiduciary of any Pension Plan or Welfare Plan.
(e) Neither Holdco, any Affiliated Company, nor any NASRA 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 Holdco, any Affiliated
Company, nor any NASRA 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 Holdco, any Affiliated Company, or any NASRA ERISA
Affiliate.
(f) There is no contract, agreement, plan or arrangement covering any
employee or former employee of Holdco or any NASRA 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 Holdco, each Affiliated Company and each NASRA ERISA
Affiliate, the NASRA Disclosure Schedule correctly identifies each material
agreement, policy, plan or other arrangement, whether written or oral,
express or implied, fixed or contingent, to which Holdco or any Affiliated
Company is a party or by which Holdco or any Affiliated Company or any
property or asset of Holdco or any Affiliated Company is bound, which is or
relates to a pension, option, bonus, deferred compensation, retirement, stock
purchase, profitsharing, severance pay, health, welfare, incentive,
vacation, sick leave, medical disability, hospitalization, life or other
insurance or fringe benefit plan, policy or arrangement.
(h) Neither Holdco, any Affiliated Company, nor any NASRA 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. Holdco and each Affiliated Company 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 Holdco and each Affiliated Company 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.
15
Section 3.16 Material Agreements.
(a) The NASRA Disclosure Schedule includes a complete and accurate list
of all contracts, agreements, leases (other than NASRA Property Leases, as
hereinafter defined), and instruments to which Holdco or any of the
Affiliated Companies 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 Holdco or
any of the Affiliated Companies, 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 NASRA Agreements").
(b) Neither Holdco nor any Affiliated Company nor, to the knowledge of
Holdco or any Affiliated Company, any other party is in default under any
Material NASRA 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 NASRA 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 Holdco or any Affiliated Company, which, in any such case, has had
or would reasonably be expected to have a Material Adverse Effect.
(c) To the knowledge of Holdco and each Affiliated Company, each such
Material NASRA 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 NASRA Agreement. No party to a Material NASRA
Agreement has advised Holdco or any Affiliated Company that it intends either
to terminate a Material NASRA Agreement or to refuse to renew a Material
NASRA Agreement upon the expiration of the term thereof.
(d) Holdco and each Affiliated Company is not in violation of, or in
default with respect to, any term of its Articles or Certificate of
Incorporation, as the case may be, or Bylaws.
Section 3.17 Properties. To the knowledge of Holdco and each of the
Affiliated Companies, Holdco or such Affiliated Company owns no real estate,
and all leases of real property to which Holdco or any of the Affiliated
Companies is a party or by which it is bound ("NASRA Property Leases") are in
full force and effect. To the knowledge of Holdco or any Affiliated Company,
there exists no default under such NASRA 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 Holdco and each of the Affiliated Companies are
owned by each of them, respectively, free and clear of any Lien, except for
Liens which do not have a Material Adverse Effect. Holdco and each of the
Affiliated Companies have good and indefeasible title with respect to such
owned properties and assets subject to no Liens, other than those permitted
under this Section 3.17, to
16
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 3.18 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.
"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) To the knowledge of Holdco or any of the Affiliated Companies, 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) Neither Holdco nor any of the Affiliated Companies has any material
Environmental Liabilities and there has been no release of Hazardous
Substances into the environment by Holdco or any of the Affiliated Companies
or with respect to any of their respective properties which has had, or would
reasonably be expected to have, a Material Adverse Effect.
17
Section 3.19 Labor Matters. Neither Holdco nor any of the Affiliated
Companies is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by Holdco or any such
Affiliated Companies, nor do they know of any activities or proceedings of
any labor union to organize any such employees.
Section 3.20 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, neither Holdco nor any of the
Affiliated Companies 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 3.21 Trademarks, Tradenames, Etc. Holdco and the Affiliated
Companies own or possess, or hold 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 their business as now conducted, without any
known conflict with the rights of others.
Section 3.22 Sale of NASRA. Except as contemplated by this Agreement,
there are currently no discussions to which any of the Affiliated Companies
is a party relating to (a) the sale of any material portion of their assets
or (b) any merger, consolidation, liquidation, dissolution or similar
transaction involving any of the Affiliated Companies whereby any of the
Affiliated Companies will issue any securities or for which any of the
Affiliated Companies is required to obtain the approval of its shareholders.
Section 3.23 Broker's Fees. Neither Holdco, any Affiliated Company, any
Original Shareholder 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 the Merger.
Section 3.24 Investment Representation. The shares of HCCH Common Stock
to be acquired by the Shareholders pursuant to the Merger will be acquired
solely for the account of such Shareholders, for investment purposes only and
not with a view to the distribution thereof. The 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. Each Shareholder has such knowledge and experience in
business matters that he is capable of evaluating the merits and risks of an
investment in HCCH and the acquisition of the shares of HCCH Common Stock,
and he is making an informed investment decision with respect thereto. The
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 Shareholders have further been
informed
18
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
Shareholders to comply with any applicable exemption under the Securities Act
with respect to the shares of HCCH Common Stock.
Section 3.25 Total Assets. The total assets of Holdco and the Affiliated
Companies plus the Designated Assets (as herein defined) of Mellon do not, in
the aggregate, exceed $10 million. As used herein, "Designated Assets", means
investment assets (excluding therefrom any assets of the Affiliated
Companies), voting securities and other income-producing property.
Section 3.26 Resignation of ▇▇▇▇▇▇▇. Effective June 24, 1996, ▇▇▇▇▇▇▇
resigned as a director and officer of Holdco and each of the Affiliated
Companies on which he was an officer and a member of the Board of Directors.
ARTICLE IV
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 delivered to Holdco and the Affiliated Companies on or before
the date hereof, each of HCCH and Merger Sub represents and warrants to
Holdco, the Affiliated Companies and the Shareholders as set forth below (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 representations, warranties, covenants or agreements in any section of
this Agreement 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 4.1 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. Merger Sub is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Illinois. 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 NASRA true and complete copies of HCCH's
Certificate of Incorporation and Bylaws and Merger Sub's Articles of
Organization and Bylaws, each as currently in effect.
19
Section 4.2 Corporate Authorization. The execution, delivery and
performance by HCCH and Merger Sub of this Agreement, the Articles of Merger
and the Confidentiality Agreement and the consummation by HCCH and Merger Sub
of the transactions contemplated hereby and thereby are within the corporate
powers of HCCH and Merger Sub and have been duly authorized by all necessary
corporate action. This Agreement, the Articles of Merger and the
Confidentiality Agreement constitute, or upon execution will constitute,
valid and binding agreements of HCCH and Merger Sub, respectively,
enforceable in each case against each in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency of
other similar laws affecting the enforcement of creditors' rights generally
or by general principles of equity.
Section 4.3 Governmental Authorization. The execution, delivery and
performance by HCCH and Merger Sub of this Agreement, the Articles of Merger
and the Confidentiality Agreement and the consummation of the Merger by HCCH
and Merger Sub, require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than:
(a) the filing of the Articles of Merger in accordance with Illinois Law;
(b) compliance with any applicable requirements of the HSR Act;
(c) compliance with any applicable requirements of the Exchange Act and
the rules and regulations promulgated thereunder;
(d) compliance with any applicable requirements of the Securities Act
and the rules and regulations promulgated thereunder;
(e) compliance with any applicable foreign or state securities or "blue
sky" laws and the rules and regulations of the NYSE;
(f) compliance with any applicable requirements of the Texas, Oklahoma
or other insurance regulatory agency having authority over HCCH; and
(g) 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 not
materially adversely affect the ability of Holdco, any Affiliated Company,
HCCH or Merger Sub to consummate the transactions contemplated hereby and
operate their businesses as heretofore operated.
Section 4.4 Non-Contravention. The execution, delivery and performance by
HCCH and Merger Sub of this Agreement and the Articles of Merger and the
consummation by HCCH and Merger Sub of the transactions contemplated hereby
and thereby do not and will not:
20
(a) contravene or conflict with the Articles or Certificate of
Incorporation, as the case may be, or Bylaws of HCCH or Merger Sub;
(b) assuming compliance with the matters referred to in Section 4.3,
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 Merger Sub 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
Merger Sub or any other Subsidiary of HCCH or any material license,
franchise, permit or other similar authorization held by HCCH or Merger Sub
or any other Subsidiary of HCCH; or
(d) result in the creation or imposition of any Lien on any material
asset of HCCH or Merger Sub or any other 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 4.5 Capitalization of HCCH
(a) The authorized capital stock of HCCH consists of 100,000,000 shares
of HCCH Common Stock. As of September 30, 1996, there were 34,679,307 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, and except for changes since September 30, 1996 resulting from the
exercise of employee and director stock options, 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.
(b) All shares of HCCH Common Stock issued in the Merger shall, upon
issuance, be fully paid, validly issued and nonassessable. HCCH has reserved
sufficient shares of HCCH Common Stock for issuance pursuant to the Merger.
21
Section 4.6 Organization of Merger Sub. The authorized capital stock of
Merger Sub consists of 1,000 shares of common stock, par value $1.00 per
share, all of which are issued and outstanding. All the issued and
outstanding capital stock of Merger Sub is owned by HCCH. Merger Sub has not
conducted any business prior to the date hereof and has no assets,
liabilities or obligations of any nature other than those incident to its
formation and pursuant to this Agreement.
Section 4.7 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 4.8 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 delivered, and will promptly deliver in the case of any of
the following filed with the SEC on or after the date hereof and prior to the
Effective Date, to Holdco:
22
(i) its annual reports on Form 10-K for its fiscal years ended
December 31, 1995 and 1994;
(ii) its quarterly report on Form 10-Q for its fiscal quarters
ending March 31, June 30, and September 30, 1996;
(iii) any current reports on Form 8-K since January 1, 1996 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, 1996; and
(iv) all of its other reports, statements, schedules and
registration statements filed with the SEC since December 31, 1995. 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 4.9 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 4.8 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 September 30, 1996,
and the notes thereto, contained in HCCH's quarterly report on Form 10-Q
filed for its fiscal quarter then ended, and "HCCH Balance Sheet Date" means
September 30, 1996.
Section 4.10 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;
23
(b) any amendment of any material term of any outstanding HCCH Securities;
(c) any action by HCCH or, to HCCH's knowledge, any affiliate of HCCH
which would preclude the ability of HCCH to account for the business
combination to be effected by the Merger as a "pooling of interests" under
generally accepted accounting principles; or
(d) the entering into of any agreement by HCCH or any person on behalf
of HCCH to take any of the foregoing actions.
Section 4.11 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 4.12 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 is 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 4.13 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
24
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 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 Effective
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 4.14 Employee Benefit Plans; ERISA.
(a) Neither HCCH nor any corporation or other entity which under Section
4001(b) of ERISA is under common control with HCCH (an "HCCH ERISA
Affiliate") maintains or within the past five years has maintained,
contributed to, or been obligated to contribute to, any Pension Plan or any
Welfare Plan which is subject to ERISA. Each Pension Plan and Welfare Plan
disclosed in the HCCH Disclosure Schedule (which Plans have been heretofore
delivered to Holdco) and 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) Neither HCCH nor any HCCH ERISA Affiliate maintains or has
maintained or contributed to any Pension Plan that is or was subject to
Section 302 or Title IV of ERISA or Section 412 of the Code. HCCH has made
available to Holdco and the Affiliated Companies, 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
25
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.
(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 4.15 Material Agreements.
(a) The HCCH Disclosure Schedule includes 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 $1,000,000 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
26
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, Merger Sub, 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 4.16 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 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 6, 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 4.17 Environmental Mailers.
(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.
27
Section 4.18 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 4.19 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 4.20 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 4.21 Broker's Fees. Neither HCCH nor Merger Sub, 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 the Merger.
ARTICLE V
COVENANTS OF HOLDCO, ETC.
From the date hereof until the occurrence of the earlier of (i) the
Effective Time or (ii) termination of this Agreement pursuant to Section 9.1
hereof, (a) Holdco and each of the Affiliated Companies agrees, except as
otherwise permitted with the written consent of HCCH, which consent shall not
be unreasonably withheld, (b) with respect to Sections 5.1(i), 5.1(j) and
5.8, each Shareholder agrees and (c) with respect to Sections 5.4 and 5.10,
Mellon agrees that:
Section 5.1 Conduct of Holdco and Affiliated Companies. Holdco and each
of the Affiliated Companies shall in all material respects conduct their
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) Holdco and each of the Affiliated Companies will not adopt or
propose any change in its Articles of Organization or Certificate of
Incorporation or Bylaws;
(b) Holdco and each of the Affiliated Companies 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, 1995, or
increase the compensation payable to any other employees (other than
28
(i) increases in the ordinary course of business which are not in the
aggregate material to the Affiliated Companies, or (ii) pursuant to plans
disclosed in NASRA Disclosure Schedule), or adopt or amend any employee
benefit plan or arrangement (oral or written);
(c) Holdco and each of the Affiliated Companies will not issue any NASRA
Securities;
(d) Holdco and each of the Affiliated Companies will keep in full force
and effect any existing directors' and officers' liability insurance and will
not modify or reduce the coverage thereunder;
(e) Other than the payment of dividends in accordance with its existing
dividend policy or practice, which policy or practice is consistent with past
policy or practice, Holdco and each of the Affiliated Companies will not pay
any dividend or make any other distribution to holders of its capital stock
nor redeem or otherwise acquire any NASRA Securities;
(f) Holdco and each of the Affiliated Companies will not, directly or
indirectly, dispose of or acquire any material properties or assets except in
the ordinary course of business;
(g) Holdco and each of the Affiliated Companies 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;
(h) Holdco and each of the Affiliated Companies 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) Holdco, each Affiliated Company and each Shareholder will not
knowingly take any action, other than those which have been disclosed to and
approved by HCCH that would prevent the accounting for the business
combination to be effected by the Merger as a pooling-of-interests;
(j) Holdco, each of the Affiliated Companies and each of the
Shareholders will not, directly or indirectly, agree or commit to do any of
the foregoing; and
(k) No Affiliated Company will (i) change accounting methods except as
necessitated by changes which such Affiliated Company 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 NASRA 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 Holdco and
the Affiliated Companies taken as a whole; (iii) lend any amount to any
person or entity, other than advances for travel and expenses which
29
are incurred in the ordinary course of business consistent with past
practices, and which are not material in amount to Holdco and the Affiliated
Companies, 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) except for the Merger, 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.
Section 5.2 Shareholder Approval. At the earliest practicable date, Holdco
and each Affiliated Company will duly call and hold a special shareholder
meeting, or duly take action by the written consent of its shareholders,
whereby this Agreement, the Merger and related matters will be submitted for
the consideration and approval of its shareholders (the "Shareholder Vote")
which approval will be recommended by the board of directors of Holdco and
each Affiliated Company, as applicable, subject to Section 5.4. The Board of
Directors of Holdco shall establish the record date for the meeting of Holdco
shareholders at which the Merger will be approved before Mellon distributes
or otherwise transfers any shares of Holdco or of any Affiliated Company to
anyone other than an Original Shareholder. Each Shareholder Vote will be
effected in compliance with applicable law.
Section 5.3 Access to Financial and Operational Information. Holdco and
each Affiliated Company 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
Holdco and each Affiliated Company and in the planning for the combination of
the businesses of Holdco and each Affiliated Company and HCCH following the
consummation of the Merger; 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, Holdco and each Affiliated Company will
cooperate in arranging joint meetings among representatives of Holdco and
each Affiliated Company and HCCH and persons with whom they maintain business
relationships. All requests for information made pursuant to this Section
shall be directed to Mellon or such person as may be designated by him in
writing. All information obtained pursuant to this Section 5.3 shall be
30
governed by the Confidentiality Agreement dated as of July 9, 1996 among HCCH
and the Affiliated Companies (the "Confidentiality Agreement").
Section 5.4 Other Offers.
(a) Holdco, each of the Affiliated Companies and Mellon will not, and
will use their best efforts to cause their respective officers, directors,
employees or other agents not to, directly or indirectly, (i) take any action
to solicit, initiate or discuss any Acquisition Proposal (as hereinafter
defined), or (ii) subject to the fiduciary duties of the Board of Directors
under applicable law as advised by counsel, engage in negotiations with, or
disclose any nonpublic information relating to, Holdco or any of the
Affiliated Companies or afford access to the properties, books or records of
Holdco or any of the Affiliated Companies to, any person or entity that may
be considering making, or has made, an Acquisition Proposal. To the extent
that Holdco or the Affiliated Companies or any of their respective officers,
directors, employees or other agents, or Mellon are currently involved in any
discussions with respect to any Acquisition Proposal or contemplated or
proposed Acquisition Proposal, Holdco and the Affiliated Companies shall
terminate, and shall use their best efforts to cause 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 Holdco or the Affiliated Companies or the acquisition
of any equity interest in, or a substantial portion of the assets of; Holdco
or any of the Affiliated Companies other than the transactions contemplated
by this Agreement.
(b) Subject to their fiduciary duties, the Boards of Directors of Holdco
and each of the Affiliated Companies, and each Original Shareholder shall not
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse
to HCCH, the approval or recommendation by such Board of Directors or
Original Shareholder, of this Agreement, the Merger or the other documents or
transactions contemplated hereby, (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal (other than an Acquisition
Proposal made by HCCH or an affiliate of HCCH) or (iii) approve or authorize
the entering into any agreement with respect to any Acquisition Proposal.
Section 5.5 Maintenance of Business. Holdco and each of the Affiliated
Companies 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 Holdco or any Affiliated Company 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 5.6 Compliance with Obligations. Holdco and each of the
Affiliated Companies shall each use its reasonable best efforts to comply in
all material respects with (i) all
31
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 Holdco and each of the Affiliated Companies and
their respective properties or assets.
Section 5.7 Notices of Certain Events. Holdco and each of the Affiliated
Companies 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 the Merger,
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the Merger, and
(c) any actions, suits, claims, investigations or other judicial
proceedings commenced or threatened against Holdco or any of the Affiliated
Companies which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant hereto or which relate to the
consummation of the Merger.
Section 5.8 Affiliates Agreement. To facilitate the treatment of the
Merger for accounting purposes as a pooling-of-interests, Holdco, each
Affiliated Company and each Original Shareholder shall use its or their best
efforts to deliver to HCCH simultaneously with the execution of this
Agreement, a written agreement from each of its "affiliates" (as that term is
used in Rule 144 or 145 under the Securities Act) (the "Affiliates
Agreement") in form and substance reasonably satisfactory to HCCH, and each
Shareholder shall deliver to HCCH an executed Affiliates Agreement
simultaneously with the execution hereof.
Section 5.9 Necessary Consents. Holdco and each of the Affiliated
Companies shall use reasonable best efforts to obtain such written consent
and take such other actions as may be necessary or appropriate for Holdco
and each of the Affiliated Companies 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
10.1 hereof).
Section 5.10 Regulatory Approval. Holdco and each of the Affiliated
Companies, and, where required pursuant to the HSR Act or the rules or
regulations of any regulatory agency, Mellon, 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. Holdco, each
of the Affiliated Companies and Mellon, will use reasonable best efforts to
obtain or assist HCCH in obtaining all such authorizations, approvals and
consents.
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Section 5.11 Satisfaction of Conditions Precedent. Holdco and each
Affiliated Company shall use all reasonable 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 VI
COVENANTS OF HCCH AND MERGER SUB
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
9.1 hereof, HCCH and Merger Sub agree that, except as otherwise permitted
with the written consent of NASRA, which consent shall not be unreasonably
withheld:
Section 6.1 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 generality of
the foregoing, from the date hereof until the Effective Time, except as
contemplated hereby or previously disclosed by HCCH to NASRA 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 6.2 Listing of HCCH Common Stock. HCCH shall cause the shares of
HCCH Common Stock to be issued in the Merger to be approved for listing on
the NYSE on or before the Effective Time.
Section 6.3 Access to Financial and Operation Information. HCCH will
give NASRA, its counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to the
offices, properties, books and records of HCCH and its Subsidiaries, will
furnish to NASRA, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data such as persons
may reasonably request and will instruct HCCH's employees, counsel and
financial advisors to cooperate with NASRA in its investigation of the
business of HCCH and its Subsidiaries and in the planning for
33
the combination of the businesses of Holdco, the Affiliated Companies and
HCCH following the consummation of the Merger and will furnish promptly to
NASRA 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 Holdco or the Affiliated
Companies or the Shareholders hereunder. In addition, if requested by NASRA
following the public announcement of this Agreement, HCCH will cooperate in
arranging joint meetings among representatives of HCCH and NASRA and persons
with whom HCCH maintains business relationships. All requests for a
information made pursuant to this Section shall be directed to the Chief
Financial Officer of HCCH or such person as may be designated by him in
writing. All information obtained pursuant to this Section 6.3 shall be
governed by the Confidentiality Agreement.
Section 6.4 Maintenance of Business. HCCH 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,
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 NASRA in writing.
Section 6.5 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.
Section 6.6 Notices of Certain Events. HCCH shall, upon obtaining
knowledge of any of the following, promptly notify NASRA 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 the Merger;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the Merger; 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 4.12 or which relate to the consummation
of the Merger.
34
Section 6.7 Obligations of Merger Sub. HCCH will take all action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement. Merger Sub will not issue any shares of its capital stock, any
securities convertible into or exchangeable for its capital stock, or any
option, warrant or other right to acquire its capital stock to any person or
entity other than HCCH or a wholly owned Subsidiary of HCCH. Merger Sub
shall not incur any indebtedness or liabilities of any kind except pursuant
to this Agreement.
Section 6.8 Notice to Affiliates. HCCH shall, at least 30 days prior to
the Effective Date, cause to be delivered to each person HCCH believes to be
an "affiliate," as that term is used in paragraphs (c) and (d) of Rule 145
under the Securities Act, of HCCH a notice informing such persons of
restrictions on transfer resulting from the Merger being accounted for as a
pooling-of-interests in accordance with generally accepted principles and all
published rules, regulations and policies of the SEC.
Section 6.9 Employee Matters. HCCH agrees that all employees of Holdco or
any Affiliated Company that remain employed after the Effective Time shall,
immediately 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. In addition,
employees of Holdco or any Affiliated Company who shall remain employees of
HCCH after the Effective Time (i) shall be credited (for purposes of both
participation and investing) through their periods of service with Holdco or
any Affiliated Company prior to the Effective Time, and (ii) shall be
entitled to receive vacation leave accrued with Holdco or any Affiliated
Company prior to the Effective Time.
Section 6.10 Officers and Directors Insurance. Commencing upon the
Effective Date, to the extent HCCH provides, in its sole discretion,
liability insurance coverage to officers, directors and employees of HCCH,
HCCH shall provide those persons who are officers, directors and employees of
Holdco and each Affiliated Company and who become officers, directors or
employees of HCCH with liability insurance coverage identical to that which
it provides to other officers, directors and employees of HCCH.
ARTICLE VII
COVENANTS OF HCCH, HOLDCO AND AFFILIATED COMPANIES
From the date hereof until the occurrence of the earlier of (i) the
Effective Time or (ii) termination of this Agreement pursuant to Section 9.1
hereof, each of Holdco, the Affiliated Companies and HCCH agree that:
Section 7.1 Advice of Changes. It will promptly advise the others in
writing (i) of any event known to any of its executive officers or the
Shareholders occurring subsequent to the date
35
of this Agreement that in its 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 Effective Date, untrue, inaccurate or
misleading in any material respect and (ii) of any Material Adverse Change in
the business condition of the party.
Section 7.2 Regulatory Approvals. It 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 Merger. Each party shall use its
reasonable best efforts to obtain all such authorizations, approvals and
consents.
Section 7.3 Actions Contrary to Stated Intent. It shall not, from or after
the date hereof and either before or after the Effective Time, take any
action that would prevent the Merger from qualifying as a reorganization
under Section 368(a) of the Code or prevent the business combination to be
effected by the Merger from being accounted for as a pooling-of-interests
under generally accepted accounting principles. Each of HCCH, Holdco and the
Affiliated Companies shall use its reasonable best efforts to cause its
affiliates not to take any action that would preclude the ability of HCCH to
account for the business combination to be effected by the Merger as a
pooling-of-interests.
Section 7.4 Certain Filings. Holdco, each Affiliated Company and HCCH
shall cooperate with one another:
(a) in connection with the preparation of any filing required by the HSR
Act;
(b) 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
(c) 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 7.5 Communications. Neither Holdco, any Affiliated Company 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 7.6 Satisfaction of Conditions Precedent. HCCH, Holdco and each
Affiliated Company will each use its reasonable best efforts to satisfy or
cause to be satisfied all the
36
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 7.7 Tax Cooperation. HCCH, Holdco and the Affiliated Companies
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.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1 Conditions to Obligations of HCCH and Merger Sub. The
obligations of HCCH and Merger Sub hereunder are subject to the fulfillment
or satisfaction, on and as of the Effective 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 Holdco, each of the Affiliated
Companies, and each Shareholder contained in Article III shall be true and
accurate in all material respects on and as of the Effective Date with the
same force and effect as if they had been made on the Effective 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
Holdco, each Affiliated Company and each Shareholder 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
Effective Date, to such effect.
(b) Holdco, each Affiliated Company, and each Shareholder shall have
performed and complied in all material respects with all of the covenants
contained herein on or before the Effective 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 NASRA Disclosure Schedule, there shall
have been no Material Adverse Change in Holdco or any of the Affiliated
Companies since June 30, 1996.
(d) HCCH shall have received from (i) each person or entity who may be
deemed pursuant to Section 5.8 to be an affiliate of Holdco or any Affiliated
Company a duly executed Affiliates Agreement and (ii) each Shareholder the
written agreement contemplated to be entered
37
into by such person pursuant to Section 5.8 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 Merger
for the continuation in full force and effect of any material contracts or
leases of Holdco and each Affiliated Company shall have been obtained.
(f) HCCH shall have received a written opinion from its counsel to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368 of the Code. In preparing such opinion, counsel may rely on (and
to the extent reasonably required, the parties and their shareholders shall
make) reasonable representations related thereto.
(g) HCCH shall have received the opinion of the general counsel to NASRA
in form and substance satisfactory to HCCH.
(h) All underwriting agreements of NASRA in force on the date hereof
shall be in force on the Effective Date, except for such agreements which
have been replaced with agreements of similar like and kind.
(i) Mellon shall be alive and not, in any way, Disabled. For purposes
of this Agreement, Mellon shall be deemed to be "Disabled" if he is unable to
engage in any substantial portion of his regular duties for Holdco and each
Affiliated Company 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.
(j) Holdco and each Affiliated Company shall have received the
unqualified opinion of ▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, independent public
accountants to Holdco and the Affiliated Companies on their audited financial
statements for each of the most recent fiscal year end.
(k) HCCH, Holdco and the Affiliated Companies shall have received a
report addressed to each of them from ▇▇▇▇▇▇ ▇▇▇▇▇ & Associates confirming
that Holdco and the Affiliated Companies qualify as an entity that may be
party to a business combination for which the pooling-of-interest method of
accounting would be available and that the transactions contemplated hereby
will qualify for pooling-of-interests treatment under generally accepted
accounting principles.
(l) Holdco and each Affiliated Company shall have delivered to HCCH its
audited or unaudited, as the case may be balance sheet and its audited or
unaudited, as the case may be income statement for each of the most recent
fiscal year end.
(m) Holdco, on an adjusted pro-forma combined basis with the Affiliated
Companies and giving effect to this transaction, shall have earned no less
than $1.63 million after taxes for the fiscal year ended March 31, 1996.
38
(n) HCCH shall have received a written report from Coopers & ▇▇▇▇▇▇▇
L.L.P. in form reasonably satisfactory to HCCH (and generally in accordance
with Statement of Auditing Standards No. 50), to the effect that the business
combination to be effected by the Merger would be properly accounted for as a
pooling-of-interests in accordance with generally accepted accounting
principles and all published rules, regulations, and policies of the SEC.
Section 8.2 Conditions to Obligations of Holdco, Affiliated Companies and
Shareholders. Holdco's, each Affiliated Company's and each Shareholder's
obligations hereunder are subject to the fulfillment or satisfaction, on and
as of the Effective 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 Effective Date
with the same force and effect as if they had been made on the Effective 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 Holdco with a certificate executed by the President
and the Chief Financial Officer of HCCH, dated as of the Effective 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 Holdco and the
Affiliated Companies 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 Effective Date,
and Holdco 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) Holdco shall have received a written opinion in form and substance
satisfactory to it from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C. to the effect that
the Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368 of the Code. In preparing
such opinion, counsel may rely on (and to the extent reasonably required,
Holdco, the Affiliated Companies and the Shareholders shall make) reasonable
representations as to facts related thereto.
(e) Holdco shall have received from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.,
counsel to HCCH, an opinion in form and substance satisfactory to the
Shareholders.
(f) Mellon shall have been appointed Chairman of the Board, Chief
Executive Officer and President of Holdco.
39
(g) The shares of HCCH Common Stock to be issued in the Merger shall
have been approved for listing on the NYSE.
Section 8.3 Conditions to Obligations of Each Party. The respective
obligations of the parties hereunder are subject to the fulfillment, on and
as of the Effective 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) Each of Holdco and each Affiliated Company's shareholders shall have
duly a approved this Agreement, the Articles of Merger and the Merger, all in
accordance with applicable laws and regulatory requirements.
(b) 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 Merger (each
party agreeing to use its reasonable best efforts to have any such order,
decree or injunction lifted).
(c) 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
Merger will be in compliance with applicable laws, the failure to comply with
which would have a Material Adverse Effect on HCCH, Holdco, any Affiliated
Company or the Surviving Corporation, or would be reasonably likely to
subject any of HCCH, Merger Sub, Holdco, any Affiliated Company or any of
their respective directors or officers to penalties or criminal liability.
(d) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act, if applicable, shall have
expired or been terminated.
ARTICLE IX
TERMINATION OF AGREEMENT
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time whether before or after the approval by the
shareholders of Holdco and the Affiliated Companies:
(a) By the mutual consent of the Boards of Directors of HCCH and Holdco.
(b) By the Board of Directors of either HCCH or Holdco 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
40
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 either HCCH or Holdco if (i) all
conditions of Closing required by Article VIII hereof have not been met or
waived by January 31, 1997, or (ii) the Merger has not occurred by such date;
provided, however, that neither HCCH nor Holdco, shall be 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 Merger and such order, decree, ruling or other
action shall have become final and nonappealable.
(e) By the Board of Directors of HCCH, if Mellon shall have become
Disabled or shall have died.
Section 9.2 Effect of Termination. Upon termination of this Agreement
pursuant to this Article IX, 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, other than
the obligations pursuant to the Confidentiality Agreement, 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 X
CLOSING MATTERS
Section 10.1 The Closing. Subject to termination of this Agreement as
provided in Article IX above, the closing of the transactions provided for
herein (the "Closing") will take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ P.C., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at 10:00
a.m., Houston Time on November 27, 1996, or, if all conditions to Closing
have not been satisfied or waived by such date, such other place, time and
date as Holdco and HCCH may mutually select (the "Closing Date"). Prior to or
concurrently with the Closing, the Agreement of Merger and such officers'
certificates or other documents as may be required to effect the Merger will
be filed in the office of the Secretary of the State of Illinois.
Accordingly, the Merger will become effective at the Effective Time.
41
Section 10.2 Conversion of Certificates.
(a) As of the Effective Time, all shares of Holdco or any Affiliated
Company Common Stock that are outstanding immediately prior thereto will, by
virtue of the Merger and without further action, cease to exist, and all such
shares of Holdco will be converted into the right to receive from HCCH the
number of shares of HCCH Common Stock determined as set forth in Section 1.3
hereof.
(b) At and after the Effective Time, each certificate representing
outstanding shares of Holdco Common Stock will represent the number of shares
of HCCH Common Stock into which such shares of Holdco Common Stock will be
deemed registered in the name of the holder of such certificate. At the
Effective Time, the holder of shares of Holdco Common Stock will surrender
the certificates for such shares (the "Holdco Certificates") to HCCH for
cancellation. Promptly following the Effective Time and receipt of the Holdco
Certificates, HCCH will cause its transfer agent to issue to such
surrendering holder certificates for the number of shares of HCCH Common
Stock to which such holder is entitled pursuant to the terms hereof.
(c) All shares of HCCH Common Stock delivered upon the surrender of
Holdco Certificates in accordance with the terms hereof will be delivered to
the registered holder. After the Effective Time, there will be no further
registration of transfers of the shares of Holdco Common Stock on the stock
transfer books of Holdco. If, after the Effective Time, Holdco Certificates
are presented for transfer or for any other reason, they will be canceled and
exchanged and certificates therefor will be delivered as provided in this
Section 10.2.
(d) Until Holdco Certificates representing Holdco Common Stock
outstanding prior to the Merger are surrendered pursuant to this Section
10.2, such certificates will be deemed, for all purposes, to evidence
ownership of the number of whole shares of HCCH Common Stock into which the
shares of Holdco Common Stock will have been converted pursuant to Section
1.3.
ARTICLE XI
INDEMNIFICATION AND
REMEDIES, CONTINUING COVENANTS
Section 11.1 Agreement to Indemnify. Subject to the limitations set
forth in this Article XI and except as set forth in Section 11.2, each
Shareholder, severally and Pro Rata (as hereinafter defined), 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 in this Section 11.1 and in
Section 11.2 below referred to individually as an "Indemnified Person" and
collectively as "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 any
recoveries under insurance policies recovered from third parties and tax
savings known to
42
Indemnified Persons at the time of making of claims hereunder (hereafter in
this Section 11.1 referred to as "HCCH Damages"), arising out of any
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 Holdco, any of the
Affiliated Companies, or any of the Shareholders pursuant hereto. "Pro Rata"
for purposes of Sections 11.1 and 11.2 with respect to each Shareholder
shall mean the proportion that such Shareholder's holdings of Holdco Common
Stock as of immediately prior to the Effective Time bears to the total shares
of Holdco Common Stock held by all Shareholders as of immediately prior to
the Effective Time. The indemnification provided for in this Section 11.1
will not apply unless and until the aggregate HCCH Damages for which one or
more Indemnified Persons seeks indemnification exceeds $100,000 in the
aggregate, in which event the indemnification provided for will include all
HCCH Damages (a franchise deductible) up to the Maximum Shareholder Liability
(as hereinafter defined). In seeking indemnification for HCCH Damages under
this Section 11.1 following the Closing, the Indemnified Persons' remedy will
be limited to receiving up to that number of shares of HCCH Common Stock
determined by dividing (a) the amount of the HCCH Damages by (b) the closing
sale price of HCCH's Common Stock on the New York Stock Exchange on the
Effective Date (the "Closing Date Price"). Provided, however, that
irrespective as to the number of claims asserted by Indemnified Persons
hereunder and the amount of the HCCH Damages for which indemnification is
sought, any such Shareholder, in the aggregate, shall under no circumstances
be required to make indemnification payments hereunder beyond the Closing
Date Price multiplied by the number of shares of HCCH Common Stock received
by such Shareholder at the time of the Merger (the "Maximum Shareholder
Liability"). Notwithstanding anything to the contrary set forth herein, in
the event that at the time of the resolution of any such indemnification
claim, such Shareholder does not hold the number of shares of HCCH Common
Stock (including any shares otherwise acquired at any time before or after
the Effective Time or at any time after any claim is made for
indemnification) necessary to settle any indemnification claim, then such
Shareholder shall pay in cash or other immediately available funds the cash
equivalent of the remainder of his in-stock indemnification obligations under
this Section 11.1 up to his Maximum Shareholder Liability. In lieu of HCCH
Common Stock, any Shareholder shall have the option to pay in cash or other
immediately available funds the cash equivalent of all or any part of his
in-stock Maximum Shareholder Liability.
Section 11.2 Indemnification with Respect to Jamaica Lawsuit and Taxes.
In addition to the indemnification provided in Section 11.1 above, each
Shareholder, severally and Pro Rata hereby specifically agrees individually
to indemnify and hold harmless the Indemnified Persons from and against all
HCCH Damages, whenever incurred, arising out of (a) that certain lawsuit
styled Jamaica Citizens Bank Ltd. v. North American Special Risk Associates.
Inc. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Case #96C-4203 in the United States District
Court, Northern District of Illinois, Eastern Division (the "Jamaica
Lawsuit") and (b) any Taxes arising out of or relating to the business of
Holdco or the Affiliated Companies. In seeking indemnification for HCCH
Damages under this Section following the Closing, the Indemnified Persons
shall be entitled to exercise their remedies with respect to the Escrow
Shares and any other assets deposited in escrow pursuant to the Escrow
Agreement, but the indemnification provided for hereby shall not be limited
to the Escrow Shares.
43
Section 11.3 HCCH Agreement to Indemnify. Subject to the limitations set
forth in this Article XI, HCCH will indemnify and hold harmless NASRA, each
Affiliated Company, and the NASRA Shareholders and their officers,
shareholders, directors, administrators. successors and assigns (hereinafter
in this Section 11.3 referred to individually as an "Indemnified Person" and
collectively as "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 any
recoveries under insurance policies, recoveries from third parties and tax
savings known to Indemnified Persons at the time of making a claim hereunder
(hereafter in this Section 11.3 referred to as "NASRA 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
or Merger Sub in this Agreement or any certificate or exhibit delivered by or
on behalf of HCCH or Merger Sub pursuant hereto. In seeking indemnification
for NASRA Damages under this Section 11.3 following the Closing, the
Indemnified Person's remedy will be limited to receiving up to that number of
shares of HCCH Common Stock determined by dividing (a) the amount of the
NASRA Damages by (b) the Closing Date Price. Provided, however, that
irrespective of the number of claims asserted by Indemnified Persons
hereunder in the amount of the NASRA Damages for which indemnification is
sought, HCCH, in the aggregate, shall under no circumstances be obligated to
make an indemnification payment hereunder beyond that number of shares of
HCCH Common Stock equal to the total number of shares of HCCH Common Stock
provided to the NASRA Shareholders on the Effective Date (the "Maximum HCCH
Liability"). The indemnification provided for in this Section 11.3 will not
apply unless and until the aggregate NASRA Damages for which one or more
Indemnified Person seeks indemnification exceeds $100,000 in the aggregate,
in which event the indemnification provided for will include all NASRA
Damages (a franchise deductible) up to the Maximum HCCH Liability.
Section 11.4 Appointment of Representative. Subject to the successorship
provisions of this Section 11.4, Mellon (the "Representative") is hereby
irrevocably appointed as the attorney-in-fact and representative of the
interests of the Shareholders for all purposes of this Agreement, and notice
is hereby given thereof to HCCH and Merger Sub, and, without independent
verification, HCCH and Merger Sub 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:
(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, 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;
44
(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 11.4; and
(e) waive the fulfillment of any condition or conditions to the Closing.
Those Shareholders who, as of the Effective Date, hold a majority of the
Holdco 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 those
Shareholders who, as of the date hereof hold a majority of Holdco 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 in Section 12.3 hereof. If
any Representative shall have died, become incapacitated or unable to serve,
those Shareholders who, as of the date hereof, hold a majority of Holdco
Common Stock 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 11.4 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 and Merger Sub contained herein.
In consideration of the foregoing, and subject to the successorship
provisions of this Section 11.4, 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 Section 9.1 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 11.4 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.
Section 11.5 Survival of Representations. Unless any representation,
warranty, covenant or agreement is required to terminate at an earlier time
in order to maintain the appropriate pooling-of-interest accounting
treatment, all representations, warranties, covenants and agreements
concerned in this Agreement will remain operative and in full force and
effect for a period of one year after the Closing (the last date of such
applicable period of not more than one year 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,
except that the covenants set forth in the Confidentiality Agreement shall
survive termination of this Agreement in accordance with
45
the terms of such Confidentiality Agreement. The indemnification referred to
and set forth in Section 11.2 shall survive until a final resolution of such
claim is effective. 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, except as set forth in Section 11.2,
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 XI will
thereafter conclusively deemed to be waived regardless of when such claim is
or should have been discovered. Any such claim for indemnification brought
under this Article XI, brought before the Final Date, should 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 11.6 Procedure for Indemnification; Third Party Claims.
(a) Promptly after receipt by an indemnified party under this Article XI
of notice of a claim against it for indemnification brought under this
Article XI (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 Plan, 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 XI is made by a third party
against an indemnified party and each 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 XI 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.
ARTICLE XII
MISCELLANEOUS
Section 12.1 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
46
evidence and reflect the transactions described herein and contemplated
hereby and to carry into effect the intents and purposes of this Agreement.
Section 12.2 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 12.3 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 or
confirmed telecopier, addressed as follows:
HCCH and Merger Sub:
HCC Insurance Holdings, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Way
With copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Holdco, each Affiliated Company and all Shareholders:
North American Special Risk Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With copies to:
Handler & Associates Ltd.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
47
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. In
the event Mellon is no longer the Representative, such successor
Representative's address shall be the address for the Shareholders.
Section 12.4 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 12.5 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 others, provided
however, that HCCH shall be permitted at any time prior to the Effective Time
to cause the assignment of Merger Sub's rights and obligations under this
Agreement to another wholly owned Subsidiary of HCCH (without in any way
relieving HCCH of its obligations under this Agreement with respect to Merger
Sub or the Merger).
Section 12.6 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 12.7 Entire Agreement. This Agreement, together with the
Confidentiality Agreement, and the other agreements and instruments
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 12.8 Amendment and Waivers. Any amendment or waiver affecting
the Shareholders shall be valid if consented to in writing by Shareholders
holding a majority of the shares of Holdco Common Stock (i) if given or made
prior to the Effective Time, such majority as determined as of the date of
such amendment or waiver, and (ii) if given or made at or after the Effective
Time, such majority as determined immediately prior to the Effective Time.
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 those persons as provided in this Section 12.8. The waiver by a party 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 Holdco, the Affiliated
Companies, the Shareholders or HCCH with respect to any of the terms
contained in this Agreement.
48
Section 12.9 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 12.10 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 12.11 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]
49
"HCC INSURANCE HOLDINGS, INC."
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
"MERGER SUB, INC."
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
[Remainder of Page Intentionally Left Blank]
Signature Page of Agreement and Plan of Reorganization
"NORTH AMERICAN SPECIAL RISK
ASSOCIATES. INC.,"
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
"NASRA TPA, INC."
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
"NASRA CONSULTING, INC."
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
"ORIGINAL SHAREHOLDERS"
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ J. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------
J. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Signature Page of Agreement and Plan of Reorganization