EXHIBIT 10.331
AGREEMENT OF PURCHASE AND SALE
BY AND AMONG
TRM INTERNATIONAL, INC. and
UNICOVER MANAGERS, INC.
AND
NORTH AMERICAN SPECIAL RISK ASSOCIATES, INC. and
HCC INSURANCE HOLDINGS, INC.
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DATED JANUARY 23, 1997
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TABLE OF CONTENTS
ARTICLE 1 PURCHASE AND SALE .......................................... 1
Section 1.1 Agreement to Sell ........................... 1
1.1.1 Non-Exclusive Asset Categories ....... 1
1.1.2 Transfer of Assets Free of Liens ..... 3
1.1.3 Excluded Assets ...................... 3
Section 1.2 Agreement to Purchase ....................... 3
Section 1.3 The Purchase Price .......................... 3
1.3.1 Purchase Price ....................... 3
1.3.2 Payment of Purchase Price ............ 3
Section 1.4 Assumption of Liabilities ................... 4
1.4.1 Assumed Liabilities ................. 4
1.4.2 Excluded Liabilities ................ 4
Section 1.5 Adjustments to Purchase Price ............... 4
Section 1.6 Allocation of Earned Commission ............. 5
ARTICLE 2 CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS AND FURTHER
ASSURANCES ................................................ 5
Section 2.1 Closing ..................................... 5
Section 2.2 Items to be Delivered at Closing ............ 5
2.2.1 Seller Documents ................... 5
2.2.2 Payment of Purchase Price .......... 6
2.2.3 Other Documents .................... 6
Section 2.3 Consent of Third Parties .................... 6
Section 2.4 Further Assurances .......................... 7
Section 2.5 Non-Assignable Contracts .................... 7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES ................................ 7
Section 3.1 Representations and Warranties of Seller .... 7
3.1.1 Authorization ..................... 7
3.1.2 Corporate Status .................. 8
3.1.3 No Conflicts ...................... 9
3.1.4 Financial Statements .............. 9
3.1.5 Absence of Undisclosed
Liabilities........................ 9
3.1.6 Taxes ............................. 9
3.1.7 Absence of Changes ................ 10
3.1.8 Litigation ........................ 12
3.1.9 Compliance with Laws; Governmental
Approvals and Consents; Governmental
Contracts ......................... 12
3.1.10 Operation of the Business ......... 12
3.1.11 Assets ............................ 12
3.1.12 Contracts ......................... 13
3.1.13 Territorial Restrictions .......... 14
3.1.14 Policyholders ..................... 14
3.1.15 Absence of Certain Business
Practices ......................... 15
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TABLE OF CONTENTS
(Continued)
3.1.16 Confidentiality .................... 15
3.1.17 Records ............................ 15
3.1.18 Brokers and Finders ................ 15
3.1.19 Receivables ........................ 15
3.1.20 Transactions with Affiliates ....... 16
3.1.21 Disclosure ......................... 16
Section 3.2 Securities Act of 1933 ...................... 16
3.2.1 Investment Representations and
Warranties ......................... 16
3.2.2 Legends ............................ 17
Section 3.3 Representations and Warranties of Purchaser
and HCCH. ................................... 18
3.3.1 Corporate Status and Authorization . 18
3.3.2 No Conflicts, Etc .................. 18
3.3.3 Capital Stock ...................... 19
3.3.4 SEC Filings ........................ 19
3.3.5 Financial Statements ............... 20
3.3.6 Absence of Certain Changes ......... 20
3.3.7 No Undisclosed Liabilities ......... 21
3.3.8 Broker's Fees ...................... 21
3.3.9 Territorial Restrictions ........... 21
3.3.10 Disclosure ......................... 21
ARTICLE 4 COVENANTS ..................................................... 22
Section 4.1. Covenants of Seller ......................... 22
4.1.1 Conduct of Truckers Business Prior to
Closing .............................. 22
4.1.2 No Solicitation ...................... 23
4.1.3 Access and Information ............... 23
4.1.4 Public Announcements ................. 23
4.1.5 Further Actions ...................... 24
4.1.6 Further Assurances ................... 24
4.1.7 Disclosure Memorandum ................ 25
4.1.8 Enforcement of Rights and
Non-Competition Agreement ............ 25
4.1.9 Transition Team ...................... 27
Section 4.2 Covenants of Purchaser ...................... 28
4.2.1 Public Announcements ................. 28
4.2.2 Further Actions ...................... 28
4.2.3 Further Assurances ................... 28
4.2.4 Rule 144 ............................. 29
4.2.5 Expenses of Transition Team .......... 29
4.2.6 Access and Information ............... 29
4.2.7 Material Adverse Changes ............. 30
4.2.8 Collection of Receivables for Seller . 30
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TABLE OF CONTENTS
(Continued)
Section 5.1 Conditions to Obligations of Each Party ..... 30
5.1.1 No Injunction, Etc. .................. 30
Section 5.2 Conditions to Obligations of Purchaser
and HCCH .................................... 30
5.2.1 Representations, Performance ......... 31
5.2.2 Consents ............................. 31
5.2.3 No Material Adverse Effect ........... 31
5.2.4 Collateral Agreements ................ 31
5.2.5 Corporate Proceedings ................ 32
5.2.6 Transfer Documents ................... 32
5.2.7 New Program Manager's Agreement ...... 32
5.2.8 Investment Letter .................... 32
Section 5.3 Conditions to Obligations of Seller ......... 32
5.3.1 Representations, Performance ......... 33
5.3.2 Corporate Proceedings ................ 33
5.3.3 Consents and Approvals ............... 33
5.3.4 Collateral Agreements ................ 33
5.3.5 No Material Adverse Effect ........... 33
ARTICLE 6 TERMINATION ................................................ 34
Section 6.1 Termination ................................. 34
Section 6.2 Effect of Termination ....................... 34
ARTICLE 7 INDEMNIFICATION ............................................ 35
Section 7.1 By Seller ................................... 35
Section 7.2 By Purchaser and HCCH ...................... 35
Section 7.3 Adjustments to Indemnification Payments ..... 36
Section 7.4 Indemnification Procedures .................. 36
Section 7.5 Limits on Indemnification ................... 37
ARTICLE 8 DEFINITIONS AND CONSTRUCTION
Section 8.1 Definition of Certain Terms ................. 37
Section 8.2 Rules of Construction ....................... 43
ARTICLE 9 GENERAL PROVISIONS ......................................... 44
Section 9.1 Survival of Representations and Warranties .. 44
Section 9.2 Expenses .................................... 44
Section 9.3 Severability ................................ 45
Section 9.4 Notices ..................................... 45
Section 9.5 Headings .................................... 46
Section 9.6 Entire Agreement ............................ 46
Section 9.7 Counterparts ................................ 46
Section 9.8 Governing Law, Etc .......................... 46
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TABLE OF CONTENTS
(Continued)
Section 9.9 Binding Effect..................................... 46
Section 9.10 Assignment......................................... 46
Section 9.11 No Third Party Beneficiaries....................... 46
Section 9.12 Amendment; Waivers, Etc. .......................... 47
Section 9.13 Form of Payments by Seller......................... 47
1
AGREEMENT OF PURCHASE AND SALE
This AGREEMENT OF PURCHASE AND SALE (this "Agreement") dated as of
January 23, 1997, and effective as of the Effective Date as defined herein,
is being entered by and between TRM INTERNATIONAL, INC., a New Jersey
corporation ("TRM"); and UNICOVER MANAGERS, INC., a New Jersey corporation
("Unicover") (TRM and Unicover sometimes referred to collectively herein as
"Seller"), on the one hand; and NORTH AMERICAN SPECIAL RISK ASSOCIATES, an
Illinois corporation ("Purchaser"); and HCC INSURANCE HOLDINGS, INC., a
Delaware corporation ("HCCH"), on the other hand, with reference to the
following RECITALS:
RECITALS
A. Seller is engaged in the business of the marketing and sale of
occupational accident and related employers liability insurance Policies to
owner/operators of long-haul trucking companies (the "Truckers Business" as
defined herein).
B. Purchaser is a wholly-owned Subsidiary of HCCH, and subject only to
the limitations and exclusions contained in this Agreement, and upon the
terms and conditions hereinafter set forth, Seller desires to sell and
Purchaser desires to purchase the Truckers Business and certain of the assets
of Seller used therein or related thereto.
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE
Section 1.1 Agreement to Sell. At the Closing hereunder (as defined in
Section 2.1 hereof), and except as otherwise specifically provided in this
Section 1.1, Seller agrees to grant, sell, convey, assign, transfer and
deliver to Purchaser, upon and subject to the terms and conditions of this
Agreement, all right, title and interest of Seller in and to the properties,
assets and rights of Seller described in Section 1. 1. 1 (other than the
Excluded Assets) relating to or used or held for use in connection with the
Truckers Business as the same may exist on the Closing Date (collectively,
the "Assets").
1.1.1 Non-Exclusive Asset Categories. As used in this Agreement, the
term "Assets" shall include, without limitation, all those items in the
following categories that conform to the definition of the term "Assets" to
the extent such items are used or held for use by Seller in connection with
the Truckers Business:
(a) transfer all amounts held in any Fiduciary Account,
including, without limitation, (i) Billed Premium collected under the
Policies prior to the Effective Date, net of any compensation
due Seller and payments made to RNRS; and (ii) Billed Premium,
including any compensation payable to Seller in connection with
Billed Premium on and after the Effective Date, net of payments made
to RNRS;
(b) all of the interest of Seller in the American Association of
Independent Contractors, Inc., an Indiana non-profit corporation
("AAIC");
(c) all accounts receivable and all notes, bonds and other
evidences of indebtedness of and rights to receive payments from any
Person held by the Seller relating to the Truckers Business for any
periods on and after the Effective Date;
(d) all of the binding authority and rights of the Seller
related to the Truckers Business under all contracts, arrangements,
licenses, leases and other agreements, including, without
limitation, the Program Manager's Agreement, insurance policy
Expirations as described in the Program Manager's Agreement,
agreements with Producers, to the extent the same may be assignable
by Seller, and any right to receive payment of any compensation on
and after the Effective Date for Policies sold or services rendered
under the Program Manager's Agreement on Billed Premium relating to
any periods on and after the Effective Date and to assert claims
and take other rightful actions in respect of breaches, defaults
and other violations of such contracts, arrangements, licenses,
leases and other agreements and otherwise;
(e) all rights under a non-exclusive license to the use of
Seller's proprietary software system related to the Truckers Business
as set forth in the Software License Agreement, to the extent that the
use of such software by Purchaser does not violate the terms of any
license or other agreement with any other Person relating to such
software system;
(f) all books, records, manuals and other materials (in any
form or medium) relating to the Truckers Business, including,
without limitation, all records and materials maintained at the
headquarters of Seller, advertising matter, correspondence, mailing
lists, Expirations, lists of Policyholders, distribution lists,
production data, sales and promotional materials and records,
purchasing materials and records, personnel records, accounting
records, Policy files and litigation files;
(g) all rights to causes of action, lawsuits, judgments, claims
and demands of any nature available to or being pursued by
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the Seller with respect to Billed Premium due or collected in
connection with the Truckers Business for any period on or after the
Effective Date, whether arising by way of counterclaim or otherwise;
and
(h) all guarantees, warranties, indemnities and similar rights in
favor of the Seller with respect to any Asset.
1.1.2 Transfer of Assets Free of Liens. Subject to the terms and
conditions hereof, at the Closing, the Assets shall be transferred or
otherwise conveyed to Purchaser free and clear of all Liens excepting only
Assumed Liabilities, and Permitted Liens listed on Schedule 3.1.11.
1.1.3 Excluded Assets. Seller shall retain and not transfer, and
Purchaser shall not purchase or acquire, any assets not identified in
Section 1.1.1 (collectively, the "Excluded Assets").
Section 1.2 Agreement to Purchase. At the Closing, Purchaser shall
purchase or otherwise obtain possession of the Assets from Seller, upon and
subject to the terms and conditions of this Agreement and in reliance on the
representations, warranties and covenants of Seller contained herein, in
exchange for the Purchase Price (as defined in Section 1.3 hereof). In
addition, Purchaser shall assume at the Closing and agree to pay, discharge
or perform, as appropriate, certain liabilities and obligations of Seller
only to the extent and as provided in Section 1.4 of this Agreement and
Permitted Liens. Except as specifically provided in Section 1.4 hereof for
Permitted Liens, Purchaser shall not assume or be responsible for any
liabilities or obligations of the Truckers Business or of Seller.
Section 1.3 The Purchase Price.
1.3.1 Purchase Price. The purchase price (the "Purchase Price")
shall be an amount equal to:
(a) 266,667 shares (collectively, the "HCCH Shares") of the
Common Stock, par value $1.00 per share (the "HCCH Common Stock"), of
HCCH; plus
(b) $6,550,000 cash.
On or before the Closing Date, and prior to Closing, HCCH shall
transfer the Purchase Price to Purchaser as a contribution to the
capital of Purchaser in compliance with Treasury Reg. Sec.
1.1502-13(f)(6)(ii).
1.3.2 Payment of Purchase Price. On the Closing Date
Purchaser shall (i) deliver to Seller, on account of the Purchase
Price, a certificate or certificates representing the HCCH Shares and
registered in the names of Seller and/or the Principals in such
proportions as Seller shall designate in writing to Purchaser, and
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(ii) pay to Seller, on account of the Purchase Price, the amount of
$6,550,000, in cash, by wire transfer of immediately available funds
to such account or accounts or such Persons as Seller shall designate
in writing to Purchaser. If, prior to Closing, 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
that constitutes the HCCH Shares to be issued pursuant to the
provisions of this Agreement will be adjusted in proportion to such
change.
Section 1.4 Assumption of Liabilities
1.4.1 Assumed Liabilities. At the Closing, and subject to
the terms and conditions set forth herein, and effective as of the
Effective Date, Purchaser shall and does hereby assume and agree to
pay, honor and discharge when due any and all liabilities,
obligations and commitments of Seller relating exclusively to the
Truckers Business and/or the Assets, including, without limitation,
compensation payable to Seller and any obligations of Seller to
Producers under the Program Manager's Agreement, existing or
arising out of Billed Premium collected under the Policies for any
periods prior to the Effective Date (collectively, the "Assumed
Liabilities") in accordance with the terms and provisions of the
assumption agreement ("Assumption Agreement") in substantially the
form of Exhibit A attached hereto and hereby made a part hereof.
1.4.2 Excluded Liabilities. Notwithstanding the foregoing
or any other provision hereof or any schedule or exhibit hereto,
and regardless of any disclosure to Purchaser, Purchaser shall not
assume any liabilities, obligations or commitments of Seller
relating to or arising out of any other business or operations of
the Seller, or the ownership of any Excluded Assets by the Seller
other than the Assumed Liabilities (the "Excluded Liabilities").
Section 1.5 Adjustments to Purchase Price. If, during the one-year period
beginning on the Effective Date (the "Measurement Period"), (a) the Billed
Premium for Policies issued in connection with the Truckers Business plus (b)
the Billed Premium for New Business issued by any insurer in connection with
the Truckers Business on and after the Effective Date, except that premium
billed on an annual basis shall be allocated pro rata to the Measurement
Period, (the amount of such calculation being the "Adjusted Gross Premium")
is less than Sixteen Million Dollars ($16,000,000.00) (the "Minimum
Premium"), Seller will refund to Purchaser an amount equal to the ratio of
fifty percent (50.0%) of the difference between Eighteen Million One Hundred
Twenty-Five Thousand Dollars ($18,125,000.00) (the "Target Premium") and the
Adjusted Gross Premium, over the Target Premium, times Thirteen Million Seven
Hundred Fifty Thousand Dollars ($13,750,000.00) payable in cash.
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Section 1.6 Allocation of Earned Commission. Notwithstanding the
Effective Date, the parties agree that all commission income earned with
respect to Billed Premium in connection with the Truckers Business for the
month of December 1996 (the "December Commission Income") shall be payable
50% to Seller and 50% to Purchaser. In addition, all commission earned with
respect to Billed Premium in connection with the Truckers Business for the
month of January 1997 (the "January Commission Income") shall be payable to
Purchaser. The parties agree that, to the extent required by law, they will
file tax returns consistent with the foregoing; provided, however, in the
event that Seller is required for federal income tax purposes to report as
ordinary income more than 50% of the December Commission Income and/or any
portion of the January Commission Income, then the amount of December
Commission Income and/or January Commission Income payable to Seller shall be
increased, and the amount of December Commission Income and/or January
Commission Income payable to Purchaser shall be decreased, by an amount equal
to the difference between (a) the amount of the December Commission Income
and/or January Commission Income required to be reported as income by
Seller for federal income tax purposes in excess of the amount of the
December Commission Income and/or January Commission Income actually paid to
Seller (the "Excess Income Amount") multiplied by the highest combined
federal, state and local income tax rates for individuals on ordinary income
and (b) the Excess Income Amount multiplied by the highest combined federal,
state and local income tax rates for individuals on long-term capital gains.
ARTICLE 2
CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS
AND FURTHER ASSURANCES
Section 2.1 Closing. The closing (the "Closing") of the sale and purchase
of the Assets shall take place at 10:00 A.M., local time, on January 24,
1997, at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or at such other time or place or on
such other date, in each case as may be mutually agreed upon in writing by
Purchaser and Seller. The date of the Closing is sometimes herein referred to
as the "Closing Date."
Section 2.2 Items to be Delivered at Closing. At the Closing, and subject
to the terms and conditions herein contained:
2.2.1 Seller Documents. Seller shall deliver to Purchaser the
following:
(i) such assignments, endorsements, and other good and
sufficient instruments and documents of conveyance and transfer, in
form reasonably satisfactory to Purchaser and its counsel, as shall
be reasonably necessary and appropriate to transfer and assign to
Purchaser all of Seller's right, title and interest in and to the
Truckers Business and the Assets, including without limitation, all
of Seller's rights under all agreements, contracts, commitments,
leases, plans, bids, quotations, proposals, instruments and other
5
documents included in the Assets to which Seller is a party or by
which it has rights on the Closing Date;
(ii) the Software License Agreement executed by an officer of the
Seller, in substantially the form of Exhibit B attached hereto and
hereby made a part hereof;
(iii) all of the corporate records, minute books, corporate seal,
membership lists, and files of AAIC, and resignations of all of the
officers, directors, attorney-in-fact, and agent for service of
process of AAIC, and an assignment of all of Seller's interest, if
any, in AAIC;
(iv) Investment Letters, executed by a duly authorized officer of
each Holder of the HCCH Shares, in substantially the form of Exhibit C
attached hereto and hereby made a part hereof, and
(v) the Noncompetition Agreements, executed by each of the
Principals, in substantially the form of Exhibit D attached hereto and
hereby made a part hereof;
and simultaneously with such delivery, all such steps will be taken as may
be required to put Purchaser in actual possession and operating control of
the Truckers Business and the Assets.
2.2.2 Payment of Purchase Price. Purchaser shall deliver
to Seller the HCCH Shares and cash representing the Purchase Price
in accordance with Section 1.3.2 hereof and the Assumption
Agreement, executed by an officer of Purchaser.
2.2.3 Other Documents. At or prior to the Closing, the
parties hereto shall also deliver to each other the agreements,
opinions, certificates and other documents and instruments referred
to in Article 5 hereof.
Section 2.3 Consent of Third Parties. The Closing and the consummation
of the transactions contemplated by this Agreement are subject to the consent
of RNRS to the assignment by Seller to Purchaser of its rights, duties and
obligations under the Program Manager's Agreement, and the execution of a New
Program Manager's Agreement on terms satisfactory to Purchaser by the
Purchaser and RNRS, as set forth in correspondence between HCCH and RNRS
dated October 21, 1996 through November 19, 1996, copies of which are
attached hereto as Exhibit D and hereby made a part hereof In the event the
approval or consent of RNRS to the assignment of Seller's rights, duties and
obligations under the Program Manager's Agreement to Purchaser has not been
obtained on or prior to the Closing Date, Seller shall continue to use all
reasonable efforts to obtain such approval or consent after the Closing Date
until such time as such approval or consent has been obtained, and Seller
will cooperate with
6
Purchaser in any lawful and economically feasible arrangement to provide that
Purchaser shall receive the interest of Seller in the benefits under the
Program Manager's Agreement with respect to Billed Premium due and collected
on and after the Effective Date, provided that Purchaser shall pay or satisfy
the corresponding liabilities for the enjoyment of such benefit to the extent
Purchaser would have been responsible therefor if such approval or consent
had been obtained.
Section 2.4 Further Assurances. Seller will, from time to time after the
Closing, at Purchaser's request, execute, acknowledge and deliver to
Purchaser such other instruments of conveyance and transfer and will take
such other actions and execute and deliver such other documents,
certifications and further assurances as Purchaser may reasonably require in
order to vest in Purchaser, or to put Purchaser in possession of, the
Truckers Business and/or any of the Assets, or to better enable Purchaser to
complete, perform or discharge any of the Assumed Liabilities or obligations
assumed by Purchaser at the Closing pursuant to Section 1.4 hereof. Each of
the parties hereto will cooperate with the other and execute and deliver to
the other parties hereto such other instruments and documents and take such
other actions as may be reasonably requested from time to time by any other
party hereto as necessary to carry out, evidence and confirm the intended
purposes of this Agreement.
Section 2.5 Non-Assignable Contracts. To the extent that any Contracts
necessary for the transaction of the Truckers Business by Purchaser are
non-assignable or not transferable to Purchaser, or non-assignable or
non-transferable without the consent of a third party, or shall be subject to
an option held by any other Person arising out of or maturing or originating
by reason of a request by Seller to transfer or assign such Contract or by
reason of the transactions contemplated in this Agreement, this Agreement
shall not constitute a contract to assign or transfer such Contract if any
attempt to transfer or assign such Contract would (i) constitute a breach of
the provisions thereof; or (ii) create rights in any other Person not
acceptable to Purchaser. If Seller shall have failed to procure the consent
of any Person to such assignment or transfer or waiver of such option prior
to the Closing Date, Seller shall use its commercially reasonable efforts to
make the use and benefits of the Truckers Business and the Assets available
to the Purchaser to the same extent, as nearly as may be possible, as if such
impediment to assignment or transfer of any such Contract did not exist.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of Seller. Seller represents
and warrants to Purchaser as of the date of this Agreement, except as set
forth in the Disclosure Memorandum delivered to Purchaser as provided in
Section 4.1.8 hereof, each of which exceptions shall specifically identify
the relevant subsection hereof to which it relates and shall be deemed to be
representations and warranties as if made hereunder, as follows:
3.1.1 Authorization. Seller has the corporate power and
authority to execute and deliver this Agreement and each of the Collateral
Agreements to which it is a party, to perform fully their respective
obligations hereunder and
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thereunder, and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Seller of this Agreement, and the
consummation of the transactions contemplated hereby, have been, and on
the Closing Date the execution and delivery by Seller of each of the
Collateral Agreements to which it is a party and the consummation of the
transactions contemplated thereby will have been, duly authorized by all
requisite corporate action of Seller. Seller has duly executed and
delivered this Agreement to Purchaser and HCCH and on the Closing Date
Seller will have duly executed and delivered to Purchaser and HCCH, each of
the Collateral Agreements to which it or any of the Principals is a party.
This Agreement is, and on the Closing Date each of the Collateral
Agreements to which it is a party will be, legal, valid and binding
obligations of Seller, enforceable against Seller in accordance with their
respective terms.
3.1.2 Corporate Status
(a) TRM and Unicover are each corporations duly organized,
validly existing and in good standing under the laws of the
jurisdiction of their respective incorporation, with full corporate
power and authority to carry on their respective business (including,
without limitation, the Truckers Business) and to own or lease and to
operate their respective properties as and in the places where such
business is conducted and such properties owned, leased or operated.
TRM and Unicover have made elections to be treated as "S" corporations
for federal income tax purposes.
(b) TRM and Unicover are each duly qualified or licensed
to do business in the jurisdictions set forth in Schedule 3.1.2(b),
respectively, and are in good standing in each of the jurisdictions
specified opposite their names in Schedule 3.1.2(b), which are the only
jurisdictions in which the operation of the Truckers Business or the
character of the properties owned, leased or operated by them in connection
with the Truckers Business makes such qualification or licensing necessary.
(c) TRM and Unicover have delivered to Purchaser complete and
correct copies of each of their and AAIC's respective articles of
incorporation and by-laws or other organizational documents, in each case,
as amended and in effect on the date hereof. Neither TRM, Unicover nor
AAIC are in violation in any material respect of any of the provisions of
its respective articles of incorporation or by-laws or other organizational
documents.
(d) As of the date of this Agreement, there are no shares of
common capital stock or membership interests of AAIC authorized or issued
and outstanding.
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3.1.3 No Conflicts. The execution, delivery and performance by Seller
of this Agreement and each of the Collateral Agreements to which it may be
a party, and the consummation of the transactions contemplated hereby and
thereby, do not and will not conflict with or result in a violation of or a
default under (with or without the giving of notice or the lapse of time or
both) (i) any Applicable Law applicable to Seller or any Affiliate thereof
or any of the properties or assets of Seller (including but not limited to
the Assets), (ii) the articles of incorporation or by-laws or other
organizational documents of Seller or AAIC or (iii) except as set forth in
Schedule 3.1.3, any Contract or other contract, agreement or other
instrument to which Seller or AAIC is a party or by which Seller, AAIC or
any of their properties or assets, including but not limited to the Assets,
may be bound or affected, except, in each case, the conflict, violation or
breach of which could not reasonably be expected to have a Material Adverse
Effect on the Truckers Business or the Assets. Except as specified in
Schedule 3.1.3, no Governmental Approval or other Consent is required to be
obtained or made by Seller in connection with the execution and delivery
of this Agreement and the Collateral Agreements to which it is a party or
the consummation of the transactions contemplated hereby or thereby, except
any Consent to which the failure to obtain could not reasonably be
expected to have a Material Adverse Effect on the Truckers Business or the
Assets.
3.1.4 Financial Statements. Seller has delivered to Purchaser certain
unaudited financial information and data prepared by Seller and setting
forth Billed Premium and revenues received by Sellers for the Truckers
Business (the "Financial Statements") as of August 31, 1996 (the
"Financial Statement Date"). The Financial Statements present fairly in all
material respects, the Billed Premium and gross premium revenues of Seller
in connection with the Truckers Business for the periods indicated thereon.
3.1.5 Absence of Undisclosed Liabilities. Seller has no
liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become
due, arising out of or relating to the Truckers Business, except (a) as
set forth in Schedule 3.1.5, (b) as and to the extent disclosed or reserved
against in the Financial Statements (including the notes thereto),
(c) unknown contingent liabilities and (d) for liabilities and obligations
that (i) were incurred after the Financial Statement Date in the ordinary
course of business consistent with prior practice and (ii) individually and
in the aggregate are not material to the Truckers Business and have not
had or resulted in, and will not have or result in, a Material Adverse
Effect on the Truckers Business or the Assets.
3.1.6 Taxes
(a) Seller has (or by the Closing will have) duly and timely
filed all Tax Returns relating to the Truckers Business with respect to
Covered Taxes required to be filed on or before the
9
Closing Date ("Covered Returns"). Except for Covered Taxes set forth on
Schedule 3.1.6(a), which are being contested in good faith and by
appropriate proceedings, the following Covered Taxes have (or by the
Closing Date will have) been duly and timely paid: (i) all Covered Taxes
shown to be due on the Covered Returns, (ii) all deficiencies and
assessments of Covered Taxes of which notice has (or by the Closing Date
will have) been received by Seller that are or may become payable by
Purchaser or chargeable as a lien upon the Truckers Business, and (iii)
all other Covered Taxes due and payable on or before the Closing Date for
which neither filing of Covered Returns nor notice of deficiency or
assessment is required, of which Seller or any Shareholder is or
reasonably should be (or by the Closing Date will be or reasonably should
be) aware that are or may become payable by Purchaser or chargeable as a
lien upon the Truckers Business.
(b) Purchaser will not be required to deduct and withhold any amount
pursuant to section 1445(a) of the Code upon the transfer of the Truckers
Business to Purchaser.
3.1.7 Absence of Changes. Except as set forth on Schedule 3.1.7,
since the Financial Statement Date, Seller has conducted the Truckers
Business only in the ordinary course consistent with prior practice and has
not, on behalf of, in connection with or relating to the Truckers Business
or the Assets:
(a) suffered any event which could reasonably be expected to have a
Material Adverse Effect on the Truckers Business or the Assets;
(b) incurred any known obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection with
the purchase of goods or services or otherwise in the ordinary course of
business consistent with prior practice, none of which liabilities, in any
case or in the aggregate, could reasonably be expected to have a Material
Adverse Effect on the Truckers Business or the Assets;
(c) mortgaged, pledged or subjected to any Lien, any property,
business or assets, tangible or intangible, held in connection with the
Truckers Business;
(d) sold, transferred, leased to others or otherwise disposed of any
of the Assets, or, except in the ordinary course of business and consistent
with prior practice, cancelled or
10
compromised any debt or claim, or waived or released any right of
substantial value relating to the Truckers Business or the Assets;
(e) made, entered into or assumed, or suffered any amendment or
termination of, any agreement, contract, commitment, lease or plan to which
it is a party or by which it is bound and relating to the Truckers Business
or the Assets, or received any notice of termination of any contract, lease
or other agreement necessary for the operation of the Truckers Business or
the Assets or suffered any damage, destruction or loss (whether or not
covered by insurance) relating to the Truckers Business or Assets, except
in any case or in the aggregate which could not reasonably be expected to
have a Material Adverse Effect on the Truckers Business or the Assets;
(f) made any material change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or agreed
or orally promised to pay, conditionally or otherwise, any bonus,
incentive, retention or other compensation, retirement, welfare, fringe or
severance benefit or vacation pay, to or in respect of any Producer or
agent of Seller relating to the Truckers Business, or made any other
changes to its personnel practices, except in the ordinary course of
business and consistent with past practice;
(g) made any material change in its selling, marketing or advertising
practices which could reasonably be expected to have a Material Adverse
Effect upon the Truckers Business or the Assets;
(h) instituted, settled or agreed to settle any litigation, action or
proceeding before any court or governmental body relating to the Truckers
Business or the Assets other than in the ordinary course of business
consistent with past practices but not in any case involving amounts in
excess of $10,000;
(i) entered into any transaction, contract or commitment other than
in the ordinary course of business consistent with prior practice, or paid
or agreed to pay any brokerage, finder's fee, Taxes or other expenses in
connection with, or incurred any severance pay obligations by reason of,
this Agreement or the transactions contemplated hereby; or
(j) taken any action or omitted to take any action that would result
in the occurrence of any of the foregoing.
11
3.1.8 Litigation. Except as set forth on Schedule 3.1.8, there is no
action, claim, demand, suit, proceeding, arbitration, grievance, citation,
summons, subpoena, inquiry or investigation of any nature, civil, criminal,
regulatory or otherwise, in law or in equity, pending or threatened against
or relating to Seller in connection with the Assets or the Truckers
Business or against or relating to the transactions contemplated by this
Agreement, which constitutes or may constitute an Assumed Liability.
3.1.9 Compliance with Laws; Governmental Approvals and Consents;
Governmental Contracts
(a) Except as disclosed on Schedule 3.1.9(a), Seller has complied in
all material respects with all, and is not in material violation of any,
Applicable Laws applicable to the Truckers Business or the Assets, and
Seller has not received any notice alleging any such conflict, violation,
breach or default, except in either case where such failure to comply,
conflict, violation, breach or default could not reasonably be expected to
have a Material Adverse Effect on the Truckers Business or the Assets.
(b) Schedule 3.1.9(b) sets forth all Governmental Approvals and other
Consents issued to Seller in connection with the conduct of the Truckers
Business or the ownership and use of the Assets, including, without
limitation, all licenses, permits or similar authorizations for the
marketing and sale of the Policies by Seller.
(c) To the best of Seller's knowledge, there are no proposed laws,
rules, regulations, ordinances, orders, judgments, decrees, governmental
takings, condemnations or other proceedings which would be applicable to
the Truckers Business or the Assets and which could reasonably be expected
to have a Material Adverse Effect on the Truckers Business or the Assets,
either before or after the Closing Date.
3.1.10 Operation of the Business. Except as set forth in Schedule
3.1.10, (a) Seller has not conducted the Truckers Business through any
divisions or any direct or indirect Subsidiary or Affiliate of Seller
other than AAIC and (b) no part of the Truckers Business is operated by
Seller through any entity other than Seller or AAIC.
3.1.11 Assets. Except as disclosed in Schedule 3.1.11, Seller has good
title to all the Assets, free and clear of any and all Liens other than
Permitted Liens. The Assets comprise all assets required for the continued
conduct of the Truckers Business by Purchaser as now being conducted by
Seller. The Assets, taken as a whole, constitute all the properties and
assets relating to or used or held for use
12
in connection with the Truckers Business during the past twelve months to
the extent such assets are still in existence on the Closing Date, and
except cash disposed of, accounts receivable collected, prepaid expenses
realized, Contracts fully performed, properties or assets replaced by
equivalent or superior properties or assets, in each case in the ordinary
course of business consistent with prior practice, and the Excluded Assets.
Except for the Excluded Assets, there are no assets or properties used in
the operation of the Truckers Business and owned by any Person other than
Seller that will not be leased or licensed to Purchaser under valid,
current leases or license arrangements. The Assets are in all material
respects adequate for the purposes for which such assets are currently used
or are held for use, and are in reasonably good repair and operating
condition (subject to normal wear and tear) and, to the knowledge of
Seller, there are no facts or conditions affecting the Assets which could,
individually or in the aggregate, interfere in any material respect with
the use, occupancy or operation thereof as currently used, occupied or
operated, or their adequacy for such use.
3.1.12 Contracts
(a) Schedule 3.1.12(a) contains a complete and correct list of all
agreements, contracts, commitments and other instruments and arrangements
(whether written or oral) of the types described below which are related to
or employed by Seller in connection with the Truckers Business to which
Seller is a party or by which it is bound in connection with the Truckers
Business or the Assets (the "Contracts"):
(i) agreements, contracts, commitments, and other instruments
and arrangements pursuant to which Seller serves as agent, manager,
broker or third-party administrator in connection with the Truckers
Business or any Prohibited Products;
(ii) agreements, contracts, commitments, and other instruments
and arrangements relating to the solicitation of new or additional
business for or on behalf of Seller;
(iii) employment, consulting, agency, collective bargaining or
other similar contracts, agreements, and other instruments and
arrangements relating to or for the benefit of current, future or
former employees, officers, directors, shareholders, sales
representatives, distributors, dealers, Producers, agents, independent
contractors or consultants of Seller or any other Person and which
require, in all cases, any payments of profits on Policies transferred
to Purchaser as part of the Truckers Business;
(iv) any other contracts, agreements or commitments that are
material to the Truckers Business.
13
(b) Seller has delivered to Purchaser complete and correct copies of
all written Contracts, together with all amendments thereto, and accurate
descriptions of all material terms of all oral Contracts, which are set
forth or required to be set forth in Schedule 3.1.12(a).
(c) To the best of Seller's knowledge, all such Contracts are in full
force and effect and enforceable against each party thereto. To the best of
Seller's knowledge, there does not exist under any Contract any event of
default or event or condition that, after notice or lapse of time or both,
would constitute a material violation, material breach or event of default
thereunder on the part of Seller or, to the best knowledge of Seller, any
other party thereto except as set forth in Schedule 3.1.12(c) and except
for such events or conditions that, individually and in the aggregate,
(i) has not had or resulted in, and could not reasonably be expected to
have or result in, a Material Adverse Effect on the Truckers Business or
the Assets and (ii) has not and will not materially impair the ability of
Seller to perform its respective obligations under this Agreement and under
the Collateral Agreements to which it is a party. Except as set forth in
Schedule 3.1.12(c), no Consent of any third party is required under any
Contract as a result of or in connection with, and the enforceability of
any Contract will not be affected in any manner by, the execution, delivery
and performance of this Agreement or any of the Collateral Agreements or
the consummation of the transactions contemplated hereby or thereby.
(d) Seller has not granted any power of attorney relating to the
Truckers Business, which is currently in effect.
3.1.13 Territorial Restrictions. Seller is not restricted by any
written agreement or understanding with any other Person from carrying on
the Truckers Business anywhere in the United States of America, and
Purchaser shall not, solely as a result of its purchase of the Truckers
Business from Seller pursuant hereto and the assumption of the Assumed
Liabilities, become restricted in carrying on the Truckers Business
anywhere in the United States of America by reason of any. restrictions
imposed upon Seller under any such agreement or understanding.
3.1.14 Policyholders. Schedule 3.1.14 sets forth (a) the names and
addresses of all owners, participants and/or holders of the Policies
constituting the Truckers Business ("Policyholders") of Seller that
purchased Policies through Seller or Producers of Seller which were in
force and effect upon the Effective Date; (b) the amount of Billed Premium
under such Policies during the one year period ending on the Effective Date
of this Agreement; and (c) a list of the names and addresses of all
Producers of such Policies. Seller has not received any notice or has any
reason to believe that any Policyholder of Seller has lapsed or intends to
permit its Policy to lapse or to non-renew any Policy. To the best
knowledge of Seller, no Policyholder of Seller described in clause (a) of
the first sentence of this section has otherwise threatened to take any
action described in the preceding
14
sentence as a result of the consummation of the transactions contemplated
by this Agreement and the Collateral Agreements.
3.1.15 Absence of Certain Business Practices. Seller has not, nor,
to the best knowledge of Seller, has any officer, employee or agent of
Seller, or, to the best knowledge of Seller, any other Person acting on
behalf of Seller or any officer, employee or agent of Seller, directly or
indirectly, within the past five year& given or agreed to give any gift,
rebate, allowance or similar benefit to any Policyholder, Producer,
governmental employee or other Person who is or may be in a position to
help or hinder the Truckers Business (or assist Seller in connection with
any actual or proposed transaction relating to the Truckers Business) (i)
which subjected or might have subjected Seller to any damage or penalty in
any civil, criminal or governmental litigation or proceeding, (ii) which if
not given in the past, could reasonably be expected to have had a Material
Adverse Effect on the Truckers Business or the Assets, (iii) which if not
continued in the future, might have a Material Adverse Effect on the
Truckers Business or the Assets or subject Purchaser or HCCH to suit or
penalty in any private or governmental litigation or proceeding, (iv) for
any of the purposes described in Section 162(c) of the Code or (v) for the
purpose of establishing or maintaining any concealed hind or concealed
bank account.
3.1.16 Confidentiality. Except as set forth on Schedule 3.1.16,
Seller has taken all commercially reasonable steps necessary to preserve
the confidential nature of all material confidential information
(including, without limitation, any proprietary information) with respect
to the Truckers Business.
3.1.17 Records. The books and records of Seller insofar as they
relate to or affect the Truckers Business and the Assets are substantially
complete and correct in all material respects.
3.1.18 Brokers and Finders. All negotiations relating to this
Agreement, the Collateral Agreements, and the transactions contemplated
hereby and thereby, have been carried on without the participation of any
Person acting on behalf of Seller or its Affiliates in such manner as to
give rise to any valid claim against Purchaser, or any of the Subsidiaries
or Affiliates of Purchaser by any Person for any brokerage or finder's
commission, fee or similar compensation, or for any bonus payable to any
officer, director, employee, agent or sales representative of or consultant
to Seller or its Affiliates upon consummation of the transactions
contemplated hereby or thereby.
3.1.19 Receivables. All of Seller's receivables (including accounts
receivable, loans receivable and advances) which have arisen in connection
with the Truckers Business and which are reflected on the Financial
Statements, and all such receivables which will have arisen since the
Financial Statement Date, are valid and genuine and have arisen solely from
bona fide transactions in the ordinary course of business consistent with
past practices. To the best knowledge
15
of Seller, all such receivables are collectible, and none of such
receivables is subject to valid defenses, set-offs or counterclaims except
as reserved for in the Financial Statements. Schedule 3.1.19 hereto
accurately lists as of December 31, 1996, all receivables arising out of or
relating to the Truckers Business, the amount owing and the aging of such
receivable, the name and last known address of the party from whom such
receivable is owing, and any security in favor of Seller for the repayment
of such receivable which such Seller purports to have. Seller has delivered
to Purchaser complete and correct copies of all instruments, documents and
agreements evidencing such receivables.
3.1.20 Transactions with Affiliates. No shareholder, director, officer
or employee of Seller, or any member of his or her immediate family or any
other of its, his or her Affiliates, owns or has a 5% or more ownership
interest in any corporation or other entity that is or was during the last
three years a party to, or in any property which is or Was during the last
three years the subject of, any material contract, agreement or
understanding, business arrangement or relationship with Seller or AAIC
material to the Truckers Business.
3.1.21 Disclosure. No representation or warranty by Seller contained in
this Agreement or any statement or certificate furnished or to be furnished
by, or on behalf of Seller to Purchaser or its representatives in
connection herewith or pursuant hereto contains or will contain any untrue
statement of a material fact or omits or will omit to state any material
fact required to make the statements contained herein or therein not
misleading.
Section 3.2 Securities Act of 1933
3.2.1 Investment Representations and Warranties. Seller represents
and warrants, on behalf of itself and each of the Principals to whom it
shall designate that any HCCH Shares should be distributed under this
Agreement (collectively, "Holder(s)") to Purchaser and HCCH that:
(a) Each Holder is an "accredited investor" as that term is
defined in Rule 501 promulgated under the Securities Act.
(b) The HCCH Shares to be received upon consummation of the
transactions contemplated hereby will be acquired for investment for
an indefinite period for each Holder's own account and not with a view
to the sale or distribution of any part thereof, and that Holders have
no present intention of selling or otherwise distributing the same.
Holders do not have any contract, undertaking, agreement or
arrangement with any Person to sell or transfer to such Person any of
the HCCH Shares.
(c) Each Holder understands that the HCCH Shares are not and may
never be registered under the Securities Act on the ground
16
that the sale provided for in this Agreement and the issuance of
securities is exempt from the registration provisions thereof, and
that the reliance by Purchaser and HCCH on such exemption is
predicated on Seller's representations set forth herein.
(d) Seller agrees, and shall cause each of the Principals who are
designated Holder to agree, that in no event will any Holder make a
disposition of any of the HCCH Shares, unless the HCCH Shares shall
have been registered under the Securities Act, unless and until
(i) Holder shall have notified HCCH of the proposed disposition, and
(ii) Holder shall have furnished HCCH with an opinion of counsel
reasonably satisfactory to HCCH or a "no action" or interpretive
letter from the Securities and Exchange Commission to the effect that
such registration is not required under the circumstances of such sale
or transfer.
(e) Each Holder has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks of Holder's investment, has the ability to bear the economic
risks of Holder's investment and has been furnished with and has had
access to such information as would be made available in the form of
a registration statement together with such additional information as
is necessary to verify the accuracy of the information supplied and
to have all questions which have been asked by Holders answered by or
on behalf of HCCH.
(f) Each Holder understands that if a registration statement
covering the HCCH Shares under the Securities Act is not in effect
when such Holder desires to sell any of the HCCH Shares, Holder may be
required to hold such HCCH Shares for an indeterminate period. Seller
also acknowledges, and shall cause each Holder to acknowledge, that
Holder understands that any sale of the HCCH Shares which might be
made by Holder in reliance upon Rule 144 under the Securities Act may
be made only in limited amounts in accordance with the terms and
conditions of that Rule. Each Holder has consulted with Seller's or
Holder's own counsel regarding the terms of Rule 144 and the
restrictions on sales of the HCCH Shares imposed thereby, and is
willing to accept the HCCH Shares pursuant to this Agreement subject
to the limitations of Rule 144.
3.2.2 Legends. All certificates representing the HCCH Shares shall
bear substantially the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF
17
1933, AS AMENDED, AND HAVE BEEN ACQUIRED BY THE
HOLDER FOR INVESTMENT PURPOSES. SAID SHARES MAY NOT BE SOLD OR
TRANSFERRED UNLESS (A) THEY HAVE BEEN REGISTERED UNDER SAID ACT, OR
(B) THE TRANSFER AGENT (OR THE COMPANY IF THEN ACTING AS ITS TRANSFER
AGENT) IS PRESENTED WITH EITHER A WRITTEN OPINION OF COUNSEL
SATISFACTORY TO COUNSEL FOR THE COMPANY OR A 'NO-ACTION' OR
INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
CIRCUMSTANCES OF SUCH SALE OR TRANSFER."
Section 3.3 Representations and Warranties of Purchaser and HCCH. Purchaser
and HCCH represent and warrant to Seller that:
3.3.1 Corporate Status and Authorization. Purchaser is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Illinois, with full corporate power and
authority to execute and deliver this Agreement and the Collateral
Agreements to which it is a party, to perform its obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby
and thereby. Purchaser is duly qualified and licensed and in good
standing in each of the jurisdictions in which such qualification or
licensing may be necessary for the transaction of the Truckers Business
by Purchaser after the Closing Date. HCCH is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to execute
and deliver this Agreement and the Collateral Agreements to which it is
a party, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery by Purchaser and HCCH of this Agreement, and the
consummation of the transactions contemplated hereby, have been, and on
the Closing Date, the execution and delivery by the Purchaser and HCCH
of each of the Collateral Agreements to which they are a party will have
been, duly authorized by all requisite corporate action. Purchaser and
HCCH have duly executed and delivered this Agreement and on the Closing
Date will have duly executed and delivered the Collateral Agreements to
which they are a party. This Agreement is, and on the Closing Date each
of the Collateral Agreements to which they are a party will be, valid
and legally binding obligations of Purchaser and HCCH, enforceable
against Purchaser and HCCH in accordance with their respective terms.
3.3.2 No Conflicts, Etc. The execution, delivery and
performance by Purchaser and HCCH of this Agreement and each of the
Collateral Agreements to which they are a party, and the consummation of
the transactions contemplated hereby and thereby, do not and will not
conflict with or result in a violation of or under (with or without the
giving of notice or the lapse of time, or both) (i) the respective
articles of incorporation or by-laws or other organizational documents
18
of Purchaser or HCCH, (ii) any Applicable Law applicable to Purchaser or
HCCH, or any of their respective Affiliates or any of their properties
or assets or (iii) any contract, agreement or other instrument
applicable to the Purchaser or HCCH, or any of their Affiliates or any
of their properties or assets, except, in the case of clause (iii), for
violations and defaults that, individually and in the aggregate, have
not and will not materially impair the ability of the Purchaser or HCCH
to perform its respective obligations under this Agreement or under any
of the Collateral Agreements to which they are a party or to consummate
the transactions contemplated hereby or thereby. Except as specified in
Schedule 3.3.2, no Governmental Approval or other Consent is required to
be obtained or made by Purchaser or HCCH in connection with the
execution and delivery of this Agreement or the Collateral Agreements to
which they are a party or the consummation of the transactions
contemplated hereby and thereby.
3.3.3 Capital Stock. The authorized capital stock of HCCH consists
of 100,000,000 shares of Common Stock, par value $1.00 per share, of
which 35,815,457 shares were issued and outstanding as of November 30,
1996. All of the issued and outstanding shares of Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth on Schedule 3.3.3 or as provided in this Agreement,
(i) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of
capital stock of HCCH is authorized or outstanding, (ii) there is not
any commitment of HCCH to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to
holders of any shares of its capital stock any evidences of indebtedness
or assets of HCCH, and (iii) HCCH has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any
other distribution in respect thereof. No person or entity is entitled to
any preemptive or similar right with respect to the issuance of any
capital stock of HCCH.
3.3.4 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 Seller:
(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;
19
(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.
3.3.5 Financial Statements. The audited consolidated financial
statements of HCCH included in its annual reports on Form 10-K and the
unaudited financial statements of HCCH included in its quarterly reports
on Form 10-Q referred to in Section 3.3.4 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.
3.3.6 Absence of Certain Changes. 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, other than the
acquisition of Purchaser by HCCH on November 27, 1996, there has not
been:
(a) any 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;
20
(b) any amendment of any material term of any outstanding
securities of HCCH;
(c) the entering into of any agreement by HCCH or any person on
behalf of HCCH to take any of the foregoing actions.
3.3.7 No Undisclosed Liabilities. Except as set forth on Schedule
3.3.7, 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 (other
than the acquisition of Purchaser by HCCH on November 27, 1996); and
(c) liabilities under this Agreement.
3.3.8 Broker's Fees. Neither HCCH nor Purchaser, nor any Person
acting on their 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 to any Person, or to reimburse
any expenses of any broker, finder, investment banker or agent in
connection with this Agreement.
3.3.9 Territorial Restrictions. Purchaser is not restricted by any
written agreement or understanding with any other Person from carrying on
the Truckers Business anywhere in the United States of America, and
Purchaser shall not, solely as a result of its purchase of the Truckers
Business from Seller pursuant hereto and the assumption of the Assumed
Liabilities, become restricted in carrying on the Truckers Business
anywhere in the United States of America by reason of any restrictions
imposed upon Purchaser under any such agreement or understanding.
3.3.10 Disclosure. No representation or warranty by Purchaser or HCCH
contained in this Agreement or any statement or certificate furnished or to
be furnished by or on behalf of Purchaser or HCCH to Seller or its
representatives in connection herewith or pursuant hereto contains or will
contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to make the statements contained herein or
therein not misleading.
21
ARTICLE 4
COVENANTS
Section 4.1 Covenants of Seller
4.1.1 Conduct of Truckers Business Prior to Closing. From the date
hereof to the Closing Date, except as expressly permitted or required by
this Agreement or as otherwise consented to by Purchaser in writing, Seller
will:
(a) carry on the Truckers Business in, and only in, the ordinary
course, in substantially the same manner as heretofore conducted, and
use all reasonable efforts to preserve intact its present business
organization, maintain its properties in commercially reasonable
operating condition and repair, keep available the services of its
present officers and significant employees, and preserve its
relationship with agents, Producers, Policyholders and others having
business dealings with it;
(b) pay accounts payable and other obligations of Seller
relating to the Truckers Business when they become due and payable in
the ordinary course of business consistent with prior practice;
(c) perform in all material respects all of its obligations
under the Policies and all other Contracts, agreements and instruments
relating to or affecting the Truckers Business or the Assets, and
comply in all material respects with all Applicable Laws applicable to
the Assets or the Truckers Business;
(d) other than new Policies issued pursuant to the Program
Manager's Agreement and amendments or endorsements to existing
Policies in the ordinary course of business, not enter into or assume
any material agreement, contract or instrument relating to the
Truckers Business, or enter into or permit any material amendment,
supplement, waiver or other modification in respect thereof,
(e) not grant (or commit to grant) any increase in the
compensation (including incentive or bonus compensation, commissions
or service fees) of any agent or Producer engaged in the solicitation,
sale or operation of the Truckers Business, or institute, adopt or
amend (or commit to institute, adopt or amend) any compensation or
benefit plan, policy, program or arrangement applicable to any such
agent or Producer; and
22
(f) not take any action or omit to take any action, which action
or omission would result in a breach of any of the representations and
warranties set forth in Section 3.1.7.
4.1.2 No Solicitation. From the date of this Agreement to the
Closing Date, neither the Seller, any of its respective Affiliates nor any
Person acting on their behalf and under their control shall (i) solicit or
encourage any inquiries or proposals for, or enter into any discussions
with respect to, the purchase or sale of any properties and assets
constituting the Assets or (ii) furnish or cause to be furnished any non-
public information concerning the Truckers Business to any Person (other
than Purchaser and its agents and representatives), other than in the
ordinary course of business or pursuant to Applicable Law and after prior
written notice to Purchaser. Seller shall not sell, transfer or otherwise
dispose of, grant any option or proxy to any Person with respect to, create
any Lien upon, or transfer any interest in, any Asset, other than in the
ordinary course of business consistent with prior practice and in
accordance with each and every term of this Agreement.
4.1.3 Access and Information
(a) From the date of this Agreement to the Closing Date, Seller
will (and will cause each of their respective Affiliates and their
Affiliates' respective accountants, counsel, consultants, employees
and agents) to give Purchaser and its accountants, counsel,
consultants, employees and agents, full access during normal business
hours to, and furnish them with all documents, records, work papers
and information with respect to, all of such Person's properties,
assets, books, contracts, commitments, reports and records relating to
the Truckers Business and the Assets, as Purchaser shall from time to
time reasonably request. In addition, Seller will permit Purchaser and
Purchaser's accountants, counsel, consultants, employees and agents,
reasonable access to such personnel of Seller during normal business
hours as may be necessary or useful to Purchaser in its review of the
properties, assets and business affairs of the Seller relating to the
Truckers Business and the above-mentioned documents, records and
information. Seller will endeavor to keep Purchaser generally
informed as to the affairs of the Truckers Business.
(b) Seller will retain all books and records relating to the
Truckers Business in accordance with Seller's record retention
policies as presently in effect.
4.1.4 Public Announcements. Except as required by Applicable Law,
Seller shall not, and shall not permit any Affiliate to, make any public
23
announcement in respect of this Agreement or the transactions contemplated
hereby without the prior written consent of Purchaser.
4.1.5 Further Actions
(a) Seller agrees to use all reasonable good faith efforts to
take all actions and to do all things reasonably necessary, proper or
advisable to consummate the transactions contemplated hereby on the
expected Closing Date.
(b) Seller will, as promptly as practicable, file or supply, or
cause to be filed or supplied, all applications, notifications and
information required to be filed or supplied by it pursuant to
Applicable Law in connection with this Agreement, the Collateral
Agreements, the sale and transfer of the Truckers Business and the
Assets pursuant to this Agreement and the consummation of the other
transactions contemplated hereby and thereby.
(c) Seller shall, as promptly as practicable, use all reasonable
efforts to obtain, or cause to be obtained, all Consents (including,
without limitation, all Governmental Approvals and any Consents
required under any Contract) necessary to be obtained by Seller in
order to consummate the sale and transfer of the Truckers Business and
the Assets pursuant to the Agreement and the consummation of the other
transactions contemplated hereby.
(d) Seller shall, and shall cause each of its Affiliates to,
coordinate and cooperate with Purchaser in exchanging such information
and supplying such assistance as may be reasonably requested by
Purchaser in connection with the filings and other actions
contemplated by Section 4.2.2.
(e) At all times prior to the Closing, Seller shall promptly
notify Purchaser in writing of any fact, condition, event or
occurrence that will or may result in the failure of any of the
conditions contained in Sections 5.1 and 5.2 to be satisfied in any
material respect, promptly upon becoming aware of the same.
4.1.6 Further Assurances. Following the Closing, Seller shall, and
shall cause each of its Affiliates to, from time to time, execute and
deliver such additional instruments, documents, conveyances or assurances
and take such other actions as shall be necessary, or otherwise reasonably
requested by Purchaser, to confirm and assure the rights and obligations
provided for in this Agreement and in the Collateral Agreements to which it
is a party and to render effective the consummation of the transactions
contemplated thereby.
24
4.1.7 Disclosure Memorandum [Intentionally Omitted.]
4.1.8 Enforcement of Rights and Non-Competition Agreement
(a) Cooperation in Enforcement of Rights. On and after the
Closing Date, to the extent required to allow Purchaser to avail
itself of any rights acquired or liabilities assumed hereunder and to
exercise all legal, equitable and contractual rights acquired or
liabilities assumed by Purchaser and HCCH hereunder, Seller shall, and
shall cause its Affiliates to, at the request of Purchaser, cooperate
with Purchaser in taking timely legal action and exercising all legal,
equitable and contractual rights that may be available to Seller with
respect thereto.
(b) Support of Marketing Efforts of Purchaser. On and after the
Closing Date, Purchaser shall have the exclusive right to market the
Truckers Business through the Producers. Seller shall take any and all
other commercially reasonable steps and actions that may be requested
by Purchaser to effect the appointment of all Producers as agents of
Purchaser, and to notify promptly such Producers of the assignment of
their contracts to Purchaser with respect to the Truckers Business.
(c) Non-Competition. Seller acknowledges and agrees that the
Purchase Price paid by Purchaser to Seller for the Truckers Business
and the Assets has been calculated and based upon, among other things,
the present and future value of the Truckers Business. and the ability
of Purchaser to conserve the Truckers Business following the Closing
Date through the use of the Producers currently marketing and
servicing the Policies under the Program Manager's Agreement in the
continued marketing and servicing of the Policies, and that
Purchaser's conservation efforts, and the future value of the Truckers
Business, will be enhanced substantially by reason of the continued
relationship among the Producers, Purchaser and RNRS. Seller
recognizes and agrees that the nature of the Truckers Business is a
national business throughout the continental United States of America,
and that Purchaser will, after the Closing Date, continue to market
the Truckers Business throughout the continental United States through
a variety of channels, including by means of its own employees,
brokers, representatives, agents, Producers, and otherwise. Seller
also recognizes Purchaser's interest in protecting the Truckers
Business and the establishment and maintenance of good relationships
with the Producers and RNRS, and that such interest gives rise to
Purchaser's desire to restrain Seller and the Principals, and their
respective successors and assigns, from competing with
25
Purchaser in any Competitive Business for a reasonable
period of time and within reasonable geographic limits after the
Closing Date. Therefore, Seller agrees to enter into this covenant not
to compete with Purchaser and shall cause each of the Principals to
enter into the Noncompetition Agreements with Purchaser in
consideration of the Purchaser's payment of the Purchase Price and
the other agreements and covenants contained in this Agreement. ln
consideration of the foregoing, Seller agrees that, during the ten
(10) year period following the Effective Date, or for such shorter
period during which Purchaser or its successors or assigns shall
engage in the Truckers Business and except as may be specifically
requested by Purchaser in writing or as otherwise required, permitted
or contemplated under this Agreement, Seller will not, directly or
indirectly, alone or with or through any other Person or entity, as a
member of a partnership, limited liability company, or other business
entity or as an investor in any security of any class (except for
ownership of the HCCH Shares or as an investor in less than 5% of any
outstanding equity securities of any corporation, partnership, limited
liability company or other business entity), or as a consultant,
advisor, agent, representative of any business entity, or through any
officer, director, agent, employee, or Affiliate of the Seller, their
successors or assigns, or by any contract, agreement, arrangement or
understanding with any other Person or business entity, engage in a
Competitive Business in any state, district or jurisdiction in the
continental United States of America. Seller and Purchaser recognize
and agree that Purchaser's enforcement of this covenant and the
Noncompetition Agreements is necessary to prevent irreparable harm and
damage to the Truckers Business acquired by Purchaser under this
Agreement, and that the limitations as to time, geographical area and
the scope of activity restrained hereby are reasonable and do not
impose on Seller and the Principals any greater restraint than is
necessary to protect the Truckers Business and Purchaser's
relationships with the Producers and RNRS. If Seller or any of the
Principals commits a breach, or threatens to commit a breach, of any
of the provisions of this Section 4.1.8 or of the Noncompetition
Agreements, Purchaser shall have the right and remedy, in addition to
any other remedies available to it at law or in equity:
(i) to have the provisions of this Section 4.1.8
specifically enforced by any court having equity jurisdiction,
including, without limitation, immediate injunctive relief, it
being acknowledged and agreed by Seller that any such breach or
threatened breach will cause irreparable injury or harm to
Purchaser and that
26
money damages will not provide an adequate remedy to Purchaser;
and
(ii) to require Seller and the Principals to account for
and pay over to Purchaser all compensation, profits, monies,
accruals, increments or other benefits (collectively,
"Benefits") derived or received by Seller or the Principals as
the result of any transactions constituting a breach of any of
the provisions of this Section 4.1.8, and Seller hereby agrees
to account for and pay over such Benefits to Purchaser; and
(iii) to recover from Seller reasonable attorney's fees and
expenses incurred by Purchaser in connection with any proceedings
to enforce the provisions of this Section 4.1.8.
(d) Each of the rights and remedies enumerated in this Section
4.1.8 shall be independent of the other, and shall be severally
enforceable, and such rights and remedies shall be in addition to,
and not in lieu of, any other rights and remedies available to
Purchaser under law or in equity. In the event that Purchaser
prevails in any action or proceeding in any court of competent
jurisdiction that, results in a finding that this covenant or any of
the Noncompetition Agreements have been breached or violated by
Seller or any of the Principals, then the parties agree that, in
addition to any other damages awarded to Purchaser for such
violation or breach, the Seller shall pay to Purchaser an amount
equal to two and one-half (2 1/2) times the total amount of damages,
costs and attorney's fees awarded Purchaser by the court in any such
court proceedings, not to exceed the Purchase Price as adjusted
pursuant to Section 1.5.
(e) If any provision of this Section 4.1.8 is held to be
unenforceable because of the scope, duration or area of its
applicability, the tribunal making such determination shall have the
power to modify such scope, duration, or area, or all of them, and
such provision or provisions shall then be applicable in such
modified form.
4.1.9 Transition Team. Seller hereby designates ▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Designated Employees") to assist in the orderly
transfer of the Truckers Business from Seller to Purchaser ("Transition
Services") during a period not less than six (6) months nor longer than one
year from the Closing Date (the "Transition Period"). During the Transition
Period, Seller shall provide and bear the cost of office space and related
office furniture and equipment,
27
including, without limitation, computers, copy machines, facsimile
machines, and other equipment customarily required in the operation of a
managing general insurance agency, to support the Designated Employees in
providing Transition Services to the Purchaser.
Section 4.2 Covenants of Purchaser
4.2.1 Public Announcements. Prior to the Closing, except as
required by Applicable Law, Purchaser and HCCH shall not, and shall not
permit their Affiliates to, make any public announcement in respect of this
Agreement or the transactions contemplated hereby without the prior written
consent of Seller.
4.2.2 Further Actions
(a) Purchaser and HCCH agree to use all commercially reasonable
efforts in good faith to take all corporate and other actions and to
do all things necessary, proper or advisable to consummate the
transactions contemplated hereby by the expected Closing Date,
including, without limitation, the issuance of the HCCH Shares to
Purchaser by HCCH.
(b) Purchaser and HCCH will, as promptly as practicable, file or
supply, or cause to be filed or supplied, all applications,
notifications and information required to be filed or supplied by
Purchaser or HCCH pursuant to Applicable Law in connection with this
Agreement, the Collateral Agreements to which they may be a party, the
acquisition of the Assets pursuant to this Agreement, and the
consummation of the other transactions contemplated hereby and
thereby.
(c) Purchaser and HCCH will coordinate and cooperate with
Seller in exchanging such information and supplying such reasonable
assistance as may be reasonably requested by Seller in connection
with the filings and other actions contemplated by Section 4.1.6.
(d) At all times prior to the Closing, Purchaser and HCCH shall
promptly notify Seller in writing of any fact, condition, event or
occurrence that will or may result in the failure of any of the
conditions contained in Sections 5.1 and 5.3 to be satisfied, promptly
upon becoming aware of the same.
4.2.3 Further Assurances. Following the Closing, Purchaser and
HCCH shall, and shall cause its Subsidiaries and Affiliates to, from time
to time, execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be
necessary, or otherwise reasonably
28
requested by Seller, to confirm and assure the rights and obligations
provided for in this Agreement and in the Collateral Agreements and render
effective the consummation of the transactions contemplated hereby and
thereby. On or before the Closing Date, HCCH will make application to the
New York Stock Exchange and will use reasonable commercial efforts to have
the HCCH Shares listed thereon.
4.2.4 Rule 144. HCCH covenants and agrees that, for so long as it
may be required to file reports under the Securities Act or the Exchange
Act, as the case may be, it will undertake to file any reports that may be
required to be filed by it under the Securities Act and the Exchange Act
and that it will take such further action as Seller may reasonably request,
from time to time, to the extent required to enable the Holders of the HCCH
Shares to sell any of the HCCH Shares without registration under the
Securities Act within the limitations or the exemptions provided by (a)
Rule 144 under the Securities Act, as such rule may be amended from time to
time, or (b) any similar or successor rule or regulation hereinafter
adopted by the Securities and Exchange Commission. Upon the written
request of Seller, HCCH will deliver to the Holders a written statement as
to whether it has complied with such filing requirements.
4.2.5 Expenses of Transition Team. During the Transition Period,
Purchaser agrees to reimburse Seller for fifty percent (50.0%) of the base
salaries of the Designated Employees, and all telephone, facsimile,
stationery and travel expenses incurred by the Designated Employees in
connection with the rendering of Transition Services to Purchaser.
Purchaser may, in its sole discretion and by providing notice in writing
to Seller in the manner provided in this Agreement, terminate the
Transition Period at any time after six (6) months thereof following the
Closing Date; and shall not, on and after the date specified in such
notice, be responsible for reimbursement of any salaries or other expenses
of the Designated Employees other than salaries and expenses incurred prior
to the date specified in the notice, and the Transition Period shall
terminate upon such date. Upon such termination by Purchaser, Seller shall
be relieved of any further obligation to provide Transition Services to
Purchaser, but may, in its sole discretion, continue to provide such
Transition Services and make available the services of the Designated
Employees, at the sole expense of Seller. If Purchaser elects to terminate
the Transition Period at any time prior to one year following the Closing
Date, it will furnish Seller with monthly production reports of New
Business for the remainder of the Measurement Period.
4.2.6 Access and Information. From the date of this Agreement and
until the date of payment of any refund of any portion of the Purchase
Price that may be required pursuant to the provisions of Section 1.5,
Purchaser will (and will cause its Affiliates and their respective
accountants, counsel, consultants, employees and agents) to give Seller and
its accountants, counsel, consultants, employees and agents, full access
during normal business hours to, and furnish them with all documents,
records, work papers and information with respect to,
29
all of such Person's properties, assets, books, contracts, commitments,
reports and records relating to the Truckers Business and the Assets,
including, without limitation, the Billed Premium for New Business during
the Measurement Period, as Seller shall from time to time reasonably
request in connection with Purchaser's calculation of the Adjusted Gross
Premium pursuant to the provisions of Section 1.5. In addition, Purchaser
will permit Seller and Seller's accountants, counsel, consultants,
employees and agents, reasonable access to such personnel of Purchaser
during normal business hours as may be necessary or useful to Seller in its
review of the calculation of the Adjusted Gross Premium by Purchaser.
4.2.7 Material Adverse Changes. From the date of this Agreement to
the Closing Date, Purchaser and HCCH shall provide Seller with all
information which Purchaser and HCCH are required to disclose to the public
that may have a Material Adverse Effect upon the business or financial
condition of HCCH or Purchaser, such disclosure to be made no later than
the time such information is first disclosed by HCCH and/or Purchaser to
the public.
4.2.8 Collection of Receivables for Seller. On and after the
Closing Date, Purchaser shall use commercially reasonable efforts to
collect all receivables, notes, bonds and other evidences of indebtedness
of and rights to receive payments from any Person relating to the Truckers
Business for any period prior to the Effective Date, and promptly account
for and pay over to Seller any such amounts collected by Purchaser and due
Seller.
ARTICLE 5
CONDITIONS PRECEDENT
Section 5.1 Conditions to Obligations of Each Party. The obligations of
the parties to consummate the transactions contemplated hereby shall be
subject to the fulfillment on or prior to the Closing Date of the following
conditions:
5.1.1 No Injunction, Etc. Consummation of the transactions
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any applicable Law, including any order, injunction, decree
or judgment of any court or other Governmental Authority. No court or
other Governmental Authority shall have determined any Applicable Law to
make illegal the consummation of the transactions contemplated hereby or by
the Collateral Agreements, and no proceeding with respect to the
application of any such Applicable Law to such effect shall be pending.
Section 5.2 Conditions to Obligations of Purchaser and HCCH. The
obligations of Purchaser and HCCH to consummate the transactions contemplated
hereby shall be subject to the fulfillment (or waiver by Purchaser and HCCH)
30
on or prior to the Closing Date of the following additional conditions, which
Seller agrees to use reasonable good faith efforts to cause to be fulfilled:
5.2.1 Representations, Performance. The representations and
warranties of Seller contained in this Agreement and in the Collateral
Agreements to which it is a party (i) shall be true and correct in all
respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) at and as
of the date hereof, and (ii) shall be repeated and shall be true and
correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in
the case of any representation or warranty without any materiality
qualification) on and as of the Closing Date with the same effect as though
made on and as of the Closing Date. Seller shall have duly performed and
complied in all material respects with all agreements and conditions
required by this Agreement and each of the Collateral Agreements to which
it is a party to be performed or complied with by it prior to or on the
Closing Date. Seller shall have delivered or shall cause to be delivered to
Purchaser a certificate, dated the Closing Date and signed by the duly
authorized officers of Seller, to the foregoing effect.
5.2.2 Consents. Seller shall have obtained and shall have
delivered or caused to be delivered to Purchaser copies of (i) all
Governmental Approvals required to be obtained by Seller in connection with
the execution and delivery of this Agreement and the Collateral Agreements
to which Seller is a party and the consummation of the transactions
contemplated hereby or thereby and (ii) subject to Section 2.5.5, all
Consents (including, without limitation, all Consents required under any
Contract material to the transfer of the Assets or the operation of the
Truckers Business) necessary to be obtained in order to consummate the sale
and transfer of the Assets pursuant to this Agreement and the consummation
of the other transactions contemplated thereby and by the Collateral
Agreements.
5.2.3 No Material Adverse Effect. Except as set forth in Schedule
3.1.8, no event, occurrence, fact, condition, change, development or effect
shall have occurred, existed or come to exist that, individually or in the
aggregate, has constituted or resulted in, or could reasonably be expected
to constitute or result in, a Material Adverse Effect on the Truckers
Business or the Assets.
5.2.4 Collateral Agreements. Purchaser shall have received each of
the following agreements, in each case duly executed by the other parties
thereto:
(a) the Software License Agreement;
(b) the Noncompetition Agreements.
31
5.2.5 Corporate Proceedings. All corporate and other proceedings
of Seller in connection with this Agreement and the Collateral Agreements
and the transactions contemplated hereby and thereby, and all documents and
instruments incident hereto and thereto, shall be reasonably satisfactory
in substance and form to Purchaser and HCCH and its counsel, and Purchaser
and HCCH and its counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be
reasonably requested.
5.2.6 Transfer Documents. Seller shall have delivered or shall
have caused to be delivered to Purchaser and HCCH at the Closing all
documents, certificates and agreements necessary to transfer to Purchaser
good and marketable title to the Truckers Business and the Assets, free and
clear of any and all Liens thereon, other than Permitted Liens, including,
without limitation:
(a) an assignment and general conveyance, in form and substance
reasonably satisfactory to Purchaser and HCCH, dated the Closing Date,
with respect to the Assets (other than any Asset to be transferred
pursuant to any of the instruments referred to in any other clause of
this Section 5.2.6); and
(b) assignments of all Contracts and any other agreements and
instruments constituting a part of the Truckers Business and Assets to
be transferred to Purchaser hereunder, dated the Closing Date,
assigning to Purchaser all of Seller's right, title and interest
therein and thereto with respect to Billed Premium for any period on
and after the Effective Date, with any required Consent endorsed
thereon; and
(c) an assignment of Leases, dated as of the Closing Date, with
respect to each Lease of Seller utilized in connection with the
Truckers Business, including office equipment leases, in form and
substance reasonably satisfactory to Purchaser, together with any
necessary transfer declarations or other filings.
5.2.7 New Program Manager's Agreement. The Purchaser shall have
entered into the New Program Manager's Agreement with RNRS substantially
upon the terms set forth in Exhibit E.
5.2.8 Investment Letter. Each Holder shall have delivered an
investment letter to HCCH in substantially the form attached hereto as
Exhibit C.
Section 5.3 Conditions to Obligations of Seller. The obligation of Seller
to consummate the transactions contemplated hereby shall be subject to the
fulfillment (or waiver by Seller), on or prior to the Closing Date, of the
following additional conditions, which HCCH and Purchaser agree to use
reasonable good faith efforts to cause to be fulfilled.
32
5.3.1 Representations, Performance. The representations and
warranties of Purchaser and HCCH contained in this Agreement and the
Collateral Agreements shall be true and correct in all respects (in the
case of any representation or warranty containing any materiality
qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) at and as
of the date hereof and (ii) shall be repeated and shall be true and correct
in all respects (in the case of any representation or warranty containing
any materiality qualification) or in all material respects (in the case of
any representation or warranty without any materiality qualification) on
and as of the Closing Date with the same effect as though made at and as of
such time. Purchaser and HCCH shall have duly performed and complied in
all material respects with all agreements and conditions required by this
Agreement and the Collateral Agreements to be performed or complied with by
them prior to or on the Closing Date. Purchaser shall have delivered to
Seller a certificate, dated the Closing Date and signed by a duly
authorized officers of Purchaser and HCCH, to the foregoing effect.
5.3.2 Corporate Proceedings. All corporate proceedings of
Purchaser and HCCH in connection with this Agreement, the Collateral
Agreements and the transactions contemplated hereby and thereby, and all
documents and instruments incident hereto and thereto, shall be reasonably
satisfactory in substance and form to Seller, and its counsel, and Seller
and its counsel shall have received all such documents and instruments, or
copies thereof, certified if requested, as may be reasonably requested.
5.3.3 Consents and Approvals. Seller shall have obtained all
Governmental Approvals necessary to consummate the transactions
contemplated hereby.
5.3.4 Collateral Agreements. Purchaser and HCCH shall have entered
into each of the Collateral Agreements to which it is a party, and Seller
shall have received the Assumption Agreement, duly executed by an officer
of Purchaser.
5.3.5 No Material Adverse Effect. Except as set forth on Schedule
3.3.7, no event, occurrence, fact, condition, change, development or effect
shall have occurred, existed or come to exist that, individually or in the
aggregate, has constituted or resulted in, or could reasonably be expected
to constitute or result in, a Material Adverse Effect on Purchaser or HCCH.
33
ARTICLE 6
TERMINATION
Section 6.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by the written agreement of Purchaser and Seller;
(b) by either Seller or Purchaser by written notice to the other
party if the transactions contemplated hereby shall not have been
consummated pursuant hereto by 5:00 p.m. Central Standard Time, on
January 31, 1997, unless such date shall be extended by the mutual written
consent of Seller and Purchaser;
(c) by Purchaser by written notice to Seller if (i) the
representations and warranties of Seller shall not have been true and
correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in
the case of any representation or warranty without any materiality
qualification) as of the date when made or (ii) if any of the conditions
set forth in Section 5.1 or 5.2 shall not have been, or if it could not
reasonably be expected that any of such conditions will be, fulfilled by
5:00 p.m. Central Standard Time, on January 31, 1997, unless such failure
shall be due to the failure of Purchaser or HCCH to perform or comply with
any of the covenants, agreements or conditions hereof to be performed or
complied with by them prior to the Closing; or
(d) by Seller by written notice to Purchaser if (i) the
representations and warranties of Purchaser or HCCH shall not have been
true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material
respects (in the case of any representation or warranty without any
materiality qualification) as of the date when made or (ii) if any of the
conditions set forth in Section 5.1 or 5.3 shall not have been, or if it
could not reasonably be expected that any of such conditions will be,
fulfilled by 5:00 p.m. Central Standard Time on January 31, 1997, unless
such failure shall be due to the failure of Seller to perform or comply
with any of the covenants, agreements or conditions hereof to be performed
or complied with by them prior to the Closing.
Section 6.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 6.1, this Agreement shall
become void and have no effect, without any liability to any Person in respect
hereof or of the transactions contemplated hereby on the part of any party
hereto, or any of its directors, officers, employees, agents, consultants,
representatives, advisers, stockholders or Affiliates, except as specified in
Section 9.2 and except for any liability resulting from such party's breach of
this Agreement.
34
ARTICLE 7
INDEMNIFICATION
Section 7.1 By Seller. Seller shall defend, indemnify and hold harmless
HCCH and Purchaser, their respective officers, directors, employees, agents,
advisers, representatives in such capacities and Affiliates (collectively, the
"Purchaser Indemnitees") from and against, and pay or reimburse Purchaser
Indemnitees for, any and all claims, liabilities, obligations, losses, fines,
costs, royalties, proceedings, deficiencies or damages (whether absolute,
accrued, conditional or otherwise and whether or not resulting from third party
claims), including expenses paid to third parties and reasonable outside
attorneys' and accountants' fees incurred in the investigation or defense of
any of the same or in asserting any of their respective rights hereunder
(collectively, "Losses"), resulting from or arising out of:
(i) any inaccuracy of any representation or warranty by Seller
made or contained in this Agreement or in any Collateral Agreement to
which it is a party or in connection herewith or therewith;
(ii) any failure of Seller to perform in any material respect any
covenant or agreement hereunder or under any Collateral Agreement to
which it is a party or to fulfill any other obligation in respect
hereof or of any Collateral Agreement to which it is a party;
(iii) any Excluded Liabilities or Excluded Assets; and
(iv) any and all Taxes of Seller and all Affiliates thereof not
relating to or arising out of the Truckers Business.
Notwithstanding anything in this Agreement to the contrary, the maximum
aggregate amount recoverable by Purchaser Indemnitees for all claims for
indemnification under this Agreement under this Section 7.1 shall, in the
aggregate, not exceed the Purchase Price.
Section 7.2 By Purchaser and HCCH. Purchaser and HCCH shall defend,
indemnify and hold harmless Seller and its officers, directors, employees,
agents, advisers, representatives and Affiliates (collectively, the "Seller
Indemnitees") from and against any and all Losses resulting from or arising out
of:
(i) any inaccuracy in any representation or warranty by
Purchaser or HCCH made or contained in this Agreement or in any
Collateral Agreement to which it is a party or in connection herewith
or therewith; or
(ii) any failure of Purchaser or HCCH to perform in any material
respect any covenant or agreement hereunder or under any Collateral
35
Agreement to which it is a party or fulfill any other obligation in
respect hereof or thereof;
(iii) the Assumed Liabilities;
(iv) any Taxes relating to the Truckers Business for any period
on and after the Effective Date; and
(v) the operation of the Truckers Business by Purchaser or
Purchaser's ownership, operation or use of the Assets following the
Closing Date,
except, in the case of clause (v), to the extent such Losses result from or
arise out of the Excluded Liabilities or constitute Losses for which Seller
is required to indemnify Purchaser Indemnitees under Section 7.1.
Section 7.3 Adjustments to Indemnification Payments. Any payment made by
Seller to Purchaser Indemnities, on the one hand, or by Purchaser to the Seller
Indemnities, on the other hand, pursuant to this Article 7 in respect of any
claim (i) shall be net of any insurance proceeds realized by and paid to the
Indemnified Party in respect of such claim and (ii) shall be (A) reduced by an
amount equal to any Tax benefits attributable to such claim and (B) increased
by an amount equal to any Taxes attributable to the receipt of such payment,
but only to the extent that such Tax benefits are actually realized, or such
Taxes are actually paid, as the case may be, by Seller or by Purchaser or by
any consolidated, combined or unitary group of which Purchaser or Seller is a
member. The Indemnified Party shall use its reasonable efforts to make
insurance claims relating to any claim for which it is seeking indemnification
pursuant to this Article 7; provided that the Indemnified Party shall not be
obligated to make such an insurance claim if the Indemnified Party in its
reasonable judgment believes that the cost of pursuing such an insurance claim
together with any corresponding increase in insurance premiums or other
chargebacks to the Indemnified Party, as the case may be, would exceed the
value of the claim for which the Indemnified Party is seeking indemnification.
Section 7.4 Indemnification Procedures. In the case of any claim asserted
by a third party against a party entitled to indemnification under this
Agreement (the "Indemnified Party"), notice shall be given by the Indemnified
Party to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and the Indemnified Party shall permit the
36
Indemnifying Party (at the expense of such Indemnifying Party) to assume the
defense of any claim or any litigation resulting therefrom, provided that (i)
the counsel for the Indemnifying Party who shall conduct the defense of such
claim or litigation shall be reasonably satisfactory to the Indemnified
Party, (ii) the Indemnified Party may participate in such defense at such
Indemnified Party's expense, and (iii) the omission by any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its indemnification obligation under this Agreement except to the extent that
such omission results in a failure of actual notice to the Indemnifying Party
and such indemnifying Party is materially damaged as a result of such failure
to give notice. Except with the prior written consent of the Indemnified
Party, no Indemnifying Party, in the defense of any such claim or litigation,
shall consent to entry of any judgment or enter into any settlement that
provides for injunctive or other nonmonetary relief affecting the Indemnified
Party or that does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation. In the event that the
Indemnified Parry shall in good faith determine that the conduct of the
defense of any claim subject to indemnification hereunder or any proposed
settlement of any such claim by the Indemnifying Party might be expected to
affect adversely the Indemnified Party's Tax liability or the ability of
Purchaser to conduct its business, or that the Indemnified Party may have
available to it one or more defenses or counterclaims that are inconsistent
with one or more of those that may be available to the Indemnifying Party in
respect of such claim or any litigation relating thereto, the Indemnified
Party shall have the right at all times to take over and assume control over
the defense, settlement, negotiations or litigation relating to any such
claim at the sole cost of the Indemnifying Party, provided that if the
Indemnified Party does so take over and assume control, the Indemnified Party
shall not settle such claim or litigation without the written consent of the
Indemnifying Parry, such consent not to be unreasonably withheld. In the
event that the Indemnifying Party does not accept the defense of any matter
as above provided, the Indemnified Parry shall have the full right to defend
against any such claim or demand and shall be entitled to settle or agree to
pay in full such claim or demand. In any event, the Indemnifying Party and
the Indemnified Party shall cooperate in the defense of any claim or
litigation subject to this Section 7 and the records of each shall be
available to the other with respect to such defense.
Section 7.5 Limits on Indemnification. Anything in this Agreement to the
contrary notwithstanding, claims for indemnification of Losses hereunder
shall not be made by any party unless the aggregate amount of such Losses
exceeds Twenty-Five Thousand Dollars ($25,000.00) ("Threshold Amount"), and
Seller shall have no obligation for any Losses in excess of the Purchase
Price, as adjusted pursuant to Section 1.5. In the event the aggregate Losses
for which any claim of indemnification is made exceed the Threshold Amount,
the Indemnifying Party shall be liable for the full amount of such Losses,
subject to the limitations set forth herein.
ARTICLE 8
DEFINITIONS AND CONSTRUCTION
Section 8.1 Definition of Certain Terms. Capitalized words and terms
used in this Agreement, but not otherwise defined in this Article 8, shall
have the meaning given them in the other Articles of this Agreement where
such words or terms are first used and defined. Except as otherwise expressly
provided or unless the context otherwise requires, the terms defined in this
Section 8.1, whenever used in this Agreement (including in the Schedules),
shall have the respective meanings assigned to them in this Section for all
purposes of this Agreement, and include the plural as well as the singular.
Adjusted Gross Premium: as defined in Section 1.5.
37
Affiliate: of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person. "Control" (including the terms
"controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management policies of a person, whether through the ownership of
voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
Agreement: this instrument as originally executed, including the
Schedules hereto, or as it may be from time to time supplemented or amended
by one or more supplements or amendments hereto entered pursuant to the
applicable provisions hereof.
Applicable Law: all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority,
(ii) Governmental Approvals and (iii) orders, decisions, injunctions,
judgments, awards and decrees of or agreements with any Governmental
Authority.
Assets: as defined in Section 1.1.
Assumed Liabilities: as defined in Section 1.4.1
Assumption Agreement: as defined in Section 1.4.1, and in
substantially the form of Exhibit A.
Balance Sheet: the balance sheet contained in the Unaudited Financial
Statements.
Balance Sheet Date: as defined in Section 3.1.4.
Billed Premium: premium billed in connection with the Policies or New
Business.
Closing: as defined in Section 2.1.
Closing Date: as defined in Section 2.1.
Code: the Internal Revenue Code of 1986, as amended.
Collateral Agreements: the agreements and other documents and
instruments described in Sections 5.2.4, 5.2.7, 5.2.8, & 5.3.4 the
agreements in substantially the form set forth on the Exhibits attached to
this Agreement.
Competitive Business: Any business engaged as an agent or producer
(other than as an agent for Purchaser), managing general agent or
38
underwriter for primary insurers in the offering, sale, solicitation,
marketing, development, issuance or promotion of (a) occupational accident
insurance issued to provide medical and indemnity benefits for work-related
injuries to sole proprietor truckers, independent owner/operators of
trucking companies, and independent operators or non-employee drivers
of trucks owned by other Persons ("Sole Proprietor Truckers"); (b) related
workers compensation insurance issued to Sole Proprietor Truckers who are
not, as of the Effective Date, required by law to obtain workers
compensation insurance and (c) liability policies or certificates of
insurance, other than workers compensation insurance, issued primarily to
indemnify insureds against claims by Sole Proprietor Truckers for benefits
under a workers compensation statute or similar law. Purchaser
acknowledges and agrees that Seller, either directly or indirectly through
Affiliates or the Principals, or by contract, agreement or arrangement, is
currently engaged in, and will continue to engage in after the Closing
Date, the offering, sale, solicitation, marketing, development, issuance
and promotion of (i) workers compensation insurance programs and products
to Persons and entities other than to Sole Proprietor Truckers who are not
required by law to obtain workers compensation insurance, (ii) reinsurance
relating to the types of insurance described in clauses (a), (b) and (c) of
this definition, (iii) administration of claims made under insurance
policies for the types of insurance described in clauses (a), (b) and
(c) of this definition and (iv) insurance programs and products other than
those described in clauses (a), (b) and (c) of this definition; and,
notwithstanding anything to the contrary contained herein or in any other
agreement, Purchaser acknowledges and agrees that none of the activities
described in clauses (i), (ii), (iii) and (iv) shall be considered to be a
Competitive Business.
Consent: any consent, approval, authorization, waiver, permit, grant,
franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice
to, any Person, including but not limited to any Governmental Authority.
Contract: as defined in Section 3.1.12(a).
Covered Returns: as defined in Section 3.1.6(a).
Covered Taxes: all Taxes relating to or assessed by reason of the
Truckers Business or the Assets.
Designated Employees: those employees of Seller designated in
Section 4.1.9.
Disclosure Memorandum: as defined in Section 4.1.8.
Dollars or $: lawful money of the United States.
Effective Date: 12:01 a.m. on December 1, 1996.
39
Exchange Act: the Securities Exchange Act of 1934, as amended.
Excluded Assets: as defined in Section 1.1.3.
Excluded Liabilities: as defined in Section 1.4.2.
Expirations: all binding authority of Seller under the Program
Manager's Agreement, including records and files of Seller for the
solicitation and sale of Truckers Business written or bound through Seller
under the Program Manager's Agreement.
Fiduciary Account: any bank account or accounts maintained by Seller
as trustee for RNRS for all premiums collected and received by Seller for
Truckers Business written under the Program Manager's Agreement.
Financial Statement Date: as defined in Section 3.1.4.
Financial Statements: each of the financial statements required
to be provided by Section 3.1.4.
GAAP: generally accepted accounting principles as in effect in the
United States.
Government Approval: any Consent of, with or to any Governmental
Authority.
Governmental Authority: any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, including, without limitation, any government authority,
insurance regulatory authority, insurance director, commissioner or
superintendent, or any agency, department, board, commission or
instrumentality of the United States, any State of the United States or any
political subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.
HCCH Balance Sheet: as defined in Section 3.3.5.
HCCH Balance Sheet Date: as defined in Section 3.3.5.
HCCH Common Stock: as defined in Section 1.3.1(a).
HCCH Shares: as defined in Section 1.3.1(a).
Holder: as defined in Section 3.2.1.
Indemnified Party: as defined in Section 7.4.
40
Indemnifying Party: as defined in Section 7.4.
IRS: the Internal Revenue Service.
Leases: means all real property leases, subleases, licenses and
occupancy agreements pursuant to which Seller is the lessee, sublessee,
licensee or occupant other than real property leases, subleases, licenses and
occupancy agreements included in Excluded Assets, and all equipment leases,
licenses, licensing arrangements and other contracts providing in whole or in
part for the use of, or limiting the use of, any copiers, office equipment,
telephone systems, computers or data processing equipment or software relating
to the Truckers Business.
Lien: any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, lease, sublease, license, occupancy agreement,
adverse claim or interest, easement, covenant, encroachment, burden, title
defect, title retention agreement, voting trust agreement, interest, equity,
option, lien, right of first refusal, charge or other restrictions or
limitations of any nature whatsoever, including but not limited to such as may
arise under any Contracts.
Losses: as defined in Section 7.1.
Material Adverse Effect: any event, occurrence, fact, condition,
change or effect that is materially adverse to the business, operations,
results of operations, condition (financial or otherwise), properties
(including intangible properties), assets (including intangible assets) or
liabilities of any Person.
Minimum Premium: as defined in Section 1.5.
New Business: Policies issued by RNRS or any other insurer written or
renewed on or after the Effective Date for any Policyholder listed on Schedule
3.1.14 or by any Producer of Seller listed on Schedule 3.1.14.
New Program Manager's Agreement: the program manager's agreement upon
substantially the terms set forth on Exhibit E.
Noncompetition Agreement: the agreements not to compete in
substantially the form set forth on Exhibit D.
Permitted Liens: (i) Liens reserved against in the Balance Sheet, to
the extent so reserved, (ii) Liens for Taxes not yet due and payable or which
are being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on Seller's books in accordance
with GAAP, (iii) Liens listed on the Disclosure Memorandum, or (iv) Liens that,
individually and in the aggregate, do not and would not materially detract
from the value of any of the Assets or the Truckers Business or materially
interfere with the use thereof as currently used or contemplated to be used or
otherwise.
41
Person: any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority or other
entity.
Policy; Policies: all individual and group policies of insurance
(including endorsements), including master policies, certificates of insurance;
renewal certificates, or riders, and which constitute part of the Truckers
Business.
Policyholder(s): as defined in Section 3.1.14.
Principals: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇.
Producer: any licensed insurance agent, broker, solicitor,
representative, or sub-agent of any person recruited by, assigned to or under
contract with Seller, and identified on Schedule 3.1.14.
Program Manager's Agreement: the agreement, restated August 1, 1996
from the original dated November 17, 1992, by and among Seller and RNRS (on
behalf of Reliance Insurance Company and Reliance National Indemnity Company),
together with all Exhibits and Schedules thereto, and as the same may be
amended, modified or supplemented by the parties thereto from time to time.
Prohibited Products: insurance policies or products constituting
or relating to a Competitive Business.
Purchaser Indemnitees: as defined in Section 7.1.
Purchase Price: as defined in Section 1.3.1.
RNRS: Reliance National Risk Specialists, a division of Reliance
Insurance Company.
Securities Act: the Securities Act of 1933, as amended.
Seller: as defined in the first paragraph of this Agreement.
Software License Agreement: the agreement substantially in the form of
Exhibit B.
Subsidiary; Subsidiaries: each corporation or other Person in which a
Person owns or controls, directly or indirectly, capital stock or other equity
interests representing at least 50% of the outstanding voting stock or other
equity interests.
Supporting Documents: as defined in Section 4.1.8.
42
Tax: any federal, state, provincial, local, foreign or other income,
alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits, windfall profits, gross
receipts, value added, sales, use, goods and services, excise, customs duties,
transfer, conveyance, mortgage, registration, stamp, documentary, recording,
premium, severance, environmental (including taxes under Section 59A of the
Code), real property, personal property, ad valorem, intangibles, rent,
occupancy, license, occupational, employment, unemployment insurance, social
security, disability, workers' compensation, payroll, health care, withholding,
estimated or other similar tax, duty or other governmental charge or assessment
or deficiencies thereof (including all interest and penalties thereon and
additions thereto whether disputed or not).
Tax Return: any return, report, declaration, form, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Transaction Expenses: as defined in Section 9.2.
Transition Period: as defined in Section 4.1.9.
Treasury Regulations: the regulations prescribed pursuant to the Code.
Truckers Business: the classes of business, products, and Policies of
insurance (including all endorsements), and lines and limits of insurance
described on Exhibit A to the Program Manager's Agreement, as amended, modified
or supplemented by the parties at any time prior to the Closing Date, and which
would constitute a Competitive Business if engaged in by Seller or the
Principals after the Closing Date.
Section 8.2 Rules of Construction
(a) "This Agreement" means this instrument as originally executed,
including the Schedules hereto, or as it may be from time to time supplemented
or amended by one or more supplements or amendments hereto entered pursuant to
the applicable provisions hereof;
(b) "includes" and "including" are not limiting, and, in each case,
shall be construed as if followed by the words "without limitation," "but not
limited to" or words of similar import;
(c) "may not" is prohibitive, and not permissive;
(d) "shall" is mandatory, and not permissive;
43
(e) "or" is not exclusive [i.e., if a party "may do (a), (b) or (c),"
then the party may do all of any one of' or any combination of' (a), (b) or
(c)] unless the context expressly provides otherwise;
(f) all references in this instrument to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of this instrument as originally executed;
(g) the words "herein," "hereof," "hereto" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(h) all terms used herein which are defined in the Securities Act,
the Exchange Act or the rules and regulations promulgated thereunder have the
meanings assigned to them therein unless otherwise defined herein; and
(i) all accounting terms not otherwise defined herein have the
meaning assigned to them in accordance with GAAP.
ARTICLE 9
GENERAL PROVISIONS
Section 9.1 Survival of Representations and Warranties. The
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement, any examination by or on behalf of
the parties hereto and the completion of the transactions contemplated herein,
but only to the extent specified below:
(a) except as set forth in clauses (b) and (c) below, the
representations and warranties contained in Section 3.1 and Section 3.2
shall survive for a period of two years following the Closing Date;
(b) the representations and warranties contained in Sections 3.1.1,
3.1.2, 3.1.3, 3.3.1 and 3.3.2 shall survive without limitation; and
(c) the representations and warranties of Seller contained in Section
3.1.6 shall survive as to any Tax covered by such representations and
warranties for so long as any statute of limitations for such Tax remains
open, in whole or in part, including without limitation by reason of waiver
of such statute of limitations.
Section 9.2 Expenses. Seller, on the one hand, and Purchaser and HCCH, on
the other hand, shall bear their respective expenses, costs and fees (including
attorneys', auditors' and financing commitment fees) in connection with the
44
transactions contemplated hereby, including the preparation, execution and
delivery of this Agreement and compliance herewith (the "Transaction
Expenses"), whether or not the transactions contemplated hereby shall be
consummated.
Section 9.3 Severability. If any provision of this Agreement, including
any phrase, sentence, clause, Section or subsection is inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever.
Section 9.4 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or (c) sent by next-day or overnight mail
or delivery or (d) sent by telecopy or telegram,
(i) if to Purchaser or HCCH, to:
HCC Insurance Holdings, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Way
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(ii) if to Seller, to:
TRM International, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇ ▇▇▇▇▇, Esquire
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
1290 Avenue of the Americas
New York, N.Y. 10104
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
45
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, (x) if by certified or registered mail, on the seventh
business day after the mailing thereof, (y) if by next-day or overnight mail
or delivery, on the day delivered, (z) if by telecopy or telegram, on the
next day following the day on which such telecopy or telegram was sent,
provided that a copy is also sent by certified or registered mail.
Section 9.5 Headings. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.
Section 9.6 Entire Agreement. This Agreement (including the Schedules
hereto) and the Collateral Agreements to which all parties hereto are parties
thereto (when executed and delivered) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
Section 9.7 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which
shall together constitute one and the same instrument.
Section 9.8 Governing Law, Etc. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the
internal laws of the State of Illinois, without giving effect to the conflict
of laws rules thereof Purchaser and Seller hereby irrevocably submit to the
jurisdiction of the courts of the State of Illinois and the Federal courts of
the United States of America located in the State of Illinois, City of
Chicago and County of ▇▇▇▇, solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred
to in this Agreement, and hereby waive, and agree not to assert, as a defense
in any action, suit or proceeding for the interpretation or enforcement
hereof or of any such document, that it is not subject thereto or that such
action, suit or proceeding may not be brought or is not maintainable in said
courts or that the venue thereof may not be appropriate or that this
Agreement or any of such document may not be enforced in or by said courts,
and the parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such an Illinois State
or Federal court. Purchaser and Seller hereby consent to and grant any such
court jurisdiction over the person of such parties and over the subject
matter of any such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 9.4, or in such other manner as may be permitted by law, shall be
valid and sufficient service thereof.
Section 9.9 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
Section 9.10 Assignment. This Agreement shall not be assignable or
otherwise transferable by any party hereto without the prior written consent
of the other parties hereto.
Section 9.11 No Third Party Beneficiaries. Except as provided in Article
7 with respect to indemnification of Indemnified Parties hereunder, nothing
46
in this Agreement shall confer any rights upon any person or entity other
than the parties hereto and their respective heirs, successors and permitted
assigns.
Section 9.12 Amendment; Waivers, Etc. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be valid or
binding unless set forth in writing and duly executed by the party against
whom enforcement of the amendment, modification, discharge or waiver is
sought. Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the
rights of the party granting such waiver in any other respect or at any other
time. Neither the waiver by any of the parties hereto of a breach of or a
default under any of the provisions of this Agreement, nor the failure by any
of the parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder, shall be
construed as a waiver of any other breach or default of a similar nature, or
as a waiver of any of such provisions, rights or privileges hereunder. The
rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
The rights and remedies of any party based upon, arising out of or otherwise
in respect of any inaccuracy or breach of any representation, warranty,
covenant or agreement or failure to fulfill any condition shall in no way be
limited by the fact that the act, omission, occurrence or other state of
facts upon which any claim of any such inaccuracy or breach is based may also
be the subject matter of any other representation, warranty, covenant or
agreement as to which there is no inaccuracy or breach. The representations
and warranties of Seller shall not be affected or deemed waived by reason of
any investigation made by or on behalf of Purchaser (including but not
limited to by any of their respective advisors, consultants or
representatives) or by reason of the fact that Purchaser or any of such
advisors, consultants or representatives knew or should have known that any
such representation or warranty is or might be inaccurate. The
representations and warranties of Purchaser shall not be affected or deemed
waived by reason of any investigation made by or on behalf of Seller
(including but not limited to by any of its advisors, consultants or
representatives) or by reason of the fact that Seller any of such advisors,
consultants or representatives knew or should have known that any such
representation or warranty is or might be inaccurate.
Section 9.13 Form of Payments by Seller. Any amounts payable by Seller to
Purchaser under this Agreement shall be payable in cash, provided, however,
if Seller is required to make any payments to Purchaser at any time before
the expiration of any holding period for the HCCH Shares required under
Securities Act Rule 144, Seller and the Holders may furnish to Purchaser a
promissory note or notes bearing interest at the rate of nine percent (9.0%)
per annum, secured by such number of the HCCH Shares, as shall be of a value
equal to one hundred twenty-five percent (125.0%) of the principal amount of
the note(s), payable upon the first date upon which the HCCH shares may be
sold by Holders in compliance with Rule 144.
47
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
TRM INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
UNICOVER MANAGERS, INC.
By: /s/ Illegible
---------------------------
Executive Vice President
---------------------------
[Title]
NORTH AMERICAN SPECIAL RISK
ASSOCIATES, INC.
By:
-------------------------
-------------------------
[Title]
HCC INSURANCE HOLDINGS, INC.
By:
---------------------
▇▇▇▇▇▇▇ ▇. Way, Chairman and
Chief Executive Officer
48
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
TRM INTERNATIONAL, INC.
By:
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
UNICOVER MANAGERS, INC.
By:
---------------------
---------------------
[Title]
NORTH AMERICAN SPECIAL RISK
ASSOCIATES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
EVP & SEC
-----------------------
[Title]
HCC INSURANCE HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
EVP & CFO
48
INDEX OF DEFINED TERMS
AAIC 2
Accredited investor 16
Adjusted Gross Premium 4
Affiliate 38
Agreement 1, 38
Applicable Law 38
Assets 1, 38
Assumed Liabilities 4, 38
Assumption Agreement 4, 38
Balance Sheet 38
Balance Sheet Date 38
Billed Premium 38
Closing 5, 38
Closing Date 5, 38
Code 38
Collateral Agreements 38
Consent 39
Contract 39
Contracts 13
Control 38
Covered Returns 10, 39
Covered Taxes 39
Designated Employees 27
Disclosure Memorandum 39
Dollars 39
Exchange Act 40
Excluded Assets 3, 40
Excluded Liabilities 4, 40
Fiduciary Account 40
Financial Statement Date 9
Financial Statements 9, 40
Financial Statement Date 40
GAAP 40
Government Approval 40
Governmental Authority 40
HCCH 1
HCCH Balance Sheet 20, 40
HCCH Balance Sheet Date 20, 40
HCCH Common Stock 3, 40
HCCH Shares 3, 40
Holder 40
Holder(s) 16
Indemnified Party 36, 40
Indemnifying Party 36, 41
49
IRS 41
Leases 41
Lien 41
Losses 35, 41
Material Adverse Effect 41
Measurement Period 4
Minimum Premium 4
New Business 41
New Program Manager's Agreement 41
Non-Competition Agreement 26, 41
Permitted Liens 41
Person 42
Policy; Policies 42
Policyholders 14
Producer 42
Program Manager's Agreement 42
Prohibited Products 42
Purchase Price 3, 42
Purchaser 1
Purchaser Indemnitees 35, 42
RNRS 42
Securities Act 42
Seller l, 42
Seller Indemnitees 35
Subsidiaries 42
Supporting Documents 42
Target Premium 4
Tax 43
Tax Return 43
Transaction Expenses 43, 45
Transition Period 27
Transition Services 27
Treasury Regulations 43
TRM 1
Truckers Business 1, 43
Unicover 1
50
EXHIBIT LIST
Reference Exhibit Description
1.4.1 A Assumption Agreement
5.2.5(a) B Employment Agreements
5.2.5(b) C Software License Agreement
5.2.11 D Investment Letter
8.1 E New Program Manager's Agreement
8.1 F Program Manager's Agreement
51