Document:

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                                                                    EXHIBIT 10.3

                          AGREEMENT AND PLAN OF MERGER

                                   DATED AS OF

                                JANUARY 19, 2001

                                  BY AND AMONG

                          HCC INSURANCE HOLDINGS, INC.,
                           HCC EMPLOYEE BENEFITS, INC.

                                       AND

                              JAMES SCOTT SCHANEN,
                                LISA RAE SCHANEN,
                              CONNOR SCHANEN QSST,
                              AUSTIN SCHANEN QSST,
                                  KEVIN TOLBERT

                                       AND

                         SCHANEN CONSULTING CORPORATION

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                                        TABLE OF CONTENTS

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ARTICLE 1 THE MERGER ...............................................................2
        Section 1.1        The Merger...............................................2
        Section 1.2        Conversion of Stock......................................3
        Section 1.3        Exchange of Certificates.................................3
        Section 1.4        Escrow...................................................4
ARTICLE 2 THE SURVIVING CORPORATION.................................................4
        Section 2.1        Certificates of Incorporation............................4
        Section 2.2        Bylaws...................................................5
        Section 2.3        Directors and Officers...................................5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS.................................5
        Section 3.1        Corporate Existence and Power............................5
        Section 3.2        Authorization............................................5
        Section 3.3        Governmental Authorization...............................6
        Section 3.4        Non-Contravention........................................6
        Section 3.5        Capitalization...........................................7
        Section 3.6        Subsidiaries and Joint Ventures..........................8
        Section 3.7        Financial Statements.....................................8
        Section 3.8        Absence of Certain Changes...............................8
        Section 3.9        No Undisclosed Liabilities..............................10
        Section 3.10       Accounting Matters......................................10
        Section 3.11       Litigation..............................................10
        Section 3.12       Taxes...................................................11
        Section 3.13       Employee Benefit Plans, ERISA...........................11
        Section 3.14       Material Agreements.....................................13
        Section 3.15       Properties..............................................14
        Section 3.16       Environmental Matters...................................15
        Section 3.17       Labor Matters...........................................15
        Section 3.18       Compliance with Laws....................................16
        Section 3.19       Trademarks, Tradenames, Etc.............................16
        Section 3.20       Sales Negotiations......................................16
        Section 3.21       Broker's Fees...........................................16
        Section 3.22       Knowledge of the Sellers................................16
        Section 3.23       Retained Earnings.......................................16
        Section 3.24       Absence of Questionable Payments........................16
        Section 3.25       Bank Accounts...........................................17
        Section 3.26       Accounts Receivable.....................................17
        Section 3.27       Full Disclosure.........................................17
        Section 3.28       Sophistication; Accreditation...........................17
        Section 3.29       Claims Against the Company..............................17
        Section 3.30       HSR Representation......................................17
        Section 3.31       Investment for Own Account..............................18
        Section 3.32       Legends.................................................18
        Section 3.33       Waiver of Dissenter's Rights............................18
        Section 3.34       Assignment of Commissions...............................18
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF
          HCC AND MERGER SUB.......................................................19
        Section 4.1        Corporate Existence and Power...........................19
        Section 4.2        Corporate Authorization.................................19
        Section 4.3        Governmental Authorization..............................19
        Section 4.4        Non-Contravention.......................................19
        Section 4.5        Broker's Fees...........................................20
        Section 4.6        SEC Filings.............................................20
        Section 4.7        Full Disclosure.........................................20
        Section 4.8        Knowledge of Purchasers.................................20
ARTICLE 5 COVENANTS OF THE SELLERS.................................................21
        Section 5.1        Conduct of SCG..........................................21
        Section 5.2        Access to Financial and Operational Information.........22
        Section 5.3        Other Offers............................................22
        Section 5.4        Maintenance of Business.................................23
        Section 5.5        Compliance with Obligations.............................23
        Section 5.6        Notices of Certain Events...............................23
        Section 5.7        Necessary Consents......................................23
        Section 5.8        Regulatory Approval.....................................24
        Section 5.9        Satisfaction of Conditions Precedent....................24
        Section 5.10       Shareholder Approval....................................24
        Section 5.11       Affiliates Agreement....................................24
        Section 5.12       Non-Competition, Non-Solicitation and Confidentiality...25
ARTICLE 6 COVENANTS OF PURCHASERS..................................................26
        Section 6.1        Conduct of Purchasers...................................26
        Section 6.2        Obligation of Merger Sub................................26
        Section 6.3        Notice to Affiliates....................................27
ARTICLE 7 COVENANTS OF PURCHASERS AND SELLERS......................................27
        Section 7.1        Advice of Changes.......................................27
        Section 7.2        Regulatory Approvals....................................27
        Section 7.3        Certain Filings.........................................27
        Section 7.4        Communications..........................................27
        Section 7.5        Satisfaction of Conditions Precedent....................28
        Section 7.6        Tax Cooperation.........................................28
        Section 7.7        Confidentiality.........................................28
ARTICLE 8 CONDITIONS TO CLOSING....................................................29
        Section 8.1        Conditions to Obligations of Purchasers.................29
        Section 8.2        Conditions to Obligations of Sellers....................31
        Section 8.3        Conditions to Obligations of Each Party.................32
ARTICLE 9 POST-CLOSING COVENANTS...................................................33
        Section 9.1        Listing of HCC Common Stock.............................33
        Section 9.2        Publication of Post-Merger Results......................33
        Section 9.3        Employee Benefits.......................................33
        Section 9.4        Covenants Relating to Sales under Rule 144..............33
        Section 9.5        Pooling-of-Interests....................................34
        Section 9.6        Assignment of Commissions...............................34
ARTICLE 10 TERMINATION OF AGREEMENT................................................35
        Section 10.1       Termination.............................................35
        Section 10.2       Effect of Termination...................................35
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ARTICLE 11 CLOSING MATTERS.........................................................36
        Section 11.1       The Closing.............................................36
ARTICLE 12 INDEMNIFICATION AND REMEDIES............................................36
        Section 12.1       General Indemnification by the Shareholders.............36
        Section 12.2       Limitation and Expiration...............................37
        Section 12.3       Agreement to Indemnify..................................38
        Section 12.4       HCC Agreement to Indemnify..............................39
        Section 12.5       Procedure for Indemnification; Third Party Claims.......40
        Section 12.6       Limitation on Liability.................................40
ARTICLE 13 MISCELLANEOUS...........................................................41
        Section 13.1       Appointment of Representative...........................41
        Section 13.2       Further Assurances......................................42
        Section 13.3       Fees and Expenses.......................................42
        Section 13.4       Notices.................................................42
        Section 13.5       Governing Law...........................................43
        Section 13.6       Binding Upon Successors and Assigns, Assignment.........43
        Section 13.7       Severability............................................43
        Section 13.8       Entire Agreement........................................43
        Section 13.9       Amendment and Waivers...................................44
        Section 13.10      No Waiver...............................................44
        Section 13.11      Construction of Agreement...............................44
        Section 13.12      Counterparts............................................44
        Section 13.13      Shareholder Knowledge...................................44
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<PAGE>   5
                          AGREEMENT AND PLAN OF MERGER

         THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
effective as of the 19th day of January, 2001 by and among HCC Insurance
Holdings, Inc., a Delaware corporation ("HCC"), HCC Employee Benefits, Inc., a
Delaware corporation and a wholly-owned subsidiary of HCC ("Merger Sub," Merger
Sub and HCC are sometimes collectively referred to herein as the "Purchasers");
James Scott Schanen ("Schanen"), Lisa Rae Schanen ("LRS"), Connor Schanen qsst
("Connor"), Austin Schanen qsst ("Austin") and Kevin Tolbert ("Tolbert")
(Schanen, LRS, Connor, Austin, and Tolbert being herein sometimes collectively
called the "Shareholders" or the "Sellers"); and Schanen Consulting Corporation,
a Georgia corporation ("SCC" which, unless the context otherwise requires,
includes its predecessor and subsidiary, The Schanen Consulting Group, LLC).
Sellers and Purchasers are sometimes referred to herein as the "Parties."

                                    RECITALS:

         A. The Boards of Directors of each of HCC, Merger Sub and SCC have
determined to engage in a transaction pursuant to which (i) SCC will merge with
and into Merger Sub (the "Merger") in accordance with the laws of the State of
Georgia and the State of Delaware and the provisions of this Agreement, (ii) at
the Effective Time (as defined herein) the capital stock of SCC (the "SCC Common
Stock") shall be converted into shares of common stock, par value $1.00 per
share, of HCC (the "HCC Common Stock") in the manner herein described, all upon
the terms and subject to the conditions set forth herein.

         B. The Board of Directors of SCC has approved and has resolved, subject
to the terms of this Agreement, to recommend that shareholders of SCC approve
the Merger, this Agreement and the Articles of Merger (as defined herein) in
accordance with Georgia law.

         C. The Board of Directors of HCC has approved the Merger, this
Agreement and the Articles of Merger. HCC, as the sole shareholder of Merger
Sub, has approved the Merger, this Agreement and the Articles of Merger in
accordance with Delaware law.

         D. The parties intend for the transactions contemplated by this
Agreement to qualify as a plan of reorganization in accordance with the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and to be accounted for as a "pooling-of-interests" for accounting
purposes.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto do hereby agree as follows:

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                                  ARTICLE 1
                                 THE MERGER

         SECTION 1.1 THE MERGER.

         (a) Subject to the terms and conditions of this Agreement, SCC will be
merged with and into Merger Sub in accordance with the laws of the State of
Georgia ("Georgia Law") and the laws of the State of Delaware ("Delaware Law"),
whereupon the separate existence of SCC shall cease, and Merger Sub shall be the
surviving corporation (the "Surviving Corporation").

         (b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger, SCC and Merger Sub
shall (i) file articles of merger, in substantially the form attached hereto as
Exhibit "A-1" (the "Articles of Merger"), in the Office of the Secretary of the
State of Georgia, and make all such other filings or recordings required by
Georgia Law and as required by the Georgia Business Corporation Act in
connection with the Merger and (ii) file a certificate of merger, in
substantially the form attached hereto as Exhibit "A-2" (the "Certificate of
Merger"), in the office of the Secretary of State of the State of Delaware, and
make all such other filings or recordings required by Delaware Law and as
required by the Delaware General Corporation Law ("DGCL"). The Merger shall
become effective upon completion of the filing of the Articles of Merger with
the Office of the Secretary of the State of Georgia and the filing of the
Certificate of Merger with the office of the Secretary of State of Delaware, in
accordance with the relevant provisions of Georgia Law or Delaware Law, as
applicable (the "Effective Time"). The date on which the Effective Time shall
occur is referred to herein as the "Effective Date."

         (c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of SCC and Merger Sub, all as
provided under Georgia Law or Delaware Law, as applicable. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time (i) all
the rights, privileges, immunities, powers and franchises, of a public as well
as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including without limitation subscriptions to
shares, and all other choses in action, and all and every other interest of or
belongings to or due to the Merger Sub or SCC shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, immunities, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation, as they were of Merger Sub and SCC,
and (ii) all debts, liabilities, duties and obligations of Merger Sub and SCC,
subject to the terms hereof, shall become the debts, liabilities and duties of
the Surviving Corporation, and the Surviving Corporation shall thenceforth be
responsible and liable for all the debts, liabilities, duties and obligations of
Merger Sub and SCC, and neither the rights of creditors nor any liens upon the
property of Merger Sub or SCC shall be impaired by the Merger, and may be
enforced against the Surviving Corporation.

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         SECTION 1.2 CONVERSION OF STOCK. At the Effective Time, each share of
SCC Common Stock outstanding immediately prior to the Effective Time shall
automatically and without any action on the part of the holder thereof cease to
be outstanding and be converted into the right to receive 797.44 shares of HCC
Common Stock (the "Merger Consideration").

         No fractional shares shall be issued and each holder of SCC Common
Stock shall be entitled to the nearest whole share of HCC Common Stock rounded
upwards if such fractional share exceeds 0.5 and otherwise rounded downwards,
provided, however, that HCC shall under no circumstances be obligated hereunder
to issue shares of HCC Common Stock in excess of an aggregate of 996,800 shares
of HCC Common Stock.

         Each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall continue to be issued and
outstanding as one share of common stock of the Surviving Corporation.

         SECTION 1.3 EXCHANGE OF CERTIFICATES.

         (a) As of the Effective Time, all shares of SCC Common Stock other than
shares of SCC Common Stock held by Stockholders ("Dissenting Shareholders") duly
exercising appraisal rights pursuant to Georgia Law ("Dissenting Shares") that
are outstanding immediately prior thereto will, by virtue of the Merger and
without further action, cease to exist, and all such shares of SCC Common Stock
will be converted into the right to receive from HCC the number of shares of HCC
Common Stock determined as set forth in Section 1.2 hereof.

         (b) At and after the Effective Time, each certificate representing
outstanding shares of SCC Common Stock will represent the number of shares of
HCC Common Stock into which such shares of SCC Common Stock are converted and
such shares of HCC Common Stock will be deemed registered in the name of the
holder of such certificate. At the Effective Time, each holder of shares of SCC
Common Stock will surrender the certificates for such shares (the "SCC
Certificates") to HCC for cancellation. Promptly following the Effective Time
and receipt of the SCC Certificates, HCC will cause to be issued to such
surrendering holder certificates for the number of shares of HCC Common Stock to
which such holder is entitled pursuant to the terms hereof. Shares of SCC Common
Stock held by Dissenting Shareholders shall thereafter represent the right to
require the Surviving Corporation to purchase such shares of SCC Common stock
for their "fair value" as determined in accordance with Georgia Law.

         (c) All shares of HCC Common Stock delivered upon the surrender of SCC
Certificates in accordance with the terms hereof will be delivered to the
registered holder. After the Effective Time, there will be no further
registration of transfers of the shares of SCC Common Stock on the stock
transfer books of SCC. If, after the Effective Time, SCC Certificates are
presented for transfer or for any other reason, they will be canceled and
exchanged and certificates therefor will be delivered as provided for herein.

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         (d) Until SCC Certificates representing SCC Common Stock outstanding
prior to the Merger are surrendered pursuant to this Section 1.3, such
certificates will be deemed, for all purposes, to evidence ownership of the
number of whole shares of HCC Common Stock into which the shares of SCC Common
Stock will have been converted.

         (e) If prior to the Merger, HCC 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, or declares a dividend on its outstanding shares
payable in shares or securities convertible into shares (but not cash), the
number of shares of HCC Common Stock into which the shares of SCC Common Stock
are to be converted will be adjusted in proportion to such change.

         SECTION 1.4 ESCROW. Pursuant to an Escrow Agreement to be entered into
on or before the Closing Date (as hereinafter defined) in substantially the form
of Exhibit 1.4 (the "Escrow Agreement"), among HCC, each of the Shareholders and
First Union National Bank as escrow agent, HCC will withhold for a period of 36
months following the Closing Date, an amount equal to 10% of the Merger
Consideration (the "Escrow Amount"). On the Closing Date, HCC will deposit, or
cause to be deposited in escrow pursuant to the Escrow Agreement, the number of
shares representing the Escrow Amount. The Escrow Amount shall be provided by
each of the Shareholders in an amount equal to 10% of the number of shares such
Shareholder will receive upon the consummation of the Merger. The Escrow Amount
will be held as collateral for the indemnification obligations of the
Shareholders pending its release from escrow in accordance with the terms of the
Escrow Agreement.

         SECTION 1.5 DISSENTERS' RIGHTS. If any Dissenting Shareholder shall be
entitled to require SCC to purchase such Shareholders' shares for their "fair
value" as provided in Section 14-2-1302 of the Georgia Business Corporation
Code, SCC shall give HCC notice thereof, and HCC shall have the right to
participate in all negotiations and proceedings with respect to any such
demands. Neither SCC nor the Surviving Corporation shall, except with the prior
written consent of HCC, voluntarily make any payment with respect to, or offer
to settle, any such demand for payment. If any Dissenting Shareholder shall fail
to perfect or shall have effectively withdrawn or lost the right to dissent, the
shares held by such Dissenting Shareholder shall thereupon be entitled to be
surrendered in exchange for HCC Common Stock as provided by Section 1.3 hereof.

                                   ARTICLE 2
                            THE SURVIVING CORPORATION

         SECTION 2.1 CERTIFICATES OF INCORPORATION. At the Effective Time, the
Certificate of Incorporation of Merger Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation.

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         SECTION 2.2 BYLAWS. At the Effective Time, the Bylaws of Merger Sub as
in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation.

         SECTION 2.3 DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
Delaware Law, the directors and officers of Merger Sub at the Effective Time
shall become the directors and the officers of the Surviving Corporation.

                                   ARTICLE 3
                    REPRESENTATIONS AND WARRANTIES OF SELLERS

         Except as otherwise set forth with appropriate section references in
the Sellers Disclosure Schedule, each of which exception shall specifically
identify or cross reference to provisions of this Article 3 to which such
exception relates, and in order to induce Purchasers to enter into and perform
this Agreement, and the Operative Agreements (as herein defined) each of the
Sellers represent and warrant to Purchasers as of the date of this Agreement and
as of the Closing Date as follows:

         SECTION 3.1 CORPORATE EXISTENCE AND POWER. SCC is a corporation duly
organized and validly existing under the laws of the state of Georgia, and has
all corporate powers and all material governmental licenses, authorizations,
consents and approvals (collectively, "Governmental Authorizations") required to
carry on its business as now conducted, except such Governmental Authorizations
the failure of which to have obtained would not have a Material Adverse Effect,
as hereinafter defined, on SCC. Sellers have delivered to Purchasers true and
complete copies of SCC's Articles or Certificate of Incorporation and Bylaws as
currently in effect. SCC is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect on SCC. For purposes of this Agreement, a
"Material Adverse Effect," with respect to any person or entity, means a
material adverse effect on the condition (financial or otherwise), business,
properties, assets, liabilities (including contingent liabilities), results of
operations or prospects of such person or entity; provided, however, that a
Material Adverse Effect shall not include any change in general economic
conditions or changes that affect a person or entity's industry generally; and
"Material Adverse Change" means a change or a development involving a
prospective change which is reasonably likely to result in a Material Adverse
Effect.

         SECTION 3.2 AUTHORIZATION. Each Seller represents and warrants that
such Seller has full right, power and authority to enter into this Agreement and
each other agreement to be entered into by such Seller in connection with the
transactions contemplated hereby (the "Operative Agreements") and that this
Agreement and such Operative Agreements constitute, or upon execution will
constitute, valid and binding agreements of such Seller, enforceable against
such Seller in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, insolvency

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<PAGE>   10

or other similar laws affecting the enforcement of creditors' rights generally
or by general principles of equity, regardless of whether such enforceability is
considered in a proceeding of equity or at law.

         SECTION 3.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by each of the Sellers of this Agreement and the Operative
Agreements, and the consummation of the transactions contemplated hereunder and
thereunder require no action by any of the Sellers or any filing by them with
any governmental body, agency, official or authority other than in respect of:

         (a) compliance with any applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act") and the rules and regulations
promulgated thereunder;

         (b) compliance with any applicable foreign or state securities or "blue
sky" laws;

         (c) compliance with any requirements of any federal, state, foreign or
other insurance or reinsurance or intermediaries, or agent or managing general
agent or third party administrators' laws, including licensing or other related
laws;

         (d) Compliance with any applicable requirements of the New York Stock
Exchange ("NYSE"); or

         (e) such other filings or registrations with, or authorizations,
consents or approvals of, governmental bodies, agencies, officials or
authorities, the failure of which to make or obtain (i) would not reasonably be
expected to have a Material Adverse Effect on SCC, or (ii) would not materially
adversely affect the ability of either of SCC or Purchasers to consummate the
transactions contemplated hereby and to operate their businesses as heretofore
operated.

         SECTION 3.4 NON-CONTRAVENTION. The execution, delivery and performance
by each of the Sellers of this Agreement and the Operative Agreements, and the
consummation by each of the Sellers of the transactions contemplated hereby and
thereby do not and will not:

         (a) contravene or conflict with SCC's Articles or Certificate of
Incorporation or Bylaws;

         (b) assuming compliance with the matters referred to in Section 3.3,
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Sellers;

         (c) conflict with or result in a breach or violation of, or constitute
a default under, or result in a contractual right to cause the termination or
cancellation of or loss of

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<PAGE>   11

a material benefit under, or right to accelerate, any material agreement,
contract or other instrument binding upon SCC or any material license,
franchise, permit or other similar authorization held by SCC;

         (d) result in the creation or imposition of any Lien (as hereinafter
defined) on any material asset of SCC; or

         (e) invalidate or adversely affect any permit, license or authorization
or status used in connection with SCC's business;

except, with respect to clauses (b), (c) and (d) above, for contraventions,
defaults, losses, Liens and other matters referred to in such clauses that would
not be reasonably expected to have individually or in the aggregate, a Material
Adverse Effect on SCC. For purposes of this Agreement, the term "Lien" means,
with respect to any asset, any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset.

         SECTION 3.5 CAPITALIZATION.

         (a) As of the date of this Agreement, the authorized capital stock of
SCC consists of 100,000 shares of a single class designated as common stock,
1,250 shares of which are issued and outstanding. All of such outstanding shares
are owned by the Shareholders free of any Liens or other encumbrances in the
amounts set forth on Schedule 3.5 of the Sellers Disclosure Schedule.

         (b) All outstanding shares of SCC have been duly authorized and validly
issued and are fully paid and nonassessable and free from any preemptive rights.
Except as set forth in and as otherwise contemplated by this Agreement, for SCC
there are outstanding (i) no shares of capital stock or other voting securities,
(ii) no securities convertible into or exchangeable for shares of its capital
stock or voting securities, (iii) no options or other rights to acquire, and no
obligation to issue, any capital stock, voting securities or securities
convertible into or exchangeable for its capital stock or other voting
securities (the items in clauses (i), (ii) and (iii) of this subsection (b)
being referred to collectively as the "SCC Securities"), (iv) no obligations to
repurchase, redeem or otherwise acquire any SCC Securities, and (v) no
contractual rights of any person or entity to include any SCC Securities in any
registration statement filed under the Securities Act.

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         SECTION 3.6 SUBSIDIARIES AND JOINT VENTURES.

         (a) For purposes of this Agreement, (i) "Subsidiary" means, with
respect to any entity, any corporation of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are directly or
indirectly owned by such entity, and (ii) "Joint Venture" means, with respect to
any entity, any corporation or organization (other than such entity and any
Subsidiary thereof) of which such entity or any Subsidiary thereof is, directly
or indirectly, the beneficial owner of 25% or more of any class of equity
securities or equivalent profit participation interest.

         (b) As of the date hereof SCC owns all of the membership interests
("Interests") in The Schanen Consulting Group, LLC ("LLC") and no person or
entity is entitled to acquire any Interests in LLC nor are there any securities
exchangeable or convertible into such Interests, and LLC is not required to
redeem or repurchase any Interests. Except for such ownership of LLC, SCC does
not have any Subsidiary and is not a party to any Joint Venture.

         SECTION 3.7 FINANCIAL STATEMENTS. Sellers have delivered to Purchasers
the audited balance sheets as of December 31, 1999, and unaudited balance sheets
for December 31, 1998, and December 31, 1997, audited income statements for the
annual period ended December 31, 1999, and unaudited income statements for the
annual periods ending December 31, 1998, and December 31, 1997 and unaudited
balance sheets and income statements for the period as of or ending September
30, 2000 (collectively, the "Financial Statements"). For purposes of this
Agreement, the "Balance Sheet Date" shall mean December 31, 1999, unless the
Effective Date is later than January 30, 2001, in which case it shall mean
December 31, 2000. The Financial Statements present fairly in all material
respects, substantially in conformity with generally accepted accounting
principles consistently applied (except as indicated in the notes thereto), the
financial position of SCC as of the dates thereof and results of operations and
cash flows for the periods therein indicated (subject to normal year-end
adjustments in the case of any interim financial statements and the absence of
certain footnotes in the case of unaudited financial statements). SCC does not
have any material debt, liability or obligation of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that is not
reflected, reserved against or disclosed in the Financial Statements except for
(i) those that are not required to be reported in accordance with the aforesaid
accounting principles; (ii) normal or recurring liabilities incurred since
December 31, 1999 in the ordinary course of business or (iii) as disclosed in
the Sellers Disclosure Schedule.

         SECTION 3.8 ABSENCE OF CERTAIN CHANGES. Since December 31, 1999, SCC
has in all material respects conducted its business in the ordinary course and
there has not been:

         (a) any Material Adverse Change with respect thereto or any event,
occurrence or development of a state of circumstances or facts known to any of
the

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<PAGE>   13

Sellers, which as of the date hereof could reasonably be expected to have a
Material Adverse Effect on SCC, including the loss of or knowledge of future
loss of a client which generates $100,000 or more of commission and/or fee
revenue;

         (b) issued any capital stock or other securities or made any
declaration, setting aside or payment of any dividend or other distribution by
SCC other than dividend distributions to the Shareholders and distributions to
partners;

         (c) any repurchase, redemption or other acquisition by SCC of any
outstanding shares of capital stock or other securities or other ownership
interests in SCC;

         (d) any amendment of any term of any outstanding securities of SCC;

         (e) any damage, destruction or other property or casualty loss (whether
or not covered by insurance) affecting the business, assets, liabilities,
earnings or prospects of SCC that, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect on SCC;

         (f) any increase in indebtedness for borrowed money or capitalized
lease obligations of SCC, except in the ordinary course of business;

         (g) any sale, assignment, transfer or other disposition of any tangible
or intangible asset material to the business of SCC, except in the ordinary
course of business and for a fair and adequate consideration;

         (h) any amendment, termination or waiver by SCC of any right of
substantial value under any agreement, contract or other written commitment to
which it is a party or by which it is bound which could reasonably be expected
to have a Material Adverse Effect on SCC;

         (i) any material reduction in the amounts of coverage provided by
existing casualty and liability insurance policies with respect to the business
or properties of SCC;

         (j) any (i) grant of any severance or termination pay to any director,
officer or employee of SCC, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any director, officer or employee of SCC other than the
Non-Competition Agreements contemplated by this Agreement, (iii) any increase in
benefits payable under any existing severance or termination pay policies or
employment agreements, or (iv) any increase in compensation, bonus or other
benefits payable to directors, officers or employees of SCC, in each case other
than in the ordinary course of business consistent with past practice;

         (k) any new or amendment to or alteration of any existing bonus,
incentive. compensation, severance, stock option, stock appreciation right,
pension, matching gift, profit-sharing, employee stock ownership, retirement,
pension group insurance, death

                                       9
<PAGE>   14

benefit, or other fringe benefit plan, arrangement or trust agreement adopted or
implemented by SCC which would result in a material increase in cost;

         (l) any capital expenditures, capital additions or capital improvements
incurred or undertaken by SCC in excess of $10,000, or any non-budgeted
expenditure in excess of $5,000;

         (m) any change in accounting methods or practices or internal control
procedures;

         (n) any payment, loan or advance of any amount to, or sale, transfer or
lease of any properties or assets (real, personal or mixed, tangible or
intangible) to any of the Shareholders, or any of SCC's officers, directors or
employees or any affiliate of any such persons;

         (o) any cancellation or threat of cancellation from any company that
affects more than 1% of SCC's business; or

         (p) the entering into of any agreement by SCC or any person on behalf
of SCC to take any of the foregoing actions.

         SECTION 3.9 NO UNDISCLOSED LIABILITIES. There are no existing
liabilities of SCC of any kind whatsoever that are, individually or in the
aggregate, material to SCC, other than:

         (a) liabilities disclosed or provided for in the respective audited
financial statements as of and for the fiscal year ended December 31, 1999
(including the notes thereto) of SCC;

         (b) liabilities incurred in the ordinary course of business consistent
with past practice since December 31, 1999; or

         (c) liabilities under this Agreement or indicated in the Sellers
Disclosure Schedule.

         SECTION 3.10 ACCOUNTING MATTERS. Neither SCC nor any of the
Shareholders has taken or agreed to take any action that (without giving effect
to any action taken or agreed to be taken by HCC or any of its affiliates) would
prevent HCC from accounting for the business combination to be effected by the
Merger as a pooling-of-interests.

         SECTION 3.11 LITIGATION. Other than actions, suits, proceedings, claims
or investigations occurring in the ordinary course of business involving
respective amounts in controversy of less than $10,000 each and $20,000 in the
aggregate, there is no action, suit, proceeding, claim or investigation pending
against, nor has SCC or any Seller received notice of a claim threatened against
SCC or any of its assets or against or involving any of its officers, directors
or employees in connection with the business or

                                       10
<PAGE>   15

affairs of SCC, including, without limitation, any such claims for
indemnification arising under any agreement to which SCC is a party. SCC has not
received notice that it is subject, or in default with respect, to any writ,
order, judgment, injunction or decree which could, individually or in the
aggregate, have a Material Adverse Effect.

         SECTION 3.12 TAXES.

         (a) SCC and LLC (i) have filed when due (taking into account
extensions) with the appropriate federal, state, local, foreign and other
governmental agencies, all tax returns, estimates and reports required to be
filed by it, (ii) either paid when due and payable or established adequate
reserves or otherwise accrued on the Financial Statements all federal. state,
local or foreign taxes, levies, imposts, duties, licenses and registration fees
and charges of any nature whatsoever, and unemployment and social security taxes
and income tax withholding, including interest and penalties thereon (each
individually a "Tax" and collectively the "Taxes") and there are no tax
deficiencies claimed in writing by any taxing authority that, in the aggregate,
would result in any tax liability in excess of the amount of the reserves or
accruals and (iii) has or will establish in accordance with its normal
accounting practices and procedures accruals and reserves that, in the
aggregate, are adequate for the payment of all Taxes not yet due and payable and
attributable to any period preceding the Effective Date. The Sellers Disclosure
Schedule sets forth those tax returns for all periods that currently are the
subject of audit or extension by any federal, state, local or foreign taxing
authority.

         (b) There are no Taxes, interest, penalties, assessments or
deficiencies claimed in writing by any taxing authority to be due in respect of
any tax returns filed by SCC (or any predecessor corporations). Neither SCC nor
any predecessor corporation or entity, has executed or filed with the Internal
Revenue Service ("IRS") or any other taxing authority any agreement or other
document extending, or having the effect of extending, the period of assessment
or collection of any Taxes.

         (c) SCC is not a party to nor bound by (or will prior to the Effective
Date become a party to or bound by) any Tax indemnity, Tax sharing or Tax
allocation agreement or other similar arrangement. SCC is not a member of an
affiliated group or filed or been included in a combined, consolidated or
unitary Tax return.

         (d) SCC has maintained a valid S election pursuant to the Code since
its incorporation and there is no corporate income tax due from SCC.

         SECTION 3.13 EMPLOYEE BENEFIT PLANS, ERISA.

         (a) SCC is not a party to any oral or written (i) employment,
severance, collective bargaining or consulting agreement not terminable on 60
days' or less notice, (ii) agreement with any executive officer or other key
employee (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving SCC of the
nature of any of the transactions contemplated by this Agreement, (B) providing
any term of employment or compensation guarantee extending

                                       11
<PAGE>   16

for a period longer than one year, or (C) providing severance benefits or other
benefits after the termination of employment of such executive officer or key
employee regardless of the reason for such termination of employment, (iii)
agreement, plan or arrangement under which any person may receive payments
subject to the tax imposed by Section 4999 of the Code, or (iv) agreement or
plan, including, without limitation, any stock option plan, stock appreciation
right plan, restricted stock plan or stock purchase plan, the benefits of which
would be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.

         (b) Neither SCC nor any corporation or other entity which under Section
4001(b) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), is under common control with SCC (an "ERISA Affiliate") maintains or
within the past five years has maintained, contributed to, or been obligated to
contribute to, any "Employee Pension Benefit Plan" ("Pension Plan") or any
"Employee Welfare Benefit Plan" ("Welfare Plan") as such terms are defined in
Sections 3(2) and 3(l) respectively of ERISA, which is subject to ERISA, except
as described on Schedule 3.13(b). Each Pension Plan and Welfare Plan disclosed
in Schedule 3.13(b) and the Sellers Disclosure Schedule (which Plans have been
heretofore delivered to Purchasers) and maintained by SCC has been maintained in
all material respects in compliance with their terms and all provisions of ERISA
and the Code (including rules and regulations thereunder) applicable thereto.

         (c) No Pension Plan or Welfare Plan is currently subject to an audit or
other investigation by the IRS, the Department of Labor (the "DOL"), the Pension
Benefit Guaranty Corporation or any other governmental agency or office nor are
any such Plans subject to any lawsuits or legal proceedings of any kind or to
any material pending disputed claims by employees or beneficiaries covered under
any such Plan or by any other parties.

         (d) No "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, resulting in liability to SCC or any ERISA Affiliate
has occurred with respect to any Pension Plan or Welfare Plan. None of the
Sellers has any knowledge of any breach of fiduciary responsibility under Part 4
of Title I of ERISA which may result in liability of SCC or any ERISA Affiliate,
any trustee, administrator or fiduciary of any Pension Plan or Welfare Plan.

         (e) Neither SCC nor any ERISA Affiliate, since January 1, 1986, has
maintained or contributed to, or been obligated or required to contribute to, a
"Multiemployer Plan," as such term is defined in Section 4001(a)(3) of ERISA.
Neither SCC nor any ERISA Affiliate has either withdrawn, partially or
completely, or instituted steps to withdraw, partially or completely, from any
Multiemployer Plan nor has any event occurred which would enable a Multiemployer
Plan to give notice of and demand payment of any withdrawal liability with
respect to SCC or any ERISA Affiliate.

                                       12
<PAGE>   17
         (f) There is no contract, agreement, plan or arrangement covering any
employee or former employee of SCC or any ERISA Affiliate that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Sections 162(a)(1) or 280G of the Code.

         (g) With respect to either of SCC and each ERISA Affiliate. Schedule
3.13(b) and the Sellers Disclosure Schedule correctly identifies each material
agreement, policy, plan or other arrangement, whether written or oral, express
or implied, fixed or contingent, to which SCC is a party or by which SCC or any
property or asset of SCC is bound, which is or relates to a pension, option,
bonus, deferred compensation, retirement, stock purchase, profit-sharing,
severance pay, health, welfare, incentive, vacation, sick leave, medical
disability, hospitalization, life or other insurance or fringe benefit plan,
policy or arrangement. Each such agreement, policy, plan or other arrangement
has been maintained in all material respects in compliance with its terms and
all provisions of ERISA and the Code (including rules and regulations
thereunder) applicable thereto.

         (h) Neither SCC nor any ERISA Affiliate maintains or has maintained or
contributed to any Pension Plan that is or was subject to Section 302 of Title
IV of ERISA or Section 412 of the Code. Sellers have made available to
Purchasers, for each Pension Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code, a copy of the most recent determination
letter issued by the IRS to the effect that each such Plan is so qualified and
that each trust created thereunder is tax exempt under Section 501 of the Code,
and each of the Sellers is unaware of any fact or circumstances that would
jeopardize the qualified status of each such Pension Plan or the tax exempt
status of each trust created thereunder.

         (i) One or more of the benefit plans of SCC listed in the Sellers
Disclosure Schedule may be subject to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"). If so, each such plan has been
operated in, and is in compliance with COBRA. All notices required to be given
under COBRA have been timely and properly given in accordance with COBRA, and
the rules and regulations promulgated thereunder, and no employee, former
employee or "qualified beneficiary" (as defined in COBRA) has any claim or
contingent claim against SCC or any ERISA Affiliate. SCC does not provide
retiree benefits of any kind, including health, medical, life, etc. and SCC has
not agreed to continue any employee benefits after termination of employment
other than COBRA.

         SECTION 3.14 MATERIAL AGREEMENTS.

         (a) The Sellers Disclosure Schedule includes a complete and accurate
list of all contracts, agreements, leases (other than Property Leases, as
hereinafter defined), and instruments to which SCC is a party or by which it or
its properties or assets are bound (1) which individually involve net payments
or receipts in excess of $10,000 per annum, inclusive of contracts entered into
with customers and suppliers in the ordinary course of business, or (2) that
pertain to employment or severance benefits for any officer, director or
employee of SCC, whether written or oral, but exclusive of contracts,
agreements,

                                       13
<PAGE>   18

leases and instruments terminable without penalty upon 60 days' or less prior
written notice to the other party or parties thereto, or (3) to which any of the
Shareholders is the opposing contracting party (the "Material Agreements").

         (b) Neither SCC nor, to the knowledge of any of the Sellers, any other
party is in default under any Material Agreement and no event has occurred which
(after notice or lapse of time or both) would become a breach or default under,
or would permit modification, cancellation, acceleration or termination of, any
Material Agreement or result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or rights of
SCC, which, in any such case, has had or would reasonably be expected to have a
Material Adverse Effect.

         (c) To the knowledge of each of the Sellers, each such Material
Agreement is in full force and effect and is valid and legally binding and there
are no unresolved disputes involving or with respect to any Material Agreement.
No party to a Material Agreement has advised SCC that it intends either to
terminate a Material Agreement or to refuse to renew a Material Agreement upon
the expiration of the term thereof. No representation or warranty is made that
all benefits contemplated in the Material Agreements will be received.

         (d) SCC is not in violation of, or in default with respect to, any term
of its Articles of Incorporation or Bylaws.

         (e) Except as set forth on Schedule 3.14 of the Sellers Disclosure
Schedule, SCC has no:

             (1) noncompetition agreement or other arrangement that would
         prevent SCC from carrying on its business anywhere in the world;

             (2) material dispute with any of its suppliers, customers, or
         distributors;

             (3) joint venture contracts, arrangements or any other agreement
         that involves the sharing of profits with any other person; or

             (4) agreements or commitments to provide indemnification.

         SECTION 3.15 PROPERTIES. SCC does not own any real estate, and all
leases of real property to which SCC is a party or by which it is bound
("Property Leases") are in full force and effect and are set forth in Sellers
Disclosure Schedule. There exists no default under such Property Leases, nor any
event (other than the transactions contemplated by this Agreement) which with
notice or lapse of time or both would constitute a default thereunder. All of
the properties and assets which are owned by SCC are owned free and clear of any
Lien, except for Liens which do not have a Material Adverse Effect. SCC has good
and indefeasible title subject to no Liens, other than those permitted under
this Section 3.15, to all of the properties and assets necessary for the

                                       14
<PAGE>   19

conduct of its business other than to the extent that the failure to have such
title would not have a Material Adverse Effect.

         SECTION 3.16 ENVIRONMENTAL MATTERS.

         (a) For the purposes of this Agreement, the following terms have the
following meanings:

             "Environmental Laws" shall mean any and all federal, state, local
         and foreign statutes, laws (including case law), regulations,
         ordinances, rules, judgments. orders. decrees, codes, plans,
         injunctions. permits, concessions, grants, franchises, licenses.
         agreements and governmental restrictions relating to human health, the
         environment or to emissions, discharges or releases of pollutants,
         contaminants, Hazardous Substances (as hereinafter defined) or wastes
         into the environment or otherwise relating to the manufacture,
         processing, distribution, use, treatment, storage, disposal, transport
         or handling of pollutants, contaminants, Hazardous Substances or wastes
         or the clean-up or other remediation thereof.

             "Environmental Liabilities" shall mean all liabilities, whether
         vested or unvested. contingent or fixed, actual or potential, which (i)
         arise under or relate to Environmental Laws and (ii) relate to actions
         occurring or conditions existing on or prior to the Effective Time.

             "Hazardous Substances" shall mean any toxic, radioactive, caustic
         or otherwise hazardous substance, including petroleum, its derivatives,
         by-products and other hydrocarbons, or any substance having any
         constituent elements displaying any of the foregoing characteristics.

             "Regulated Activity" shall mean any generation, treatment, storage,
         recycling, transportation, disposal or release of any Hazardous
         Substances.

         (b) No notice, notification, demand, request for information, citation,
summons. complaint or order has been received, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending, or to any
Seller's knowledge, has been threatened by any governmental entity or other
party with respect to any (i) alleged violation of any Environmental Law by SCC,
(ii) alleged failure by SCC to have any environmental permit, certificate,
license, approval, registration or authorization required in connection with the
conduct of its business or (iii) Regulated Activity of SCC.

         (c) SCC does not have any Environmental Liabilities and there has been
no release of Hazardous Substances into the environment by SCC or with respect
to any of their properties which has had, or would reasonably be expected to
have, a Material Adverse Effect.

         SECTION 3.17 LABOR MATTERS. SCC is not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by it, nor does

                                       15
<PAGE>   20

any of the Sellers know of any activities or proceedings of any labor union to
organize any such employees.

         SECTION 3.18 COMPLIANCE WITH LAWS. Except for violations which do not
have and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, SCC has not received any notice that it is
in violation of, or has violated, any applicable provisions of any laws,
statutes, ordinances or regulations or any term of any judgment, decree,
injunction or order binding against it.

         SECTION 3.19 TRADEMARKS, TRADENAMES, ETC. SCC owns or possesses, or
holds a valid right or license to use, all intellectual property, patents,
trademarks, tradenames, service marks, copyrights and licenses (collectively
"Intellectual Property"), and all rights with respect to the foregoing,
necessary for the conduct of its business as now conducted, without any known
conflict with the rights of others. A schedule of all such Intellectual Property
is set forth on Schedule 3.19 of the Sellers Disclosure Schedule.

         SECTION 3.20 SALES NEGOTIATIONS. Except as contemplated by this
Agreement, there are currently no discussions to which SCC or any of the Sellers
is a party relating to (a) the sale of any material portion of the assets of
SCC, (b) any merger, consolidation, liquidation, dissolution or similar
transaction involving SCC whereby SCC will issue any securities or for which SCC
is required to obtain the approval of its shareholders or partners, or (c) the
sale of any SCC Common Stock.

         SECTION 3.21 BROKER'S FEES. None of SCC or the Sellers nor anyone
acting on the behalf or at the request thereof has any liability to any broker,
finder, investment banker or agent, or has agreed to pay any brokerage fees,
finder's fees or commissions, or to reimburse any expenses of any broker,
finder, investment banker or agent in connection with this Agreement.

         SECTION 3.22 KNOWLEDGE OF THE SELLERS. As used in this Agreement,
"knowledge of the Sellers" means the actual knowledge of Schanen or any Seller,
or the following officers of SCC: the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, President or any Executive Vice President or
any person performing the functions of such office whether having such title or
not.

         SECTION 3.23 RETAINED EARNINGS. At the Closing the retained earnings of
SCC are equal to at least $1,495,000.

         SECTION 3.24 ABSENCE OF QUESTIONABLE PAYMENTS. Neither SCC nor any
director, officer, agent, employee, or any Seller acting on behalf of SCC has
used any SCC funds for unlawful contributions, payments, gifts or entertainment,
or made any unlawful expenditures relating to political activities to domestic
or foreign government officials or others. SCC has reasonable financial controls
to prevent such or unlawful contributions, payments, gifts, entertainment or
expenditures. Neither SCC, or any current director or officer, agent, employee
or any Seller acting on behalf of SCC has accepted or received any unlawful
contributions, payments, gifts or expenditures. To its

                                       16
<PAGE>   21

knowledge, SCC has at all times complied, and is in compliance, in all respects
with the Foreign Corrupt Practices Act and all applicable foreign laws and
regulations relating to prevention of corrupt practices and similar matters.

         SECTION 3.25 BANK ACCOUNTS. Section 3.25 of Sellers Disclosure Schedule
sets forth the names and locations of all banks, trust companies, savings and
loan associations and other financial institutions at which SCC maintains safe
deposit boxes or accounts of any nature and the names of all persons authorized
to draw thereon, make withdrawals therefrom, or have access to such safe deposit
boxes or accounts.

         SECTION 3.26 ACCOUNTS RECEIVABLE. All accounts receivable of SCC
reflected in the Financial Statements or existing at the Effective Date,
represent sales actually made or work actually performed in the ordinary course
of business and are recorded in SCC's books consistent with the presentation
applied in the Financial Statements for the year ended December 31, 1999. Set
forth on Schedule 3.26 to the Sellers Disclosure Schedule are a full and
complete list and aging study of all such accounts receivable.

         SECTION 3.27 FULL DISCLOSURE. No information furnished by SCC or the
Sellers or their representatives in connection with this Agreement (including,
but not limited to, the Financial Statements and all information in the Sellers
Disclosure Schedule and each of the other Operative Agreements) contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statement so made or information so delivered not
misleading.

         SECTION 3.28 SOPHISTICATION; ACCREDITATION. Each Shareholder is:

         (a) either alone or with the assistance of a professional advisor, a
sophisticated investor, able to fend for himself or herself in the transactions
contemplated by this Agreement and the Operative Agreements to which such
Shareholder is a party and has such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks of
the prospective investment in HCC; or

         (b) an "accredited investor" as defined in Regulation D of the
Securities Act.

         SECTION 3.29 CLAIMS AGAINST THE COMPANY. Each Shareholder does not have
any claims against SCC other than claims for accrued salaries and reimbursement
of expenses, in the ordinary course of business, consistent with past practices.

         SECTION 3.30 HSR REPRESENTATION. Each Shareholder is his, her or its
own ultimate parent entity as defined under the rules and regulations
promulgated under the HSR Act. Each Shareholder either:

         (a) is not a $10 million person as defined under the HSR Act; or

         (b) is a $10 million person but is acquiring HCC Common Stock solely
for the purposes of investment within the meaning of 16 C.F.R. Section 802.9.

                                       17
<PAGE>   22

         SECTION 3.31 INVESTMENT FOR OWN ACCOUNT. The HCC Common Stock is being
acquired by each Shareholder for investment for his, her or its respective
account, not as a nominee or agent, and not with a view to the distribution of
any part thereof. Each such Shareholder has no present intention of selling,
granting any participation in, or otherwise distributing any of the HCC Common
Stock in a manner contrary to the Securities Act or any applicable state's
securities or Blue Sky Law, nor does any such Shareholder have any contract,
undertaking, agreement or arrangement with any person or entity to sell,
transfer or grant a participation to such person or entity with respect to any
of the HCC Common Stock. Each Shareholder has further been informed that
Purchaser is under no obligation to register the HCC Common Stock under the
Securities Act.

         SECTION 3.32 LEGENDS. It is understood that the Certificates evidencing
the HCC Common Stock may bear one or more legends, including a legend
substantially as follows:

                  "Securities evidenced by this Certificate have not been
         registered under the Securities Act of 1933, as amended, the ("Act") or
         applicable state's securities laws, and no interest may be sold,
         distributed, assigned, offered, pledged or otherwise transferred unless
         (a) there is an effective registration statement under the Act and
         applicable state securities laws covering such transaction involving
         such securities, (b) this Corporation receives an opinion of legal
         counsel for the whole of these securities satisfactory to this
         Corporation stating that such transaction is exempt from registration,
         or (c) this corporation otherwise satisfies itself that such
         transaction is exempt from registration."

         SECTION 3.33 WAIVER OF DISSENTER'S RIGHTS. Schanen and Tolbert hereby
waive any right to exercise any dissenter's rights under Georgia law.

         SECTION 3.34 ASSIGNMENT OF COMMISSIONS. Schanen and Tolbert represent
and warrant that all commissions, fees or other amounts due for business which
each has written as an employee or agent of SCC or Merger Sub, and Schanen
represents and warrants that any other commissions, fees or other amounts
attributable to persons other than Schanen or Tolbert who are agents or
employees of SCC or Merger Sub have been irrevocably assigned by Schanen,
Tolbert or any such person to SCC or Merger Sub; provided, however, that
commissions due on premiums earned, whether received or not, by Tolbert prior to
December 31, 2000, shall be paid to him as the funds are received by Merger Sub.

                                       18
<PAGE>   23

                                   ARTICLE 4
              REPRESENTATIONS AND WARRANTIES OF HCC AND MERGER SUB

         Except as otherwise set forth with the appropriate section references
in the Purchasers Disclosure Schedule, each of which exception shall
specifically identify or cross reference the provisions of this Article 4 to
which such exception relates, and in order to induce Sellers to enter into and
perform this Agreement and the Operative Agreements, and except as disclosed in
any document, exhibit or appendix filed with the Securities and Exchange
Commission ("SEC") which has been filed on or before the date hereof or the
Effective Date, the Purchasers represent and warrant to the Sellers as of the
date of this Agreement and as of the Closing Date as follows:

         SECTION 4.1 CORPORATE EXISTENCE AND POWER. Each Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation. Each Purchaser has all corporate powers
and all material Governmental Authorizations required to carry on its business
as now conducted, except such Governmental Authorizations the failure of which
to have obtained would not have a Material Adverse Effect on Purchasers.

         SECTION 4.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by each Purchaser of this Agreement, and the consummation by
Purchaser of the transactions contemplated hereby and thereby are within the
corporate powers of each Purchaser and have been duly authorized by all
necessary corporate action. This Agreement constitutes, or upon execution will
constitute, valid and binding agreements of each Purchaser enforceable in each
case in accordance with their respective terms, except as such enforcement may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity.

         SECTION 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by each Purchaser of this Agreement, require no action by or in
respect of, or filing with, any governmental body, agency, official or authority
other than:

         (a) compliance with any applicable requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and the NYSE and the rules and
regulations promulgated under each;

         (b) such other filings or registrations with, or authorizations,
consents or approvals of, governmental bodies, agencies, officials or
authorities, the failure of which to make or obtain (i) would not reasonably be
expected to have a Material Adverse Effect on Purchasers or (ii) would not
materially adversely affect the ability of the Sellers or Purchasers to
consummate the transactions contemplated hereby and operate their businesses as
heretofore operated.

         SECTION 4.4 NON-CONTRAVENTION. The execution, delivery and performance
by each Purchaser of this Agreement and the consummation by each Purchaser of
the transactions contemplated hereby and thereby do not and will not:

                                       19
<PAGE>   24

         (a) contravene or conflict with the Certificate of Incorporation or
Bylaws of each Purchaser;

         (b) assume compliance with the matters referred to in Section 4.3,
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to each Purchaser;

         (c) conflict with or result in a breach or violation of, or constitute
a default under, or result in a contractual right to cause the termination or
cancellation of or loss of a material benefit under, or right to accelerate, any
material agreement, contract or other instrument binding upon Purchasers or any
other Subsidiary of Purchasers or any material license, franchise, permit or
other similar authorization held by Purchasers or any Subsidiary of Purchasers;
or

         (d) result in the creation or imposition of any Lien on any material
asset of Purchasers;

except, with respect to clauses (b), (c) and (d) above, for contraventions,
defaults, losses, Liens and other matters referred to in such clauses that in
the aggregate would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on each Purchaser.

         SECTION 4.5 BROKER'S FEES. Neither Purchasers, nor anyone acting on the
behalf or at the request thereof has any liability to any broker, finder,
investment banker or agent, or has agreed to pay any brokerage fees, finder's
fees or commissions, or to reimburse any expenses of any broker, finder,
investment banker or agent in connection with the transactions contemplated by
this Agreement.

         SECTION 4.6 SEC FILINGS. HCC has made available to each of the
Shareholders true and complete copies of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q and its Proxy Statements on Schedule 14-A filed
in connection with annual meeting of Shareholders for the years ended December
31, 1999, 1998 and 1997. HCC has filed all documents required to be filed under
the Exchange Act. As of their respective filing dates, each of the document
required to be filed by HCC and so filed, complied in all material respects with
the requirements of the Exchange Act, and the applicable rules and regulations
of the SEC promulgated thereunder.

         SECTION 4.7 FULL DISCLOSURE. No information furnished by HCC to any
Shareholder or its or their representative in connection with this Agreement or
the Operative Agreements contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make this statement so made
or information so delivered not misleading.

         SECTION 4.8 KNOWLEDGE OF PURCHASERS. As used in this Agreement,
"knowledge of Purchasers" means the actual knowledge of the Chief Executive
Officer, Chief

                                       20
<PAGE>   25

Operating Officer, President, Chief Financial Officer, or any Executive Vice
President of Purchasers.

                                   ARTICLE 5
                            COVENANTS OF THE SELLERS

         SECTION 5.1 CONDUCT OF SCC. From the date of the execution of this
Agreement until Closing, the Sellers shall cause SCC to conduct its businesses
in the ordinary course. Without limiting the generality of the foregoing, from
the date hereof until the Closing or a termination of this Agreement, and except
as contemplated by this Agreement, each of the Sellers shall cause SCC to:

         (a) not adopt or propose any change in its Articles or Certificate of
Incorporation or Bylaws or partnership agreement;

         (b) not enter into or amend any employment agreements (oral or written)
or increase the compensation payable or to become payable by it to any of its
officers, directors, or consultants over the amount payable as of September 30,
2000, or increase the compensation payable to any other employees, or adopt or
amend any employee benefit plan or arrangement (oral or written), or (iv) adopt
or amend any employee benefit plan or arrangement (oral or written);

         (c) not issue any SCC Securities or LLC Interests;

         (d) not terminate any existing directors and officers or similar
liability insurance and not modify or reduce the coverage thereunder;

         (e) not pay any dividend or make any other distribution to holders of
SCC Securities;

         (f) not, directly or indirectly, dispose of or acquire any material
properties or assets except in the ordinary course of business;

         (g) not incur any additional indebtedness for borrowed money except
pursuant to existing arrangements which have been disclosed to Purchasers prior
to the date hereof;

         (h) not (i) change accounting methods; (ii) amend or terminate any
contract, agreement or license to which it is a party (except pursuant to
arrangements previously disclosed in writing to Purchasers or disclosed in the
Sellers Disclosure Schedule) except those amended or terminated in the ordinary
course of business, consistent with past practices; (iii) lend any amount to any
person or entity, other than advances for travel and expenses which are incurred
in the ordinary course of business consistent with past practices, and which are
not material in amount to SCC, which travel and expenses shall be documented by
receipts for the claimed amounts, (iv) enter into any guarantee or suretyship
for any obligation except for the endorsements of checks and other negotiable
instruments in ordinary course of business, consistent with past practice; (v)
waive or

                                       21
<PAGE>   26

release any material right or claim; (vi) issue or sell any SCC Securities, or
issue or create any warrants, obligations, subscriptions, options, convertible
securities, stock appreciation rights or other commitments to issue SCC
Securities, or take any action other than this transaction to accelerate the
vesting of any outstanding option or other security (except pursuant to existing
arrangements disclosed in writing to Purchasers before the date of this
Agreement); (vii) merge, consolidate or reorganize with or acquire any entity;
(viii) agree to any audit assessment by any tax authority or file any federal or
state income or franchise Tax return unless copies of such returns have been
delivered to Purchasers for its review prior to such agreement or filing; and
(ix) terminate the employment of any key executive employee;

         (i) not take any action or engage in any activity which would result in
SCC losing its S corporation status for federal income tax purposes;

         (j) not take any action or make any distribution which would cause the
SCC shareholders' retained equity, determined in accordance with generally
accepted accounting principles, and exclusive of any capitalized non-compete or
other employment-related compensation to be less than $400,000;

         (k) not take any action which could prevent HCC from accounting for the
business combination to be effected by the Merger, as a pooling-of-interests;

         (l) not enter into any transaction incurring capital expenditures over
$10,000 or incurring any non-budgeted expense item over $5,000, in each case, in
the aggregate; and

         (m) not, directly or indirectly, agree or commit to do any of the
foregoing.

         SECTION 5.2 ACCESS TO FINANCIAL AND OPERATIONAL INFORMATION. The
Sellers will give Purchasers, its counsel, financial advisors, auditors and
other authorized representatives reasonable access during normal business hours
to the offices, properties, books and records of SCC and LLC, will furnish to
Purchasers, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data as such persons may reasonably
request and will instruct its employees, counsel and financial advisors to
cooperate with Purchasers in its investigation of the businesses of SCC and in
the planning for the combination of the businesses of SCC and Purchasers
following the consummation of the transactions contemplated by this Agreement;
provided that no investigation pursuant to this Section or otherwise shall
affect any representation or warranty given hereunder. In addition, following
the public announcement of this Agreement or the transactions contemplated
hereby, the Sellers will cooperate in arranging joint meetings among
representatives of SCC and Purchasers and persons with whom SCC maintains
business relationships.

         SECTION 5.3 OTHER OFFERS. The Sellers will not, and will not permit SCC
to, directly or indirectly, (i) take any action to solicit, initiate or discuss
any Acquisition Proposal (as hereinafter defined), or (ii) engage in
negotiations with, or disclose any

                                       22
<PAGE>   27

nonpublic information relating to, SCC or afford access to the properties, books
or records of SCC to, any person or entity that may be considering making, or
has made, an Acquisition Proposal. To the extent that any of the Sellers or SCC
or any of its officers, directors, employees or other agents are currently
involved in any discussions with respect to any Acquisition Proposal or
contemplated or proposed Acquisition Proposal, Sellers shall suspend, and shall
cause, where applicable, SCC and its officers, directors, employees or other
agents to suspend, such discussions immediately. The term "Acquisition Proposal"
as used herein means any offer or proposal for, or any indication of interest
in, a merger or other business combination involving SCC or LLC or the
acquisition of any equity interest in, or a substantial portion of the assets
of, SCC or LLC other than the transactions contemplated by this Agreement.

         SECTION 5.4 MAINTENANCE OF BUSINESS. The Sellers will use their best
efforts to cause SCC to carry on its business, keep available the services of
its officers and employees and preserve its relationships with those of its
customers, agents, suppliers, licensors and others having business relationships
with it that are material to its business in substantially the same manner as it
has prior to the date hereof. If any of the Sellers becomes aware of a material
deterioration or facts which are likely to result in a material deterioration in
the relationship with any customer, supplier, licensor or others having business
relationships with it, such Seller will promptly in writing bring such
information to the attention of the Purchasers.

         SECTION 5.5 COMPLIANCE WITH OBLIGATIONS. The Sellers shall use their
best efforts to cause SCC to comply in all material respects with (i) all
applicable federal, state, local and foreign laws, rules and regulations, (ii)
all agreements and obligations, including its respective charter and bylaws, by
which it, its properties or its assets may be bound, and (iii) all decrees,
orders, writs, injunctions, judgments, statutes, rules and regulations
applicable to SCC and its properties or assets.

         SECTION 5.6 NOTICES OF CERTAIN EVENTS. Any Seller shall, upon obtaining
knowledge of any of the following, promptly notify Purchasers of:

         (a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with this Agreement,

         (b) any notice or other communication from any governmental or
regulatory agency or authority in connection with this Agreement, and

         (c) any actions, suits, claims, investigations or other judicial
proceedings commenced or threatened against SCC which, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant hereto
or which relate to the consummation of transactions contemplated by this
Agreement.

         SECTION 5.7 NECESSARY CONSENTS. After the Effective Date, each of the
Sellers shall use its best efforts to obtain such written consents and take such
other actions as

                                       23
<PAGE>   28

may be necessary or appropriate to allow Purchasers to hold and carry on the
acquired businesses after the Closing.

         SECTION 5.8 REGULATORY APPROVAL. Each of the Sellers will, and will
cause SCC to, where required pursuant to the rules or regulations of any
regulatory agency, execute and file, or join in the execution and filing, with
any application or other document that may be necessary in order to obtain any
Governmental Authorization which may be reasonably required, or which Purchasers
may reasonably request, in connection with the consummation of the transaction
provided for in this Agreement. Each of the Sellers will, and will cause SCC to,
use reasonable best efforts to obtain or assist Purchasers in obtaining all such
Governmental Authorizations.

         SECTION 5.9 SATISFACTION OF CONDITIONS PRECEDENT. Each of the Sellers
shall use all reasonable efforts to cause the transactions provided for in this
Agreement to be consummated, and, without limiting the generality of the
foregoing to obtain all consents and authorizations of third parties and to make
all filings with, and give all notices to, third parties that may be necessary
or reasonably required on its part in order to effect the transactions provided
for herein.

         SECTION 5.10 SHAREHOLDER APPROVAL. At the earliest practicable date,
SCC will duly call and hold a Special Shareholders Meeting, or duly take action
by the written consent of its Shareholders, whereby this Agreement, the Merger
and related matters will be submitted for the consideration and approval of its
Shareholders (the "Shareholder Vote") which approval will be recommended by the
Board of Directors of SCC. The Shareholder Vote will be effected in compliance
with applicable law.

         SECTION 5.11 AFFILIATES AGREEMENT. To facilitate the treatment of the
Merger for accounting purposes as a pooling-of-interest, SCC and each
Shareholder shall deliver to HCC simultaneously with the execution of this
Agreement, a written agreement (the "Affiliates Agreement") in form and
substance reasonably satisfactory to HCC.

                                       24
<PAGE>   29

         SECTION 5.12 NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY.
Schanen and Tolbert agree as follows:

         (a) During the period of three (3) years after the termination
("Employment Termination") of their respective employment with HCC, SCC or any
of their successors, affiliates or subsidiaries (collectively, the "Employer"),
Schanen or Tolbert shall not for any reason, within any of the markets in which
Employer or its affiliates has sold products or services or formulated a plan to
sell products or services into a market during the last twelve (12) months of
their respective employment, as the case may be, engage in or contribute their
knowledge to any work which is competitive with or similar to a product,
process, apparatus, service, or development on which the person in question
worked or with respect to which such person had access to Confidential
Information while employed by Employer. Following the expiration of said three
(3) year period, Schanen and Tolbert each shall continue to be obligated under
the Confidential Information set forth in paragraph (d) of this Section not to
use or to disclose Confidential Information of Employer so long as it shall not
be publicly available. It is understood that the geographical area set forth in
this covenant is divisible so that if this clause is invalid or unenforceable in
an included geographic area, that area is severable and the clause remains in
effect for the remaining included geographic areas in which the clause is valid.

         (b) That for a period of three (3) years after their respective
Employment Termination, neither will solicit or accept any business from any
customer or client or prospective customer or client with whom he dealt or
solicited while employed by Employer.

         (c) For a period of three (3) years after their respective Employment
Termination, neither will either directly or indirectly, on his own behalf or on
behalf of others, solicit, attempt to hire, or hire any person employed by
Employer to work for him or for another entity, firm, corporation, or
individual.

         (d) Neither Schanen nor Tolbert will, except as Employer may otherwise
consent or direct in writing, reveal or disclose, sell, use, lecture upon,
publish or otherwise disclose to any third party any Confidential Information,
or authorize anyone else to do these things at any time either during or
subsequent to his employment. This paragraph shall continue in full force and
effect after termination of Schanen or Tolbert's employment. Schanen and
Tolbert's obligations under this paragraph with respect to any specific
Confidential Information shall cease when that specific portion of the
Confidential Information becomes publicly known, in its entirety and without
combining portions of such information obtained separately. It is understood
that such Confidential Information of Employer include matters that Schanen and
Tolbert conceive or develop, as well as matters Schanen and Tolbert learn from
other employees of Employer. Confidential Information is defined to include
information: (1) disclosed to or known by Schanen or Tolbert, as applicable, as
a consequence of or through his employment with SCC; (2) not generally known
outside of Employer; and (3) which relates to any aspect of Employer or its
business, finances, operation plans, budgets, research, or strategic

                                       25
<PAGE>   30

development. "Confidential Information" includes, but is not limited to
Employer's trade secrets, proprietary information, financial documents, long
range plans, customer lists, employer compensation, marketing strategy, existing
contracts and contractual forms and terms, data bases, costing data, computer
software developed by Employer, investments made by Employer, and any
information provided to Employer by a third party under restrictions against
disclosure or use by Employer or others.

         (e) Upon termination of his employment with Employer, Schanen or
Tolbert, if requested by Employer, shall reaffirm in writing his recognition of
the importance of maintaining the confidentiality of Employer's Confidential
Information and proprietary information, and reaffirm any other obligations set
forth in this Agreement.

         (f) Neither Schanen nor Tolbert has used or disclosed any Confidential
Information he may have obtained from Employer prior to signing this Agreement,
in any way inconsistent with the provisions of this Agreement.

         (g) Any breach of paragraphs (a), (b) or (c) above cannot be remedied
solely by money damages, and that in addition to any other remedies Employer may
have, Employer shall be entitled to obtain injunctive relief against Schanen or
Tolbert, as the case may be. Nothing herein, however, shall be construed as
limiting Employer's right to pursue any other available remedy at law or in
equity, including recovery of damages.

         (h) In the event either of Schanen or Tolbert breaches paragraphs (a),
(b) or (c) of this Section, the restrictive time periods contained in those
provisions will be extended by the period of time he was in violation of such
provisions.

         (i) The agreements contained in this Section are independent of the
other agreements contained herein. Accordingly, failure of Employer to comply
with any of its obligations outside of this Section do not excuse Schanen and
Tolbert from complying with the agreements contained herein.

                                   ARTICLE 6
                             COVENANTS OF PURCHASERS

         SECTION 6.1 CONDUCT OF PURCHASERS. From the date hereof until the
Closing or a termination of this Agreement, Purchasers shall in all material
respects conduct its business in the ordinary course, provided, however, that
nothing in this Agreement shall be construed to prohibit or otherwise restrain
Purchasers in any manner from acquiring other businesses or substantially all of
the assets thereof.

         SECTION 6.2 OBLIGATION OF MERGER SUB. HCC shall take all action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.

                                       26
<PAGE>   31
         SECTION 6.3 NOTICE TO AFFILIATES. HCC shall, at least 30 days prior to
the Effective Date, cause to be delivered to each person HCC believes to be an
"Affiliate" (as that term is used in paragraph (c) and (d) of Rule 145 under the
Securities Act), of HCC a notice informing such persons of restrictions on
transfers resulting from the Merger being accounted for as a pooling-of-interest
in accordance with generally accepted accounting principles and the rules,
regulations and policies of the SEC.

                                   ARTICLE 7
                       COVENANTS OF PURCHASERS AND SELLERS

         SECTION 7.1 ADVICE OF CHANGES. Each Party will promptly advise the
others in writing (i) of any event known to it, him or her or any of its
executive officers occurring subsequent to the date of this Agreement that in
its reasonable judgment renders any representation or warranty of such Party
contained in this Agreement, if made on or as of the date of such event or the
Effective Date, untrue, inaccurate or misleading in any material respect and
(ii) of any Material Adverse Change in the business condition of the Party.

         SECTION 7.2 REGULATORY APPROVALS. The Parties shall execute and file,
or join in the execution and filing of, any application or other document that
may be necessary in order to obtain the authorization, approval or consent of
any governmental body, federal, state, local or foreign, which may be required
or reasonably requested by Purchasers in connection with the consummation of the
transactions contemplated by this Agreement, including filings under the HSR
Act, if determined to be applicable by counsel for Purchasers. Each Party shall
use its reasonable best efforts to obtain all such authorizations, approvals and
consents, and the costs therefor shall be paid by Purchasers.

         SECTION 7.3 CERTAIN FILINGS. The Parties shall cooperate with one
another:

         (a) in determining whether any action by or in respect of, or filing
with, any governmental body, agency or official, or authority is required, or
any actions, consents, approvals or waivers are required to be obtained from
Parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement; and

         (b) in seeking any such actions, consents, approvals or waivers or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.

         SECTION 7.4 COMMUNICATIONS. None of the Sellers shall make any
disclosure to the public or to any person or entity, other than their officers,
employees, or advisors who need to know such information in connection with the
negotiation and consummation of the transactions contemplated by this Agreement,
of the negotiation, execution, terms, or subject matter of this Agreement
without the prior written consent of Purchasers. Unless required by law, prior
to consummation, Purchasers shall not make any further public announcement in
connection with the negotiation and consummation of the transactions

                                       27
<PAGE>   32

contemplated by this Agreement, without the prior consent of Schanen, which
consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, Sellers and Purchasers shall have the right to disclose the
transaction contemplated by this Agreement to the insurers, reinsurers, brokers,
agents and third-party administrators that work with SCC, and Purchasers shall
have the right to disclose the transaction contemplated by this Agreement to
financial analysts, lenders, regulating agencies, and its shareholders.

         SECTION 7.5 SATISFACTION OF CONDITIONS PRECEDENT. Each of the Parties
will use its best efforts to satisfy or cause to be satisfied all the conditions
precedent that are applicable to each of them, and to cause the transactions
contemplated by this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all material consents and authorizations
of third parties and to make filings with, and give all notices to, third
parties that may be necessary or reasonably required on its part in order to
effect the transactions contemplated hereby.

         SECTION 7.6 TAX COOPERATION. The Parties shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any sales, use, transfer, value-added, stock
transfer or stamp taxes, any transfer, recording, registration or other fees,
and any similar taxes or fees which become payable in connection with the
transactions contemplated by this Agreement. The Parties shall also cooperate in
the preparation of income and franchise tax returns for 2000 and 2001, including
the preparation of short-year returns for the portion of 2001 preceding the
Closing.

         SECTION 7.7 CONFIDENTIALITY. Between the date of this Agreement and the
Effective Date, each Party will maintain in confidence, and cause its directors,
officers, employees, agents, and advisors to maintain in confidence, and not use
to the detriment of another Party, any written or oral or other information
obtained in confidence from another Party in connection with this Agreement or
the transactions contemplated hereby unless (1) such information is already
known to such Party or to others not bound by a duty of confidentiality, (2)
such information becomes publicly available through no fault of such Party, (3)
the use of such information is necessary, or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transaction contemplated hereby, or (4) the furnishing or use of such
information is required by or necessary or appropriate in connection with legal
proceedings. Upon a termination of this Agreement, each Party will return or
destroy as much of such written information as may be reasonably requested.

                                       28
<PAGE>   33

                                   ARTICLE 8
                              CONDITIONS TO CLOSING

         SECTION 8.1 CONDITIONS TO OBLIGATIONS OF PURCHASERS. The obligations of
Purchasers hereunder are subject to the fulfillment or satisfaction, on and as
of the Effective Date, of each of the following conditions (any one or more of
which may be waived by Purchasers, but only in a writing signed by Purchasers):

         (a) The representations and warranties contained in Article 3
(considered collectively) and each of those representations and warranties
(considered individually) remain true and accurate in all material respects on
and as of the Effective Date with the same force and effect as if they had been
made on the Effective Date (except to the extent a representation or warranty
speaks specifically as of an earlier date and except for changes contemplated by
this Agreement) without giving effect to any supplement to the Sellers
Disclosure Schedule and Sellers shall have provided Purchasers with a
certificate, dated as of the Effective Date, to such effect.

         (b) Each of the representations and warranties in Section 3.1, Section
3.5, Section 3.6, Section 3.7, Section 3.10 and Section 3.27 must be accurate in
all respects as of the date of this Agreement and must be accurate in all
respects as of the Effective Date as if made on the Effective Date without
giving effect to any supplement to the Sellers Disclosure Schedule.

         (c) Sellers shall have performed and complied in all material respects
with all of their covenants (considered individually and collectively) contained
herein required to be performed on or before the Effective Date. Each of the
covenants set forth in Section 5.1(e), (h) and (k) shall have been performed in
all respects as of the Effective Date. Purchasers shall have received a
certificate to such effect signed by each of the Sellers.

         (d) There shall have been no Material Adverse Change in SCC since
September 30, 2000.

         (e) All written consents, assignments, waivers or authorizations, other
than Governmental Authorizations, that are required as a result of the
transaction contemplated by this Agreement for the continuation in full force
and effect of any Material Agreements shall have been obtained.

         (f) Purchasers shall have received an opinion of counsel to Sellers and
SCC in form and substance satisfactory to Purchasers.

         (g) All agency and commission fee agreements, overrides and business
contracts (collectively "Fee Agreements") of SCC in force on the date of this
Agreement shall be in force on the Effective Date, without restriction or
modification as a result of the consummation of the Merger for a period at least
equal to the remainder of their respective annual terms.

                                       29
<PAGE>   34
         (h) The Sellers shall have received and caused to be delivered to
Purchasers the opinion of Holland, Shipes & Vann, P.C. on the financial
statements of SCC and the related supplemental schedules for the year ended
December 31, 1999.

         (i) Sellers shall have arranged for Purchasers' review of the audit or
review workpapers for SCC for each of fiscal year 1999 and the three prior
fiscal years.

         (j) Until the Closing, SCC shall continue to qualify as an S
corporation.

         (k) Schanen and Tolbert (collectively, the "Key Employees") and such
other key employees of SCC as Purchasers shall require, shall each have executed
and delivered to Purchasers a Non-Competition Agreement in form and substance
reasonably satisfactory to Purchasers and the Key Employees shall have entered
into an agreement with the Purchasers providing for their continued employment.
All other employment or consulting agreements of SCC other than those described
on the Sellers' Disclosure Schedule shall at Purchaser's request be terminated
without any payment by or further obligation of SCC.

         (l) Each of the Key Employees shall be alive and not in any way,
Disabled. For purposes of this Agreement, a person shall be deemed to be
"Disabled" if he is unable to engage in any substantial portion of his regular
duties for SCC or any Affiliate of SCC by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
three (3) months.

         (m) Shareholders shall have furnished Purchasers with evidence of such
consents as Shareholders shall know, or Purchasers shall determine, to be
required to enable Purchasers to continue to enjoy the benefit of any lease,
license, permit, contract or other agreement or instrument to which SCC is a
party or beneficiary and which can, by its terms (with consent) and consistent
with applicable law, be so enjoyed after the Merger. If there is in existence
any lease, governmental license, permit or contract that, by its terms or
applicable law, expires, terminates or is otherwise rendered invalid upon the
Merger, and such lease, license, permit, or contract is required in order for
the business of SCC to continue to be conducted following the Merger in the same
manner as conducted previously, Purchasers shall have obtained, or been
furnished by Shareholders an equivalent of, that lease, license, permit, or
contract effective as of and after the Effective Date.

         (n) Purchasers shall have received resignations of all persons who are
officers or directors, as applicable, of SCC immediately prior to the Closing.

         (o) Purchasers shall have received general releases in favor of SCC and
Purchasers executed by each of the Sellers, Lisa Bianchi, and Susan Kaufman.
Those releases will not relate to rights or obligations arising under this
Agreement.

                                       30
<PAGE>   35
         (p) Purchasers shall have received possession of all corporate,
accounting, business and tax records of SCC.

         (q) The form and substance of all actions, proceedings, instruments and
documents required to consummate the transactions contemplated by this Agreement
shall have been satisfactory in all reasonable respects to Purchasers and
Purchasers' counsel.

         (r) Purchasers and SCC shall have received the letters from Holland,
Shipes & Vann, P.C., accountants for SCC and addressed to Purchasers and SCC
stating that SCC qualifies as an entity that may be a party to a business
combination for which the pooling-of-interests accounting method of accounting
would be available.

         (s) No order of any court or administrative agency shall be in effect
that enjoins, restrains, conditions or prohibits consummation of this Agreement
or any Operative Agreement, no litigation, investigation or administrative
proceeding shall be pending or threatened that would enjoin, restrain, condition
or prevent consummation of this Agreement or any Operative Agreement.

         (t) Purchasers shall have received from each of the Shareholders an
agreement that each such Shareholders shall dispose of any investment which is
reasonably deemed by HCC to be in conflict with any of HCC's or SCC's operations
within twelve (12) months after the Closing Date.

         (u) Purchasers shall have received from each Shareholder an agreement
that any of the HCC Common Stock received hereunder shall be held for a minimum
of one year period and shall be further subject to any limitations on sale
contained in any rules or regulations of the SEC under the Securities Act or the
Exchange Act, or which result in Purchaser losing the benefits of accounting for
the business combination as a pooling of interests.

         (v) The Shareholders shall have entered into the Escrow Agreement.

         (w) Purchasers shall be satisfied that on a pro-forma basis SCC will
earn at least $5,000,000 of pre-tax profit for the year ended December 31, 2000.

         SECTION 8.2 CONDITIONS TO OBLIGATIONS OF SELLERS. The Sellers'
obligations hereunder are subject to the fulfillment or satisfaction, on and as
of the Effective Date, of each of the following conditions (any one or more of
which may be waived, but only in a writing signed by such Party):

         (a) The representations and warranties of Purchasers set forth herein
shall be true and accurate in all material respects on and as of the Effective
Date with the same force and effect as if they, had been made on the Effective
Date (except to the extent a representation or warranty speaks specifically as
of an earlier date and except for changes contemplated by this Agreement) and
Purchasers shall have provided the Sellers with a

                                       31
<PAGE>   36

certificate executed by the President and the Chief Financial Officer of
Purchasers, dated as of the Effective Date, to such effect. For the purpose of
determining the accuracy of the representations and warranties of Purchasers,
any change or effect in the business of Purchasers that results in substantial
part as a consequence of the public announcement or pendency of the transactions
contemplated hereby shall not be deemed a Material Adverse Change or Material
Adverse Effect or other breach of representation or warranty with respect to
Purchasers.

         (b) Purchasers shall have performed and complied with all of its
covenants contained herein in all material respects on or before the Effective
Date, and the Sellers shall have received a certificate to such effect signed by
Purchasers' President and Chief Financial Officer.

         (c) Sellers shall have received from Haynes and Boone, LLP, counsel to
Purchasers, an opinion in form and substance satisfactory to the Sellers,
including the tax-free nature of the Merger.

         (d) The form and substance of all actions, proceedings, instruments and
documents required to consummate the transactions contemplated by this Agreement
shall have been satisfactory in all reasonable respects to the Shareholders and
their counsel.

         (e) Purchasers shall have entered into letters of employment with Ms.
Lisa Bianchi and Ms. Susan Kaufman providing for annual salaries of $200,000
each plus the right to share in any employee bonus pool established by the
Purchasers.

         SECTION 8.3 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of the Parties hereunder are subject to the fulfillment, on and as
of the Effective Date. of each of the following conditions (any one or more of
which may be waived by such Parties, but only in a writing signed by such
Parties):

         (a) No statute, rule, regulation, executive order, decree, injunction
or restraining order shall have been enacted, promulgated or enforced (and not
repealed, superseded or otherwise made inapplicable) by any court or
governmental authority which prohibits the consummation of the transaction
contemplated by this Agreement or the Operative Agreements (each Party agreeing
to use its reasonable best efforts to have any such order, decree or injunction
lifted).

         (b) There shall have been obtained any and all Governmental
Authorizations, permits, approvals and consents of securities or "blue sky"
commissions of any jurisdiction and of any other governmental body or agency,
that may reasonably be deemed necessary so that the consummation of the
transaction contemplated by this Agreement will be in compliance with applicable
laws, the failure to comply with which would have a Material Adverse Effect on
Purchasers, SCC or would be reasonably likely to subject any of Purchasers or
SCC or any of their respective directors or officers to penalties or criminal
liability.

                                       32
<PAGE>   37
                                   ARTICLE 9
                             POST-CLOSING COVENANTS

         SECTION 9.1 LISTING OF HCC COMMON STOCK. If required, HCC shall cause
the shares of HCC Common Stock to be issued in the Merger to be approved for
listing on the NYSE.

         SECTION 9.2 PUBLICATION OF POST-MERGER RESULTS. HCC shall use
commercially reasonable efforts to cause financial results covering at least 30
days of post-Merger combined operations to be published in its first report of
quarterly financial statements as soon as practicable and by the date such
information is required to be filed with the SEC.

         SECTION 9.3 EMPLOYEE BENEFITS. Following the consummation of the
Merger, as soon as reasonably practicable, HCC shall arrange to make generally
available to the employees of SCC, the benefits generally applicable to
employees of HCC.

         SECTION 9.4 COVENANTS RELATING TO SALES UNDER RULE 144.

         (a) SEC Reporting Requirements, Etc. For so long as any shares of the
HCC Common Stock are owned of record by any of the Sellers, HCC agrees that:

             (i) HCC shall maintain in full force and effect at all times the
         registration of the HCC Common Stock with the SEC pursuant to Section
         12 of the Exchange Act, and shall at all times remain subject to the
         reporting requirements of Section 13 of the Exchange Act;

             (ii) HCC shall at all times file, when due, all reports required
         to be filed with the SEC pursuant to Section 13 of the Exchange Act;
         and

             (iii) HCC shall from time to time take such other action that may
         be required of an issuer of securities under Rule 144 promulgated under
         the Securities Act ("Rule 144"), to maintain the eligibility of the HCC
         Common Stock for sale thereunder.

         (b) Sales of HCC Common Stock under Rule 144. HCC agrees that,
beginning on a date that is one year from the Closing, not later than three
business days after its receipt of written notice from a Seller (each, a "144
Sale Notice," substantially in the form of Exhibit B hereto), notifying HCC that
certain shares of HCC Common Stock have been sold under the provisions of Rule
144 (the "Sale Shares"), HCC shall, at its cost and in accordance with and
subject to the provisions of Rule 144:

             (1) Remove, or cause to be removed, all restrictive legends
         appearing on any share certificates evidencing the Sale Shares or
         otherwise applicable to the Sale Shares;

                                       33
<PAGE>   38

                  (2) Rescind any stop transfer instructions given at any time
         by HCC to its stock transfer agent (the "Transfer Agent") that
         terminate or expire upon a sale of the shares to which such
         instructions relate in compliance with Rule 144; and

                  (3) Cause its attorneys to issue to the Transfer Agent a
         written opinion of counsel, stating therein (if true) that the Sale
         Shares may be transferred without restriction to the purchaser(s)
         thereof in reliance upon Rule 144 and that any stop transfer
         instructions with respect to the Sale Shares may be removed.

Provided, however, that each 144 Sale Notice delivered to HCC shall be
accompanied by (i) a standard representation letter to HCC from the securities
brokerage firm that sold the Sale Shares for such Seller, and (ii) a copy of
Form 144 filed with the SEC in connection with the sale of the Sale Shares under
Rule 144.

         (c) Pre-Sale Confirmations. HCC agrees that not later than five
business days after receiving a written request from a Seller, HCC will confirm,
in writing (if true), that the Seller is the registered owner of the shares of
HCC Common Stock identified in such written request and that there are no stop
transfer instructions in effect with respect to such shares (other than
instructions that will terminate or expire upon a sale of such shares in
accordance with Rule 144).

         (d) No Effect on Other Rights. Nothing herein shall limit or restrict
any rights available to any of the Sellers arising under any federal or state
securities laws or regulations.

         (e) Assignment. Each of the Sellers shall have the right, upon written
notice to HCC, to transfer, convey and assign all of such Sellers rights arising
under this Section 9.4 to any person or entity that acquires any HCC Common
Stock from such Seller in a private, non-public transaction (whereupon such
other person or entity shall be referred to as a "Seller" for purposes of this
Section 9.4).

         (f) Definition. For purposes hereof, "business days" means any day
other than a Saturday, Sunday and U.S. Federal holiday.

         SECTION 9.5 POOLING-OF-INTERESTS. Shareholders shall take no action
which could or would result in Purchasers losing the benefits of accounting for
the merger as a pooling-of-interests.

         SECTION 9.6 ASSIGNMENT OF COMMISSIONS. Schanen and Tolbert and each
other person who is entitled to commissions, fees or other amounts attributable
to business written by any such person for business written on behalf of SCC or
Merger Sub shall irrevocably assign the rights to such fees, commissions or
other amounts to SCC or Merger Sub.

                                       34
<PAGE>   39

                                   ARTICLE 10
                            TERMINATION OF AGREEMENT

         SECTION 10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Date:

         (a) By the mutual consent of the Shareholders and Purchasers.

         (b) By Purchasers or by the Shareholders if there has been a material
breach by the other of any representation or warranty contained in this
Agreement, which in either case cannot be, or has not been, cured within 15 days
after written notice of such breach is given to the Party committing such
breach, provided that the right to effect such cure shall not extend beyond the
date set forth in subparagraph (c) below.

         (c) By Purchasers or by the Shareholders if all conditions of Closing
required by Article 8 hereof have not been met or waived by January 31, 2001
(the "Termination Date"). Provided, however, that neither Purchasers nor
Shareholders, shall be entitled to terminate this Agreement pursuant to this
subparagraph (c) if such Party is in material violation of any of its
representations, warranties or covenants in this Agreement.

         (d) If any governmental authority shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable.

         SECTION 10.2 EFFECT OF TERMINATION. Each Party's right of termination
under Section 10.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
10.1, all further obligations of the Parties under this Agreement will terminate
except that the obligations in Section 7.7, Section 13.3, Section 13.5, Section
13.6 and Section 13.11 will survive; provided, however, that if this Agreement
is terminated by a Party because of the breach of the Agreement by the other
Party or because one or more of the conditions to the terminating Party's
obligations under this Agreement is not satisfied as a result of the other
Party's failure to comply with its obligations under this Agreement, the
terminating Party's right to pursue all legal remedies will survive such
termination unimpaired.

                                       35
<PAGE>   40

                                   ARTICLE 11
                                 CLOSING MATTERS

         SECTION 11.1 THE CLOSING. Subject to termination of this Agreement as
provided in Article 10 above, the closing of the transactions provided for
herein (the "Closing") will take place at the offices of Haynes and Boone, LLP,
1000 Louisiana, Suite 4300, Houston, Texas 77002 at 9:00 a.m., Houston Time on
January 19, 2001 or, if all conditions to Closing have not been satisfied or
waived by such date, such other place, time and date as the Shareholders and
Purchasers may mutually select (the "Closing Date"). Such Closing may, with the
consent of all Parties, take place by delivery and exchange of documents by
facsimile or electronic mail transmission with originals to follow by overnight
mail service courier.

                                   ARTICLE 12
                          INDEMNIFICATION AND REMEDIES

         SECTION 12.1 GENERAL INDEMNIFICATION BY THE SHAREHOLDERS. Each
Shareholder, jointly and severally (the "Indemnifying Parties") to the extent
hereinafter set forth, covenants and agrees to indemnify, defend, protect and
hold harmless HCC, Merger Sub and the Surviving Corporation and their respective
officers, directors, employees, shareholders, members, assigns, successors and
affiliates (individually, an "Indemnified Party" and collectively, "Indemnified
Parties") from, against and in respect of:

         (a) all liabilities, losses, claims, damages, punitive damages, causes
of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:

             (i) any breach of any representation or warranty of SCC or the
         Shareholders set forth in this Agreement or any schedule or
         certificate, delivered by or on behalf of SCC or the Shareholders in
         connection herewith; or

             (ii) any nonfulfillment of any covenant or agreement by the
         Shareholders, or, prior to the Effective Time, SCC, under this
         Agreement; or

             (iii) the business, operations or assets of SCC prior to the
         Closing Date or the actions or omissions of SCC's officers, employees
         or agents prior to the Closing Date; or

                                       36
<PAGE>   41
             (iv) the matters disclosed on the Disclosure Schedule or the
         nonfulfillment of any representation, covenant or agreement described
         in Section 3.5, Section 3.6, Section 3.10, Section 3.12 or Section
         3.13; or

             (v) the failure of SCC or any Shareholder to obtain any necessary
         consent relating to the leasing by SCC of the leasehold property
         utilized by SCC; or

             (vi) fraud; and

         (b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 12.1; and

         (c) all representations, warranties, covenants and obligations in this
Agreement, the Disclosure Schedules, the supplements to the Disclosure
Schedules, the certificates delivered pursuant to this Agreement and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing. The right to indemnification, payment of Damages or other remedies
based on such representations, warranties, covenants and obligations will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with any such representation,
warranty, covenant or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages or other remedies based on such
representation, warranties, covenants and obligations.

         SECTION 12.2 LIMITATION AND EXPIRATION. Notwithstanding the above:

         (a) (i) there shall be no liability for indemnification under Section
12.1 unless the aggregate amount of Damages exceeds $100,000 (the "Franchise
Deductible"); provided, however, if Damages exceed the Franchise Deductible, the
Indemnifying Persons shall be liable for all such Damages and (ii) provided,
further that the Franchise Deductible shall not apply to Damages arising out of
any breaches of the covenants of the Shareholders set forth in this Agreement or
representations and warranties made in Section 3.1, Section 3.5, Section 3.6,
Section 3.10 or Section 3.12 or for fraud (the "Deductible Exclusions");

         (b) the aggregate amount of any Shareholders' liability under this
Article 12 except for matters referred to as Deductible Exclusions shall not
exceed an amount equal to the Merger Consideration valued at the Closing Date
Price, defined below and received by such Shareholder;

         (c) the indemnification obligations under this Article 12, or under any
certificate or writing furnished in connection herewith, shall terminate at the
date that is the later of clause (i) or (ii) of this Section 12.2(c):

                                       37
<PAGE>   42
                  (i) (1) with respect to claims relating to or arising out of
         (i) any Taxes arising out of or relating to the business of SCC; or
         (ii) any taxes arising out of the payment of salaries, wages, bonuses,
         commissions, distributions or the granting of options or stock to any
         shareholder during their entire term as an employee, whether a
         shareholder at the time of payment or not; (iii) any taxes arising out
         of the reorganization of the shareholdings or the reorganization of the
         structure of the entities prior to the Closing Date; or (iv) the
         irrevocable assignment of all commissions, fees or other amounts due to
         SCC; or (v) any damages or expenses arising from or related to the
         claims alleged by Dr. Arun Misra against Tolbert, SCC or any other
         employee or shareholder of SCC: (A) the date that is six (6) months
         after the expiration of the longest applicable federal or state statute
         of limitation (including extensions thereof), or (B) if there is no
         applicable statute of limitation, ten (10) years after the Closing
         Date; or

                       (2) with respect to claims other than those specified in
         clause (i)(1) of this Section 12.2(c) that are of a nature and of
         sufficient materiality typically expected to be encountered in the
         audit process, on the completion of the first independent audit of the
         financial statements of the combined operations of HCC and SCC; or

                       (3) with respect to all claims other than those referred
         to in clause (i)(1) or (2) of this Section 12.2(c), twelve (12) months
         after the Effective Time; or

                  (ii) the final resolution of claims or demands pending as of
         the relevant dates described in clause (i) of this Section 12.2(c)
         (such claims referred to as "Pending Claims") and Possible Claims. For
         purposes of this Agreement, a Possible Claim shall be one in which an
         Indemnified Party has notified the Indemnifying Party that a possible
         claim or demand may be made against the Indemnified Party for which
         indemnification under this Article 12, might be applicable, provided,
         however, that a Possible Claim, which has not become a Pending Claim,
         shall not extend the term of the Escrow Agreement beyond the Escrow
         Agreement's termination date by more than three (3) months.

         SECTION 12.3 AGREEMENT TO INDEMNIFY. Subject to the limitations set
forth in this Article 12 and except as set forth in Section 12.2, each
Shareholder shall be liable severally and Pro Rata (as hereinafter defined)
(hereafter in this Section 12.3 referred to as "HCC Damages"). "Pro Rata" for
purposes of Section 12.1 and Section 12.2 with respect to each Shareholder shall
mean the proportion that such Shareholder's holdings of SCC Common Stock as of
the time immediately prior to the Effective Time bears to the total shares of
SCC Common Stock held by all Shareholders as of the time immediately prior to
the Effective Time. In seeking indemnification for HCC Damages under this
Article 12 following the Closing, the Indemnified Persons' remedy will be
limited to receiving up to that number of shares of HCC Common Stock determined
by dividing (a) the amount of the HCC Damages by (b) the closing sale price of
HCC's Common

                                       38
<PAGE>   43

Stock on the NYSE on the Effective Date (the "Closing Date Price"). Provided,
however, that irrespective as to the number of claims asserted by Indemnified
Persons hereunder and the amount of the HCC Damages for which indemnification is
sought, any such Shareholder, in the aggregate, shall under no circumstances be
required to make indemnification payments hereunder beyond the Closing Date
Price multiplied by the number of shares of HCC Common Stock received by such
Shareholder at the time of the Merger (the "Maximum Shareholder Liability").
Notwithstanding anything to the contrary set forth herein, in the event that at
the time of the resolution of any such indemnification claim, such Shareholder
does not hold the number of shares of HCC Common Stock (including any shares
otherwise acquired at any time before or after the Effective Time or at any time
after any claim is made for indemnification) necessary to settle any
indemnification claim, then such Shareholder shall pay in cash or other
immediately available funds the cash equivalent of the remainder of his in-stock
indemnification obligations under this Section 12.3 up to his Maximum
Shareholder Liability. In lieu of HCC Common Stock, any Shareholder shall have
the option to pay in cash or other immediately available funds the cash
equivalent of all or any part of his in-stock Maximum Shareholder Liability.

         SECTION 12.4 HCC AGREEMENT TO INDEMNIFY. Subject to the limitations set
forth in this Article 12, HCC will indemnify and hold harmless SCC, and the SCC
Shareholders and their officers, shareholders, directors, administrators,
successors and assigns from and against any and all claims, demands, actions,
causes of action, losses, costs, damages, liabilities and expenses including,
without limitation, reasonable legal fees, (hereafter in this Section 12.4
referred to as "SCC Damages") arising out of any misrepresentation or breach of
or default under any of the representations, warranties, covenants and
agreements given or made by HCC or Merger Sub in this Agreement or any
certificate or exhibit delivered by or on behalf of HCC or Merger Sub pursuant
hereto. In seeking indemnification for SCC Damages under this Section 12.4
following the Closing, the Indemnified Party's remedy will be limited to
receiving that number of additional shares of HCC Common Stock determined by
dividing (a) the amount of the SCC Damages by (b) the Closing Date Price.
Provided, however, that irrespective of the number of claims asserted by
Indemnified Persons hereunder in the amount of the SCC Damages for which
indemnification is sought, HCC, in the aggregate, shall under no circumstances
be obligated to make an indemnification payment hereunder beyond that number of
additional shares of HCC Common Stock equal to the total number of shares of HCC
Common Stock provided to the SCC Shareholders on the Effective Date (the
"Maximum HCC Liability"). The indemnification provided for in this Section 12.4
will not apply unless and until the aggregate SCC Damages for which one or more
Indemnified Party seeks indemnification exceeds $100,000 in the aggregate, in
which event the indemnification provided for will include all SCC Damages (a
Franchise Deductible) up to the Maximum HCC Liability. The Franchise Deductible
and Maximum HCC Liability shall not apply to damages arising from fraud.

                                       39
<PAGE>   44

         SECTION 12.5 PROCEDURE FOR INDEMNIFICATION; THIRD PARTY CLAIMS.

         (a) Promptly after receipt by an Indemnified Party under this Article
12 of notice of a claim or if the Indemnified Party believes it is or could be
entitled to indemnification under this Article 12 (collectively a "Claim"), the
Indemnified Party will, if a claim is to be made against an Indemnifying Party,
give prompt written notice to the Indemnifying Party of the Claim, but the
failure to promptly notify the Indemnifying Party will not relieve the
Indemnifying Party of any Liability that it may have to any Indemnified Party,
except to the extent that the Indemnifying Party demonstrates that the defense
of such action is prejudiced by the Indemnified Party's failure to give such
prompt notice. Such notice shall contain a description in reasonable detail of
facts upon which such Claim is based and, to the extent known, the amount
thereof. Such notice shall serve to preserve the Indemnified Party's claim for
indemnity against the Indemnifying Party without regard to the expiration of the
time periods set forth in Section 12.2 hereof.

         (b) If any Claim referred to in this Article 12 is made by a third
party against an Indemnified Party and such Indemnified Party gives written
notice to the Indemnifying Party of the Claim, the Indemnifying Party will be
entitled to participate in the defense of Claim but under all circumstances HCC
shall be entitled to assume the defense of the Claim and, thereafter, if HCC has
so assumed the defense, no other Party hereto will be liable under this Article
12 for any fees of counsel or any other expenses with respect to the defense of
the Claim in each case subsequently incurred in connection with the defense of
the Claim unless such other Party elects to retain its separate counsel. If HCC
is not the Indemnifying Party and elects, in writing, not to assume the defense,
the Indemnifying Party shall assume the defense and HCC will not be liable for
any fees or expenses with respect to the defense of the Claim, unless HCC elects
to retain its separate counsel.

         SECTION 12.6 LIMITATION ON LIABILITY. It is a fundamental point of
mutual agreement among all Parties hereto that the Parties' liability for and in
respect of this Agreement and the Merger shall, except for matters relating to
Deductible Exclusions, be limited to the absolute, fixed dollar amounts and for
the absolute, fixed time limitations specified in this Article 12. These
limitations of amount of liability and time to assert any such liability shall
apply to all claims and other demands, charges, allegations, liabilities,
responsibilities, exposures and the like.

                                       40
<PAGE>   45

                                   ARTICLE 13
                                  MISCELLANEOUS

         SECTION 13.1 APPOINTMENT OF REPRESENTATIVE. Subject to the
successorship provisions of this Section 13.1, Schanen (the "Representative") is
hereby irrevocably appointed as the attorney-in-fact and representative of the
interests of the Shareholders for all purposes of this Agreement, and notice is
hereby given thereof to HCC and Merger Sub, and, without independent
verification, HCC and Merger Sub may rely upon Representative's undertakings in
such capacity. The Representative shall have full and irrevocable authority on
behalf of the Shareholders, and shall promptly and completely exercise such
authority in a timely fashion to:

         (a) participate in, represent and bind the Shareholders in all respects
with respect to any arbitration or legal proceeding relating to this Agreement,
including, without limitation, the defense and settlement of any matter, and the
calculation thereof for every purpose thereunder, consent to jurisdiction, enter
into any settlement, and consent to entry of judgment, each with respect to any
or all of the Shareholders;

         (b) receive, accept and give notices and other communications relating
to this Agreement;

         (c) take any action that the Representative deems necessary or
desirable in order to fully effectuate the transactions contemplated by this
Agreement;

         (d) execute and deliver any instrument or document that the
Representative deems necessary or desirable in the exercise of his authority
under this Section 13.1; and

         (e) waive the fulfillment of any condition or conditions to the
Closing.

         Those Shareholders who, as of the Effective Date, hold a majority of
the SCC Common Stock may, at any time and by written action delivered to HCC,
remove the Representative or any successor thereto, but such removal shall be
effective only upon the replacement of such Representative or successor by a new
Representative designated, by written notice delivered to HCC, by those
Shareholders who, as of the date hereof hold a majority of SCC Common Stock,
provided, however, that any such notice shall be effective upon actual receipt
by HCC. Any such written notice shall be delivered to HCC in accordance with the
notice provisions set forth in Section 13.4 hereof. If any Representative shall
have died, become Disabled or unable to serve, those Shareholders who, as of the
date hereof, hold a majority of SCC Common Stock shall promptly designate by
written notice delivered to HCC, a replacement Representative. Any costs and
expenses incurred by the Representative in connection with actions taken
pursuant to or permitted by this Section 13.1 will be borne by the Shareholders
and paid or reimbursed to the Representative Pro Rata.

         The foregoing authorization is granted and conferred in consideration
for the various agreements and covenants of HCC and Merger Sub contained herein.
In

                                       41
<PAGE>   46

consideration of the foregoing, and subject to the successorship provisions of
this Section 13.1, this authorization granted to the Representative shall be
irrevocable and shall not be terminated by any act of any of the Shareholders or
by operation of law, whether by death or incompetence of any Shareholder or by
the occurrence of any other event except the termination of this Agreement
pursuant to Section 10.1 hereof. If after the execution hereof any such
Shareholder shall die or become incompetent, the Representative is nevertheless
authorized and directed to exercise the authority granted in this Section 13.1
as if such death or incompetence had not occurred and regardless of notice
thereof. The Representative shall have no liability to any Shareholder for any
act or omission or obligation hereunder, provided that such action or omission
is taken by the Representative in good faith and without willful misconduct.

         SECTION 13.2 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.

         SECTION 13.3 FEES AND EXPENSES. Until otherwise agreed by the parties,
each party shall bear its own fees and expenses, including counsel fees and fees
of brokers and investment bankers contracted by such party, in connection with
the transaction contemplated hereby.

         SECTION 13.4 NOTICES. Whenever any party hereto desires or is required
to give any notice, demand, or request with respect to this Agreement, each such
communication shall be in writing and shall be effective only if it is delivered
by personal service or mailed, United States registered or certified mail,
postage prepaid, or sent by facsimile, or prepaid overnight courier addressed as
follows:

         HCC and Merger Sub:

                  HCC Insurance Holdings, Inc.
                  13403 Northwest Freeway
                  Houston, Texas  77040-6094
                  Attention:  General Counsel
                  Fax:  (713) 744-9648

         with a copy (which shall not constitute notice) to:

                  Haynes and Boone, LLP
                  1000 Louisiana Street, Suite 4300
                  Houston, Texas  77002-5012
                  Attention:  Arthur S. Berner, Esq.
                  Fax:  (713) 236-5652

                                       42
<PAGE>   47

         SCC and Schanen (individually and as Representative)

                  James Scott Schanen
                  7000 Central Parkway, Suite 1220
                                       -
                  Atlanta, Georgia  30328
                  Fax:  (770) 551-2166

         with a copy (which shall not constitute notice) of any notice to SCC or
         any Shareholder to:

                  Epstein Becker & Green, P.C.
                  Suite 1400 - The Lenox Building
                  3399 Peachtree Road, N.E.
                  Atlanta, Georgia  30326
                  Attention:  Robert N. Berg, Esq.
                  Fax:  (404) 812-5699

         Such communications shall be effective when they are received by the
addressee thereof. Any party may change its address for such communications by
giving notice thereof to other parties in conformity with this Section. In the
event Schanen is no longer the Representative, such successor Representative's
address shall be the address for the Shareholders.

         SECTION 13.5 GOVERNING LAW. The internal laws of the State of Texas
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto. Any dispute arising hereunder
shall lie exclusively in the state courts of the State of Texas, or in the
Federal courts sitting in Harris County, Texas.

         SECTION 13.6 BINDING UPON SUCCESSORS AND ASSIGNS, ASSIGNMENT. This
Agreement and the provisions hereof shall be binding upon each of the parties,
their permitted successors and assigns. This Agreement may not be assigned by
any party without the prior consent of the others, provided, however, that HCC
shall be permitted at any time prior to the Effective Time to cause the
assignment of Merger Sub's rights and obligations under this Agreement to
another wholly-owned Subsidiary of HCC (without in any way relieving HCC of its
obligations under this Agreement with respect to Merger Sub or the Merger).

         SECTION 13.7 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall continue in full force and effect and in
no way be affected, impaired or invalidated.

         SECTION 13.8 ENTIRE AGREEMENT. This Agreement and the Operative
Agreements and instruments referenced herein constitute the entire understanding
and

                                       43
<PAGE>   48

agreement of the parties with respect to the subject matter hereof and supersede
all prior and contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between parties with respect
hereto.

         SECTION 13.9 AMENDMENT AND WAIVERS. Any amendment or waiver affecting
the Shareholders shall be valid if consented to in writing by the Representative
or Shareholders holding a majority of the shares of SCC Common Stock (i) if
given or made prior to the Effective Time, such majority as determined as of the
date of such amendment or waiver, and (ii) if given or made at or after the
Effective Time, such majority as determined immediately prior to the Effective
Time. Any term or provision of this Agreement may be amended, and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a writing signed by
those persons as provided in this Section 13.9. The waiver by a party of any
breach hereof or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default,
unless such waiver so expressly states. At any time before the Effective Time,
this Agreement may be amended or supplemented by SCC, the Shareholders or HCC
with respect to any of the terms contained in this Agreement.

         SECTION 13.10 NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.

         SECTION 13.11 CONSTRUCTION OF AGREEMENT. A reference to an Article,
Section or an Exhibit shall mean an Article of, a Section in, or Exhibit to,
this Agreement unless otherwise explicitly set forth. The titles and headings
herein are for reference purposes only and shall not in any manner limit the
construction of this Agreement which shall be considered as a whole. The words
"include," and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." No Party shall be deemed to have
prepared this Agreement for purpose of aiding in the construction thereof.

         SECTION 13.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against any Party
whose signature appears thereon and all of which together shall constitute one
and the same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all the Parties reflected hereon as signatories.

         SECTION 13.13 SHAREHOLDER KNOWLEDGE. THE SHAREHOLDERS ACKNOWLEDGE THAT
THEY (a) HAVE KNOWLEDGE AND EXPERIENCE IN BUSINESS AND FINANCIAL MATTERS THAT
ENABLE THEM TO EVALUATE THE MERITS AND RISKS OF ENTERING INTO THIS AGREEMENT,
(b) HAVE READ AND UNDERSTAND THE PROVISIONS HEREOF, (c) ARE NOT IN A DISPARATE
BARGAINING POSITION, AND (d) HAVE BEEN REPRESENTED BY, OR HAVE HAD THE
OPPORTUNITY TO BE REPRESENTED BY, LEGAL COUNSEL IN CONNECTION WITH THE
NEGOTIATION

                                       44
<PAGE>   49

AND EXECUTION OF THIS AGREEMENT. THE SHAREHOLDERS EACH FURTHER ACKNOWLEDGE AND
AGREE THAT IN EXECUTING THIS AGREEMENT, NO PROMISE OR AGREEMENT WHICH IS NOT
HEREIN EXPRESSED HAS BEEN MADE TO SUCH SHAREHOLDER AND SUCH SHAREHOLDER HAS NOT
RELIED UPON ANY STATEMENT OR REPRESENTATION PERTAINING TO THE SUBJECT MATTER
HEREOF MADE BY HCC, OR ANY OTHER PARTY. THE SHAREHOLDERS FURTHER ACKNOWLEDGE
THAT THEY UNDERSTAND THAT THE LAW FIRM OF EPSTEIN BECKER & GREEN, P.C. DOES NOT
REPRESENT THEIR INDIVIDUAL INTERESTS AND REPRESENTS ONLY SCC AND THE
SHAREHOLDERS GENERALLY. THE SHAREHOLDERS AGREE THAT TO THE EXTENT REQUIRED BY
APPLICABLE LAW TO BE EFFECTIVE, THIS PARAGRAPH CONSTITUTES A CONSPICUOUS NOTICE.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>   50

         IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
effective as of the date first above written.

PURCHASERS:

HCC INSURANCE HOLDINGS, INC.

By: /s/ FRANK J. BRAMANTI
   ---------------------------------------
Name:  Frank J. Bramanti,
Title: Executive Vice President

HCC EMPLOYEE BENEFITS, INC.

By: /s/ FRANK J. BRAMANTI
   ---------------------------------------
Name:  Frank J. Bramanti,
Title: Executive Vice President

SHAREHOLDERS:

/s/ JAMES SCOTT SCHANEN
------------------------------------------
JAMES SCOTT SCHANEN

/s/ LISA RAE SCHANEN
------------------------------------------
LISA RAE SCHANEN

------------------------------------------
CONNOR SCHANEN QSST

By: /s/ LISA RAE SCHANEN
    --------------------------------------
         Trustee

------------------------------------------
AUSTIN SCHANEN QSST

By: /s/ LISA RAE SCHANEN
    --------------------------------------
         Trustee

/s/ KEVIN TOLBERT
------------------------------------------
KEVIN TOLBERT

                      (Signature page - Merger Agreement)
<PAGE>   51

SCHANEN CONSULTING CORPORATION

By: /s/ JAMES SCOTT SCHANEN
   --------------------------------------------------
Name:  James Scott Schanen
Title:  President

                      (Signature page - Merger Agreement)
<PAGE>   52

                                    Exhibit B

                        [Shareholder's Name and Address]

                                     [Date]

HCC Insurance Holdings, Inc.
13403 Northwest Freeway
Houston, Texas  77040-6094
Attention: General Counsel
Fax (713) 744-9647

Ladies and Gentlemen:

         The undersigned proposes to sell an aggregate of ______ shares of the
common stock, $1.00 par value per share, (the "Stock") of HCC Insurance
Holdings, Inc. (the "Company") through ___________(the "Broker") in accordance
with the requirements of Rule 144, as amended ("Rule 144") promulgated under the
Securities Act of 1933, as amended (the "Act"). The undersigned hereby requests
that the restrictive legends now appearing upon certificates representing the
Stock owned beneficially and of record by the undersigned be removed and that
the stop transfer instructions to the Company's transfer agent (the "Transfer
Agent") with respect to the Stock be rescinded, in accordance with and pursuant
to Rule 144. It is understood, however that legends will only be removed and
instructions rescinded in order to effect the transfer of Stock already sold in
compliance with Rules 144 (the "Sale Shares") and after confirmation of this
fact is received from the Broker who has executed my order to sell the Stock.

         In addition, if required by such Transfer Agent, the undersigned
requests that your attorneys provide to the Transfer Agent a written opinion of
counsel (the "Opinion"), confirming that the Sale Shares may be transferred
without restriction to the purchaser(s) thereof in reliance upon Rule 144 and
that any stop transfer instructions with respect to the Sale Shares may be
removed.

         In support of this request and in consideration for the removal of such
legends and rescission of such instructions to effect transfers after sales have
been made in compliance with Rule 144, and in order to permit your attorneys to
render the Opinion, the undersigned hereby represents, warrants and agrees with
the Company and your attorneys who furnish the Opinion as follows:

1.       Attached hereto is a fully completed and manually signed copy of a
         Notice of Proposed Sale of Securities Pursuant to Rule 144 ("Form 144")
         with respect to the sale of the Stock. As set forth on Form 144, the
         undersigned has been the beneficial owner of the Stock for a period of
         at least one (1) year prior to the date hereof as computed in
         accordance with paragraph (d) of Rule

<PAGE>   53

         144. The Stock was acquired by the undersigned in one or more
         transactions not involving a public offering.

2.       At the time of any sale of the Stock for the undersigned, the aggregate
         number of shares of the Company's common stock that are restricted
         securities, as defined in Rule 144(a)(3), sold by the undersigned or
         for the undersigned's account and by or for the account of any person
         whose sales are required by paragraph (a)(2) and paragraph (e)(3) of
         Rule 144, to be aggregated with sales by or for it (other than shares
         registered under the Act or sold in private placement or Regulation A
         transactions) will not exceed the amounts permitted under Rule 144(e).

3.       The undersigned represents and warrants that the undersigned is not
         acting in concert with any other person, firm or entity in connection
         with the sales contemplated herein.

4.       The undersigned agrees that the Stock will only be sold in "brokers'
         transactions" within the meaning of Section 4(4) of the Act and the
         rules and regulations thereunder and otherwise in compliance with Rule
         144. The undersigned has not solicited or arranged for the solicitation
         of, and will not solicit or arrange for the solicitation of, orders to
         buy the Stock in anticipation of or in connection with such proposed
         sale; and such sale or sales shall be made in transactions contemplated
         by paragraph (f) under Rule 144. The undersigned has no sell orders
         open in the Stock, or in any security convertible into the Stock with
         any other broker or bank and will not place any such sell orders
         pending the completion of this transaction. The undersigned has no
         present intention of selling any additional securities of the same
         class as the Stock or any securities convertible into the same class as
         the Stock. The undersigned has not made, and will not make, any payment
         in connection with the offering or sale of the Stock to any person,
         other than the usual and customary broker's commission paid to the
         Broker in connection therewith.

5.       Concurrently with the placing with the Broker of an order to sell the
         Stock in reliance upon Rule 144, the undersigned will (i) mail or
         transmit to the Securities and Exchange Commission (the "SEC"), 450
         Fifth Street, N.W., Washington, D.C. 20549, three fully completed
         signed copies of Form 144, one copy of which has been manually signed;
         (ii) if the Company's securities are admitted to trading on any
         national securities exchange, the undersigned will transmit one
         manually signed copy of the Form 144 to the principal exchange on which
         such securities are admitted to trading; (iii) mail or deliver to the
         Company and the Broker a manually signed copy of the Form 144 as sent
         to the SEC; and (iv) if all of the Stock for which the Form 144 is
         filed are not sold within ninety (90) days thereafter, to mail three
         copies of an amended and signed Form 144, one copy of which has been
         manually signed to the SEC, one manually signed copy of the amended
         Form 144 to any exchange as set forth in subsection (ii) hereof and one
         manually signed copy of amended Form 144 to the Company and the Broker

                                       2
<PAGE>   54

         prior to the commencement of further sales, together with such
         documents evidencing reaffirmation of the warranties contained herein
         as Company may request. The undersigned represents that the information
         contained in the Form 144 which will be filed with the SEC with respect
         to the Stock, whether originally or as amended, will be complete and
         correct as at the dates thereon.

6.       The undersigned represents that the undersigned presently has a bona
         fide intention of selling the Stock under the terms and conditions of
         Rule 144 and that the undersigned has no knowledge of any material
         adverse information in regard to the current and prospective operations
         of the Company which has not been publicly disclosed.

7.       The Company has informed the undersigned that as of the date hereof it
         (i) has filed all reports required to be filed by Section 13 or 15(d)
         of the Securities Exchange Act of 1934 during the preceding 12 months
         (or for such shorter period that the registrant was required to file
         such reports) and (ii) has been subject to the such filing requirements
         for the past ninety (90) days. The undersigned does not know of have
         any reason to believe that the Company has not complied with the
         reporting requirements referred to in Rule 144(c)(1). The IRS
         identification number and the SEC file number set forth on the attached
         Form 144 have been supplied by the Company and the Company has informed
         the undersigned that the number of shares of the Company's common stock
         shown as outstanding on such Form 144 is the number shown as
         outstanding by the most recent report or statement published by the
         Company.

                                   Sincerely,

                                   [Shareholder  Name]

                                       3<PAGE>   1
                                                                   EXHIBIT 10.12

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 5th
day of January, 2000 (the "Effective Date"), between HOUSTON CASUALTY COMPANY
("HC" or "Company"), and BENJAMIN D. WILCOX ("Executive"), sometimes
collectively referred to herein as the "Parties."

                                    RECITALS:

         WHEREAS, Executive is to be employed as President of and Chief
Executive Officer of HC and Senior Vice President of HCC Insurance Holdings,
Inc. ("HCC");

         WHEREAS, it is the desire of the Boards of Directors of HC (the
"Board") and HCC to (i) directly engage Executive as an officer of HC and its
subsidiaries; and (ii) directly engage, if elected, the services of Executive as
a director of HC and its subsidiaries;

         WHEREAS, Executive is desirous of committing himself to serve HC and
HCC on the terms herein provided; and

         WHEREAS, Executive and HC have previously entered into an Employment
Agreement effective as of December 7, 1998 (the "1998 Contract") which is to be
cancelled, terminated and of no further force or effect.

         NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the Parties agree as follows:

         1. TERMINATION OF 1998 CONTRACT AND TERM. Effective as of the Effective
Date, the 1998 Contract shall be cancelled, terminated and of no further force
or effect. The Company hereby agrees to elect Executive as its President and
Chief Executive Officer and HCC hereby agrees to employ Executive as a Senior
Vice President, and Executive hereby agrees to accept such employment, on the
terms and conditions set forth herein, for the period commencing on the
Effective Date and expiring as of 11:59 p.m. on December 31, 2002 (the "Basic
Term") (unless sooner terminated as hereinafter set forth).

         2. DUTIES.

             (a) DUTIES AS EMPLOYEE OF THE COMPANY. Executive shall, subject to
the supervision of the Chairman of the Board and President of HCC, have general
management and control of HC, and its subsidiaries in the ordinary course of its
business with all such powers with respect to such management and control as may
be reasonably incident to such responsibilities. During normal business hours,
Executive shall devote his full time and attention to diligently attending to
the business of the Company during the Basic Term. During the Basic Term,
Executive shall not directly or indirectly render any services of a business,
commercial, or professional nature to any other person, firm, corporation, or
organization, whether for compensation or otherwise,

<PAGE>   2

without the prior written consent of the Chairman of the Board. However,
Executive shall have the right to engage in such activities as may be
appropriate in order to manage his personal investments so long as such
activities do not materially interfere or conflict with the performance of his
duties to the Company hereunder. The conduct of such activity shall not be
deemed to materially interfere or conflict with Executive's performance of his
duties until Executive has been notified in writing thereof and given a
reasonable period in which to cure the same.

             (b) OTHER DUTIES. Executive agrees to serve on the Senior
Management Committee of HCC and as a Director of HC and its subsidiaries,
provided Executive is indemnified for serving in any and all such capacities in
a manner acceptable to the Company and Executive. If elected, Executive agrees
that he shall not be entitled to receive any additional compensation for serving
as a director other than the compensation to be paid to Executive by the Company
pursuant to this Agreement.

        3. COMPENSATION AND RELATED MATTERS.

             (a) BASE SALARY. From the Effective Date until December 31, 2000,
Executive shall receive a base salary equal to $315,000, payable not less
frequently than in substantially equal monthly installments. The base salary
shall be increased by $15,000 on each of January 1, 2001 and 2002. For purposes
of this Agreement, "Base Salary" shall mean the Executive's initial base salary
and, when increased, the increased base salary.

             (b) BONUS PAYMENTS. Each year Executive shall be entitled to
receive, in addition to the Base Salary, an annual bonus payment effective as of
December 7, 2000, at the sole discretion of the Compensation Committee of HCC,
but not less than $50,000 per year.

             (c) STOCK OPTIONS. In addition to the options previously provided
to Executive to purchase 100,000 shares of HCC Common Stock at a price per share
equal to $16-15/16, the terms of which shall remain in effect, Executive shall
be provided additional stock options pursuant to the terms set forth on Exhibit
A attached hereto.

             (d) EXPENSES. During the Basic Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by him in
accordance with the policies and procedures established by the Compensation
Committee for the Company's senior executive officers in performing services
hereunder, provided that Executive properly accounts therefor in accordance with
Company policy.

             (e) OTHER BENEFITS. Executive shall be entitled to participate in
or receive benefits under any compensatory employee benefit plan or other
arrangement made available by the Company now or in the future to its senior
executive officers and key management employees, subject to and on a basis
consistent with the terms, conditions, and overall administration of such plan
or arrangement. Nothing paid to Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the Base Salary payable to Executive

                                       2
<PAGE>   3

pursuant to Paragraph (a) of this Section. The Company shall not make any
changes in any employee benefit plans or other arrangements in effect on the
date hereof or subsequently in effect in which Executive currently or in the
future participates (including, without limitation, each pension and retirement
plan, supplemental pension and retirement plan, savings and profit sharing plan,
stock or unit ownership plan, stock or unit purchase plan, stock or unit option
plan, life insurance plan, medical insurance plan, disability plan, dental plan,
health and accident plan, or any other similar plan or arrangement) that would
adversely affect Executive's rights or benefits thereunder, unless such change
occurs pursuant to a program applicable to substantially all executives of the
Company and does not result in a proportionately greater reduction in the rights
of or benefits to Executive as compared with any other executive of the Company.

             (f) VACATIONS. Executive shall be entitled to twenty (20) paid
vacation days per year during the Basic Term. There shall be no carryover of
unused vacation from year to year. For purposes of this Paragraph, weekends
shall not count as vacation days, and Executive shall also be entitled to all
paid holidays and personal days given by the Company to its senior executive
officers.

             (g) PERQUISITES. Executive shall be entitled to receive the
perquisites and fringe benefits appertaining to an executive officer of HC in
accordance with any practice established by the Compensation Committee.
Notwithstanding, and in addition to, any perquisites to which Executive is
entitled pursuant to the preceding sentence, Executive shall: (i) have a car
allowance of $1,250 per month; (ii) be allowed to travel on business utilizing
first class domestic passage and business class international passage (and, upon
approval of the Chief Executive Officer, will be entitled to travel with
Executive's spouse); (iii) receive annual country club dues at the Lochinvar
Golf and the Bayou Clubs; and (iv) receive a total of $1,000,000 life insurance
(either term or "split dollar" in HC's discretion), which shall be in addition
to the standard benefits provided to the Executive under the Company's or HCC's
group life insurance programs that covers officers.

             (h) PRORATION. Any payments or benefits payable to Executive
hereunder in respect of any calendar year during which Executive is employed by
the Company for less than the entire year, unless otherwise provided in the
applicable plan or arrangement, shall be prorated in accordance with the number
of days in such calendar year during which he is so employed. Notwithstanding
the foregoing, any payments pursuant to Paragraphs 4(c) or 4(d) of this
Agreement shall not be subject to proration.

        4. TERMINATION.

             (a) DEFINITIONS.

                   (1) "CAUSE" shall mean:

                       (i) Material dishonesty which is not the result of an
         inadvertent or innocent mistake of Executive with respect to the
         Company or any of its subsidiaries;

                                       3
<PAGE>   4

                       (ii) Willful misfeasance or nonfeasance of duty by
         Executive intended to injure or having the effect of injuring in some
         material fashion the reputation, business, or business relationships of
         the Company or any of its subsidiaries or any of their respective
         officers, directors, or employees;

                       (iii) Material violation by Executive of any material
         term of this Agreement; or

                       (iv) Conviction of Executive of any felony, any crime
         involving moral turpitude or any crime other than a vehicular offense
         which could reflect in some material fashion unfavorably upon the
         Company or any of its subsidiaries.

Executive may not be terminated for Cause unless and until there has been
delivered to Executive written notice from the Board supplying the particulars
of Executive's acts or omissions that the Board believes constitute Cause, a
reasonable period of time (not less than 30 days) has been given to Executive
after such notice to either cure the same or to meet with the Board, with his
attorney if so desired by Executive, and following which the Board by action of
not less than two-thirds of its members furnishes to Executive a written
resolution specifying in detail its findings that Executive has been terminated
for Cause as of the date set forth in the notice to Executive.

                   (2) A "CHANGE OF CONTROL" shall be deemed to have occurred
if:

                       (i) Any "person" or "group" (within the meaning of
         Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
         other than a trustee or other fiduciary holding securities under an
         employee benefit plan of the Company becomes the "beneficial owner" (as
         defined in Rule 13d-3 under the Securities Exchange Act of 1934),
         directly or indirectly, of 50% or more of the Company's then
         outstanding voting common stock; or

                       (ii) At any time during the period of three (3)
         consecutive years (not including any period prior to the date hereof),
         individuals who at the beginning of such period constituted the Board
         (and any new director whose election by the Board or whose nomination
         for election by the Company's shareholders were approved by a vote of
         at least two-thirds of the directors then still in office who either
         were directors at the beginning of such period or whose election or
         nomination for election was previously so approved) cease for any
         reason to constitute a majority thereof; or

                       (iii) The shareholders of the Company approve a merger or
         consolidation of the Company with any other corporation, other than a
         merger or consolidation (a) in which a majority of the directors of the
         surviving entity were directors of the Company prior to such
         consolidation or merger, and (b) which would result in the voting
         securities of the

                                       4
<PAGE>   5

         Company outstanding immediately prior thereto continuing to represent
         (either by remaining outstanding or by being changed into voting
         securities of the surviving entity) more than 50% of the combined
         voting power of the voting securities of the surviving entity
         outstanding immediately after such merger or consolidation; or

                       (iv) The shareholders approve a plan of complete
         liquidation of the Company or an agreement for the sale or disposition
         by the Company of all or substantially all of the Company's assets.

                   (3) A "DISABILITY" shall mean the absence of Executive from
Executive's duties with the Company on a full-time basis for 180 consecutive
days, or 180 days in a 365-day period, as a result of incapacity due to mental
or physical illness which results in the Executive being unable to perform the
essential functions of his position, with or without reasonable accommodation.

                   (4) A "GOOD REASON" shall mean any of the following (without
Executive's express written consent):

                       (i) Following a Change of Control, a material alteration
         in the nature or status of Executive's title, duties or
         responsibilities, or the assignment of duties or responsibilities
         inconsistent with Executive's status, title, duties and
         responsibilities;

                       (ii) A failure by the Company to continue in effect any
         employee benefit plan in which Executive was participating, or the
         taking of any action by the Company that would adversely affect
         Executive's participation in, or materially reduce Executive's benefits
         under, any such employee benefit plan, unless such failure or such
         taking of any action adversely affects the senior members of corporate
         management of the Company generally to the same extent;

                       (iii) A relocation of the Company's principal executive
         offices, or Executive's relocation to any place other than the
         principal executive offices, exceeding a distance of fifty (50) miles
         from the Company's current executive office located in Houston, Texas,
         except for reasonably required travel by Executive on the Company's
         business;

                       (iv) Any material breach by the Company of any provision
         of this Agreement; or

                       (v) Any failure by the Company to obtain the assumption
         and performance of this Agreement by any successor (by merger,
         consolidation, or otherwise) or assign of the Company.

         However, Good Reason shall exist with respect to an above specified
         matter only if such matter is not corrected by the Company within
         thirty (30) days of its receipt of written notice of such matter from
         Executive, and in no event shall a termination by Executive occurring
         more than one hundred eighty (180) days following the date of the event
         described above be a termination for Good Reason due to such event.

                                       5
<PAGE>   6

                   (5) "TERMINATION DATE" shall mean the date Executive is
terminated for any reason pursuant to this Agreement.

               (b) TERMINATION WITHOUT CAUSE OR TERMINATION FOR GOOD REASON:
BENEFITS. In the event there is a termination by the Company without Cause, or
if Executive terminates for Good Reason (a "Termination Event"), this Agreement
shall terminate, except as provided in Paragraph 6, and Executive shall be
entitled to the following severance benefits:

                   (1) For a period of twelve (12) months after the Termination
         Date (unless the remainder of the Basic Term is less than twelve (12)
         months in which case, for an amount of time equal to the remainder of
         the Basic Term), Base Salary (as defined in Paragraph 3(a)), at the
         rate, and payable quarterly unless such termination is by the Company
         without Cause, in which event such amount of Base Salary shall be paid
         in a lump sum within ten (10) days of the Termination Event.

                   (2) If there is a Change of Control or a Termination Event,
         any stock options ("Stock Awards") which Executive has received under
         this Agreement shall vest immediately; and if there is a Termination
         Event all such Stock Awards shall be exercisable for one (1) year from
         the date of such Termination Event or the remainder of their term,
         whichever is less.

                   (3) To the extent not theretofore paid or provided, the
         Company shall timely pay or provide to Executive any other amounts or
         benefits required to be paid or provided or which Executive is eligible
         to receive under any plan, program, policy or practice, or contract or
         agreement of the Company and its affiliated companies for the period of
         time equal to the remainder of the Basic Term (such other amounts and
         benefits shall be hereinafter referred to as the "Other Benefits").
         Without limiting the preceding sentence or any other provision of this
         Agreement, through December 31, 2003 the Company, at its sole expense,
         shall continue to provide (through its own plan and/or individual
         policies) Executive (and Executive's dependents) with health benefits
         no less favorable than the group health plan benefits provided during
         such period to any senior executive officer of the Company or any
         affiliated company (to the extent any such coverage or benefits are
         taxable to Executive by reason of being provided under a self-insured
         health plan of the Company or an affiliate, the Company shall make
         Executive "whole" for the same on an after-tax basis). In any event,
         the Other Benefits provided for pursuant to this Paragraph shall be
         secondary to any benefits and coverage Executive (or his dependents)
         receive from another employer.

                   (4) If Executive receives any payments whether or not
         pursuant to this Agreement which are subject to an excise tax imposed
         under Section 4999 of the Internal Revenue Code of 1986, as amended, or
         any similar tax imposed under federal, state, or local law
         (collectively, "Excise Taxes"), the Company shall pay to Executive (on
         or before the date

                                       6
<PAGE>   7

         on which the Company is required to withhold such Excise Taxes), 1) an
         additional amount equal to all Excise Taxes then due and payable, and
         2) the amount necessary to defray Executive's increased (federal,
         state, and local) tax liability arising due to payment of the amount
         specified in this Subsection (4) which shall include any costs and
         expenses, including penalties and interest incurred by Executive in
         connection with any audit, proceedings, etc. related to the payment of
         such Excise Taxes or this payment. For purposes of calculating the
         amount payable to Executive under this Paragraph, the federal and state
         income tax rates used shall be the highest marginal federal and state
         rates applicable to ordinary income in Executive's state of residence,
         taking into account any federal income tax deductions or credits
         available to Executive for state income taxes. The Company shall cause
         its independent auditors to calculate such amount and provide Executive
         a copy of such calculation at least ten (10) days prior to the date
         specified above for payment of such amount. It is the intent of the
         Parties that this Subsection (4) shall place Executive in the same net
         after-tax position Executive would have been in had no payment been
         subject to an Excise Tax and, notwithstanding anything herein to the
         contrary, it shall be construed to effectuate said result.

                   (5) All accrued compensation and unreimbursed expenses
         through the Termination Date. Such amounts shall be paid to Executive
         in a lump sum in cash within thirty (30) days after the Termination
         Date; and

                   (6) Executive shall be free to accept other employment during
         such period, and there shall be no offset of any employment
         compensation earned by Executive in such other employment during such
         period against payments due Executive under this Paragraph (4), and
         there shall be no offset in any compensation received from such other
         employment against the Base Salary set forth above.

                (c) TERMINATION IN EVENT OF DEATH: BENEFITS. If Executive's
employment is terminated by reason of Executive's death during the Basic Term,
this Agreement shall terminate, except as provided in Paragraph 6, without
further obligation to Executive's legal representatives under this Agreement,
other than for payment of all accrued compensation, unreimbursed expenses, the
timely payment or provision of Other Benefits through the date of death, and, if
such death occurs on or after October 1 of any year, such cash bonus as
Executive would otherwise have been awarded in such year if Executive's death
had not occurred. Such amounts shall be paid to Executive's estate or
beneficiary, as applicable, in a lump sum in cash within ninety (90) days after
the date of death. With respect to the provision of Other Benefits, the term
Other Benefits as used in this Paragraph 4(c) shall include, without limitation,
and Executive's estate and/or beneficiaries shall be entitled to receive,
benefits at least equal to the most favorable benefits provided by the Company
to the estates and beneficiaries of other executive level employees of the
Company under such plans, programs, practices, and policies relating to death
benefits, if any, as in effect with respect to other executives and their
beneficiaries at any time during the 120-day period immediately preceding the
date of death. Additionally, all Stock Awards for which Executive would have
been eligible had he completed the Basic Term (except as set forth in Paragraph
4(b)(2)), shall be

                                       7
<PAGE>   8

accelerated, and Executive's estate or beneficiary shall be vested in such Stock
Awards as of the date of Executive's termination. Additionally, all Stock Awards
shall be vested immediately and shall be exercisable for the greater of one year
after the date of such vesting or the remaining term of such option.

                (d) TERMINATION IN EVENT OF DISABILITY: BENEFITS. If Executive's
employment is terminated by reason of Executive's Disability during the Basic
Term, this Agreement shall continue in full force for a period of one (1) year
following such Disability and if such Disability occurs on or after October 1 of
any year Executive shall be entitled to the same cash or stock bonus in such
year that Executive would have been awarded if such Disability had not occurred.
Following such one (1) year period, this Agreement shall continue in full force
except that (a) the Base Salary shall be reduced by 50% and (b) Executive shall
not be entitled to any subsequent cash bonuses. In addition, all outstanding
Stock Awards shall vest immediately upon such termination due to Disability. If
Executive's Disability occurs prior to the commencement of the Consulting
Period, defined below, in addition to the amounts provided for herein, Executive
shall receive the Consulting Fee, defined below, at such time as it would have
otherwise been earned, whether or not Executive can perform Consulting Services,
defined below. Additionally, all Stock Awards shall be vested immediately and
shall be exercisable for the greater of one year after the date of such vesting
or the remaining term of such option.

                (e) VOLUNTARY TERMINATION BY EMPLOYEE AND TERMINATION FOR CAUSE:
BENEFITS. Executive may terminate his employment with the Company without Good
Reason by giving written notice of his intent and stating an effective
Termination Date at least ninety (90) days after the date of such notice;
provided, however, that the Company may accelerate such effective date by paying
Executive through the proposed Termination Date and also vesting awards that
would have vested but for this acceleration of the proposed Termination Date.
Upon such a termination by Executive except as provided in Paragraph 6 or upon
termination for Cause by the Company, this Agreement shall terminate and the
Company shall pay to Executive all accrued compensation, unreimbursed expenses
and the Other Benefits through the Termination Date. All unvested options shall
be void. Such amounts shall be paid to Executive in a lump sum in cash within
thirty (30) days after the date of termination.

                (f) DIRECTOR POSITIONS. Executive agrees that upon termination
of employment, for any reason, at the request of the Chairman of the Board, he
will immediately tender his resignation from any and all Board positions held
with the Company and/or any of its subsidiaries and affiliates. If Executive
remains as a director, after such termination, Executive shall be compensated as
an outside director.

         5. NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY. Executive
recognizes and agrees that the benefit of not being employed at-will, is
provided in consideration for, among other things, the agreements contained in
this Section, as well as the Stock Awards granted to Executive pursuant to this
Agreement. The Company agrees that while employed pursuant to this Agreement,
Executive will be provided with confidential information of Company; specialized

                                       8
<PAGE>   9

training on how to perform his duties; and contact with the Company's customers
and potential customers. Furthermore, in the event Executive is terminated
without Cause, or terminates for Good Reason, and more than one (1) year remains
on the existing Basic Term, then Executive shall receive additional
consideration in an amount equal to the quotient of the Base Salary divided by
12, which shall thereupon be multiplied by the number of months remaining in the
Basic Term minus 12 months and which shall be paid in one lump sum within ten
(10) days of such termination.

         In consideration of all of the foregoing, Executive agrees as follows:

                  (a) NON-COMPETITION DURING EMPLOYMENT. Executive agrees during
the Basic Term he will not compete with the Company by engaging in the
conception, design, development, production, marketing, or servicing of any
product or service that is substantially similar to the products or services
which the Company provides, and that he will not work for, in any capacity,
assist, or become affiliated with as an owner, partner, etc., either directly or
indirectly, any individual or business which offers or performs services, or
offers or provides products substantially similar to the services and products
provided by Company.

                  (b) CONFLICTS OF INTEREST. Executive agrees that during the
Basic Term and any Consulting Period, he will not engage, either directly or
indirectly, in any activity (a "Conflict of Interest") which might adversely
affect the Company or its affiliates, including ownership of a material interest
in any supplier, contractor, distributor, subcontractor, customer or other
entity with which the Company does business or accepting any material payment,
service, loan, gift, trip, entertainment, or other favor from a supplier,
contractor, distributor, subcontractor, customer or other entity with which the
Company does business, and that Executive will promptly inform the Chairman of
the Company as to each offer received by Executive to engage in any such
activity. Executive further agrees to disclose to the Company any other facts of
which Executive becomes aware which might in Executive's good faith judgment
reasonably be expected to involve or give rise to a Conflict of Interest or
potential Conflict of Interest.

                  (c) NON-COMPETITION AFTER TERMINATION. Executive agrees that
Executive shall not, at any time during the period of two (2) years after the
later of the termination of the Basic Term or the Consulting Period, for any
reason, within any of the markets in which the Company has sold products or
services or formulated a plan to sell products or services into a market during
the last twelve (12) months of Executive's employ or which the Company enters
into within three (3) months thereafter, engage in or contribute Executive's
knowledge to any work which is competitive with or similar to a product,
process, apparatus, service, or development on which Executive worked or with
respect to which Executive had access to Confidential Information while employed
by the Company; provided, however, this Paragraph

                                       9
<PAGE>   10

(c) shall not operate to prevent Executive from engaging in retail insurance
activities during such two-year period to the extent such activities do not
compete or permit any other person or entity to compete with any business the
Company or any of its subsidiaries or affiliated companies were engaged in at
the time of such termination or which the Company enters into within three (3)
months thereafter. Following the expiration of said two (2) year period,
Executive shall continue to be obligated under the Confidential Information
Paragraph of this Agreement not to use or to disclose Confidential Information
of the Company so long as it shall not be publicly available. It is understood
that the geographical area set forth in this covenant is divisible so that if
this clause is invalid or unenforceable in an included geographic area, that
area is severable and the clause remains in effect for the remaining included
geographic areas in which the clause is valid.

                  (d) NON-SOLICITATION OF CUSTOMERS. Executive further agrees
that for a period of two (2) years after the termination of the Basic Term, he
will not solicit or accept any business from any customer or client or
prospective customer or client with whom Executive dealt or solicited while
employed by Company during the last twelve (12) months of his employment.

                  (e) NON-SOLICITATION OF EMPLOYEES. Executive agrees that for
the duration of the Basic Term, and for a period of two (2) years after the
termination of the Basic Term, he will not either directly or indirectly, on his
own behalf or on behalf of others, solicit, attempt to hire, or hire any person
employed by Company to work for Executive or for another entity, firm,
corporation, or individual.

                  (f) CONFIDENTIAL INFORMATION. Executive further agrees that he
will not, except as the Company may otherwise consent or direct in writing,
reveal or disclose, sell, use, lecture upon, publish or otherwise disclose to
any third party any Confidential Information or proprietary information of the
Company, or authorize anyone else to do these things at any time either during
or subsequent to his employment with the Company. This Section shall continue in
full force and effect after termination of Executive's employment and after the
termination of this Agreement. Executive's obligations under this Paragraph with
respect to any specific Confidential Information and proprietary information
shall cease when that specific portion of the Confidential Information and
proprietary information becomes publicly known, in its entirety and without
combining portions of such information obtained separately. It is understood
that such Confidential Information and proprietary information of the Company
include matters that Executive conceives or develops, as well as matters
Executive learns from other employees of Company. Confidential Information is
defined to include information: (1) disclosed to or known by the Executive as a
consequence of or through his employment with the Company; (2) not generally
known outside the Company; and (3) which relates to any aspect of the Company or
its business, finances, operation plans, budgets, research, or strategic
development. "Confidential Information" includes, but is not limited to the
Company's trade secrets, proprietary information, financial documents, long
range plans, customer lists, employer compensation, marketing strategy, data
bases, costing data, computer software developed by the Company, investments
made by the Company, and any information provided to the Company by a third
party under restrictions against disclosure or use by the Company or others.

                  (g) RETURN OF DOCUMENTS, EQUIPMENT, ETC. All writings,
records, and other documents and things comprising, containing, describing,
discussing, explaining, or evidencing any Confidential Information, and all
equipment, components, parts, tools, and the like in Executive's custody or
possession that have been obtained or prepared in the course of Executive's
employment with the Company shall be the exclusive property of the Company,
shall not be copied and/or

                                       10
<PAGE>   11

removed from the premises of the Company, except in pursuit of the business of
the Company, and shall be delivered to the Company, without Executive retaining
any copies, upon notification of the termination of Executive's employment or at
any other time requested by the Company. The Company shall have the right to
retain, access, and inspect all property of Executive of any kind in the office,
work area, and on the premises of the Company upon termination of Executive's
employment and at any time during employment by the Company to ensure compliance
with the terms of this Agreement.

                  (h) REAFFIRM OBLIGATIONS. Upon termination of his employment
with the Company, Executive, if requested by Company, shall reaffirm in writing
Executive's recognition of the importance of maintaining the confidentiality of
the Company's Confidential Information and proprietary information, and reaffirm
any other obligations set forth in this Agreement.

                  (i) PRIOR DISCLOSURE. Executive represents and warrants that
he has not used or disclosed any Confidential Information he may have obtained
from Company prior to signing this Agreement, in any way inconsistent with the
provisions of this Agreement.

                  (j) CONFIDENTIAL INFORMATION OF PRIOR COMPANIES. Executive
will not disclose or use during the period of his employment with the Company
any proprietary or Confidential Information or Copyright Works which Executive
may have acquired because of employment with an employer other than the Company
or acquired from any other third party, whether such information is in
Executive's memory or embodied in a writing or other physical form.

                  (k) BREACH. Executive agrees that any breach of Paragraphs
5(a), (c), (d), (e) or (f) above cannot be remedied solely by money damages, and
that in addition to any other remedies Company may have, Company is entitled to
obtain injunctive relief against Executive. Nothing herein, however, shall be
construed as limiting Company's right to pursue any other available remedy at
law or in equity, including recovery of damages and termination of this
Agreement and/or any payments that may be due pursuant to this Agreement.

                  (l) RIGHT TO ENTER AGREEMENT. Executive represents and
covenants to Company that he has full power and authority to enter into this
Agreement and that the execution of this Agreement will not breach or constitute
a default of any other agreement or contract to which he is a party or by which
he is bound.

                  (m) EXTENSION OF POST-EMPLOYMENT RESTRICTIONS. In the event
Executive breaches Paragraphs 5(b), (d), or (e) above, the restrictive time
periods contained in those provisions will be extended by the period of time
Executive was in violation of such provisions.

                  (n) ENFORCEABILITY. The agreements contained in Section 5 are
independent of the other agreements contained herein. Accordingly, failure of
the Company to comply with any of its obligations outside of this Paragraph do
not excuse Executive from complying with the agreements contained herein.

                                       11
<PAGE>   12

                  (o) SURVIVABILITY. The agreements contained in Paragraphs
5(c)-(g) shall survive the termination of this Agreement for any reason.

         6. CONSULTING AGREEMENT. Effective upon Executive's termination of
employment for any reason other than Executive's termination prior to the end of
the Basic Term by the Company for Cause, HC hereby retains Executive as a
consultant (an independent contractor and not as an employee) for a period of
three (3) years (the "Consulting Period"). Termination of the Basic Term shall
not effect the Parties' rights and obligations under this Paragraph 6. Subject
to the following, Executive agrees to provide, if requested, a minimum of 166
hours of service per year, or, as requested by the Company, up to a total of 500
hours during any one year of the Consulting Period; provided, however, that the
total number of hours to be worked over the duration of the Consulting Period
shall not exceed 500 hours (the "Consulting Services"). The Consulting Services
to be provided shall be commensurate with Executive's training, background,
experience and prior duties with the Company. Executive agrees to make himself
reasonably available to provide such Consulting Services during the Consulting
Period; provided, however, the Company agrees that it shall provide reasonable
advance notice to Executive of its expected consulting needs and any request for
Consulting Services hereunder shall not unreasonably interfere with Executive's
other business activities and personal affairs as determined in good faith by
Executive. In addition, Executive shall not be required to perform any requested
Consulting Services which, in Executive's good faith opinion, would cause
Executive to breach any fiduciary duty or contractual obligation Executive may
have to another employer. Further, during the Consulting Period, Executive shall
not be subject to any non-competition provisions except for the two-year period
provided for in Paragraph 5(c). Unless waived by Executive, Executive shall not
be required to perform Consulting Services for more than four (4) days during
any week or for more than eight (8) hours during any day. Executive's travel
time shall not constitute hours of Consulting Services for purposes of this
Paragraph 6. The Parties contemplate that, when appropriate, the Consulting
Services shall be performed at Executive's office, residence or at the Company's
executive offices in Houston, Texas and may be performed at such other locations
only as they may mutually agree upon. Executive shall be properly reimbursed for
all travel and other expenses reasonably incurred by Executive in rendering the
Consulting Services. HCC shall pay Executive $200,000 per year (the "Consulting
Fee") during the Consulting Period, payable monthly in arrears. Executive may
elect to delay payment for services but not the services themselves. Except as
set forth below and in Paragraphs 4(c) or 4(d) hereof, if Executive fails to
provide the hours requested by the Company in any 24-month period, Executive's
rights to receive any further Consulting Fee shall immediately terminate. During
the Consulting Period, Executive shall receive no employment benefits from HCC.
If Executive dies or becomes Disabled during the Basic Term (or as an employee
of the Company following the Basic Term) or during the Consulting Period he (or,
on his death, his beneficiary or estate) shall receive or continue to receive as
the case may be the Consulting Fee during the remainder of the Consulting Period
as if such death or Disability had not occurred.

         7. ASSIGNMENT. This Agreement cannot be assigned by Executive. The
Company may assign this Agreement only to a successor (whether direct or
indirect, by purchase, merger,

                                       12
<PAGE>   13

consolidation or otherwise) to all or substantially all of the business and
assets of the Company provided such successor expressly agrees in writing
reasonably satisfactory to Executive to assume and perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
it if no such succession and assignment had taken place. Failure of the Company
to obtain such written agreement prior to the effectiveness of any such
succession shall be a material breach of this Agreement.

         8. BINDING AGREEMENT. Executive understands that his obligations under
this Agreement are binding upon Executive's heirs, successors, personal
representatives, and legal representatives.

         9. NOTICES. All notices pursuant to this Agreement shall be in writing
and sent certified mail, return receipt requested, addressed as set forth below,
or by delivering the same in person to such party, or by transmission by
facsimile to the number set forth below. Notice deposited in the United States
Mail, mailed in the manner described hereinabove, shall be effective upon
deposit. Notice given in any other manner shall be effective only if and when
received:

                  If to Executive:            Benjamin D. Wilcox
                                              2904 Ferndale
                                              Houston, Texas  77009
                                              Fax:  (713) 610-1974

                  If to Company:              HCC Insurance Holdings, Inc.
                                              13403 Northwest Freeway
                                              Houston, Texas  77040
                                              Fax:  (713) 462-2401

                  with a copy (which shall    Arthur S. Berner, Esq.
                  not constitute notice) to:  Haynes and Boone, LLP
                                              1000 Louisiana Street,
                                              Suite 4300
                                              Houston, Texas  77002-5012
                                              Fax:  (713) 236-5652

         10. WAIVER. No waiver by either party to this Agreement of any right to
enforce any term or condition of this Agreement, or of any breach hereof, shall
be deemed a waiver of such right in the future or of any other right or remedy
available under this Agreement.

         11. SEVERABILITY. If any provision of this Agreement is determined to
be void, invalid, unenforceable, or against public policy, such provisions shall
be deemed severable from the Agreement, and the remaining provisions of the
Agreement will remain unaffected and in full force and effect.

                                       13
<PAGE>   14

         12. ARBITRATION. In the event any dispute arises out of Executive's
employment with or by the Company, or separation/termination therefrom, whether
as an employee or as a consultant, which cannot be resolved by the Parties to
this Agreement, such dispute shall be submitted to final and binding
arbitration. The arbitration shall be conducted in accordance with the National
Rules for the Resolution of Employment Disputes of the American Arbitration
Association ("AAA"). If the Parties cannot agree on an arbitrator, a list of
seven (7) arbitrators will be requested from AAA, and the arbitrator will be
selected using alternate strikes with Executive striking first. The cost of the
arbitration will be shared equally by Executive and Company ; provided, however,
the Company shall promptly reimburse Executive for all costs and expenses
incurred in connection with any dispute in an amount up to, but not exceeding 20
percent of Executive's Base Salary (or, if the dispute arises during the
Consulting Period, Executive's Base Salary as in effect immediately prior to the
beginning of the Consulting Period) unless such termination was for Cause in
which event Executive shall not be entitled to reimbursement unless and until it
is determined he was terminated other than for Cause. Arbitration of such
disputes is mandatory and in lieu of any and all civil causes of action and
lawsuits either party may have against the other arising out of Executive's
employment with Company, or separation therefrom. Such arbitration shall be held
in Houston, Texas.

         13. ENTIRE AGREEMENT. The terms and provisions contained herein shall
constitute the entire agreement between the parties with respect to Executive's
employment with Company during the time period covered by this Agreement. This
Agreement replaces and supersedes any and all existing Agreements entered into
between Executive and the Company relating generally to the same subject matter,
if any, and shall be binding upon Executive's heirs, executors, administrators,
or other legal representatives or assigns.

         14. MODIFICATION OF AGREEMENT. This Agreement may not be changed or
modified or released or discharged or abandoned or otherwise terminated, in
whole or in part, except by an instrument in writing signed by the Executive and
an officer or other authorized executive of Company.

         15. UNDERSTAND AGREEMENT. Executive represents and warrants that he has
read and understood each and every provision of this Agreement, and Executive
understands that he has the right to obtain advice from legal counsel of choice,
if necessary and desired, in order to interpret any and all provisions of this
Agreement, and that Executive has freely and voluntarily entered into this
Agreement.

         16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.

         17. JURISDICTION AND VENUE. With respect to any litigation regarding
this Agreement, Executive agrees to venue in the state or federal courts in
Harris County, Texas, and agrees to waive and does hereby waive any defenses
and/or arguments based upon improper venue and/or lack of personal jurisdiction.
By entering into this Agreement, Executive agrees to personal jurisdiction in
the state and federal courts in Harris County, Texas.

                                       14
<PAGE>   15

         IN WITNESS WHEREOF, the Parties have executed this Agreement in
multiple copies, effective as of the date first written above.

EXECUTIVE                               COMPANY

                                        HOUSTON CASUALTY COMPANY

/s/ Benjamin D. Wilcox                  By: /s/ Stephen L Way
------------------------------             -------------------------------------
BENJAMIN D.  WILCOX                             STEPHEN L. WAY,
                                                Chairman of the Board

Dated: March 15, 2001                   Dated:  March 16, 2001

                 [SIGNATURE PAGE OF WILCOX EMPLOYMENT AGREEMENT]

<PAGE>   16

                                    EXHIBIT A

         STOCK OPTIONS. Executive shall be provided with options to purchase
100,000 shares of HCC Common Stock at a price per share equal to $12.0625, the
closing price of HCC's Common Stock on the New York Stock Exchange on January 5,
2000 (the date of grant). Such shares will vest at 33-1/3% per year beginning on
December 31, 2000 and 33-1/3% on each of the two December 31sts thereafter. Such
options will expire on December 31, 2004 unless Executive is no longer a
full-time employee of the Company, in which event such option shall expire on
the later of the period otherwise set forth in Executive's Employment Agreement
for exercise after termination or December 31, 2003.

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