SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13, OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) MAY 14, 1996
HOMEOWNERS GROUP, INC.
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(Exact name as specified in charter)
DELAWARE 0-17338 65-0033743
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 SAWGRASS CORPORATE PARKWAY, SUNRISE, FLORIDA 33325
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (954) 845-2360
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ITEM 1. CHANGES IN CONTROL
(a) The Company announced on May 15, 1996 that it has entered into a definitive
merger agreement (the "Merger Agreement") with The Cross Country Group, Inc.
("Cross Country"), pursuant to which Cross Country will acquire all of the
outstanding shares of the Company for $2.35 per share in cash. The funding of
the purchase is anticipated to be financed by Fleet Bank. As of April 23, 1996,
Cross Country held approximately 7.6% of the Company's outstanding stock. The
merger is subject to a number of conditions, including approval of the
transaction by the stockholders of the Company and by regulatory authorities.
The Board of Directors has approved the transaction and will recommend
ratification of the agreement at the Special Stockholders' meeting called to
consider the merger. The meeting and the closing are anticipated in late
September. In consideration of the Merger Agreement, each of the current Board
of Directors has entered into a Voting Agreement, under which each has agreed to
vote all shares which he or she is entitled to vote, to approve and adopt the
Merger Agreement, the Merger and all agreements related to the merger and all
actions related thereto, at any meetings which such Merger Agreement and other
related agreements or such other actions with respect to the merger or the
merger agreement are submitted for the consideration and vote of the
stockholders of the Company.
(b) The following table sets forth information concerning beneficial ownership,
as of April 23, 1996, by persons known to the Company (based upon filings on
Schedules 13D and 13G filed pursuant to the Securities Exchange Act of 1934) to
own more than 5% of the Company's outstanding voting securities.
<TABLE>
<CAPTION>
Beneficial Ownership
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Shares Percent
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<S> <C> <C> <C>
Carl Buccellato........................................................... 523,453 (2) 9.0%
Melvin Stewart............................................................ 305,375 (3) 5.5%
C. Gregory Morris......................................................... 30,000 (4) 0.5%
Diane M. Gruber........................................................... 20,050 (5) 0.4%
Gary D. Lipson............................................................ 33,500 (6) 0.6%
Michael A. Nocero, Jr. M.D................................................ 135,500 (7) 2.1%
Sandra Stewart Bernstein.................................................. 406,862 (8) 7.3%
2810 North 46th Avenue
Hollywood, FL 33021
Dimensional Fund Advisors, Inc............................................ 361,300 (8) 6.5%
1299 Ocean Avenue
Santa Monica, CA 90401
T. Rowe Price Small Cap Value Fund, Inc................................... 350,000 (8) 6.3%
100 E. Pratt Street
Baltimore, MD 21202
The Cross Country Group, Inc.............................................. 420,100 (9) 7.6%
4040 Mystic Valley Parkway
Boston, MA 02155
All Directors and Executive Officers as a Group (6 persons)............... 1,047,878 (10) 17.8%
<FN>
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(1) The address of all executive officers and directors is 400 Sawgrass Corporate
Parkway, Sunrise, FL 33325.
(2) Includes 14,397 shares of common stock held by Carl Buccellato as Trustee of
the Renee Buccellato Trust, the Lori Ann Buccellato Trust and the Matthew
Buccellato Trust. Includes presently exercisable options to purchase 260,000
shares of common stock.
(3) Includes 243,701 shares of common stock held by Melvin Stewart as Trustee of
the Melvin Stewart Trust. Also includes 15,788 shares of common stock held by
Mitchell Stewart as Trustee of the Bari Udell Trust, as to which trust Melvin
Stewart has the power to direct the voting and investment of such shares as
trust advisor and as to which beneficial ownership is disclaimed by Mr. Stewart.
(4) Consists of options to purchase 30,000 shares of common stock.
(5) Includes presently exercisable option to purchase 10,000 shares of common
stock. The total does not include 1,000 shares owned by Gayle N. Gruber, Ms.
Gruber's daughter, as to which beneficial ownership is disclaimed by Ms. Gruber.
(6) Includes options to purchase 17,500 shares of common stock.
(7) Includes 70,000 shares of common stock owned under a retirement plan for the
benefit of Michael A. Nocero, Jr. M.D. and indirect ownership of 24,000 shares
owned by his daughters. Includes presently exercisable options to purchase
17,500 shares of common stock.
(8) Ownership shares and percentages based upon the Schedules 13G as provided to
the Company.
(9) Ownership shares and percentages based on Schedules 13D as provided to the
Company. Consists of three related parties that own positions, NAPAQ
Corporation, Cross Country Motor Club, Inc. and Jeffrey C. Wolk.
(10) Includes an aggregate of 335,000 shares which the officers and directors
have the right to acquire within 60 days of April 23, 1996, through the exercise
of options.
</FN>
</TABLE>
ITEM 7. EXHIBITS
Exhibit 10.38 Agreement and Plan of Merger
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOMEOWNERS GROUP, INC.
JUNE 9, 1996 /s/ C. GREGORY MORRIS
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(Date) C. Gregory Morris
Chief Financial Officer
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May 14, 1996
among The Cross Country Group, Inc., a Nevada corporation ("Parent"), CHGI
Acquisition Corporation, a Delaware Corporation and a wholly owned subsidiary of
Parent (the "Sub"), and Homeowners Group, Inc., a Delaware corporation (the
"Company") (Sub and the Company being hereinafter collectively referred to as
the "Constituent Corporations").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent pursuant to this
Agreement; and
WHEREAS, the respective Boards of Directors of Parent, the Company and
Sub have approved the merger of Sub with the Company (the "Merger"), upon the
terms and subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, Parent, Sub and the
Company agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2), Sub
shall be merged into the Company and the separate existence of Sub shall
thereupon cease, with the Company being the surviving corporation in the Merger
(the "Surviving Corporation"). Upon the effectiveness of the Merger, the Company
shall possess all of the rights, privileges, powers and franchises of each of
the Constituent Corporations, and all property, real, personal and mixed, and
all debts due to any of the Constituent Corporations on whatever account, as
well as all other things in action or belonging to each of the Constituent
Corporations shall be vested in the Surviving Corporation; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the Constituent Corporations, and the title to any real estate
vested by deed or otherwise in any of the Constituent Corporations shall not
revert or be in any way impaired by reason of the Merger; but all rights of
creditors and all liens upon any property of any of the Constituent Corporations
shall be preserved unimpaired, and all debts, liabilities and duties of the
Constituent Corporations shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective when
a properly executed Certificate of Merger is duly filed with the Secretary of
State of Delaware, which filing shall
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be made as soon as practicable after the closing of the transactions
contemplated by this Agreement in accordance with Section 11.1. When used in
this Agreement, the term "Effective Time" shall mean the date and time at which
such Certificate is so filed.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, except that Article
First thereof shall be amended to read as follows:
"FIRST: The name of the Corporation is Homeowners Group, Inc."
and thereafter may be amended in accordance with its terms and as provided by
law.
2.2 BY-LAWS. The By-Laws of the Sub as in effect at the Effective Time
shall be the By-Laws of the Surviving Corporation.
2.3 DIRECTORS. The directors of the Surviving Corporation shall be the
directors of Sub who shall serve until their respective successors are duly
elected and qualified in the manner provided in the Certificate of Incorporation
and By-Laws of the Surviving Corporation, or as otherwise provided by law.
2.4 OFFICERS. The officers of the Surviving Corporation shall initially
consist of the officers of the Company, until their successors are duly elected
and qualified in the manner provided in the Certificate of Incorporation and
By-Laws of the Surviving Corporation, or as otherwise provided by law.
ARTICLE III
CONVERSION OF SHARES
3.1 EXCHANGE RATIO. As of the Effective Time, by virtue of the Merger
and without any action on the part of any holder:
(a) All shares of Company Common Stock par value $.01 per share
("Company Common Stock") which are held by the Company, any subsidiary
of the Company, Parent, Sub or any other subsidiary of Parent, shall be
cancelled.
(b) All issued and outstanding shares of capital stock of Sub
shall be converted into 1,000 issued and outstanding shares of Common
Stock of the Surviving Corporation.
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(c) Each remaining outstanding share of Company Common Stock
(other than shares of Company Common Stock held by any holder who shall
have taken the necessary steps under the Delaware General Corporation
Law ("DGCL") to dissent and demand payment, has not subsequently
withdrawn or lost such rights, and is otherwise entitled to such payment
under the DGCL, if the DGCL provides for such payment in connection with
the Merger ("Dissenting Shares"), shall be cancelled and converted into
the right to receive $2.35 (the "Merger Price") in cash, without
interest thereon.
(d) Notwithstanding the foregoing provisions or any other
provision of this Agreement to the contrary, Dissenting Shares shall not
be converted into the right to receive cash at or after the Effective
Time unless and until the holder of such Dissenting Shares withdraws his
or her demand for such appraisal with the consent of the Company, if
required by the DGCL, or becomes ineligible for such appraisal. If a
holder of Dissenting Shares shall withdraw his or her demand for such
appraisal with the consent of the Company, if required by the DGCL, or
shall become ineligible for such appraisal (through failure to perfect
or otherwise), then, as of the Effective Time or the occurrence of such
event, whichever last occurs, such holder's Dissenting Shares shall
automatically be converted into and represent the right to receive cash
as provided above. The Company shall give Parent (i) prompt notice of
any written demands for appraisals, withdrawals of demands for appraisal
and any other instruments served pursuant to Section 262 of the DGCL
received by the Company, and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under
Section 262 of the DGCL. The Company will not voluntarily make any
payment with respect to any demands for appraisal and will not, except
with the prior written consent of Parent, settle or offer to settle any
such demands. Each holder of Dissenting Shares shall have only such
rights and remedies as are granted to such a holder under Section 262 of
the DGCL.
3.2 EXCHANGE AGENT.
(a) Parent shall authorize one or more persons to act as
Exchange Agent hereunder (the "Exchange Agent").
(b) Immediately prior to the Effective Time, Parent shall
deposit in trust with the Exchange Agent funds in an aggregate amount
equal to (and from time to time deposit additional funds so that the
aggregate amount in trust is not less than) the sum of: (i) the
aggregate amount payable pursuant to Section 7.5 hereof, plus (ii) the
product of (A) the number of Shares outstanding immediately prior to the
Effective Time (other than any such shares held in the treasury of the
Company and its subsidiaries or owned by Parent or any direct or
indirect subsidiary of Parent or known at the Effective Time to be
Dissenting Shares), and (B) the Merger Price (the "Payment Fund"). The
Payment Fund shall be invested by the Exchange Agent as directed by the
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Surviving Corporation, and any net earnings with respect thereto shall
be paid to the Surviving Corporation as and when required by the
Surviving Corporation.
(c) The Exchange Agent shall, pursuant to irrevocable
instructions, make the payments referred to in Section 3.1(c) hereof out
of the Payment Fund. The Parent shall cause the Exchange Agent to make
the payments referred to in Section 3.1(c) within 10 days of the
Effective Time. The Payment Fund shall not be used for any other
purpose, except as provided herein. If cash is deposited in the Payment
Fund in respect of shares of Company Common Stock that subsequently
become Dissenting Shares, the Exchange Agent shall promptly repay to the
Surviving Corporation from the Payment Fund an amount equal to the
product of (i) the number of such Dissenting Shares, and (ii) the Merger
Price. Promptly following the date which is six months after the
Effective Time, the Exchange Agent shall return to the Surviving
Corporation all cash, certificates and other instruments in its
possession relating to the transactions described in this Agreement, and
the Exchange Agent's duties shall terminate. Thereafter, each holder of
a certificate representing a share of Company Common Stock entitled to
receive at the Effective Time cash therefor may surrender such
certificate to the Surviving Corporation and (subject to applicable
abandoned property, escheat and similar laws) receive in exchange
therefor the amount of cash per share of Company Common Stock specified
in Section 3.1(c) hereof, without interest, but shall have no greater
rights against the Surviving Corporation than may be accorded to general
creditors of the Surviving Corporation under Delaware law.
Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to a holder of shares of Company Common Stock for
any cash delivered pursuant hereto to a public official pursuant to
applicable abandoned property laws.
(d) As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record (other than Parent,
any subsidiary of Parent, the Company or any subsidiary of the Company)
of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock
(the "Certificates"): (i) a form letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent); and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for cash. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by Parent, together with
such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor cash in an
amount equal to the Merger Price multiplied by the number of shares of
Company Common Stock theretofore represented by the Certificate, and the
Certificate so surrendered shall forthwith be cancelled.
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3.3 TRANSFER TAXES. If any cash to be paid in the Merger is to be paid
to a person other than the holder in whose name the certificate representing
shares of Company Common Stock surrendered in exchange therefor is registered,
it shall be a condition of such exchange that the certificate so surrendered
shall be properly endorsed or otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the payment of such cash to a person other
than the registered holder of the certificate surrendered, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
3.4 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company Common
Stock shall thereafter be made. If, after the Effective Time, certificates
representing shares of Company Common Stock are presented to the Surviving
Corporation, they shall be cancelled and exchanged for the cash consideration
set forth above.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Sub that:
4.1 (a) CORPORATION ORGANIZATION. Each of the Company and the Company
Subsidiaries (as defined in Section 4.5 hereof): (i) is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation; (ii) has all requisite power and
authority, corporate and otherwise, to own, operate and lease the
properties and assets it now owns, operates and leases and to carry on
its business as now being conducted; and (iii) is qualified or licensed
to do business and in good standing in every jurisdiction in which the
ownership, operation or lease of property by it or the conduct of its
business requires such qualification or licensing, except for such
failures which would not have a Company Material Adverse Effect (as
hereinafter defined). The term "Company Material Adverse Effect" as used
in this Agreement shall mean any change or effect that, individually or
when taken together with all other such changes or effects, is, or could
reasonably be, or is reasonably likely to be, materially adverse to the
business, condition (financial or otherwise), prospects, results of
operations, properties, assets or liabilities (the "Business") of the
Company and the Company Subsidiaries, taken as a whole.
(b) CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company has
previously delivered to Parent complete and correct copies of the
Certificate of Incorporation, and all amendments thereto to the date
hereof, and By-laws, as
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presently in effect, of the Company and any Company Subsidiary (all of
which are listed in Section 4.5 of the Disclosure Schedule), and none of
the Company and any Company Subsidiary is in default in the performance,
observation or fulfillment of either of its Certificate of Incorporation
or By-laws.
4.2 AUTHORIZATION. The Company has full corporate power and authority to
execute and deliver this Agreement and, subject to the adoption of this
Agreement by the Company's stockholders, to consummate the transactions
contemplated hereby. The Board of Directors of the Company (the "Company Board")
has duly approved the Merger, such approval constituting Company Board approval
for purposes of Section 203 of the DGCL and Article Eleven of the Company's
Certificate of Incorporation, and has duly authorized the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby,
and has resolved to recommend that its stockholders adopt this Agreement and
approve the Merger, and no other corporate proceedings (other than the adoption
of this Agreement by the stockholders of the Company) on the part of the Company
or any Company Subsidiary are necessary to approve and authorize the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and, subject to the foregoing, this Agreement constitutes (assuming due
authorization, execution and delivery of this Agreement by the other parties
hereto), the valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms.
4.3 CONSENTS AND APPROVALS: NO VIOLATIONS. Subject to obtaining the
requisite adoption and approval of this Agreement by the holders of a majority
of the outstanding shares of Company Common Stock in accordance with Delaware
law and the Company's Certificate of Incorporation and By-laws, and except:
(a) for approvals of insurance regulatory authorities;
(b) as set forth in Section 4.3 of the Disclosure Schedule;
(c) for the filings by the Company and Parent required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act");
(d) for the filing of the Proxy Statement (as defined in Section
4.16 hereof) with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); and
(e) for the filing of the Certificate of Merger and other
appropriate merger documents, if any, as required by the laws of the
State of Delaware,
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not, assuming receipt of the foregoing
requisite consent, authorizations,
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approvals and permits: (i) violate any provision of the Certificate of
Incorporation or By-laws (or comparable governing documents) of the Company or
any Company Subsidiary; (ii) violate any statute, ordinance, rule, regulation,
order or decree of any court or of any public, governmental or regulatory body,
agency or authority applicable to the Company or any Company Subsidiary or by
which any of their respective properties or assets may be bound; (iii) require
any filing with, or permit, consent or approval of, or the giving of any notice
to, any public, governmental or regulatory body, agency or authority; (iv)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, franchise, permit, agreement or
other instrument or obligation to which the Company or any Company Subsidiary is
a party, or by which any of them or any of their respective properties or assets
may be bound, or (v) except as disclosed in the Disclosure Schedules, afford any
employee of the Company or any Company Subsidiary any rights to compensation,
employment, severance pay, notice of termination or any other benefits;
excluding from the foregoing clauses (ii), (iii) or (iv) violations, breaches
and defaults which, and filings, notices, permits, consents and approvals, the
absence of which, would not have a Company Material Adverse Effect.
4.4 CAPITALIZATION. The authorized capital stock of the Company consists
of:
(a) 5,000,000 authorized shares of Company Preferred Stock, of
which, on the date hereof, no shares are issued and outstanding;
(b) 45,000,000 authorized shares of Company Common Stock, of
which on the date hereof, 5,558,350 shares are issued and outstanding;
(c) 300,000 shares reserved for issuance pursuant to outstanding
options granted under the Company's 1988 Stock Option Plan of which, on
the date hereof, 140,000 options were outstanding, and 140,000 shares
were subject to options currently exercisable;
(d) 300,000 shares reserved for issuance pursuant to outstanding
options granted under the Company's 1988 Incentive Stock Option Plan of
which, on the date hereof, 291,550 options were outstanding, and 219,550
shares were subject to options currently exercisable; and
(e) 300,000 shares are reserved for issuance pursuant to
outstanding options granted under the Company's 1992 Non-Employee
Directors' Stock Option Plan of which, on the date hereof, 117,500
options were outstanding, and 62,500 shares were subject to options
currently exercisable.
All shares of capital stock of the Company which are outstanding as of the date
hereof are duly authorized, validly issued, fully
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paid and nonassessable, and are not subject to, nor were they issued in
violation of, any preemptive rights. Set forth in Section 4.4 of the Disclosure
Schedule is a list of all of the holders of outstanding options, the date of the
grant(s) thereof, the exercise price(s) and exercise date(s) of each option
grant, and the number of shares subject thereto, including specifically the
number and exercise price of all options which are currently exercisable. Except
as set forth in Section 4.4 of the Disclosure Schedule and in this Section 4.4,
there are no shares of capital stock of the Company authorized or outstanding,
and there are no subscriptions, options, conversion or exchange rights, warrants
or other agreements, claims or commitments of any nature whatsoever obligating
the Company or any Company Subsidiary to issue, transfer, deliver or sell, or
cause to be issued, transferred, delivered or sold, additional shares of the
capital stock of the Company or any Company Subsidiary or obligating the Company
or any Company Subsidiary to grant, extend or enter into any such agreement or
commitment.
4.5 SUBSIDIARIES. Set forth in Section 4.5 of the Disclosure Schedule is
the number of authorized, issued and outstanding shares of each Company
Subsidiary (as defined below), its jurisdiction of incorporation and the number
of shares of capital stock or other equity interest owned or held by the Company
or any Company Subsidiary with respect to any corporation, partnership, joint
venture or other entity. All the outstanding shares of capital stock of each
corporation of which the Company owns, directly or indirectly, 50% or more of
the outstanding capital stock (a "Company Subsidiary") have been validly issued
and are fully paid, nonassessable and are not subject to, nor were they issued
in violation of, any preemptive rights. All outstanding shares of capital stock
of the Company Subsidiaries are owned, directly or indirectly, by the Company,
and except as set forth in Section 4.5 of the Disclosure Schedule with respect
to the shares of HOMS Insurance Agency, Inc., free and clear of all liens,
charges, encumbrances, security interests, equities, options, restrictions on
voting rights or rights of disposition, and claims or third party rights of
whatever nature. Except for Company Subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other equity or other securities of
any corporation, partnership, joint venture or other entity or have any direct
or indirect equity or ownership interest in any corporation, partnership, joint
venture or other entity, other than HMS Texas Partnership as to which the
Company is the general partner owning 45% of the partnership interest and
Southwest Marketing Services, Inc., a Michigan corporation, of which the Company
owns 12.5% of the outstanding capital stock. Except as set forth in Section 4.5
of the Disclosure Schedule, neither the Company nor any Company Subsidiary is
subject to any obligation or requirement to provide funds for or to make any
investment (in the form of a loan, capital contribution or otherwise) in any
entity.
4.6 SEC REPORTS. The Company has heretofore delivered to Parent and the
Sub its:
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(a) Annual Reports on Form 10-K for the years ended December 31,
1993, December 31, 1994, and December 31, 1995, as filed with the SEC;
(b) proxy statements relating to the Company's meetings of
stockholders (whether annual or special) during 1993, 1994 and 1995; and
(c) all other reports or registration statements filed by the
Company with the SEC since December 31, 1991.
Each report, schedule, registration statement and definitive proxy statement
filed by the Company with the Commission since December 31, 1991 (the "SEC
Documents"), as of its respective filing date, (i) complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the respective rules and regulations of
the Commission thereunder applicable to such SEC Documents, and (ii) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The Company has timely filed all documents that it was
required to file with the Commission since January 1, 1992, except where the
failure to file did not and would not reasonably be expected to have a Company
Material Adverse Effect. The Company has not filed any Reports on Form 8-K
since February 9, 1996. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved, and fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as at the dates
thereof and the consolidated results of their operations and changes in
financial position for the periods then ended, except as may be as otherwise
stated therein and, in the case of unaudited statements, as permitted by Form
10-Q, non-material accruals, and for normal, recurring year-end audit
adjustments that would not be material in the aggregate.
4.7 FINANCIAL STATEMENTS. The Company has previously delivered to Parent
and the Sub:
(a) the audited consolidated balance sheets of the Company and
its subsidiaries as of December 31 in each of the years 1993 through
1995 and its audited consolidated statements of operations, changes in
stockholders' equity and changes in financial position for the
respective fiscal years then ended, including the notes thereto, in each
case examined by and accompanied by the report of Deloitte and Touche
LLP ("Deloitte and Touche"), independent certified public accountants,
and
(b) unaudited consolidated balance sheets of the Company and its
subsidiaries as of March 31, 1996, and as of March
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31, 1995, and unaudited consolidated statements of operations and
changes in financial position for the respective three month periods
then ended, including the notes thereto
(all of the financial statements referred to above in this Section are
hereinafter collectively referred to as the "Company Financial Statements"). The
Company Financial Statements have been prepared from, and are in accordance
with, the books and records of the Company and its consolidated subsidiaries,
and present fairly the consolidated financial position, consolidated results of
operations and changes in financial position of the Company and its consolidated
subsidiaries as of the dates and for the periods indicated, in each case in
conformity with generally accepted accounting principles, consistently applied
during such periods, except as otherwise stated in such financial statements or
in the notes thereto, or in the auditor's certifying report thereon and subject
(in the case of the unaudited interim financial statements referred to above) to
non-material accruals and normal year-end audit adjustments.
4.8 ABSENCE OF UNDISCLOSED LIABILITiES. Except as and to the extent
reflected in the balance sheet dated as of December 31, 1995 included in the
Company Financial Statements (the "Balance Sheet"), or in the notes to the
Company Financial Statements for the fiscal year then ended, neither the Company
nor any Company Subsidiary had at that date any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise
and whether due or to become due). Since the date of the Balance Sheet, neither
the Company nor any Company Subsidiary has incurred any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise,
and whether due or to become due), except for such which were incurred in the
ordinary course of business and consistent with past practice, and except to the
extent reflected in the Company's unaudited balance sheet dated as of March 31,
1996.
4.9 ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31, 1995, there
has not been, occurred or arisen any Company Material Adverse Effect.
4.10 LEGAL PROCEEDINGS, ETC. Except as set forth in Section 4.10 of the
Disclosure Schedule:
(a) there are no suits, actions, claims, proceedings or
investigations pending, relating to or involving the Company or any
Company Subsidiary (or any of their respective officers or directors in
connection with the business or affairs of the Company and the Company
Subsidiaries) or any properties or rights of the Company or any Company
Subsidiary, before any court, arbitrator or administrative or
governmental body, United States or foreign, which if determined
adversely would have a Company Material Adverse Effect;
(b) to the knowledge of the Company, there are no such suits,
actions, claims, proceedings or investigations
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threatened against the Company relating to or involving the Company or
any Company Subsidiary (or any of their respective officers or directors
in connection with the business or affairs of the Company and the
Company Subsidiaries or any properties or rights of the Company or any
Company Subsidiaries) or any properties or rights of the Company or
Company Subsidiary, before any court, arbitrator or administrative or
governmental body, United States or foreign, which if determined
adversely would have a Company Material Adverse Effect;
(c) there are no such suits, actions, claims, proceedings or
investigations pending or, to the knowledge of the officers of the
Company, threatened, challenging the validity or propriety of the
transactions contemplated by this Agreement; and
(d) neither the Company nor any Company Subsidiary is subject to
any judgment, decree, injunction, rule or order of any court or, to the
knowledge of the officers of the Company, any governmental restriction
applicable to the Company or any Company Subsidiary, which, individually
or in the aggregate, is reasonably likely to have a Company Material
Adverse Effect on the ability of the Company or any Company Subsidiary
to acquire any property or conduct business in any area.
4.11 COMPLIANCE WITH APPLICABLE LAW. The Company and each Company
Subsidiary currently holds and is in compliance with the terms of, and has for
at least the last three years been in compliance with the terms of all licenses,
permits and authorizations necessary for the lawful conduct of their respective
businesses, and has complied with, and neither the Company nor any Company
Subsidiary is in violation of, or in default in any respect under, the
applicable statutes, ordinances, rules, regulations, order or decrees of all
federal, state, local and foreign governmental bodies, agencies and authorities
having, asserting or claiming jurisdiction over it or over any part of its
operations or assets, except for such violations and defaults which,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
4.12 PERMITS. The Company and each Company Subsidiary possesses all
permits, approvals, authorizations, consents, licenses (other than those
relating to intellectual property, which are addressed in Section 4.18) and
registrations (the "Permits") which are required in order for them to conduct
the Business as presently conducted. Section 4.12 of the Disclosure Schedule
sets forth a list of all Permits issued by a state regulatory agency and all
other material Permits issued, granted to, or held by each of the Company or any
Company Subsidiary.
4.13 FRANCHISEES. As of the date hereof, there were 18 persons or
entities which own or possess the right to operate a franchised business
pursuant to a franchise agreement entered into with the Company or any Company
Subsidiary ("Franchisees"). Section 4.13 of the Disclosure Schedule sets forth
the name of
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each Franchisee, the Franchisee's territory, the address of each Franchisee's
office, and the scheduled renewal or expiration date of each such Franchisee's
franchise agreement. Except as set forth in Section 4.13 of the Disclosure
Schedule, none of the Company or any Company Subsidiary nor (to the knowledge of
the Company or any Company Subsidiary) any Franchisee, is in material breach of
or default under any such agreement (or with or without notice or lapse of time
or both, would be in breach or default under any such agreement). Except as set
forth in Section 4.13 of the Disclosure Schedule, there is no material dispute
between the Company or any Company Subsidiary, on the one hand, and any
Franchisee, on the other hand. All of the provisions of any agreement or
arrangement regarding the Company's or any Company Subsidiary's option to
purchase any Franchisee are set forth in the agreements with the Franchisees
disclosed in Section 4.13 of the Disclosure Schedule, and there are no other
agreements or arrangements, whether written or oral, relating to such repurchase
rights. Except as set forth in Section 4.13 of the Disclosure Schedule, as of
the date hereof, there were no agreements or arrangements between the Company or
any Company Subsidiary and any person to offer, sell, extend or modify any
franchise agreement or arrangement, including any agreement or arrangement by
which the Company or any Company Subsidiary manages or operates the Business in
a specific geographic region.
4.14 FRANCHISE AGREEMENTS. The Company and each Company Subsidiary has
delivered to Parent a true and complete copy of all of the franchise agreements
entered into between the Company, any Company Subsidiary and any Franchisee.
Those of the franchise agreements which are with Franchisees beneficially owned
in whole or in part by affiliates of the Company are (or will be upon amendment
as set forth in Section 9.9 to the Disclosure Schedule) on terms and conditions
substantially the same as the Company's other franchise agreements.
4.15 OFFERING CIRCULAR. The Company and each of its subsidiaries has
delivered to Parent a true and complete copy of the most recent uniform
franchise offering circular and other disclosure statements of the Company or of
any Company Subsidiary, if any, that have been used in connection with its sale
of franchises to Franchisees (the "Offering Circular"). As of its date, the
Offering Circular complied in all material respects with the requirements of the
Federal Trade Commission Act, as amended, and the rules and regulations of the
Federal Trade Commission promulgated thereunder, to the extent applicable, and
to applicable state and foreign laws; and to the Company's or any Company
Subsidiary's knowledge, such document did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.16 PROXY STATEMENT. The information with respect to the Company, its
officers and directors and the Company Subsidiaries to be contained in the
definitive proxy statement to be furnished to the stockholders of the Company
pursuant to Section 7.2 hereof (the "Proxy Statement") will not, on the date the
Proxy Statement
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is first mailed to stockholders of the Company or on the date of the Company
Stockholders' Meeting (as hereinafter defined) referred to in Section 7.3
hereof, or at the Effective Time, as such Proxy Statement is then amended or
supplemented, contain any statement which, at such time, is false or misleading
with respect to any material fact, or which omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein not false or misleading, or necessary to correct any statement in any
earlier communication (including the Proxy Statement) to stockholders of the
Company with respect to the Merger. If at any time prior to the Effective Time,
any event with respect to the Company, its officers and directors and the
Company Subsidiaries, should occur which is or should be described in an
amendment of, or a supplement to, the Proxy Statement, such event shall be so
described and the presentation in such amendment or supplement of such
information will not contain any statement which, at the time and in light of
the circumstances under which it is made, is false or misleading with respect to
any material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication (including the
Proxy Statement) to stockholders of the Company with respect to the Merger. The
Proxy Statement will comply as to form with all applicable laws, including the
provisions of the Exchange Act.
4.17 SETTLEMENT AGREEMENT. The Company and Homeowners Marketing
Services, Inc., a wholly owned subsidiary of the Company ("HMS"), have entered
into a binding settlement agreement, in the form attached hereto as Exhibit A
(the "Settlement Agreement"), with Acceleration National Insurance Company
("ANIC") providing that (i) ANIC will agree to accept the greater of:
$4,100,000, or the amount equal to $4,100,000 plus an additional amount
calculated by multiplying $4,100,000 times the percentage by which the Merger
Price exceeds $2.20, and rounding that product to the next higher $50,000, in
full and complete satisfaction of its judgment against HMS in ACCELERATION
NATIONAL INSURANCE COMPANY, PLAINTIFF VS. HOMEOWNERS MARKETING SERVICES, INC.,
ET AL., DEFENDANTS, in the Court of Common Pleas of Franklin County, Ohio (the
"ANIC Lawsuit"), and (ii) such sum will be paid to ANIC at the Closing. The
Company has not and will not alter or amend the Settlement Agreement without the
prior written consent of the Parent.
4.18 INTELLECTUAL PROPERTY.
(a) As used herein, "Intellectual Property" shall mean all
intellectual property rights anywhere in the world, including, but not
limited to, all (i) registered and unregistered trademarks, service
marks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, trade dress, logos, slogans and
general intangibles of like nature, together with the goodwill
associated therewith; (ii) patents and patent applications and all
patents issued upon said patent applications or based upon such
disclosures; (iii)
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copyrights, copyright registrations and applications; (iv) know-how,
trade secrets, confidential or proprietary technical information,
databases, computer software, customer lists, business and marketing
plans, designs, processes, research in progress, inventions and
invention disclosures (whether patentable or unpatentable), drawings,
schematics, blueprints, flow sheets, designs and models, of any nature
whatever; and (v) all licenses and rights with respect to the foregoing
or property of like nature. Section 4.18 of the Disclosure sets forth
the Intellectual Property that is owned by the Company or any Company
Subsidiary and any licenses, sublicenses or other arrangements pursuant
to which the Company or any Company Subsidiary is authorized to use any
third party Intellectual Property. Except as set forth in Section 4.18
of the Disclosure Schedule, the Company and the Company Subsidiaries own
all right, title and interest in and to, and have valid licenses to use
or otherwise possess legally enforceable rights to use all of the
Intellectual Property, wherever located, which is necessary to conduct
the Business as currently conducted, the absence of which would have a
Company Material Adverse Effect. Section 4.18 of the Disclosure Schedule
sets forth a complete and accurate list of (i) all patents and patent
applications and all registered or applied for trademarks, registered
copyrights, computer software programs (other than "off-the-shelf"
programs), trade names, slogans and service marks, and the owner
thereof, which are material to and used in connection with the Business,
including all registrations and applications for registrations thereof,
and the jurisdictions in which each such intellectual property right has
been issued or registered or in which any such application for such
issuance and registration has been filed; (ii) all unregistered United
States trademarks and unregistered copyrights which are material to the
Business, the owner thereof, and to the Company's and any Company's
Subsidiary's knowledge, all competing claims to any such marks or
copyrights; (iii) all registered or applied for trademarks in
jurisdictions other than the United States, and the owner thereof; (iv)
all material licenses, sublicenses and other agreements to which the
Company or any Company Subsidiary is a party and pursuant to which any
person is authorized to use any Intellectual Property; and (v) all
licenses, sublicenses and other agreements as to which the Company or
any Company Subsidiary is a party and pursuant to which the Company or
any Company Subsidiary is authorized to use, sublicense or transfer any
third party Intellectual Property which are material to the business of
the Company or any Company Subsidiary as they are currently conducted.
(b) Except as set forth in Section 4.18 of the Disclosure
Schedule, neither the Company nor any Company Subsidiary has
transferred, conveyed, sold, assigned, pledged, mortgaged, granted a
security interest in or otherwise encumbered the Intellectual Property
that is material to the Business as currently conducted.
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(c) The Company and each Company Subsidiary is not, nor will it
be as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in material breach
of any license, sublicense or other agreement relating to the
Intellectual Property which would result in a Company Material Adverse
Effect.
(d) All patents, patent applications, and all United States
trademark, service mark and copyright registrations held by the Company
or any Company Subsidiary, which are material to the Business, are valid
and subsisting, in full force and effect and have been duly maintained.
Except as set forth in Section 4.18 of the Disclosure Schedule, the
Company and each Company Subsidiary: (i) is not, and within the last
three years, has not been, a party to any suit, action or proceeding
which involves a claim of infringement, invalidity, misuse or
abandonment of any patents, trademarks, service marks or copyrights
(including, but not limited to, computer software), or violation of any
trade secret or other proprietary right of any third party; (ii) has no
knowledge that the manufacturing, marketing, licensing, sale,
distribution or use of its products or services, as currently conducted,
infringes or violates any patent, trademark, service mark, copyright,
trade secret or other proprietary right of any third party; and (iii)
has no knowledge that any third party is violating or infringing any
Intellectual Property rights which violation or infringement would be
likely to have a Company Material Adverse Effect.
4.19 CERTAIN TAX MATTERS.
(a) DEFINITIONS. As used in this Agreement:
(i) "Taxes" means any federal, state, county, local or
foreign taxes, charges, fees, levies or other assessments,
including all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipt, capital stock, production,
business and occupation, disability employment, payroll,
license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity,
and includes any interest and penalties (civil or criminal) on
or in addition to any such taxes.
(ii) "Tax Return" means a report, return or other
information required to be supplied to a governmental entity
with respect to Taxes, including, where permitted or required,
combined or consolidated returns for any group of entities.
(iii) "Tax Ruling" means a written ruling of a taxing
authority relating to Taxes.
(iv) "Closing Agreement" means a written and legally
binding agreement with a taxing authority relating to Taxes.
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(b) REPRESENTATIONS. Except as set forth in Section 4.19 of the
Disclosure Schedule:
(i) FILING OF TAX RETURNS. The Company and each of
the Company Subsidiaries have filed all Tax Returns required
to be filed by each of them and such Tax Returns are in all
material respects true, complete and correct and filed on a
timely basis.
(ii) PAYMENT OF TAXES. The Company and each of the
Company Subsidiaries have, within the time and in the manner
prescribed by law, paid all Taxes that are currently due and
payable, except for those which are being contested in good
faith and for which adequate reserves have been taken.
(iii) TAX LIENS. There are no tax liens upon the
assets of the Company or of any of the Company Subsidiaries
except for statutory liens for current Taxes not yet due.
(iv) WITHHOLDING TAXES. The Company and each of the
Company Subsidiaries have complied in all material respects
with the provisions of the Code relating to the withholding of
Taxes, as well as similar provisions under any other laws, and
have, within the time and in the manner prescribed by law,
withheld and paid over to the proper governmental authorities
all amounts required.
(v) EXTENSIONS OF TIME FOR FILING. Neither the
Company nor any of the Company Subsidiaries has requested any
extension of time within which to file any Tax Return, which
Tax Return has not since been filed.
(vi) WAIVERS OF STATUTE OF LIMITATIONS. Neither the
Company nor any of the Company Subsidiaries has executed any
outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax Returns.
(vii) NO DEFICIENCIES. The statute of limitations for
the assessment of any Taxes has expired for all Tax Returns of
the Company and of each of the Company Subsidiaries or such
Tax Returns have been examined by the appropriate taxing
authorities for all periods. No deficiency for any Taxes has
been proposed, asserted or assessed against the Company or any
of the Company Subsidiaries which has not been resolved and
paid in full.
(viii) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS.
No audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or
Tax Returns of the Company or any of the Company Subsidiaries.
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(ix) POWERS OF ATTORNEY. No power of attorney
currently in force has been granted by the Company or any of
the Company Subsidiaries concerning any Taxes or Tax Returns.
(x) TAX RULINGS. Neither the Company nor any of the
Company Subsidiaries has received a Tax Ruling or entered into
a Closing Agreement with any taxing authority that has or
would have a continuing adverse effect after December 31,
1995.
(xi) TAX SHARING AGREEMENTS. Neither the Company nor
any Company Subsidiary is a party to any agreement relating to
allocating or sharing of Taxes.
(xii) CODE SECTIONS 280G AND 162(M). Neither the
Company nor any Company Subsidiary is a party to any
agreement, contract or arrangement that could result in the
payment of any "excess parachute payments" within the meaning
of Section 280G of the Code or any amount that would be
non-deductible pursuant to Section 162(m) of the Code.
(xiii) CODE SECTION 341(F). Neither the Company nor
any of the Company Subsidiaries has, with regard to any assets
or property held or acquired by any of them, filed a consent
to the application of Section 341(f)(2) of the Code, or agreed
to have Section 341(f)(2) of the Code apply to any disposition
of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company or any of the
Company Subsidiaries.
4.20 INSURANCE AND REINSURANCE. Section 4.20 of the Disclosure Schedule
sets forth all insurance and reinsurance policies relating to the Company and
any Company Subsidiary. The Company and each Company Subsidiary has given any
and all notices and made any and all payments required to maintain such policies
in full force and effect. Except as set forth in Section 4.20 of the Disclosure
Schedule: neither the Company nor any Company Subsidiary has received notice of
default under any such policy, and has not received written notice or, to the
knowledge of the Company or any Company Subsidiary, oral notice of any pending
or threatened termination or cancellation, coverage limitation or reduction or
material premium increase with respect to such policy. Except as set forth in
Section 4.20 of the Disclosure Schedule, neither the Company nor any Company
Subsidiary has any contracts, agreements, arrangements or understandings with
the Continental Casualty Company ("CNA") or Sphere Drake Insurance PLC ("Sphere
Drake"). Except as set forth in Section 4.20 of the Disclosure Schedule: (i)
neither the Company nor any Company Subsidiary has any obligation or liability
to CNA, nor (ii) is the Company or any Company Subsidiary in default of, nor has
an event occurred which, with the giving of notice or the passage of time, would
constitute a default under, any existing agreement or arrangement with CNA,
Sphere Drake or Victor O. Schinnerer & Company ("Schinnerer"). The Company
further represents and
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warrants the accuracy of the first sentence of Section 4.3 of the Real Estate
Errors and Omissions Program Administration and Hold Back Agreement with CNA
effective December 1, 1993.
4.21 OFFICERS' AND DIRECTORS' LIABILITY INSURANCE. The Company has
heretofore delivered to the Parent its officers' and directors' liability
insurance policy. There are no pending or anticipated claims made with respect
to such policies as of the date hereof, nor have any such claims been made
during the last three years. The annual premium on such officers' and directors'
liability insurance policy covering the Company's officers and directors is
$114,000.
4.22 TRANSACTIONS WITH AFFILIATES. Section 4.22 of the Disclosure
Schedule contains true and correct copies of all agreements between the Company
and its executive officers whose salary and bonus for the fiscal year ended
December 31, 1995, exceeded $50,000 (the "Executive Contracts"). As of the date
hereof, except as set forth in Section 4.22 of the Disclosure Schedule:
(a) there are no outstanding amounts payable to or receivable
from, or advances by the Company or any Company Subsidiary to, and
neither the Company nor any Company Subsidiary is otherwise a creditor
of or debtor to, any stockholder, officer, director, employee or
affiliate of the Company or any Company Subsidiary; and
(b) there are no contracts, agreements, arrangements or
understandings between the Company or any Company Subsidiary and any
stockholder, officer, director, employee or affiliate of the Company or
any Company Subsidiary. Full and complete copies of all such documents
listed in the Disclosure Schedule have been delivered to Parent.
4.23 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 4.23 of the Disclosure Schedule sets forth a true
and complete list of each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination
pay, hospitalization or other medical, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, and each other
employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with the Company or any Company
Subsidiary would be deemed a "single employer" within the meaning of
Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), for the benefit of any employee or former employee of
the Company or any ERISA Affiliate (the "Plans"). Section 4.23 of the
Disclosure Schedule sets forth each of the Plans that is an "employee
benefit plan" as that term is defined in Section 3(3) of ERISA (the
"ERISA Plans").
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(b) With respect to each Plan, the Company has heretofore
delivered to Parent true and complete copies of each of the following
documents:
(i) a copy thereof;
(ii) a copy of the most recent annual report and
actuarial report, if required under ERISA and the most recent
report prepared with respect thereto in accordance with
Statement of Financial Accounting Standards No. 87, Employer's
Accounting for Pensions;
(iii) a copy of the most recent Summary Plan
Description required under ERISA with respect thereto;
(iv) if the Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding
agreement and the latest financial statements thereof; and
(v) the most recent determination letter received from
the Internal Revenue Service with respect to each Plan intended
to qualify under Section 401 of the Internal Revenue Code of
1986, as amended (the "Code").
(c) No Plan (or other employee benefit plan, program, agreement
or arrangement to which the Company or any ERISA Affiliate made, or was
required to make, contributions during the five (5) year period ending
on the Closing Date) is subject to Title IV of ERISA.
(d) Neither the Company nor any ERISA Affiliate, nor any ERISA
Plan, nor any trust created thereunder, nor, to the Company's knowledge
after due inquiry of all appropriate persons, any trustee or
administrator thereof has engaged in a transaction in connection with
which the Company or any ERISA Affiliate, any ERISA Plan, any such
trust, or any trustee or administrator thereof, or any party dealing
with any ERISA Plan or any such trust could be subject to either a
material civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the
Code.
(e) No ERISA Plan or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, as of the
last day of the most recent fiscal year of each ERISA Plan ended prior
to the Closing Date; and all contributions required to be made with
respect thereto (whether pursuant to the terms of any ERISA Plan or
otherwise) on or prior to the Closing Date have been timely made.
(f) No ERISA Plan is a "multiemployer pension plan," as defined
in Section 3(37) of ERISA, nor is any ERISA Plan a plan described in
Section 4063(a) of ERISA.
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(g) Each Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including but
not limited to ERISA and the Code.
(h) Each ERISA Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of
the Code.
(i) No Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to
current or former employees of the Company or an ERISA Affiliate beyond
their retirement or other termination of service (other than (i)
coverage mandated by applicable law or (ii) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in
Section 3(2) of ERISA).
(j) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or officer
of the Company or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer.
(k) There are no pending, anticipated, or to the Company's
knowledge, threatened claims by or on behalf of any Plan, by any
employee or beneficiary covered under any such Plan, or otherwise
involving any such Plan (other than routine claims for benefits).
4.24 BROKERS AND FINDERS. Except for Raymond James & Associates, Inc.
("Raymond James"), neither the Company nor any Company Subsidiary, nor any of
their officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions, finders' fees or
similar fees or expenses, and no broker or finder has acted directly or
indirectly for the Company or any Company Subsidiary in connection with this
Agreement or the transactions contemplated hereby and thereby. Except for the
fees and expenses of Raymond James (a copy of the executed agreement dated
January 26, 1995 providing for which has been delivered to Parent), no
investment banking, financial advisory or similar fees have been incurred or are
or will be payable by the Company or any Company Subsidiary in connection with
this Agreement or the transactions contemplated hereby.
4.25 TITLE TO PROPERTIES. Except as set forth in the Disclosure
Schedule, the Company or one of the Company Subsidiaries has good and
indefeasible title to all properties purported to be owned by it (except
non-material properties sold or otherwise disposed of since the date thereof in
the ordinary course of business) - free and clear of all claims, liens, charges,
security interests or encumbrances of any natures whatsoever except (i)
statutory liens securing payments (including taxes) not yet due, and (ii) such
imperfections or
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irregularities of title, claims, liens, charges, security interests or
encumbrances as do not have a Company Material Adverse Effect.
4.26 LEASED PROPERTIES. Section 4.26 of the Disclosure Schedule sets
forth a list of all leasehold estates of the property occupied by the Company or
one of the Company Subsidiaries, and the Company or a Company Subsidiary is in
possession of the properties purported to be leased thereunder and each lease is
valid without material default thereunder by the lessee or, to the Company's
knowledge, the lessor, except for such leases the invalidity of which or the
material default under which in the future would not reasonably be expected to
have a Company Material Adverse Effect.
4.27 CERTAIN AGREEMENTS. Except as disclosed in the Disclosure Schedule,
neither the Company nor any Company Subsidiary is a party to any oral or written
(i) agreement, contract, indenture or other instrument relating to the borrowing
of money or the guarantee of any obligation for the borrowing of money material
to the Company and its Subsidiaries taken as a whole, or (ii) other contract,
agreement or commitment of the Company or its Subsidiaries material to the
Company and the Company Subsidiaries taken as a whole (except those entered into
in the ordinary course of business and which provide for the payment or receipt
of less than $50,000).
4.28 GOOD RELATIONS. Except as set forth in Section 4.28 of the
Disclosure Schedule, to the Company's knowledge neither the Company nor any
Company Subsidiary, nor any officer or director of any of them, knows of any
impending loss of customers, suppliers or employees of the Company or any
Company Subsidiary that might have a Company Material Adverse Effect, or which
might prevent the Business from being carried on in substantially the same
manner in which it is carried on at the date of this Agreement. Since January 1,
1995, except as set forth in Section 4.28 of the Disclosure Schedule, there has
not been any material adverse pending, nor to the Company's knowledge
threatened, dispute of any kind with any customer, client, supplier, employee,
landlord, subtenant or licensee of the Company nor any Company Subsidiary or any
pending or threatened occurrence or situation of any kind, nature or description
which is reasonably likely to result in a material reduction in the amount, or a
material adverse change in the terms or conditions, of business with any
substantial customer or supplier.
4.29 FULL DISCLOSURE. No representation or warranty made herein by
Company, and no statement contained in any document (including, without
limitation, financial statements of the Company and the Schedules and Exhibits
hereto), certificate, memorandum, or other writing furnished or to be furnished
by the Company or on its behalf to Parent or any of its representatives pursuant
to the provisions hereof or in connection with the transactions contemplated
hereby, contains or will contain any untrue or misleading statement of material
fact or omits or will omit to state any material fact necessary in order to make
the statements herein or therein not misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE SUB
Parent and Sub jointly and severally represent and warrant to the
Company that:
5.1 CORPORATE ORGANIZATION. Each of the Parent and the Sub: (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; (ii) has all requisite power and
authority, corporate and otherwise, to own, operate and lease the properties and
assets it now owns, operates and leases and to carry on its business as now
being conducted; and (iii) is qualified or licensed to do business as a foreign
corporation and in good standing in every jurisdiction in which the ownership,
operation or lease of property by it or the conduct of its business requires
such qualification or licensing, except for such failures to be so qualified and
in good standing, if any, which would not have a Parent Material Adverse Effect
(as hereinafter defined). The term "Parent Material Adverse Effect" as used in
this Agreement shall mean any change or effect that, individually or when taken
together with all other such changes or effects, is, or could reasonably be,
materially adverse to the business, condition (financial or otherwise), results
of operations, properties, assets or liabilities of the Parent and the Sub,
taken as a whole.
5.2 AUTHORIZATION. Each of Parent and Sub has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Boards of Directors of Parent and Sub, and
the stockholder(s) of Sub, have duly approved this Agreement and have duly
authorized the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and no other corporate proceedings on the
part of Parent or Sub are necessary to approve and authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Parent and Sub,
and constitutes (assuming due authorization, execution and delivery of this
Agreement by the Company), the valid and binding agreement of Parent and Sub,
enforceable against each of them in accordance with its terms.
5.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth in
Section 5.3 of the Disclosure Schedule, and except for:
(a) the Parent's compliance with the applicable requirements of
state insurance, broker and franchise laws;
(b) the filings required under the HSR Act to be filed by the
Company and Parent; and
(c) the filing of Certificate of Merger and other appropriate
merger documents, if any, as required by the laws of the State of
Delaware, the execution and delivery of this Agreement and the
consummation of the transactions
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contemplated hereby, will not: (i) violate any provision of the
Certificate of Incorporation or Bylaws of Parent or Sub; (ii) violate
any statute, ordinance, rule, regulation, order or decree of any court
or of any public, governmental or regulatory body, agency or authority
applicable to Parent or Sub, or by which any of their respective
properties or assets may be bound; (iii) require any filing with or
permit, consent or approval of, or the giving of any notice to, any
public, governmental or regulatory body or authority; or (iv) result in
a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement or other instrument or obligation
to which Parent or Sub is a party, or by which either of them or any of
their respective properties or assets may be bound.
5.4 CAPITALIZATION.
(a) The authorized capital stock of the Sub consists of 1,000
shares of common stock, par value $.01 per share, of which, as of the
date hereof, 100 shares were issued and outstanding and owned directly
by Parent. Sub has been formed for the purpose of engaging in the
transactions contemplated by this Agreement and has engaged in no
business and incurred no liabilities other than in connection with this
Agreement and the transactions contemplated hereby.
(b) Except as set forth above, there are, as of the date hereof,
no shares of capital stock of Sub authorized or outstanding, and there
are no subscriptions, options, conversion or exchange rights, warrants
or other agreements, claims or commitments of any nature whatsoever
obligating Sub to issue, transfer, deliver, sell, or redeem, or cause to
be issued, transferred, delivered, sold or redeemed, additional shares
of the capital stock of Sub or obligating Sub to grant, extend or enter
into any such agreement or commitment.
5.5 FINANCIAL STATEMENTS. Parent has previously made or will make
available to the Company:
(a) the audited consolidated balance sheet of Parent and
subsidiaries as of September 30, 1995, and the audited
consolidated statements of operations and changes in financial
position for the year then ended, including the notes thereto,
in each case examined by and accompanied by the report of
Schwartz and Schwartz, independent certified public accountants,
and
(b) unaudited consolidated balance sheets of the Company and its
subsidiaries as of March 31, 1996, and March 31, 1995, and
unaudited consolidated statements of operations and changes in
financial position for the respective three month periods then
ended, including the notes thereto
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(the financial statement referred to above in this Section are hereinafter
collectively referred to as the "Parent Financial Statements"). The Parent
Financial Statements have been prepared from, and are in accordance with, the
books and records of Parent and its subsidiaries and present fairly the
consolidated financial position of Parent and its subsidiaries as of the dates
and for the periods indicated, in each case in conformity with generally
accepted accounting principles, consistently applied during such periods, except
as otherwise stated in such financial statements.
5.6 ABSENCE OF MATERIAL ADVERSE CHANGE. Since September 30, 1995, there
has not been, occurred or arisen any Parent Material Adverse Effect.
5.7 PROXY STATEMENT. None of the information with respect to Parent and
the Sub and each of their respective officers, directors, associates and
affiliates or with respect to the plans for the Surviving Corporation after the
Effective Time which shall have been supplied by Parent or the Sub specifically
for use in the Proxy Statement, will, on the date the Proxy Statement is first
mailed to stockholders of the Company or on the date of the Company
Stockholders' Meeting referred to in Section 7.3 hereof, at the Effective Date,
as such Proxy is then amended or supplemented, contain any statement which, at
such time, is false or misleading with respect to any material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication (including the Proxy Statement) to stockholders of
the Company with respect to the Merger. If at any time prior to the Effective
Time any event should occur which is or should be described in an amendment of,
or a supplement to, the Proxy Statement, such event shall be so described, and
the presentation in such amendment or supplement of such information with
respect to Parent and Sub and their respective officers, directors, associates
and affiliates or with respect to the plans for the Surviving Corporation after
the Effective Time which shall have been supplied by Parent or Sub in writing
specifically for use in the Proxy Statement, will not contain any statement
which, at the time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier communication (including the Proxy Statement) to stockholders of the
Company with respect to the Merger.
5.8 BROKERS AND FINDERS. Neither Parent nor any of its subsidiaries nor
any of their respective officers, directors or employees, has employed any
broker or finder or incurred any liability for any brokerage fees, commissions,
finders' fees or similar fees or expenses, and no broker or finder has acted
directly or indirectly for Parent or Sub or any of their respective subsidiaries
in connection with this Agreement or the transactions contemplated hereby. No
investment banking, financial advisory or similar fees have been incurred or are
or
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will be payable by Parent or any of its subsidiaries in connection with this
Agreement or the transactions contemplated hereby.
5.9 PARENT FINANCIAL CONDITION. Parent has received a commitment letter
from Fleet Bank for a $20,000,000 line of credit and otherwise has the necessary
assets to consummate the transactions and make the payments contemplated by this
Agreement.
ARTICLE VI
COVENANTS
6.1 CONDUCT OF THE COMPANY'S BUSINESS. During the period commencing on
the date hereof and continuing until the Effective Time, the Company agrees
(except as expressly contemplated by this Agreement or to the extent that Parent
shall otherwise consent in writing) that:
(a) The Company and each Company Subsidiary will carry on its
business in, and only in, the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent with such business, use all reasonable efforts to preserve
intact its present business organizations, keep available the services
of its present officers and employees and preserve its relationships
with customers, consultants, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall
not be materially impaired at the Effective Time.
(b) The Company will not declare any dividends on or make
distributions in respect of the Company Common Stock. Neither the
Company nor any Company Subsidiary will amend its Articles of
Incorporation, as amended, or By-laws or similar governing documents.
(c) Neither the Company nor any Company Subsidiary will issue,
authorize or propose the issuance of, or purchase or propose the
purchase of, any shares of the capital stock of the Company or any
Company Subsidiary or securities convertible into, or rights, warrants
or options (including employee stock options) to acquire, any such
shares or other convertible securities (other than the issuance of
Company Common Stock upon the exercise in accordance with the present
terms thereof, of stock options outstanding on the date of this
Agreement).
(d) Neither the Company, nor any Company Subsidiary, officer,
director or employee of (or any investment banker, attorney, accountant
or other representative retained by) the Company or any Company
Subsidiary shall, directly or indirectly, solicit, initiate or encourage
any inquiries or proposals by, or engage in any discussions or
negotiations with, or provide information to, any corporation,
partnership, person or other entity or group which it is
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reasonably expected may lead to, or which relates to, any Takeover
Transaction (as hereinafter defined). The Company will promptly advise
Parent orally and in writing of the receipt and content of such
inquiries or proposals. As used in this subsection (d), "Takeover
Transaction" shall mean any proposal or transaction: (i) relating to a
merger or other business combination involving the Company or any
Company Subsidiary; or (ii) for the acquisition of a substantial equity
interest in the Company or any Company Subsidiary or a substantial
portion of the assets of the Company or any Company Subsidiary, other
than the one contemplated by this Agreement; PROVIDED, HOWEVER, that
nothing contained in this Section 6.1(d) shall prohibit the Board of
Directors of the Company from: (x) furnishing information to, or
entering into discussions or negotiations with, any person or entity
that makes an unsolicited bona fide proposal in writing to engage in a
Takeover Transaction which the Company Board in good faith determines
represents a financially superior transaction for the stockholders of
the Company as compared to the Merger if, and only to the extent that:
(A) the Company Board determines after consultation with Greenberg,
Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. or other outside counsel
of national reputation for its expertise in corporate and securities law
matters as the Company shall select ("Company Counsel"), that failure to
take such action would be inconsistent with the compliance by the
Company Board with its fiduciary duties to stockholders imposed by law,
(B) prior to or concurrently with furnishing such information to, or
entering into discussions or negotiations with, such a person or entity
the Company provides written notice to Parent that it is so doing; and
(C) the Company keeps Parent informed of the status (excluding, however,
the identity of such person or entity and the terms of any proposal) of
any such discussions or negotiations; and (y) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with regard
to a takeover transaction.
(e) The Company will not, and will not permit any Company
Subsidiary to, acquire or agree to acquire by merging or consolidating
with or into, purchasing a substantial portion of the assets or stock
of, or otherwise, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets outside the ordinary
and usual course of business consistent with past practice, or otherwise
enter into, amend or modify any material commitment or transaction,
without the prior written consent of the Parent, such consent not to be
unreasonably withheld.
(f) The Company will not and will not permit any Company
Subsidiary to enter into, amend or modify the Settlement Agreement, nor
any agreement with CNA, Sphere Drake, Schinnerer, any lessor, American
Insurance Group ("AIG"), or any director of the Company, without the
prior written consent of the Parent, such consent not to be unreasonably
withheld.
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(g) The Company will not and will not permit any Company
Subsidiary to, sell, lease, license, encumber or otherwise dispose of,
or agree to sell, lease, license, encumber or otherwise dispose of, any
of its assets outside the ordinary and usual course of business
consistent with past practice.
(h) The Company will not and will not permit any Company
Subsidiary to: (i) incur, assume, prepay, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently
or otherwise) for any indebtedness for borrowed money, or (ii) issue or
sell any debt securities or warrants or rights to acquire any debt
securities of the Company or any Company Subsidiary or guarantee any
obligations of others; (iii) except for loans, advances or capital
contributions to or investments in, a wholly owned Company Subsidiary,
make any loans, advances or capital contributions to, or investments in,
any other person or entity except for: (A) investments in IntelliSTAR in
an amount not greater than $75,000 pursuant to the General Partnership
Agreement dated as of July 14, 1995 between HMS and Professional Forum
Enterprises, Inc., a Florida corporation, or (B) investments or loans
made in the ordinary course of business which in no event shall exceed
$50,000 in any specific investment or loan PROVIDED, HOWEVER, that the
aggregate amount of all investments, loans or capital contributions made
by the Company or any Company Subsidiary shall not exceed $200,000 in
the aggregate, and any such loans or advances shall be repayable to the
Company within a period not to exceed six months.
(i) The Company will not and will not permit any Company
Subsidiary to adopt, amend, terminate or enter into any compensation,
collective bargaining, employee pension, profit sharing, retirement,
insurance, incentive compensation, severance, vacation or other plan,
agreement, trust, fund or arrangement for the benefit of any of its
employees (whether or not legally binding).
(j) The Company shall not, and shall not permit any Company
Subsidiary to: (i) increase the aggregate amounts payable under or
otherwise change in a manner materially (in reference to all Executive
Contracts) adverse to the Company any other material term of the
Executive Contracts or any other agreement with its executive officers
except as and to the extent disclosed in the Company Disclosure
Schedule, (ii) enter into any employment agreement with any executive
officer, (iii) increase the compensation payable to any other officer or
employee except for increases in the ordinary course of business
consistent with past practice of the Company; provided that any such
increase to a compensation level which exceeds $100,000 shall require
Parent consent which shall not be unreasonably withheld.
(k) The Company shall file all reports, schedules and definitive
proxy statements (the "Company Filings") required to be filed by the
Company with the SEC and shall provide
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copies thereto to Parent promptly upon the filing thereof. As of its
respective date, each Company Filing will comply in all material
respects with the requirements of the Exchange Act and the applicable
rules and regulations of the Commission thereunder and none of the
Company Filings will contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they are made, not misleading. As of their respective dates, the
financial statements of the Company included in the Company Filings will
have been prepared in accordance with generally accepted accounting
principles consistently applied (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form
10-Q), and will fairly present in all material respects the consolidated
financial position of the Company as at the dates thereof and the
consolidated results of operations, cash flow or changes in financial
position for the periods indicated therein. Upon the filing of a Company
Filing, the Company Filing shall be considered as an SEC Document for
all purposes of this Agreement.
(l) The Company will not take, agree to take, or knowingly
permit to be taken any action or do or knowingly permit to be done
anything in the conduct of the Business of the Company and the Company
Subsidiaries, or otherwise, which would be contrary to or in breach of
any of the terms or provisions of this Agreement, or which would cause
any of the representations of the Company contained herein to be or
become untrue in any material respect.
6.2 RIGHTS AGREEMENT. The Company Board will take all necessary action
so that:
(a) the common stock purchase rights (the "Rights") issued by
the Company pursuant to the Rights Agreement dated as of November 1,
1990 between the Company and Continental Stock Transfer and Trust
Company (the "Rights Agreement") will not be exercisable, trade
separately, or be otherwise affected by the Merger;
(b) neither Parent not Sub, nor any of their respective
affiliates will be deemed to be an "Acquiring Person" or an "Adverse
Person" (as such terms are defined in the Rights Agreement); and
(c) neither a "Distribution Date" nor a "Stock Acquisition Date"
(as such terms are defined in the Rights Agreement) shall occur by
virtue of the Merger.
The Company will take any and all action reasonably requested by Parent to
ensure and confirm that the Company, Parent, Sub and their respective affiliates
will not have any obligations in connection with the Rights or the Rights
Agreement in connection with the Merger. The Company shall not redeem the
Rights, or amend or terminate the Rights Agreement prior to the Effective
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Time unless required to do so by order of a court of competent jurisdiction.
6.3 TERMINATION OF EMPLOYMENT. At the Closing, (i) the Company shall
cause to be terminated the employment agreement between the Company and Carl
Buccellato dated as of December 22, 1995, existing as of the date hereof and
attached hereto as Exhibit B; (ii) the Company shall pay to Carl Buccellato
eight hundred thousand ($800,000.00) dollars in consideration for such
termination; and (iii) the Company and Carl Buccellato shall acknowledge in
writing that neither party shall have any further obligations resulting from the
termination of or relating to said employment agreement.
6.4 CONSULTING AGREEMENT. At the Closing and upon termination of the
employment agreement referred to in Section 6.3 hereof, the Surviving
Corporation shall enter into a three year consulting agreement with Carl
Buccellato (the "Consultant") whereby Carl Buccellato shall provide consulting
services to the Surviving Corporation for no more than a maximum of one thousand
hours per year. The consulting agreement shall contain restrictive covenants
substantially similar to the restrictive covenants contained in Exhibit B
attached hereto at Article VIII, Section 8.1. The restrictions on competition
set forth in subsection (b) of said Section 8.1 shall terminate upon the
expiration of the consulting agreement unless Surviving Corporation elects to
extend such restriction for one additional year, in which case it will pay
Consultant $50,000 during such extension year in equal monthly installments. In
consideration of the services to be rendered by Carl Buccellato to the Surviving
Corporation pursuant to said Consulting Agreement and in consideration of the
restrictive covenants to be contained therein, the Surviving Corporation shall
(i) pay to Carl Buccellato a consulting fee in the amount of two hundred
thousand ($200,000) per year, payable in equal monthly installments of
$16,666.67 for the term of the consulting agreement, (ii) continue during the
term of such consulting agreement, Consultant's present life, medical, dental,
group term and accidental death and disability insurance and medical executive
reimbursement Coverage, all at a maximum aggregate cost to Surviving Corporation
of not more than $30,000 per year, and (iii) transfer to Consultant his company
owned automobile at the book value thereof at December 31, 1995.
6.5 TERMINATION OF LIPSON CONSULTING AGREEMENT. At the Closing, (i) the
Company shall cause to be terminated the Engagement Agreement between the
Company and Gary Lipson dated as of December 22, 1995, as amended by First
Amendment to Engagement Agreement dated April 29, 1996, Second Amendment to
Engagement Agreement dated May 14, 1996 and to Consulting Agreement dated April
29, 1996 (copies of which are collectively referred to as the "Engagement
Agreement" and copies of which are attached hereto as Exhibit C); (ii) the
Company and Gary Lipson shall acknowledge in writing that neither party shall
have any further obligations resulting from the termination of or relating to
said Engagement Agreement; and (iii) Gary Lipson shall execute and deliver to
Parent a general release in favor of Parent, Sub, the
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Surviving Corporation and each of the officers and directors thereof. In
consideration of the foregoing, and of all obligations of any kind to Gary
Lipson under the Engagement Agreement or otherwise, the Surviving Corporation
shall pay to Gary Lipson the amount of One Hundred Thousand Dollars ($100,000)
payable in equal monthly installments of $8,333.33 under the terms of an
agreement to be mutually agreed which will provide for any disputes to be
resolved in the courts of the State of Florida or the United States District
Court of the Southern District of Florida and that the laws of the State of
Florida shall govern such agreement. With the exception of bona fide legal fees
or directors' fees for services actually rendered, the Company has not since
January 1, 1996 made, and will not through the Closing Date make, any payments
to Gary Lipson of any kind whatsoever.
6.6 MUTUAL RELEASES. At the Closing the Company shall cause each of its
directors to execute and deliver to Parent and Sub (and each director and
principal stockholder thereof ("Parent Affiliate")), and Parent and Sub (and
each Parent Affiliate) shall execute and deliver to each of the Company's
directors, mutual releases releasing and forever discharging each other party to
this Agreement and, in the case of Parent and Sub, the Parent Affiliates, from
any and all demands, causes of action or suits in law or in equity arising out
of or related to any actions or inactions of such party with respect to this
Agreement and the Merger and all of the transactions related thereto (provided
same are not in violation of the terms of this Agreement) up to and including
the Closing Date; PROVIDED HOWEVER THAT none of the foregoing shall limit in any
way the Surviving Corporation's right, or the Parent's or Sub's right (if any),
to assert any such demand, cause of action or claim (or facts that would
otherwise support such a demand, cause of action or claim) as a defense of any
claim or action commenced against it by any party released in accordance with
this Section.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 ACCESS TO PROPERTIES AND RECORDS.
(a) Between the date of this Agreement and the Effective Time,
the Company will, and will cause each Company Subsidiary to, provide Parent and
its accountants, counsel and other authorized representatives full access during
reasonable business hours and under reasonable circumstances to any and all
premises, properties, contracts, commitments, books, records and other
information (including tax returns filed and those in preparation) of the
Company and each Company Subsidiary and will cause their officers to furnish to
Parent and its authorized representatives any and all financial, technical and
operating data and other information pertaining to the business of the Company
and the Company Subsidiaries, as Parent shall from time to time request. Without
limiting the generality of the foregoing, those representatives of the Parent
listed on Exhibit
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7.1 may be present on-site and have access to all facilities during business
hours for the purpose of monitoring the operations of the Business; provided
that not more than three such representatives shall be so present at any time.
(b) All information furnished or to be furnished to Parent or
Sub, or obtained by the representatives referred to in (a) above, shall be
subject to the terms of the confidentiality agreement (the "Confidentiality
Agreement") between the Company and Parent which has previously been executed.
7.2 PROXY STATEMENT. The parties will cooperate in the preparation and
filing of a preliminary Proxy Statement with the SEC as soon as practicable
after the date hereof, and will use their best efforts to respond to the
comments of the SEC in connection therewith and to furnish all information
required to prepare the definitive Proxy Statement (including, without
limitation, financial statements and supporting schedules and certificates and
reports of independent public accountants). Promptly after receipt of comments
from the SEC, the Company will cause the definitive Proxy Statement to be mailed
to the stockholders of the Company and, if necessary, after the definitive Proxy
Statement shall have been so mailed, promptly circulate amended, supplemental or
supplemented proxy material and, if required in connection therewith, resolicit
proxies. The Company will not use any proxy material in connection with the
Company Stockholders Meeting without Parent's prior approval which will not be
unreasonably withheld. Parent and the Company will promptly furnish each other
with all information concerning themselves, their subsidiaries, directors,
officers and stockholders and such other matters as may be necessary or
advisable for the Proxy Statement, and any other statement or applications made
by or on behalf of Parent or the Company to any public, governmental or
regulatory body in connection with the Merger and the other transactions
contemplated by this Agreement.
7.3 STOCKHOLDER APPROVAL. The Company shall promptly call a meeting of
its stockholders for the purpose of voting upon this Agreement and the Merger
and the Company agrees that this Agreement and the Merger shall be submitted at
a meeting of the stockholders of the Company and the Company shall take all
steps necessary to duly call, give notice of, convene, and hold such meeting
(the "Company Stockholders' Meeting"). The Company Stockholders' Meeting shall
be held as soon as permissible and practicable following the date upon which the
Proxy Statement is distributed. The Company agrees that the Company Board will
recommend that its stockholders adopt this Agreement and approve the Merger
unless advised in writing by its counsel, Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A. or other Company Counsel, that such recommendation will
constitute a violation of its fiduciary duties to stockholders.
7.4 EMPLOYEE BENEFIT PLANS. The Company agrees not to grant nor further
amend (except as provided in Section 7.5) any options pursuant to the 1988 Stock
Option Plan, the 1988 Incentive Stock Option Plan or the 1992 Non-Employee
Directors' Stock Option Plan or any other Plan, from and after the date hereof,
and further
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agrees that the 1988 Stock Option Plan, the 1988 Incentive Stock Option Plan and
the 1992 Non-Employee Directors' Stock Option Plan shall be terminated as of the
Effective Time of the Merger.
7.5 COMPANY STOCK OPTIONS. The Company shall (subject to the approval of
the holders thereof) make such adjustments to all the outstanding options to
purchase shares of Company Common Stock as may be necessary to provide that at
the Effective Time: (i) each such option then exercisable other than due to any
amendment dated after April 1, 1996, up to a maximum of 456,550 options (the
"Company Options") shall, in settlement, be converted into the right to receive
a cash payment in an amount equal to the difference, if any, between the Merger
Price and the per share exercise price of such Company Option, multiplied by the
number of shares of Company Common Stock subject to such Company Option, and
(ii) all other currently non-exercisable options issued to Directors of the
Company (whether under any of the Plans, or otherwise) shall be cancelled at no
cost to the Company. The Company shall adopt such amendments to its plans under
which such Company Options were granted, and shall use its reasonable best
efforts to obtain prior to the Closing Date such consents of the holders of such
Company Options, as shall be necessary to effectuate the foregoing.
7.6 BEST EFFORTS, ETC. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including obtaining any consents, authorizations, exemptions and approvals from,
and making all filings with, any insurance department, governmental, regulatory
or public body or authority which are necessary or, in the judgment of Parent,
desirable in connection with the transactions contemplated by this Agreement.
7.7 HSR ACT. The Company and Parent shall, as soon as practicable, file
Notification and Report Forms under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") and shall use best efforts to respond as promptly as
practicable to all inquiries received from the FTC or the Antitrust Division for
additional information or documentation.
7.8 INTERIM FINANCIALS. Prior to the Effective Time, the Company will
deliver to Parent as soon as available but in no event later than 45 days after
the end of any fiscal quarter, a consolidated statement of financial position of
the Company and the Company Subsidiaries as at the last day of such fiscal
quarter and the consolidated statements of income and changes in financial
position of such party and its subsidiaries for the fiscal period then ended
(which statements may be unaudited) prepared in conformity with the requirements
of Form 10-Q under the Exchange Act.
7.9 MATERIAL EVENTS. At all times prior to the Effective Time, each
party shall promptly notify the others in writing of
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the occurrence of any event which will or may result in the failure to satisfy
any of the conditions specified in Articles VIII or IX hereof.
7.10 PUBLIC ANNOUNCEMENTS. Except as required by applicable law, rule,
regulation or legal process (including the rules of the Nasdaq National Market),
neither Parent, nor Sub nor the Company, nor any of their respective affiliates,
officers, directors, employees, agent or representatives will, without the prior
consent of the other parties, make any public announcement or statement
regarding the matters contemplated by this Agreement or the transactions
contemplated hereby. If any such announcement or statement is so required, the
announcing party shall consult in advance with the other parties concerning the
reasons for and the content of such announcement or statement.
7.11 INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE COMPANY. The
Surviving Corporation will indemnify, defend and hold harmless the officers and
directors of the Company for their acts and omissions occurring prior to the
Effective Time to the full extent permitted by applicable provisions of Delaware
law (including rights to receive advance payment of expenses in defending any
suits, actions or proceedings). The Parent shall cause the Surviving Corporation
to maintain in full force and effect for not less than 4 years after the
Effective Time, officers' and directors' liability insurance covering said
persons (or shall obtain substantially equivalent insurance covering such
persons), on terms not materially less favorable than such insurance maintained
in effect by the Company on the date hereof in terms of coverage (including,
without limitation, types of claims, time period of claims and persons covered),
amounts and deductibles; provided, however, that, in providing such officers'
and directors' insurance, the Surviving Corporation will have no obligation
whatsoever to pay premiums on such officers' and directors' liability insurance
in excess of 150% of the annual premium existing on the officers' and directors'
liability insurance as of the date hereof.
7.12 AGREEMENT TO VOTE FOR MERGER.
(a) Parent and Sub agree that they shall vote any shares of
the Company owned by either of them directly or indirectly for approval
of the Merger.
(b) Company agrees and represents that each member of its
Board of Directors has agreed to vote any shares of the Company owned by
such Director directly or indirectly ("Director's Shares") for approval
of the Merger. Company further agrees to provide the Parent with an
irrevocable proxy in form attached hereto as Exhibit D in favor of
Parent or its nominees with respect to all such Director's Shares.
7.13 SETTLEMENT AGREEMENT FUNDING. At the Closing, Parent agrees that it
will cause funds to be available to enable HMS to make a payment to ANIC in full
and complete satisfaction of HMS' obligations pursuant to the Settlement
Agreement and HMS agrees to use such funds solely and exclusively to make such
payment to
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ANIC in full and complete satisfaction of its obligations pursuant to the
Settlement Agreement.
ARTICLE VIII
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
The respective obligations of the parties to effect the Merger are
subject to the satisfaction, on or prior to the Closing, of the following
conditions.
8.1 HSR APPROVAL. Any applicable waiting period under the HSR Act shall
have expired or been terminated.
8.2 OTHER APPROVALS.
(a) No provision of any applicable law or regulation shall
prohibit the consummation of the applicable Closing.
(b) There shall not have been commenced or threatened, or be in
effect, any temporary restraining order, preliminary injunction or
permanent injunction or other order issued by any court of competent
jurisdiction preventing the consummation of the transactions
contemplated by this Agreement.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB
Each and every obligation of Parent and Sub under this Agreement shall
be subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions, each of which may be waived by Parent and Sub as provided
herein except as otherwise provided by law.
9.1 REPRESENTATION AND WARRANTIES TRUE. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects as of the date hereof and shall be deemed to have been
made again at and as of the Closing and shall then be true and correct in all
material respects, and at the Closing, the Company shall have delivered to
Parent a certificate to that effect signed by the Chief Executive Officer and
the principal financial officer of the Company.
9.2 THE COMPANY'S PERFORMANCE. Each of the obligations of the Company to
be performed by it or its officers or directors on or before the Closing Date
pursuant to the terms hereof shall have been duly performed in all material
respects by the Closing, including any action with respect to the Rights and the
Rights Agreement pursuant to Section 6.2 of this Agreement, and at the Closing,
the Company shall have delivered to Parent a certificate to that effect signed
by the Chief Executive Officer and the principal financial officer of the
Company.
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9.3 STOCKHOLDER APPROVAL AND OTHER COMPANY ACTION. The approval of the
stockholders by the requisite vote of the Company referred to in Section 7.3
hereof shall have been obtained.
9.4 OTHER APPROVALS. All regulatory consents, approvals, or clearances
necessary for the consummation of the Closing shall have been obtained.
9.5 CONSENTS. The lessor of the principal real estate premises occupied
by the Company, and each other party to any contract with the Company or the
Company's Subsidiaries: (i) the loss of which could have a Company Material
Adverse Effect, and (ii) which provides that such other party shall have the
right to terminate such contract, or declare such contract to be in default, as
a result of the Merger or any of the transactions or events described herein;
shall each have granted its consent in form and substance reasonably
satisfactory to Parent's counsel.
9.6 OPINION OF THE COMPANY'S COUNSEL. Parent shall have been furnished
with opinions of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.,
counsel to the Company, dated the Closing Date, in substantially the form
attached hereto as Exhibit E. In rendering such opinions such counsel may rely,
to the extent such counsel deems such reliance necessary or appropriate, upon
opinions of other counsel, in form and substance satisfactory to Parent (or may
deliver such opinions of other counsel each dated the Closing Date and addressed
to Parent), and, as to matters of fact, upon certificates of government
officials and of any officials of the Company or any Company Subsidiary,
provided that the extent of such reliance is set forth in such opinion and such
opinion states that it is reasonable for Parent to rely thereon.
9.7 CNA. Neither the Company, nor any Company Subsidiary, nor, to the
best of the Company's knowledge, CNA shall be in default under the terms of any
agreement or understanding between CNA and the Company or any of the Company
Subsidiaries.
9.8 INSURANCE COUNSEL OPINION. Parent shall have received the written
opinion of Bickford & Hahn LLP, insurance counsel to the Company, in form and
substance satisfactory to Lane Altman & Owens LLP, counsel to Parent (which
opinion shall specifically set forth the facts and legal analysis forming the
basis of such opinion) that, as of the Closing, the Company and each Company
Subsidiary has taken all necessary action under the reinsurance agreement with
Sphere Drake set forth in Section 4.20 of the Disclosure Schedule to ensure the
enforceability by the reinsured or its successors and assigns of the full
aggregate limits thereof, including all reinstatements, and that such
reinsurance is a valid and binding legal obligation of Sphere Drake.
9.9 AGREEMENTS WITH AFFILIATES. All agreements, understandings,
commitments or arrangements with officers and directors of the Company or the
Company Subsidiaries, or any beneficial holder of 5% or more of the Company's
Common Stock, or any affiliate of any of the foregoing, executed or entered into
on or subsequent to April 1, 1996 regardless of when effective
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shall be cancelled or terminated at no cost to the Company, unless otherwise
directed by the Parent with respect to any particular arrangement(s) identified
by Parent. Without limiting the generality of the foregoing, this shall include
the items set forth in Item 9.9 of the Disclosure Schedule.
9.10 BINDING SETTLEMENT AGREEMENT. The Settlement Agreement, as attached
hereto as Exhibit A, shall be in full force and effect and, at the Closing, upon
the payment of funds required by such Agreement to ANIC pursuant to the
Settlement Agreement, the Company shall deliver to Parent the mutual releases
executed by the parties to the Settlement Agreement and attached as exhibits to
the Settlement Agreement.
9.11 RESIGNATIONS AND CERTIFICATES. The Company shall have furnished
Parent with undated resignations of its and the Company Subsidiaries' officers
and directors, and such certificates of its officers and others to evidence
compliance with the conditions set forth in this Article IX as may be reasonably
required by Parent.
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
Each and every obligations of the Company under this Agreement shall be
subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions, each of which may be waived by the Company as provided
herein except as otherwise provided by law:
10.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Parent and Sub contained in this Agreement shall be true and
correct in all material respects as of the date hereof and shall be deemed to
have been made again at and as of the Closing and shall then be true and correct
in all material respects, and at the Closing, Parent and Sub shall have each
delivered to the Company a certificate to that effect signed by the Chief
Executive Officer and the principal financial officer of Parent and of Sub.
10.2 PARENT'S AND THE SUB'S PERFORMANCE. Each of the obligations of
Parent and Sub to be performed by them on or before the Closing Date pursuant to
the terms hereof shall have been duly performed and complied with in all
material respects by the Closing and at the Closing Parent and Sub shall have
each delivered to the Company a certificate to that effect signed by the Chief
Executive Officer and principal financial officer of Parent and Sub.
10.3 STOCKHOLDER APPROVAL. The approval of the stockholders of the
Company referred to in Section 7.3 hereof shall have been obtained.
10.4 OPINION OF PARENT'S AND THE SUB'S COUNSEL. The Company shall have
been furnished with an opinion of Lane Altman & Owens
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LLP, dated the Closing Date, in substantially the form attached hereto as
Exhibit F. In rendering such opinions such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon opinions of other
counsel, in form and substance satisfactory to the Company (or may deliver such
opinions of other counsel each dated the Closing Date and addressed to the
Company), and, as to matters of fact, upon certificates of government officials
and of any official or officials of Parent Sub, provided that the extent of such
reliance is set forth in such opinions and such opinions state that it is
reasonable for the Company to rely thereon.
10.5 ABSENCE OF ORDER. No restraining order, or injunctions of any court
which prevents consummation of the Merger shall have been entered and remain in
effect.
10.6 CERTIFICATES. Parent and Sub shall have furnished the Company with
such certificates of their respective officers and others to evidence compliance
with the conditions set forth in this Article X as may be reasonably requested
by the Company.
10.7 FAIRNESS OPINION. The Company has received from Raymond James &
Associates, Inc. an opinion that the price to be paid pursuant to the Agreement
for the shares of Company Common Stock is fair to the stockholders of the
Company from a financial point of view and such opinion shall not have been
withdrawn or modified.
ARTICLE XI
CLOSING
11.1 TIME AND PLACE. Subject to the provisions of Articles VII, IX, X an
XII hereof, the closing (herein sometimes referred to as the "Closing") of the
transactions contemplated hereby shall take place as soon as practicable after
the satisfaction or waiver of the conditions to Closing contained in Articles
VIII, IX and X, at the offices of Lane Altman & Owens LLP, 101 Federal Street,
Boston, Massachusetts at 1:00 p.m., local time (the "Closing Date"), or at such
other place, at such other time, or on such other date as the Parent, Sub and
the Company may mutually agree upon for the Closing to take place.
11.2 DELIVERIES AT THE CLOSING. At the Closing:
(a) There shall be delivered to Parent, Sub and the Company
the opinions, certificates and other documents and instruments provided
to be delivered under Articles IX and X hereof.
(b) The Sub and the Company shall cause the Certificate of
Merger to be filed in accordance with the provisions of the DGCL and
shall take any and all other lawful actions and do any and all other
lawful things necessary to effect the Merger and to enable the Merger to
become effective.
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ARTICLE XII
TERMINATION AND ABANDONMENT
12.1 TERMINATION. Notwithstanding adoption of this Agreement by
stockholders of the Company, this Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time of the Merger:
(a) by the mutual consent of the Boards of Directors of
Parent, Sub and the Company; or
(b) by Parent if, without fault of such terminating party:
(i) the Merger shall not have been consummated on or
before the later of (i) September 30, 1996 or (ii) two
business days after the Company Stockholders' Meeting; or
(ii) there shall have occurred (A) any general
suspension of, or limitation on prices for, trading in
securities on the New York Stock Exchange or National
Association of Securities Dealers Automated Quotations System,
(B) a declaration of a banking moratorium or any limitation or
suspension of payments by any U.S. governmental authority on
the extension of credit by lending institutions, (C) a
commencement of war or armed hostilities directly involving
the United States, or (D) any limitation (whether nor not
mandated) by any governmental authority which will materially
adversely affect the extension of credit by banks or other
lending institutions in the United States.
(c) by either Parent or the Company, if, without fault of such
terminating party:
(i) the Merger shall not have been consummated on or
before October 31, 1996, or such earlier date as may be
specified in the Settlement Agreement as a date allowing ANIC
to terminate the Settlement Agreement; or
(ii) if any court of competent jurisdiction in the
United States or other United States governmental body shall
have issued an order, judgment or decree (other than a
temporary restraining order) restraining, enjoining or
otherwise prohibiting the Merger and such order, judgment or
decree shall have become final and nonappealable.
(d) by Parent, if any of the following events have occurred:
(i) holders of more than 10% of the Company's Common
Stock shall have claimed or perfected appraisal rights and
become Dissenting Shares;
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(ii) the Company (or the Company Board) shall have
authorized, recommended, proposed or publicly announced its
intention to enter into any merger or consolidation agreement
(other than this Agreement) or any other transaction in which
all or substantially all of the Company's or any Company
Subsidiary's equity or assets would be acquired by a third
party (other than parent, Sub or any of their affiliates); or
(iii) the Company Board does not recommend in the
Proxy Statement that the Company's stockholders adopt and
approve the Merger, this Agreement and the transactions
contemplated thereby; or
(iv) after publicly recommending in the Proxy
Statement that Company's stockholders adopt and approve the
Merger, this Agreement and the transactions contemplated
hereby, the Company Board shall have withdrawn, modified or
amended such recommendation in any respect materially adverse
to Parent or Sub.
12.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement and the Merger by either Parent or the Company, this Agreement shall
become void and there shall be no liability hereunder on the part of Parent,
Sub, or the Company or their respective officers or directors except, in each
case, for a knowing breach, and except as provided in Sections 12.3 and 13.1
hereof, which Sections shall survive any such termination and continue in effect
thereafter.
12.3 TERMINATION PAYMENTS AND EXPENSES:
(a) If any of the following occurs and neither Parent nor Sub
is in material breach of their obligations contained herein:
(i) if any of the events set forth in Section 12.1(d)
occurs and as result thereof Parent terminates this Agreement;
or
(ii) at any time on or prior to the expiration of two
years following termination of this Agreement, a definitive
agreement is entered into for the acquisition of all or
substantially all of the Company's equity or assets with a
person other than Parent or Sub, or any of their respective
affiliates at either (A) a price per share in excess of the
Merger Price, or (B) an aggregate purchase price in excess of
the aggregate purchase price contemplated in this Agreement
(which shall include the payments contemplated by Section 7.13
hereof); or
(iii) if the following shall have occurred: (A) the
Company Stockholders' Meeting shall have been held to adopt
this Agreement and the Company's stockholders shall have
failed to adopt this Agreement, and (B)(I) there shall have
existed at the record date for the
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Company Stockholders' Meeting or at the date thereof a person
or group who shall have beneficially owned or been entitled to
vote or direct the voting of not less than 20% of the then
outstanding shares of Company Common Stock, and who shall have
voted against this Agreement and the transactions contemplated
hereby, or (II) at the date of the Company Stockholders'
Meeting a person or group other than Parent, Sub or any of
their affiliates shall have in good faith proposed (and such
person or group shall appear to have the ability to consummate
such proposal) to acquire the Company,
then the Company shall pay Parent, upon Parent's request, the amount of
Parent's and Sub's reasonable documented out-of- pocket expenses
actually incurred by them in connection with the proposed acquisition of
the Company including fees and expenses of legal counsel, investment
bankers and accountants plus a fee of $500,000.
(b) The Company acknowledges that the agreements contained in
this Section 12.3 are an integral part of the transactions contemplated
by this Agreement and that, without these agreements, Parent and Sub
would not enter into this Agreement. Accordingly, if the Company fails
to pay any amounts pursuant to this Section 12.3, and, in order to
obtain such payment, legal action is commenced which results in a
judgment against the Company therefor, the Company will pay the
plaintiff's reasonable costs (including reasonable attorneys' fees) in
connection with such suit, together with interest computed on any
amounts determined pursuant to this Section 12.3 (computed from the date
or dates incurred) at the prime rate of interest announced from time to
time by Citibank, N.A. The Company's obligations pursuant to this
Section 12.3 will survive any termination of this Agreement.
(c) Except as provided in this Section 12.3, all costs and
expenses incurred in connection with this Agreement shall be paid in
accordance with Section 13.1
ARTICLE XIII
MISCELLANEOUS
13.1 EXPENSES. Except as provided in Section 12.3, all costs and
expenses incurred in connection with this Agreement, and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses EXCEPT THAT in no event shall Company's legal expenses exceed an amount
that is reasonable and fully supported by available time records.
13.2 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties, obligations, covenants and agreements of the
Company, Parent and Sub contained herein or in any Exhibit or Schedule,
certificate or letter delivered pursuant hereto shall expire with, and be
terminated and extinguished by, the effectiveness of the Merger and shall not
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survive the Effective Time of the Merger, except those provided in Articles I
and III and Sections 7.1(b), 7.10, 7.11 and 12.3.
13.3 HEADINGS. The descriptive headings of the several articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
13.4 NOTICES. All notices or other communications required hereunder
shall be in writing and shall be deemed given on the date delivered if delivered
personally (including by reputable overnight courier), on the date transmitted
if sent by telecopy, (which is confirmed), or 72 hours after mailing if mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Sub, to:
The Cross Country Group, Inc.
4040 Mystic Valley Parkway
Medford, Massachusetts 02133
Attention: Sidney Wolk, President
Telecopy: (617) 395-6706
with a copy to:
Lane Altman & Owens LLP
101 Federal Street
Boston, Massachusetts 02110
Attention: Robert Rosen, Esq.
Telecopy: (617) 345-0400
and
(b) if to the Company, to:
Homeowners Group, Inc.
400 Sawgrass Corporate Parkway
Sunrise, Florida 33325
Attention: Carl Buccellato
President, Chairman and
Chief Executive Officer
Telecopy: (954) 845-2260
with a copy to:
Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33133
Attention: Paul Berkowitz, Esq.
Telecopy: (305) 579-0717
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<PAGE>
13.5 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns and the persons referred to in
Section 7.11, but neither this Agreement nor any of the rights interests, or
obligations hereunder, shall be assigned by any of the parties hereto without
the prior written consent of the other parties, except that Sub may assign all
of its rights, interests and obligations hereunder, provided that the transferee
agrees in writing to be bound by all of the terms, conditions and provisions
contained herein and the Parent remains responsible for all of Parent's
obligations hereunder.
13.6 COMPLETE AGREEMENT. This Agreement, including the schedules,
exhibits and other writings referred to herein or delivered pursuant hereto, the
Confidentiality Agreement and certain agreements entered into between Parent and
certain stockholders of the Company together contain the entire understanding of
the parties with respect to the Merger and the related transactions and
supersede all prior arrangements or understandings with respect thereto.
13.7 MODIFICATIONS, AMENDMENTS AND WAIVERS. At any time prior to the
Effective Time of the Merger (notwithstanding any stockholder approval) if
authorized by their respective boards of Directors and to the extent permitted
by law, (i) the parties hereto may, by written agreement, modify, amend or
supplement any term or provision of this Agreement, and (ii) any term or
provision of this Agreement may be waived by the party which is, or whose
stockholders are, entitled to the benefits thereof; provided, however, that
after this Agreement is adopted by the Company's stockholders pursuant to
Section 7.3 hereof, no such amendment or modification shall be made which
changes the cash into which Company Common Stock is to be converted as provided
in Section 3.1, or which in any way materially adversely affects the rights of
such stockholders without the further approval of such stockholders. Any written
instrument or agreement referred to in this paragraph shall be validly and
sufficiently authorized for the purposes of this Agreement if signed on behalf
of Parent, the Company and Sub by a person authorized to sign this Agreement.
13.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
13.9 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including but not limited to
matters of validity, construction, effect and performance.
13.10 ACCOUNTING TERMS. All accounting terms used herein which are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with generally accepted accounting principles.
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<PAGE>
13.11 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
[END OF PAGE]
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers hereunto duly authorized,
all as of the date first written above.
THE CROSS COUNTRY GROUP, INC.
By: /s/ HOWARD WOLK
------------------------------
Name: Howard Wolk
Title: Vice President
ATTEST:
CHGI ACQUISITION CORPORATION
By: /s/ HOWARD WOLK
------------------------------
Name: Howard Wolk
Title: Vice President
ATTEST:
HOMEOWNERS GROUP, INC.
By: /s/ CARL BUCCELLATO
------------------------------
Name: Carl Buccellato
Title: President and Chief
Executive Officer
ATTEST:
Acknowledged and agreed to with
respect to Sections 6.3 and 6.4
/s/ CARL BUCCELLATO
- --------------------------------
Carl Buccellato, Individually
Acknowledged and agreed to with
respect to Section 6.5
/s/ GARY LIPSON
- --------------------------------
Gary Lipson, Individually
<PAGE>
EXHIBIT A
AGREEMENT FOR SATISFACTION OF JUDGMENT
This agreement for satisfaction of Judgment (the "Agreement") is entered
into between and amongst Accel International Corporation ("Accel), Acceleration
National Insurance Company ("ANIC"), Homeowners Group, Inc. (HOMG"), and
Homeowners Marketing Services, Inc. ("HMS").
BACKGROUND
A. Accel is a Delaware corporation with its principal place of business
at 475 Metro Place North, Dublin, Ohio 43017.
B. ANIC is an Ohio corporation with its principal place of business at
475 Metro Place North, Dublin, Ohio 43017.
C. HOMG is a Delaware corporation with its principal place of business
at 400 Sawgrass Corporate Parkway, Sunrise, Florida 33325-6235.
D. HMS is a Florida corporation and a wholly-owned sudsidiary of HOMG.
E. On or about November 20, 1991, ANIC is filed a six-count complaint in
the Court of Common Please of Franklin County, Ohio, in a case styled
ACCELERATION NATIONAL INSURANCE COMPANY V. HOMEOWNERS MARKETING SERVICES, INC.,
ET AL., Case No. 91CVH11-9404. The complaint was subsequently amended to
include ten counts.
F. On or about May 3, 1995, ANIC filed a fifteen-count complaint in the
Court of Common Pleas of Franklin County
<PAGE>
Ohio, in a case styled ACCELERATION NATIONAL INSURANCE COMPANY V. HOMEOWNERS
MARKETING SERVICES INC., ET AL., Case No. 94CVHO5-3083. The two complaints were
consolidated and tried as one action commencing on November 6, 1995 (the
"Litigation").
G. On December 20, 1995, judgment was entered in favor of ANIC against
HMS for the sum of $5, 156,022.00 plus interest and costs in the Litigation (the
"Judgment"). Judgment was also entered in favor of Defendant HOMG.
H. HMS has filed a notice of appeal from the Judgment initiating Case No.
96APE01-68 and Case No. 96APE1-69 in the Court of Appeals, Franklin County,
Ohio (the "Appeal"). On or about January 29, 1996, ANIC filed a conditional
cross-appeal of each of HMS appeals in the Court of Appeals of Franklin County,
Ohio, which cross-appeals are currently pending (the "Cross-Appeal").
I. ANIC has initiated post judgment proceedings in Florida and elsewhere,
including discovery in aid of execution. On March 13, 1996, the Circuit Court
for Broward County, Florida dismissed an action by HMS which contested the
domestication of the Judgment in Florida. No stay of execution of the Judgment
is presently in effect.
J. Simultaneously with ANIC's collection efforts, the parties have
engaged in negotiations for a settlement of their respective claims. In this
regard, HMS and HOMG have provided ANIC with some of the financial information
requested by ANIC regarding HMS, HOMG, and their affiliated
2
<PAGE>
companies. ANIC has relied upon the accuracy of such financial information in
entering into this Agreement.
K. HOMG has applied for and currently holds the right to receive a
federal income tax refund in the estimated amount of $1,277,449.00 from the
Internal Revenue Service ("IRS") for the 1993 taxable year, which refund is
currently being considered by the IRS (the "Refund Claim").
L. HOMG plans to enter into an agreement and plan of merger with a
purchaser pursuant to which, subject to the approval of the stockholders of
HOMG, the purchaser will acquire the outstanding shares of HOMG in exchange for
shares of the purchaser's stock (the "Merger Agreement").
M. The parties to this Agreement desire to provide for the satisfaction
and release of the Judgment and for the resolution of all disputes between
ANIC, HOMG and HMS.
STATEMENT OF AGREEMENT
In consideration of their mutual promises and covenants, the parties agree
as follows:
1. RECITALS. The foregoing recitals are true and correct and repeated
herein in their entirety.
2. CASH PAYMENT. ANIC agrees to accept the sum of $4,100,000.00 in cash
in full and complete satisfaction of the Judgment on the condition such payment
is received by ANIC no later than the closing of the Merger Agreement or August
31, 1996, whichever occurs first.
3. INCOME TAX REFUND. HOMG represents and warrants that it has applied
for, but has not yet received, a
3
<PAGE>
federal income tax refund for the years ending December 31, 1991 and 1992 in the
approximate amount of $1,277,499.00 (the "Refund Claim"). HOMG agrees to
collateralize the Judgment by giving ANIC a valid and enforceable security
interest in the Refund Claim. The Pledge and Security Agreement which HOMG will
execute simultaneously with the execution of this Agreement giving ANIC a valid
and enforceable security interest in the Refund claim, is attached hereto and
made a part of this Agreement as Exhibit 1. HOMG hereby warrants that it has
granted no other lien or security interest against the Refund Claim and further
warrants that there is no ERISA or federal tax lien against the Refund Claim.
Simultaneously with the execution of this Agreement, HOMG will furnish ANIC with
an opinion of counsel in a form reasonably satisfactory to ANIC that upon proper
recordation of the Pledge and Security Agreement, ANIC will hold a valid and
perfected lien and security interest in the Refund Claim. If the proceeds of the
Refund Claim are received by ANIC prior to the closing of the Merger Agreement.
ANIC agrees to accept at the closing of the Merger Agreement in full and
complete satisfaction of the Judgment the balance determined by subtracting from
$4,100,000.00 (plus interest, if any, pursuant to /section/8 of this Agreement)
the actual cash proceeds of the Refund Claim received by ANIC. If the closing of
the Merger Agreement occurs prior to ANIC receiving the proceeds of the Refund
Claim, then sum of $4,100,000.00 in cash shall be paid to ANIC in full and
complete satisfaction of
4
<PAGE>
the Judgment, and ANIC will execute such documents and instruments as may
reasonably be necessary to release and relinquish its security interest against
the Refund Claim. If ANIC receives the proceeds of the Refund Claim and
thereafter the obligation of ANIC to accept the discounted amount of
$4,100,000.00 is terminated pursuant to /section/7 of this Agreement. ANIC shall
retain the proceeds of the Refund claim in partial satisfaction of the
Judgment. If the obligation of ANIC to accept the discounted amount of
$4,100,000.00 is terminated pursuant to /section/7 of this Agreement before ANIC
receives the proceeds of the Refund Claim, the security interest shall remain in
full force and effect, and ANIC will be entitled to receive the proceeds of the
Refund claim in partial satisfaction of the Judgment.
4. DISMISSAL OF APPEAL AND CROSS-APPEAL. HMS will dismiss the Appeal
and ANIC will dismiss the Cross-Appeal immediately upon full execution of the
Merger Agreement, provided such execution is achieved on or prior to April 30,
1996, or within the five (5) day cure period thereafter provided in
/section/7(b) hereof. Upon timely execution of the Merger Agreement, HMS and
ANIC shall promptly instruct their counsel to approve and to submit an agreed
entry dismissing the Appeal and Cross-Appeal with prejudice in the form attached
hereto as Exhibit 2.
5. FORBEARANCE OF COLLECTION EFFORTS. Unless sooner terminated pursuant
to the provisions of /section/7 of this Agreement, ANIC will not undertake prior
to October 3, 1996
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<PAGE>
any act to execute on the Judgment, including the issuance on service of writs
of attachment, garnishment or execution from any court, or to obtain discovery
in aid of execution from any third party. ANIC shall assist HMS in avoiding
compliance and/or sanctions in relation to any court order compelling an action
in aid of execution.
6. CONDITION PRECEDENT TO CLOSING OF MERGER AGREEMENT. HOMG covenants,
represents, and warrants that satisfaction of the Judgment in accordance with
the terms of this Agreement shall be a condition precedent to the closing of the
Merger Agreement.
7. CONTINGENCIES AND TERMINATION. The obligations of ANIC to accept the
discounted amount of $4,100,000.00 in full satisfaction of the Judgment and to
forebear from any and all efforts to enforce the Judgment are contingent upon
the execution and closing of the Merger Agreement. Sections 2 and 5 of this
Agreement shall become null, void, and of no further force or effect at the
sole option of ANIC upon the occurrence of any one of the following events:
(a) the failure of the purchaser to execute and deliver to ANIC
the letter agreement attached hereto as Exhibit 3 within two (2) business
days of the full execution of this agreement;
(b) the Merger Agreement has not been fully executed on or before
April 30, 1996, provided that the failure of the Merger Agreement to be
executed is not cured within five (5) days;
6
<PAGE>
(c) the Merger Agreement has not been closed on or before October 31
1996;
(d) HOMG advises ANIC or publicly announces that the proposed Merger
Agreement has been abandoned, or the purchaser publicly announces that the
proposed Merger Agreement has been abandoned. HOMG further agrees to
directly notify ANIC within twenty-four hours should the proposed Merger
agreement be abandoned by HOMG or by the purchaser for any reason;
(e) the shareholders of HOMG fail to approve and to authorize the
proposed Merger Agreement;
(f) HOMG fails to obtain the approval of any government regulatory
body or agency from which approval of the Merger Agreement is sought; or
(g) other security interest or liens against the Refund Claim are
discovered by ANIC upon its completion of a search of public records,
which demonstrate breach of the warranties by HOMG set forth in /section/3
of this Agreement.
If any of the foregoing events occur and ANIC elects to terminate its agreements
and commitments set forth in /section/2 and 5 of this Agreement, ANIC shall
promptly notify HOMG and HMS in writing of its decision to do so.
8. INTEREST. In the event HMS has not fully satisfied its obligation to
pay $4,100,000.00 on or beforee August 31, 1996, interest on the unpaid amount
shall accrue
7
<PAGE>
at a per annum rate of 10% starting the day after August 31, 1996.
9. EFFECT OF TERMINATION. In the event ANIC elects in accordance with
/section/7 of the Agreement to terminate ANIC's obligations to accept the
discounted amount of $4,100,000.00 in full satisfaction of the Judgment and to
forebear from any and all efforts to enforce the Judgment, the parties shall be
in the same position they were in prior to this Agreement, except that (a) ANIC
shall retain the Refund Claim as partial satisfaction of the Judgment and shall
be free to enforce the remainder of the Judgment in full, and (b) if the Appeal
and the Cross-Appeal have been dismissed pursuant to /section/4 of this
Agreement prior to ANIC's election to terminate, such dismissals shall be
final, and neither HMS nor ANIC will be entitled to seek reinstatement of those
proceedings.
10. INFORMATION REGARDING MERGER AGREEMENT TRANSACTION. Subject to the
confidentiality provisions of /section/11 of this Agreement, HOMG agrees to
supply ANIC with copies of the following documents in their possession and
pertaining to the Merger Agreement immediately upon the finalization of each
such document; the certificate of merger between HOMG and the purchaser; the
proxy statement and prospectus to be sent to the stockholders of HOMG; all
requests for approval of the Merger Agreement submitted to government regulatory
bodies or agencies; and all responses to such requests for approval of the
merger Agreement submitted to government regulatory bodies or agencies.
8
<PAGE>
11. COVENANTS PENDING CLOSING. From the date of this Agreement until the
closing of the Merger Agreement or termination pursuant to the provisions of
/section/7 of this Agreement, whichever first occurs, HOMG and HMS hereby
covenant as hereinafter set forth;
(a) HOMG and HMS will conduct their business and operations according
to their ordinary and usual course of business. Without limiting the
generality of the foregoing, HOMG and HMS will not:
(i) create, incur or assume any indebtedness, including
obligations in respect of capital leases, except as necessary or
incidental to the scope and course of the usual, customary, day-to-day
operation of their business;
(ii) declare, set aside or pay a dividend or distribution, or
redeem or otherwise acquire any shares of HOMG stock;
(iii) increase in any manner the compensation of any of their
directors, officers or other managerial employees, or increase the
rate or terms of any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such
directors, officers or key employee except increases occurring in the
ordinary course of business in accordance with customary practices; or
9
<PAGE>
(iv) enter into any agreement, commitment or transaction
including without limitation any borrowing, capital expenditure or
capital financing) material to the business, operations or financial
condition of HOMG or HMS, except the Merger Agreement and such other
agreements, commitments or transactions as may be necessary or
incidental to the ordinary course of their business operations.
(b) Upon reasonable notice, HOMG will, on a monthly basis, (i) give ANIC
and its authorized representatives reasonable access to all books, records,
offices, and facilities of HOMG and its subsidiaries and affiliates, (ii)
permit ANIC to make inspections thereof during normal business hours as
ANIC may reasonably request, and (iii) cause their officers to furnish ANIC
with such financial and operating data and other information with respect
to the business of HOMG and its subsidiaries and affiliates as ANIC may
from time to time reasonably request. ANIC acknowledges and agrees that any
such documents or information obtained hereunder, and any non-publicly
available documents provided by HOMG pursuant to /section/10 of this
Agreement may contain trade secrets or other confidential or proprietary
information, will maintain the originals and any copies of any such
documents, and any reports or compilations derived therefrom in strictest
confidence
10
<PAGE>
and will not utilize them, or any information derived therefrom, for any
purpose whatsoever other than the completion of this Agreement and
enforcement of the Judgment in the event the obligations of the ANIC under
/section/5 of this Agreement are terminated. Without limiting the
generality of the immediately preceding sentence. ANIC shall not utilize
any information it obtains hereunder not any information derived therefrom
to compete with HMS, HOMG or their affiliates.
12. MUTUAL RELEASE. At the closing of the Merger Agreement and upon
receipt by ANIC of funds totaling $4,100,000.00 plus interest, if any, payable
pursuant to /section/8 of this Agreement (including any funds received in
respect of the Refund Claim), ANIC, Accel, HOMG and HMS will execute and
exchange a mutual release in the form attached hereto as Exhibit 4, and Accel
and ANIC shall execute and deliver to HMS in the forms attached hereto as
Composite Exhibit 5, Satisfaction of Judgment for each action pending in (i) the
Circuit Court of Broward County, Florida, styled HOMEOWNERS MARKETING SERVICES,
INC. V. ACCELERATION NATIONAL INSURANCE COMPANY, Case No. 96-001110 CACE (12)
(the "Domestication Action"); and (ii) the Court of Common Pleas of Franklin
County, Ohio, styled ACCELERATION NATIONAL INSURANCE COMPANY V. HOMEOWNERS
MARKETING SERVICES, INC., ET AL, Consolidated Case Nos. 91CVG11-9404,
91CVH05-3083 (the "Ohio Action"). Simultaneously therewith, ANIC will execute
and deliver to HMS in the forms attached as Composite Exhibit 6.
11
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Stipulations to Dismiss Action with Prejudice for (i) the Ohio Action; (ii) the
Domestication Action; (iii) that certain action pending in the Circuit Court of
Broward County, Florida, styled ACCELERATION NATIONAL INSURANCE COMPANY V.
HOMEOWNERS MARKETING SERVICES, INC., ET AL., Case No. 96-001152 (18); and (iv)
that certain action pending in the Circuit Court of Dade County, Florida, styled
ACCELERATION NATIONAL INSURANCE COMPANY V. HOMEOWNERS MARKETING SERVICES, INC.,
Case No. 96-00850 (CA) 23.
13. ADDITIONAL REPRESENTATIONS AND WARRANTIES. ANIC, Accel,, HOMG and HMS
each warrants and represents that the officer signing this Agreement on its
behalf is authorized by the corporate by-laws to do so and to bind the
corporation to the terms of this Agreement. By execution of this settlement
Agreement, the parties represent that they have the capacity to execute this
Agreement on behalf of HMS, HOMG, Accel, and ANIC, respectively. HMS and HOMG
hereby warrant: (i) that they have made no assignment of their claims or causes
of action against ANIC set forth in the Litigation; and (ii) that no other
person has any right to or interest in them, except for their attorneys who
claim only an attorney's lien in the proceeds, if any, of this settlement. ANIC
and Accel hereby warrant; (i) that they have made no assignment of its claims or
causes of action against HMS and HOMG set forth in the Litigation to any party
except between each other; and (ii) that no other person has any right to or
interest in them.
12
<PAGE>
14. PUBLICITY. No public release, announcement or other form of
publicity concerning the transactions contemplated hereby shall be issued by any
party prior to the full execution of this Agreement. Except as required by
applicable law, rule, regulation or legal process, neither ANIC, nor HOMG, nor
HMS, nor any of their respective affiliates, officers, directors, employees,
agents or representatives will, without the prior consent of the other parties,
make any public announcement or statement, including any press release,
regarding the matters contemplated by this Agreement; provided, however, that
upon full execution of the Merger Agreement HOMG and/or the purchaser may issue
a press release or releases announcing the merger, along with such other matters
as may be required by law or by the rules of any stock exchange or market on
which the shares of HOMG or the purchaser are listed or traded. Following the
dissemination of such release(s) by HOMG and/or purchaser. ANIC may issue a
press release in the form attached hereto as Exhibit 7. If any other such
announcement or statement is so required, the announcing party shall consult in
advance with the other parties concerning the reasons for and the content of
such announcement or statement.
15. GOVERNING LAW, CONSENT TO JURISDICTION. This Agreement shall be
construed according to the laws of the state of Ohio. Should any dispute arise
regarding this Agreement which the parties are unable to resolve, the parties
agree that the Court of Common Pleas, Franklin
13
<PAGE>
County, Ohio shall have exclusive jurisdiction to adjudicate any and all such
controversies.
16. CONSTRUCTION. The parties to this Agreement have been represented
by counsel in connection with the negotiations and drafting of this Agreement
and any ambiguity in this Agreement shall not be construed against any party.
Nothing herein expressed or implied is intended or shall be construed to confer
upon or give any person, firm, or corporation other than ANIC, HOMG and HMS and
their respective subsidiaries, affiliates, legal representatives, successors and
assigns, any rights or benefits under or by reason of this Agreement.
17. ENTIRE AGREEMENT, AMENDMENT, COUNTERPARTS. The parties agree that
this Agreement constitutes the entire agreement between them with regard to the
matters set forth herein. This agreement supersedes any and all prior
agreements or understandings between ANIC, HOMG and HMS as to the subject matter
of this Agreement. This Agreement may be modified or amended only by a written
document, signed by the duly authorized representatives of the parties to this
Agreement, and no oral modification of the Agreement shall be effective,
notwithstanding any provisions of governing law that may allow oral
modification. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original as against any party whose signature
appears thereon, all of which taken together shall constitute one and the same
instrument. This Agreement shall be deemed fully executed when
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<PAGE>
one or more counterparts hereof, individually or taken together, shall bear the
signature of each of the parties reflected herein as signatories.
18. NOTICES. In the event that any party to this Agreement shall be
required to afford notice in writing to any other party of the occurrence or
non-occurrence of any event, such notice shall be provided as follows:
IF TO ANIC OR ACCEL:
Thomas C. Friedberg
Chairman and Chief Executive Officer
(ANIC or Accel)
475 Metro Place North
Dublin, Ohio 43017
WITH A COPY TO:
James B. Savage, Esq.
McFadden, Winner and Savage
175 South Third Street
Suite 210
Columbus, Ohio 43215-5134
IF TO HOMG OR HMS:
Carl Buccellato
Chairman and Chief Executive Officer
(HOMG or HMS)
400 Sawgrass Corporate Parkway
Sunrise, Florida 33325-6235
WITH A COPY TO:
Paul Berkowitz, Esq.
Greenberg Traurig, et al
1221 Brickell Avenue
Miami, Florida 33131
15
<PAGE>
IN WITNESS WHEREOF, each party has executed this Agreement by its duly
authorized representative on the date set forth below
ACCEL INTERNATIONAL
CORPORATION
Date: May 2, 1996 By: /s/ Thomas C. Friedberg
----------- --------------------------
Its: Chairman/President/CEO
--------------------------
ACCELERATION NATIONAL
INSURANCE COMPANY
Date: May 2, 1996 By: Thomas C. Friedberg
----------- --------------------------
Its: Chairman/CEO
--------------------------
HOMEOWNERS GROUP, INC.
Date: May 1, 1996 By: /s/ Carl Buccellato
----------- --------------------------
Its: President/CEO
--------------------------
HOMEOWNERS MARKETING
SERVICES, INC.
Date: May 1, 1996 By: /s/ Carl Buccellato
----------- --------------------------
Its: President/CEO
--------------------------
16
<PAGE>
FIRST AMENDMENT TO MAY 2, 1996 AGREEMENT FOR
SATISFACTION OF JUDGMENT
Accel International Corporation ("Accel"), Acceleration National Insurance
Company ("ANIC"), Homeowners Group, Inc. ("HOMG"), and Homeowners Marketing
Services, Inc. ("HMS") (hereinafter collectively the "Parties") are the parties
to an agreement for satisfaction of Judgment effective May 2, 1996 (hereinafter
the "Agreement"). The Parties now wish to change subparagraph L. of the
"BACKGROUND" to the Agreement and amend the terms of the Agreement itself as
follows:
(1) The Parties delete subparagraph L. of the "BACKGROUND" to the Agreement
in its entirety and substitute the following new paragraph L.:
L. HOMG plans to enter into an agreement with a purchaser pursuant
to which, subject to the approval of the stockholders of HOMG, the
purchaser will either acquire the outstanding common stock of HOMG in
exchange for the purchaser's stock or cash (hereinafter, for convenience,
either transaction is referred to as the "Merger Agreement").
(2) The Parties delete section 2. of the Agreement in its entirety and
substitute the following new section 2.:
ANIC agrees to accept in cash the greater of $4,100,000 or the amount
equal to $4,100,000 plus an additional amount calculated by multiplying
$4,100,000 times the percentage by which the per HOMG share valuation
assumed in the Merger Agreement exceeds $2.20, after rounding the resulting
sum up to the next $50,000 increment, in full and complete satisfaction of
the Judgment on the condition such payment is received by ANIC no later
than the closing of the Merger Agreement or August 31, 1996, whichever
comes first. (by way of
<PAGE>
illustration, if the Merger Agreement results in a per HOMG share value of
$2.35, ANIC agrees to accept $4,400,000 calculated as follows: 2.35 minus
2.20 divided by 2.20 plus 1 times $4,100,000 equals $4,379,545.30, which is
rounded up to the next $50,000 increment, $4,400,000.)
(3) The Parties delete section 7.(a) of the Agreement in its entirety and
substitute the following new section 7.(a):
(a) the failure of the purchaser, before the execution of the Merger
Agreement or May 11, 1996, whichever is earlier, to execute and deliver to
ANIC the letter agreement attached hereto as Exhibit 1 if the Merger
Agreement contemplates a stock exchange OR the letter agreement attached
hereto as Exhibit 2 if the Merger Agreement contemplates a stock purchase
for cash.
(4) The words "the amount payable under section 2. of this Agreement"
are hereby substituted for "$4,100,000" in section 3. (lines 22 and 26 on page
4 and lines 6 and 9 on page 5), section 7. (line 2), section 8. (line 2),
section 9. (line 3), and in section 12. (line 3).
(5) The words "May 7, 1996" are hereby substituted for "April 30, 1996" in
section 4. (line 4) and in section 7.(b) (line 2).
Except as modified by this amendment, the terms of the Agreement remain in
full force and effect. IN WITNESS WHEREOF, each party has executed this First
Amendment to the
2
<PAGE>
Agreement by the duly authorized representative on the date set forth below.
ACCEL INTERNATIONAL
CORPORATION
Date: May 7, 1996 By: /s/ Thomas C. Friedberg
----------- --------------------------
Its: Chairman/President/CEO
--------------------------
ACCELERATION NATIONAL
INSURANCE COMPANY
Date: May 7, 1996 By: Thomas C. Friedberg
----------- --------------------------
Its: Chairman/CEO
--------------------------
HOMEOWNERS GROUP, INC.
Date: May 7, 1996 By: /s/ Carl Buccallato
----------- --------------------------
Its: President/CEO
--------------------------
HOMEOWNERS MARKETING
SERVICES, INC.
Date: May 7, 1996 By: /s/ Carl Buccellato
----------- --------------------------
Its: President/CEO
--------------------------
<PAGE>
EXHIBIT B
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of December 22, 1995, by and
between HOMEOWNERS GROUP, INC., a Delaware corporation (the "Company"), and CARL
BUCCELLATO (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company, pursuant to the
provisions contained in this Employment Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the premise, and the respective
covenants and agreements of each of the Company and the Executive contained in
this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE I
EMPLOYMENT
1.1 THE COMPANY. The Company employs the Executive and the Executive
accepts such employment. Subject to the direction of the Board of Directors of
the Company and the Executive Committee thereof, the Executive shall serve as
the Chairman of the Board, President and Chief Executive Officer of the Company.
The Executive shall have such responsibilities, perform such duties and exercise
such power and authority as are inherent in, or incident to, the offices of
Chairman of the Board, President and Chief Executive Officer. The Executive
shall devote his full business time and attention, and his best efforts, to the
diligent performance of such duties.
1.2 SUBSIDIARY CORPORATIONS. The Executive shall serve as the Chairman of
the Board, President and Chief Executive Officer of each and every one of the
Company's direct and indirect subsidiary corporations, including without
limitation Homeowners Marketing Services, Inc., a Florida corporation ("HMS"),
Homeowners Association of America, Inc., a Florida corporation ("HAA"), and HOMS
Insurance Agency, Inc., a Florida corporation ("HOMS").
<PAGE>
ARTICLE II
TERM
Subject to the provisions of Article VI below, the term of this
Agreement shall be for a period of five years, commencing as of January l,
1996 and expiring on December 31, 2000. Unless either party shall give to
the other written notice of termination on or before June 30, 2000, the term
of this Agreement shall, on December 31, 2000, be extended for a period of
three years, commencing as of January l, 2001 and expiring on December 31,
2003.
ARTICLE III
SALARY
3.1 INITIAL SALARY. In full payment for the obligations to be performed
by the Executive during the term of this Agreement, the Company shall pay to
the Executive a salary at an annual rate equal to the sum of (a) Three
Hundred Seventy-Seven Thousand Two Hundred Eleven Dollars ($377,211) and (b)
a cost of living adjustment for the 1995 calendar year determined pursuant
to the provisions of that certain Employment Agreement dated as of June 1,
1992 by and between the Company and the Executive (the "Previous Agreement")
(subject to applicable payroll and/or other taxes required by law to be
withheld).
3.2 ADJUSTMENT OF SALARY. As promptly as practicable after the
conclusion of each of the Company's fiscal years during the term of the
Executive's employment hereunder, the certified public accountants regularly
retained by the Company shall determine the increase, if any, in the cost of
living, using as the basis of such computation the current applicable
Consumer Price Index published by the Bureau of Labor Statistics of the
United States Department of Labor (the "Index"). Any such increase shall be
computed as follows:
(a) The Index number in the column for Miami, Florida, entitled
"all items," for the month of January shall be the "Current Index Number" and
the corresponding Index number for the immediately preceding January,
commencing with January 1995, shall be the "Base Index Number."
(b) The increase in the cost of living shall be determined by
dividing the Current Index Number by the Base Index Number and subtracting
the integer 1 from the quotient thereof, and then multiplying the remainder
by One Hundred Percent (100%) in accordance with the following formula:
2
<PAGE>
Increase (CURRENT INDEX NUMBER
in = -------------------- - 1) x 100%
Cost of Living Base Index Number
(c) The percentage increase in the cost of living, multiplied by
the Executive's then current salary, shall be the increase required to be
determined pursuant to this Section 3.2.
(d) If the publication of the Consumer Price Index is
discontinued for any reason, then the parties shall utilize comparable
statistics of the cost of living for the City of Miami, Florida, the City of
Fort Lauderdale, Florida, Dade County, Florida, or Broward County, Florida,
as computed and published by an agency or instrumentality of the United
States of America or by a responsible financial periodical or recognized
authority then to be selected by the parties.
(e) In the absence of fraud or manifest error, any determination
made by the Company's accountants pursuant to this Section 3.2 shall be
conclusive and binding upon the Company and the Executive.
(f) The Executive's then current salary shall be adjusted as of
January 1 of each year, commencing as of January 1, 1997, in accordance with
the provisions of this Section 3.2 and such adjustment shall remain in effect
during such year.
3.3 PAVMENT OF SALARY. Payments of salary shall be made to the
Executive in installments from time to time on the same dates payments of
salary are generally made to all senior management employees of the Company.
ARTICLE IV
BONUS
The Executive may receive an annual bonus in an amount determined
by the Board of Directors of the Company, in its discretion, if and when so
determined by the Board of Directors.
ARTICLE V
CERTAIN FRINGE BENEFITS
5.1 GENERALLY. The Executive shall be entitled to receive such benefits
and to participate in such benefit plans as are generally provided from time
to time by the Company to its senior management employees; provided,
however, that nothing contained in this Section 5.1 shall be construed to
obligate the Company to provide any specific benefits to its employees
generally.
3
<PAGE>
5.2 VACATIONS. The Executive shall be entitled to vacation time on an
annual basis in accordance with such policies as are from time to time adopted
by the Company's Board of Directors with respect to its senior management
employees.
5.3 AUTOMOBILE. The Company shall provide the Executive a luxury automobile
for use by the Executive in connection with the performance of his duties under
this Agreement. The Executive shall be entitled to receive reimbursement for
such automobile expenses as are incurred by the Executive in connection with the
performance of his duties under this Agreement. Such reimbursement shall include
the cost of operating the automobile, the cost of maintenance of such automobile
and the cost of insurance of such automobile.
5.4 STOCK OPTIONS. The Executive shall be entitled to participate in the
Company's stock option plans as may from time to time be in effect and to
receive such incentive or other stock options as may from time to time be
granted to him thereunder; provided, however, that nothing contained in this
Section 5.4 shall be construed to obligate the Company, its Board of Directors
or any committee of its Board of Directors to grant any incentive or other stock
option whatsoever to the Executive.
5.5 LIFE INSURANCE. The Company shall purchase and maintain in effect one
or more term insurance policies on the life of the Executive in an aggregate
amount of not less than One Million Dollars ($1,000,000). The beneficiary of
each such policy shall be the person or persons who shall from time to time be
designated in writing by the Executive to the Company. In the absence of any
written designation to the contrary, the beneficiary of all such insurance
policies shall be the Executive's spouse.
5.6 INCOME TAX RETURNS AND ESTATE PLANNING. The Company shall pay for the
cost of preparation of the Executive's annual federal income tax returns and for
reasonable estate planning advice that the Executive receives from time to time.
5.7 REIMBURSEMENT OF MEDICAL EXPENSES. The Company shall reimburse the
Executive for the full amount of any medical, dental and optical expenses not
covered under any group medical plan from time to time in effect for the benefit
of Company employees generally. Such coverage shall include without limitation
mental health care and treatment and other medical, dental and optical expenses
not covered under the Company's health care plan now or hereafter in effect. The
Company may satisfy its obligation to the Executive under this Section 5.7 by
providing excess medical, dental, optical and other health care insurance
coverage for the Executive's benefit.
4
<PAGE>
5.8 ANNUAL PHYSICAL EXAMINATION. To the extent not covered by any
group medical plan from time to time in effect for the benefit of Company
employees generally or other insurance coverage provided by the Company for
the benefit of the Executive, the Company shall reimburse the Executive for
the full cost of a complete annual physical examination.
5.9 BUSINESS AND ENTERTAINMENT EXPENSES. The Company shall
reimburse the Executive for all reasonable business and
entertainment expenses related to the Executive's position with the
Company.
ARTICLE VI
TERMINATION OF EMPLOYMENT
6.1 CERTAIN DEFINITIONS. The following terms shall have the
following respective meanings when utilized in this Agreement:
(a) "Bonus" shall mean, as of a given date, the most recent annual
bonus awarded by the Company to the Executive.
(b) "Cause" shall mean any action by the Executive or
any inaction by the Executive which constitutes:
(i) fraud, embezzlement, misappropriation,
dishonesty or breach of trust;
(ii) a felony or moral turpitude;
(iii) a material breach or violation of any or all of the
covenants, agreements and obligations of the Executive set forth
in this Agreement, other than as the result of the Executive's
death or Disability (as hereinafter defined);
(iv) a willful or knowing failure or refusal by the Executive to
perform any or all of his material duties and responsibilities as
an officer of the Company, other than as the result of the
Executive's death or Disability; or
(v) gross negligence by the Executive in the performance of any
or all of his material duties and responsibilities as an officer
of the Company, other than as a result of the Executive's death
or Disability;
provided, however, that if the basis for any termination of the Executive's
employment by the Company as set forth in the Termination Notice (as
hereinafter defined) delivered by the
5
<PAGE>
Company to the Executive is any or all of the definitions of Cause set
forth in Sections 6.1(b)(iii), 6.1(b)(iv) or 6.1(b)(v) of this Agreement,
then, in such event, the Executive shall have fifteen (15) days from and
after the date of his receipt of such Termination Notice to present a
reasonable plan to cure such action or inaction specified in the
Termination Notice, which plan may require more than fifteen (15) days to
cure the specified action or inaction, but such plan must be reasonably
satisfactory to the Company and the Executive must proceed diligently to
effectuate such plan.
(c) "Compensation" shall mean the sum of the Executive's
Salary (as hereinafter defined) and Bonus.
(d) "Disability" shall mean any mental or physical
illness, condition, disability or incapacity which prevents the Executive
from reasonably discharging his duties and responsibilities as an officer of
the Company. If any disagreement or dispute shall arise between the Company
and the Executive as to whether the Executive suffers from any Disability,
then, in such event, the Executive shall submit to the physical or mental
examination of a physician licensed under the laws of the State of Florida,
who is mutually agreeable to the Company and the Executive, and such
physician shall determine whether the Executive suffers from any Disability.
In the absence of fraud or bad faith, the determination of such physician
shall be final and binding upon the Company and the Executive. The entire
cost of such examination shall be paid for solely by the Company.
(e) "Good Reason" shall mean:
(i) the assignment by the Board of Directors or the Executive
Committee of the Board of Directors to the Executive, without his
express written consent, of duties and responsibilities which
results in the Executive having less significant duties and
responsibilities or exercising less significant power and
authority than he had, or duties and responsibilities or power
and authority not comparable to that of the level and nature
which he had, immediately prior to such assignment;
(ii) the removal of the Executive from, or a failure to reappoint
the Executive to, his then current position or positions with the
Company or its subsidiaries or affiliates, except (A) with the
Executive's express written consent or (B) in connection with any
termination of the Executive's employment by the Company as the
result of the Executive's Protracted Disability (as hereinafter
defined) or for Cause;
6
<PAGE>
(iii) the reduction of the Executive's Salary or
the reduction of any or all of the Executive's
benefits set forth in Article V above;
(iv) the Company's failure to perform on a timely
basis its obligations under this Agreement;
(v) the Company's requiring the Executive, without his express
written consent, to travel on Company business to an extent
substantially greater than the Executive's business travel
obligations immediately prior to such time;
(vi) the Company's requiring the Executive, without his express
written consent, to change his place of permanent residency to
place outside of Broward County, Florida;
(vii) the Company's moving its executive offices to a place
outside of Broward County, Florida, without the Executive's
express written consent; or
(viii) the failure of the Company to obtain the express written
assumption of, and agreement to perform on a timely basis, the
Company's obligations under this Agreement by any successor to
the Company as required by Article IX of this Agreement.
(f) "Protracted Disability" shall mean any Disability which
prevents the Executive from reasonably discharging his duties and
responsibilities as an officer of the Company for a period of twelve (12)
consecutive months.
(g) "Salary" shall mean, as of a given date, the Executive's then
current annual salary.
(h) "Termination Date" shall mean a specific date not less than
forty-five (45) nor more than ninety (90) days from and after the date of any
Termination Notice upon which the Executive's employment by the Company shall
be terminated in accordance with the provisions of this Agreement.
(i) "Termination Notice" shall mean a written notice which sets
forth (i) the specific provision of this Agreement relied upon to terminate
the Executive's employment, (ii) in reasonable detail the facts and
circumstances claimed to provide the basis for the termination of the
Executive's employment, and (iii) a Termination Date.
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6.2 TERMINATION OF EMPLOYMENT.
(a) Notwithstanding the provisions of Article II hereof, this
Agreement (i) shall automatically terminate upon the death of the Executive
pursuant to the provisions of Section 6.3 hereof, (ii) may be terminated at
any time by the Company pursuant to the provisions of Sections 6.4 or 6.5
hereof, and (iii) may be terminated at any time by the Executive pursuant to
the provisions of Section 6.6 hereof.
(b) If either the Company or the Executive shall desire to
terminate the Executive's employment by the Company pursuant to any of the
provisions of Sections 6.4, 6.5 or 6.6 of this Agreement, then, in such
event, the party causing such termination shall provide a Termination Notice
to the other party.
(c) If this Agreement shall be terminated pursuant to
any of the provisions of this Article VI, the Company shall be discharged
from all of its obligations to the Executive under this Agreement upon the
payment to the Executive of the amount set forth in the Section of this
Article VI pursuant to which such termination shall occur. The Executive's
sole and exclusive remedy for the termination of this Agreement, regardless
of whether such termination shall be initiated by the Company or the
Executive, and regardless of whether such termination shall be with or
without Cause, shall be the payment by the Company to the Executive of the
amount set forth in the Section of this Article VI pursuant to which such
termination shall occur.
6.3 TERMINATION UPON DEATH OF EXECUTIVE. If during the term of this
Agreement the Executive shall die, then the employment of the Executive by
the Company shall automatically terminate on the date of the Executive's
death. In such event, not more than thirty (30) days after the date of the
Executive's death, the Company shall pay to the Executive's estate or as
otherwise directed by the Executive's personal representative, an amount in
cash equal to the Executive's Compensation (subject to applicable payroll
and/or other taxes required by law to be withheld) determined as of the
date of the Executive's death.
6.4 DISABILITY OF EXECUTIVE.
(a) In the event that at any time during the term of
this Agreement the Executive shall suffer any Disability, then the Company
shall be obligated to continue to pay in the ordinary and normal course of
its business to the Executive or his legal representative, as the case may
be, the Executive's Compensation (subject to applicable payroll and/or other
taxes required by law to be withheld) from the date that the Executive shall
first suffer any such Disability to the date that the Executive's employment
by the Company shall be terminated pursuant to any of the provisions of this
Agreement.
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(b) In the event that the Executive shall suffer any
Protracted Disability during the term of this Agreement, then the Company may
terminate the Executive's employment under this Agreement. In such event, in
addition to any other benefits which may have been provided by the Company to
the Executive or his legal representative, as the case may be, pursuant to
the provisions of Section 6.4(a) above, not later than the Termination Date
specified in the Termination Notice delivered by the Company to the Executive
or his legal representative, as the case may be, the Company shall pay to the
Executive or as otherwise directed by the Executive's legal representative an
amount in cash equal to the Executive's Compensation (subject to applicable
payroll and/or taxes required by law to be withheld) determined as of the
date of such Termination Notice. Subsequent to such Termination Date, the
Executive or his legal representative, as the case may be, shall also be
entitled to receive any benefits which may be payable under any disability
insurance policy or disability plan provided to the Executive by the Company.
6.5 TERMINATION OF EMPLOYMENT BY COMPANY.
(a) The Company may terminate this Agreement at any time with
Cause. In such event, the Company shall be obligated to continue to pay in
the ordinary and normal course of its business to the Executive only his
Salary (subject to applicable payroll and/or other taxes required by law to
be withheld) through the Termination Date set forth in the Termination
Notice.
(b) The Company may terminate this Agreement at any time
without Cause. If any such termination shall occur on or before December 31,
2000, then, in such event, not later than the Termination Date specified in
the Termination Notice, the Company shall pay to the Executive, in cash, an
amount equal to (i) the Executive's Compensation, determined as of the date
of the Termination Notice, multiplied by (ii) the greater of (A) the number
of years and any portion of a year remaining in the term of this Agreement or
(B) three (subject to applicable payroll and/or other taxes required by law
to be withheld). If any such termination shall occur after December 31, 2000,
then, in such event, not later than the Termination Date specified in the
Termination Notice, the Company shall pay to the Executive, in cash, an
amount equal to (i) the Executive's Compensation, determined as of the date
of the Termination Notice, multiplied by (ii) three (subject to applicable
payroll and/or other taxes required by law to be withheld).
6.6 TERMINATION OF EMPLOYMENT BY EXECUTIVE.
(a) The Executive may termlnate this Agreement at any time with
Good Reason. If any such termination shall occur on or before December 31,
2000, then, in such event, not later than the Termination Date specified in
the Termination Notice, the Company
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shall pay to the Executive, in cash, an amount equal to (i) the Executive's
Compensation, determined as of the date of the Termination Notice, multiplied
by (ii) the greater of (A) the number of years and any portion of a year
remaining in the term of this Agreement or (B) three (subject to applicable
payroll and/or other taxes required by law to be withheld). If any such
termination shall occur after December 31, 2000, then, in such event, not
later than the Termination Date specified in the Termination Notice, the
Company shall pay to the Executive, in cash, an amount equal to (i) the
Executive's Compensation, determined as of the date of the Termination
Notice, multiplied by (ii) three (subject to applicable payroll and/or other
taxes required by law to be withheld).
(b) The Executive may terminate this Agreement at any time without
Good Reason. In such event, the Company shall be obligated to continue to pay
in the ordinary and normal course of its business to the Executive only his
Salary (subject to applicable payroll and/or other taxes required by law to
be withheld) through the Termination Date set forth in the Termination
Notice.
ARTICLE VII
TERMINATION OF EMPLOYMENT
SUBSEQUENT TO A CHANGE IN CONTROL OF THE COMPANY
7.1 CHANGE IN CONTROL OF THE COMPANY DEFINED. For purposes of this
Article VII, the term "Change in Control of the Company" shall mean any
change in control of the Company of a nature which would be required to be
reported (a) in response to Item 6(e) of Schedule 14A of Regulation 14A, as
in effect on the date of this Agreement, promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (b) in response to
Item 1 of the Current Report on Form 8-K, as in effect on the date of this
Agreement, promulgated under the Exchange Act, or (c) in any filing by the
Company with the Securities and Exchange Commission; provided, however, that,
without limitation, a Change in Control of the Company shall he deemed to
have occurred if:
(i) any "person" (as such term is defined in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act), other than the Company, any
majority-owned subsidiary of the Company or any compensation plan
of the Company or any majority-owned subsidiary of the Company,
becomes the "beneficial owner" (as such term is defined in Rule
13d-3 of the Exchange
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Act), directly or indirectly, of securities of the Company (whether by merger,
consolidation, reorganization or otherwise) representing fifteen percent (15%)
or more of the combined voting power of the Company's then outstanding
securities;
(ii) during any period of two consecutive years during the term of this
Agreement, the individuals who at the beginning of such period constitute the
Board of Directors of the Company cease for any reason to constitute at least a
majority of such Board of Directors, unless the election of each director who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of such period;
(iii) any "person" (as such term is defined in Sections 13(d)(3) and 14(d)(2) of
the Exchange Act), other than the Company, any subsidiary of the Company or any
compensation, retirement, pension or other employee benefit plan or trust of the
Company or any subsidiary of the Company, becomes the "beneficial owner" (as
such term is defined in Rule l3d-3 promulgated under the Exchange Act), directly
or indirectly, of securities of HMS, HAA or HOMS, respectively, or any successor
to HMS, HAA or HOMS, respectively (whether by merger, consolidation,
reorganization or otherwise) representing a majority of the combined voting
power of the then outstanding securities of HMS, HAA or HOMS, as the case may
be;
(iv) the Company shall merge or consolidate with or into another corporation or
other entity, or enter into a binding agreement to merge or consolidate with or
into another corporation or other entity, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
corporation or entity) not less than eighty-five percent (85%) of the combined
voting power of the voting securities of the Company or such surviving
corporation or entity outstanding immediately after such merger or
consolidation;
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(v) HMS shall merge or consolidate with or into another corporation or other
entity, or enter into a binding agreement to merge or consolidate with or into
another corporation or other entity, other than a merger or consolidation which
would result in the voting securities of HMS outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving corporation or entity) not
less than a majority of the combined voting power of the voting securities of
HMS or such surviving corporation or entity outstanding immediately after such
merger or consolidation;
(vi) HAA shall merge or consolidate with or into another corporation or other
entity, or enter into a binding agreement to merge or consolidate with or into
another corporation or other entity, other than a merger or consolidation which
would result in the voting securities of HAA outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving corporation or entity) not
less than a majority of the combined voting power of the voting securities of
HAA or such surviving corporation or entity outstanding immediately after such
merger or consolidation;
(vii) HOMS shall merge or consolidate with or into another corporation or other
entity, or enter into a binding agreement to merge or consolidate with or into
another corporation or other entity, other than a merger or consolidation which
would result in the voting securities of HOMS outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving corporation or entity) not
less than a majority of the combined voting power of the voting securities of
HOMS or such surviving corporation or entity outstanding immediately after such
merger or consolidation;
(viii) the Company shall sell, lease, exchange, transfer, convey or otherwise
dispose of all or substantially all of its assets, or enter into a binding
agreement for the sale, lease, exchange, transfer, conveyance or other
disposition of all or substantially all of its assets, in one transaction or in
a series of related transactions;
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(ix) any of HMS, HAA or HOMS shall sell, lease, exchange,
transfer, convey or otherwise dispose of all or substantially all
of its respective assets, or enter into a binding agreement for
the sale, lease, exchange, transfer, conveyance or other
disposition of all or substantially all of its respective assets,
in one transaction or in a series of related transactions;
(x) the Company shall liquidate or dissolve, or
any plan or proposal shall be adopted for the
liquidation or dissolution of the Company; or
(xi) any of HMS, HAA or HOMS shall liquidate or dissolve, or any
plan or proposal shall be adopted for the liquidation or
dissolution of any of HMS, HAA or HOMS.
7.2 TERMINATION OF EMPLOYMENT AFTER CHANGE IN CONTROL OF COMPANY.
(a) Notwithstanding the provisions of Articles II and VI of this
Agreement, in the event that there shall occur any Change in Control of the
Company and at any time subsequent to the date of any such Change in Control
of the Company, either the Company shall terminate the employment of the
Executive without Cause or the Executive shall terminate his employment for
Good Reason, then, in any such event, the following shall occur:
(i) Not later than the Termination Date specified in the
Termination Notice delivered by the Company to the Executive, or
by the Executive to the Company, as the case may be, the Company
shall pay to the Executive an amount, in cash, equal to his "base
amount," as such term is defined in Section 280G of the Internal
Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder, determined as of the date of the
Termination Notice, multiplied by Two and Ninety-Nine One
Hundredths (2.99) (the "Change in Control Termination Amount")
(subject to applicable payroll and/or other taxes required by law
to be withheld); and
(ii) Any and all stock options granted to the Executive under any
stock option plan of the Company as may from time to time be in
effect, which shall not by their terms have vested on or before
such Termination Date, shall vest on such Termination Date.
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(b) The Change in Control Termination Amount shall be
determined by the Company's regularly retained certified public accountants
in consultation with the Company's regularly retained attorneys. In making
such determination, the Company's regularly retained certified public
accountants and attorneys shall liberally construe the provisions of the
Internal Revenue Code of 1986, as amended, and the applicable rules and
regulations thereunder. In the absence of fraud or manifest error, any
determination made pursuant to this Section 7.2(b) shall be conclusive and
binding upon the Company and the Executive.
(c) Notwithstanding anything to the contrary set forth
in Sections 7.2(a) and 7.2(b) above, the amount paid by the Company to the
Executive shall be limited to the maximum amount which will not constitute a
"parachute payment," as such term is defined in Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended. This limitation shall first be
applied to amounts provided pursuant to clause (ii) of Section 7.2(a) hereof
(otherwise included in the calculation of a parachute payment) to the extent
thereof and then to amounts provided pursuant to clause (i) of Section 7.2(a)
hereof.
ARTICLE VIII
CERTAIN RESTRICTIONS ON THE EXECUTIVE
8.1 CERTAIN RESTRICTIONS. The Executive covenants and agrees
with the Company as follows:
(a) He shall not at any time, directly or indirectly,
for himself or any other person, firm, corporation, partnership, association
or other entity (collectively, a "Person") which competes in any manner with
the Company or any of its subsidiaries or affiliates in the United States of
America or its territories and possessions or any other countries in which
the Company as of the date of termination of this Agreement conducts its
business directly or indirectly through any of its subsidiaries or affiliates
(collectively, the "Territory"), employ, attempt to employ or enter into any
contractual arrangement for employment with, any employee or former employee
of the Company or any of its subsidiaries or affiliates, unless such former
employee shall not have been employed by the Company or any of its
subsidiaries or affiliates for a period of at least one year.
(b) He shall not, during the term of this Agreement and for a
period of three years from and after the date of termination of this
Agreement, directly or indirectly, (i) acquire or own in any manner any
interest in, or loan any amount to, any Person which competes in any manner
with the Company or any of its subsidiaries
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or affiliates in the Territory, (ii) be employed by or serve as an employee,
agent, officer, or director of, or as a consultant to, any Person, other than
the Company and its subsidiaries and affiliates, which competes in any manner
with the Company or its subsidiaries or affiliates in the Territory, or (iii)
compete in any manner with the Company or its subsidiaries or affiliates in
the Territory. The foregoing provisions of this Section 8.1(b) shall not
prevent the Executive from acquiring and owning not more than three percent
(3%) of the equity securities of any Person whose securities are listed for
trading on a national securities exchange or are regularly traded in the
over-the-counter securities market.
(c) In the course of the Executive's employment by the
Company, the Executive will have access to confidential or proprietary
information of the Company and its subsidiaries and affiliates. The Executive
shall not at any time divulge or communicate to any Person, or use to the
detriment of the Company or its subsidiaries or affiliates, any such
confidential or proprietary information. The term "confidential or
proprietary information" shall mean information not generally available to
the public, including without limitation personnel information, financial
information, customer lists, supplier lists, ownership information, marketing
plans and analyses, trade secrets, know-how, computer software, management
agreements and procedures and techniques of operating and managing the
business of the Company and its subsidiaries and affiliates. The Executive
acknowledges and agrees that all confidential or proprietary information is
and shall remain the property of the Company and its subsidiaries and
affiliates, and agrees to maintain all such confidential or proprietary
information in strictest confidence.
8.2 REMEDIES. It is recognized and acknowledged by each of the Company
and the Executive that a breach or violation by the Executive of any or all of
his covenants and agreements contained in Section 8.1 of this Agreement will
cause irreparable harm and damage to the Company and its subsidiaries and
affiliates in a monetary amount which would be virtually impossible to
ascertain and, therefore, will deprive the Company of an adequate remedy at
law. Accordingly, if the Executive shall breach or violate any or all of his
covenants and agreements set forth in Section 8.1 hereof, then the Company and
its subsidiaries and affiliates shall have resort to all equitable remedies,
including without limitation the remedies of specific performance and
injunction, both permanent and temporary, as well as all other remedies which
may be available at law.
8.3 INTENT. It is the intent of the parties that the restrictions set
forth in Section 8.1 hereof shall be enforced to the fullest extent
permissible under the laws and public policies of each jurisdiction in which
enforcement of such restrictions may be sought. If any provision contained in
Section 8.1 hereof shall
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be adjudicated by a court of competent jurisdiction to be invalid or
unenforceable because of its duration or geographic scope, then such
provision shall be reduced by such court in duration or geographic scope or
both to such extent as to make it valid and enforceable in the jurisdiction
where such court is located, and in all other respects shall remain in full
force and effect.
ARTICLE IX
SUCCESSOR TO THE COMPANY
The Company shall require any successor, whether direct or
indirect, and whether by purchase, merger, consolidation or otherwise, to all
or substantially all of the business or properties and assets of the Company,
to execute and deliver to the Executive, not later than the date of the
consummation of any such purchase, merger, consolidation or other
transaction, a written instrument in form and in substance reasonably
satisfactory to the Executive and his legal counsel pursuant to which any
such successor shall agree to assume and to perform on a timely basis or to
cause to be performed on a timely basis all of the Company's covenants,
agreements and obligations set forth in this Agreement (a "Successor
Agreement"). The failure of the Company to cause any such successor to
execute and deliver a Successor Agreement to the Executive shall (a)
constitute a breach of the provisions of this Agreement by the Company and
(b) be deemed to constitute a termination by the Executive of his employment
hereunder (as of the date upon which any such successor shall succeed to all
or substantially all of the business or properties and assets of the Company)
for Good Reason.
ARTICLE X
ATTORNEYS' FEES
In the event that any litigation shall arise between the Company
and the Executive based, in whole or in part, upon this Agreement or any or
all of the provisions contained herein, then, in any such event, the
prevailing party in any such litigation shall be entitled to recover from the
non-prevailing party, and shall be awarded by a court of competent
jurisdiction, any and all reasonable fees and disbursements of trial and
appellate counsel paid, incurred or suffered by such prevailing party as the
result of, arising from, or in connection with, any such litigation.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 GOVERNING LAW. This Agreement shall be governed by, and shall be
construed and interpreted in accordance, with the laws of the State of Florida,
without giving effect to the principles of conflicts of law thereof.
11.2 NOTICES. Any and all notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand, or when delivered by
United States mail, by registered or certified mail, postage prepaid, return
receipt requested, to the respective parties at the following respective
addresses:
If to the Company: Homeowners Group, Inc.
6365 Taft Street
Suite 2000
Hollywood, Florida 33084
Attention: Chief Financial Officer
If to the Executive: Carl Buccellato
507 Palm Drive
Hallandale, Florida 33009
or to such other address as either party may from time to time give written
notice of to the other in accordance with the provisions of this Section 11.2.
11.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Company and the Executive with respect to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
arrangements, both oral and written, between the Company and the Executive with
respect to such subject matter. Without limiting the generality of the
immediately preceding sentence, and except as otherwise provided in Section 3.1
above, the Previous Agreement is superseded by this Agreement and shall be of no
further force or effect from and after January 1, 1996.
11.4 AMENDMENTS. This Agreement may not be amended or modified in any
manner, except by a written instrument executed by each of the Company and the
Executive.
11.5 BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit of,
and shall be binding upon, each of the Company and the Executive and their
respective heirs, personal representatives, executors, legal representatives,
successors and assigns.
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11.6 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall
not affect the enforceability of the remaining portions of this Agreement or
any part hereof, all of which are inserted conditionally on their being
valid in law. Except as otherwise provided in Section 8.3 above, if any one
or more of the words, phrases, sentences, clauses or sections contained in
this Agreement shall be declared invalid by any court of competent
jurisdiction, then, in any such event, this Agreement shall be construed as
if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, or section or sections had not been inserted.
11.7 NO WAIVERS. The waiver by either party of a breach or violation of
any provision of this Agreement by the other party shall not operate nor be
construed as a waiver of any subsequent breach or violation. The waiver by
either party to exercise any right or remedy it or he may possess shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
11.8 JURISDICTION AND VENUE; SERVICE OF PROCESS; WAIVER OF
TRIAL BY JURY.
(a) Any claim or dispute arising out of, connected with,
or in any way related to this Agreement which results in litigation shall be
instituted by the complaining party and adjudicated either in the Federal
District Court for the Southern District of Florida or in the Circuit Court
for Broward County, Florida, and each of the parties to this Agreement
consent to the personal jurisdiction of and venue in such courts. In no event
shall either party to this Agreement contest the jurisdiction or venue of
such courts with respect to any such litigation.
(b) Each of the Company and the Executive agrees that
service of any process, summons, notice or document, by United States
registered or certified mail, to its or his address set forth in or as
provided in Section 11.2 above shall be effective service of such process,
summons, notice or document for any action, suit or proceeding brought
against it or him by the other party in the Federal District Court for the
Southern District of Florida or in the Circuit Court for Broward County,
Florida.
(c) In recognition of the fact that the issues which would arise
under this Agreement are of such a complex nature that they could not be
properly tried before a jury, each of the Company and the Executive waives
trial by jury.
11.9 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of any or all of the provisions hereof.
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11.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the separate parties in separate counterparts, each of which
shall be deemed to constitute an original and all of which shall be deemed to
constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed and delivered
this Agreement on the date first written above.
HOMEOWNERS GROUP, INC.
By /s/ C. GREGORY MORRIS
----------------------------------
C. Gregory Morris,
Vice President and
Chief Financial Officer
/s/ CARL BUCCELLATO
-----------------------------------
Carl Buccellato
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EXHIBIT C
ENGAGEMENT AGREEMENT
THIS ENGAGEMENT AGREEMENT is entered into on December 22, 1995, by and
between HOMEOWNERS GROUP, INC., a Delaware corporation (the "Company"), and GARY
D. LIPSON (the "Attorney").
WITNESSETH:
WHEREAS, the Attorney has provided substantial and valuable legal services
to the Company and its subsidiary corporations and affiliated entities over a
period of several years;
WHEREAS, in providing such services, the Attorney has consistently
demonstrated diligence, ability, skill, expertise and efficiency, all for the
benefit of the Company and its subsidiary corporations and affiliated entities;
WHEREAS, the business of the Company and its subsidiary corporations and
affiliated entities is very complex;
WHEREAS, many of the business and contractual relationships of the Company
and its subsidiary corporations and affiliated entities are novel, complex and
difficult;
WHEREAS, the Attorney is knowledgeable about the businesses in which the
Company and its subsidiary corporations and affiliated entities are engaged and
about the Company and its subsidiary and affiliated corporations and their
respective operations, contractual relationships and affairs;
WHEREAS, the Company desires to insure the Attorney's availability, on a
continuing basis, to provide legal services to the Company and its subsidiary
corporations and affiliated entities;
WHEREAS, the Company desires to utilize a substantial portion of the
Attorney's time, on a continuing basis, to provide legal services to the Company
and its subsidiary corporations and affiliated entities;
WHEREAS, the Attorney's acceptance of the engagement by the Company, on the
terms desired by the Company, will undoubtedly limit engagement of the Attorney
by other clients or potential clients;
<PAGE>
WHEREAS, a substantial portion of the services anticipated to be performed
by the Attorney will be of great significance to the Company;
WHEREAS, in the course of performing legal services for the Company, it is
anticipated that substantial time demands and special requests will be made of
the Attorney by the Company;
WHEREAS, the hourly rate to be charged by the Attorney to the Company
pursuant to this Engagement Agreement (the "Agreement") is substantially less
than the hourly rate ordinarily charged by the Attorney to new clients;
WHEREAS, the hourly rate to be charged by the Attorney to the Company
pursuant to this Agreement is substantially less than that ordinarily charged by
attorneys of comparable or similar knowledge, experience and expertise to that
of the Attorney located in South Florida for legal services of a comparable or
similar nature to those anticipated to be provided by the Attorney to the
Company;
WHEREAS, the Company desires to be able to predict and to plan for the
payment of fees for legal services to the Attorney;
WHEREAS, the Board of Directors of the Company has reviewed this Agreement
with the advice of independent legal counsel;
WHEREAS, the Board of Directors of the Company believes this Agreement to
be reasonable in its terms;
WHEREAS, the Board of Directors of the Company believes that the engagement
of the Attorney, on the terms set forth in this Agreement, is in the best
interests of the Company and its shareholders;
NOW, THEREFORE, in consideration of the premises, and the respective
covenants and agreements of each of the Company and the Attorney contained in
this Agreement, each of the Company and the Attorney agrees as follows:
ARTICLE I
PREMISES
The parties acknowledge and agree that each and every one of the premises
set forth above is true and correct.
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ARTICLE II
ENGAGEMENT
The Company engages the Attorney to provide legal services to the Company
for a minimum of five hundred (500) hours per calendar year and the Attorney
accepts such engagement. The Attorney shall make himself available to provide
legal services if and when so requested by the Company.
ARTICLE III
FEES AND EXPENSES
3.1 NONREFUNDABLE RETAINER. The Company acknowledges that, based upon the
premises set forth in this Agreement, the Attorney, by his execution and
delivery of this Agreement, is making a significant commitment to the Company of
his time and resources for the benefit of the Company and to the detriment of
the Attorney's ability to be engaged by existing clients and potential clients.
As a result, and in order to induce the Attorney to enter into this Agreement
and to perform his obligations hereunder, the Company shall pay to the Attorney
a nonrefundable retainer equal to One Hundred Thousand Dollars ($100,000)(the
"Nonrefundable Retainer"). The Company acknowledges that the Nonrefundable
Retainer is reasonable and is earned by the Attorney as of the date of this
Agreement, except to the extent that the Nonrefundable Retainer is forfeited by
the Attorney pursuant to the provisions of Section 4.4(a) below. The
Nonrefundable Retainer shall be in addition to any amount charged by the
Attorney to the Company for legal services rendered by him.
3.2 INITIAL HOURLY RATE. The Attorney shall initially charge the Company
for his services on the basis of an hourly rate of Two Hundred Dollars ($200)
(the "Hourly Rate"). The Attorney shall invoice the Company in increments of
one-tenth of an hour.
3.3 ADJUSTMENT OF HOURLY RATE. The Hourly Rate shall be increased as of
January of each year, commencing as of January l, 1997. The amount of such
increase shall be mutually determined in good faith by the Chief Executive
Officer of the Company and the Attorney; provided, however, that the amount of
such increase shall be not less than five percent (5%) of the Attorney's then
current Hourly Rate. If the Chief Executive Officer of the Company and the
Attorney are unable to come to such mutual agreement, then the Attorney may
terminate this Agreement and such termination shall be deemed a termination
without Cause (as such term is hereinafter defined) hereunder.
3
<PAGE>
3.4 EXPENSES. The Company shall advance to the Attorney or reimburse him
for all out-of-pocket costs and expenses incurred by him on the Company's
behalf. Such out-of-pocket costs and expenses may include, but are not
limited to, long-distance telephone and facsimile charges, photocopy
expenses, filing and recording fees, delivery charges and travel expenses. If
a substantial amount is required to be paid by the Attorney to any party on
the Company's behalf, the Attorney reserves the right, in his discretion, to
require the Company to advance such amount to him prior to its payment by the
Attorney.
3.5 PAYMENT OF FEES AND EXPENSES. After the conclusion of each calendar
month, the Attorney shall invoice the Company for legal services rendered by
him at the then current Hourly Rate and for expenses incurred by him on
behalf of the Company during such month. Any such invoice sent to the Company
by the Attorney shall be paid in full by the Company within thirty days after
its receipt thereof.
ARTICLE IV
DURATION OF AGREEMENT
4.1 DURATION. This Agreement shall be effective as of the date hereof
and shall remain in effect unless and until it is terminated by either of the
Company or the Attorney pursuant to the provisions of this Agreement.
4.2 TERMINATION BY COMPANY. The Company may terminate this Agreement and
discharge the Attorney at any time, with or without cause, by the delivery of
written notice to such effect to the Attorney.
4.3 TERMINATION BY ATTORNEY. The Attorney may terminate this Agreement
and withdraw from providing legal services to the Company at any time as
provided by the Rules of Professional Conduct of the Rules Regulating the
Florida Bar.
4.4 PAYMENTS TO ATTORNEY UPON TERMINATION.
(a) If the Company shall terminate this Agreement and discharge the
Attorney with Cause (as such term is hereinafter defined), then
simultaneously with the termination of this Agreement, the Company shall pay
to the Attorney, in cash, all amounts which shall have become payable by the
Company to him pursuant to the provisions of Sections 3.4 and 3.5 of this
Agreement, and the Nonrefundable Retainer shall be deemed forfeited by the
Attorney. The term "Cause" shall mean (i) the suspension or
4
<PAGE>
termination for any reason of the Attorney's membership in the Florida Bar;
(ii) the Attorney's conviction of a felony; or (iii) any action or inaction
on the part of the Attorney which constitutes fraud, embezzlement,
misappropriation, breach of trust or moral turpitude.
(b) If the Company shall terminate this Agreement and discharge the
Attorney without Cause, or if the Attorney shall terminate this Agreement and
withdraw from providing legal services to the Company, then simultaneously
with the termination of this Agreement, the Company shall pay to the
Attorney, in cash, (i) all amounts which shall have become payable by the
Company to him pursuant to the provisions of Sections 3.4 and 3.5 of this
Agreement and (ii) the full amount of the Nonrefundable Retainer.
ARTICLE V
CLAIMS AND DISPUTES
5.1 JURISDICTION AND VENUE. Any claim or dispute arising out of,
connected with, or in any way related to this Agreement which results in
litigation shall be instituted by the complaining party and adjudicated
either in the Federal District Court for the Southern District of Florida or
in the Circuit Court for Dade or Broward County, Florida, and each of the
parties to this Agreement consent to the personal jurisdiction of and venue
in such courts. In no event shall either party to this Agreement contest the
jurisdiction or venue of such courts with respect to any such litigation.
5.2 SERVICE OF PROCESS. Each of the Company and the Attorney agrees that
service of any process, summons, notice or document, by United States
registered or certified mail, to its or his address set forth in or as
provided in Section 6.2 below shall be effective service of such process,
summons, notice or document for any action, suit or proceeding brought
against it or him by the other party in the Federal District Court for the
Southern District of Florida or in the Circuit Court for Dade or Broward
County, Florida.
5.3 WAIVER OF TRIAL BY JURY. In recognition of the fact that the issues
which would arise under this Agreement are of such a complex nature that they
could not be properly tried before a jury, each of the Company and the
Attorney waives trial by jury.
5.4 ATTORNEYS' FEES AND EXPENSES. In the event that any litigation or
other proceeding shall arise between the Company and the Attorney or
involving either or both of them based, in whole or in part, upon this
Agreement or any or all of the provisions contained herein, then, in any such
event, the prevailing party in
5
<PAGE>
any such litigation or other proceeding shall be entitled to recover from
the non-prevailing party, and shall be awarded by a court or other authority
of competent jurisdiction, any and all reasonable fees and disbursements of
trial and appellate counsel paid, incurred or suffered by such prevailing
party as the result of, arising from, or in connection with, any such
litigation or other proceeding.
5.5 INTEREST. Any amount which is not paid by the Company to the
Attorney when due hereunder shall bear simple interest from the date such
payment was due to the date actually paid by the Company to the Attorney at
the highest rate of interest permitted by the laws of the State of Florida.
5.6 RETENTION OF DOCUMENTS; CHARGING LIEN. The Company understands and
acknowledges that the Attorney has the right to retain any and all files,
papers and other property coming into his possession in connection with his
engagement by the Company until he has been paid all amounts which have
become payable to him pursuant to this Agreement. The Company agrees to the
imposition of a charging lien on all real and personal property that is
preserved, protected or obtained by the Attorney as a result of the services
provided pursuant to this Agreement for any amount which may become payable
to the Attorney pursuant to the Agreement.
5.7 REFORMATION OF AGREEMENT.
(a) It is the intent of the parties that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws
and public policies of the State of Florida and the Rules of Professional
Conduct of the Rules Regulating the Florida Bar.
(b) If any provision contained in this Agreement shall be
adjudicated by any court or other authority of competent jurisdiction to be
invalid or unenforceable, then such provision may be modified by such court
or other authority so as to make it valid and enforceable, and in all other
respects this Agreement shall remain in full force and effect.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 GOVERNING LAW. This Agreement shall be governed by, and shall be
construed and interpreted in accordance, with the laws of the State of
Florida, without giving effect to the principles of conflicts of law
thereof.
6
<PAGE>
6.2 NOTICES. Any and all notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand, or when delivered by
United States mail, by registered or certified mail, postage prepaid, return
receipt requested, to the respective parties at the following respective
addresses:
If to the Company: Homeowners Group, Inc.
6365 Taft Street
Suite 2000
Hollywood, Florida 33084
Attention: President
with a copy to: Paul Berkowitz, Esq.
Greenberg, Traurig
1221 Brickell Avenue
Miami, Florida 33133
If to the Attorney: Gary D. Lipson, Esq.
914 Matanzas Avenue
Coral Gables, Florida 33146
or to such other address as either party may from time to time give written
notice of to the other in accordance with the provisions of this Section 6.2.
6.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Company and the Attorney with respect to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
arrangements, both oral and written, between the Company and the Attorney with
respect to such subject matter.
6.4 AMENDMENTS. This Agreement may not be amended or modified in any
manner, except by a written instrument executed by each of the Company and the
Attorney.
6.5 BENEFITS: BINDING EFFECT. This Agreement shall be for
the benefit of, and shall be binding upon, each of the Company and
the Attorney and their respective heirs, personal representatives,
executors, legal representatives, successors and assigns.
6.6 AGENCY RELATIONSHIP. The relationship between the
Company and the Attorney shall be that of principal and agent,
respectively. The Attorney shall not be deemed to be a partner,
joint venturer, franchisee or employee of the Company.
7
<PAGE>
6.7 NO WAIVERS. The waiver by either party of a breach or violation of any
provision of this Agreement by the other party shall not operate nor be
construed as a waiver of any subsequent breach or violation. The failure by
either party to exercise any right or remedy it or he may possess shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
6.8 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
any or all of the provisions hereof.
6.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the separate parties in separate counterparts, each of which
shall be deemed to constitute an original and all of which shall be deemed to
constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed and delivered
this Agreement on the date first written above.
HOMEOWNERS GROUP, INC.
By /s/ CARL BUCCELLATO
------------------------------
Carl Buccellato,
President
/s/ GARY D. LIPSON
------------------------------
Gary D. Lipson
8
<PAGE>
AMENDMENT TO ENGAGEMENT AGREEMENT
THIS AMENDMENT TO ENGAGEMENT AGREEMENT is entered into as of
April 29, 1996 by and between HOMEOWNERS GROUP, INC., a Delaware corporation
(the "Company"), and GARY D. LIPSON (the "Attorney");
WITNESSETH:
WHEREAS, each of the Company and the Attorney has previously entered
into a certain Engagement Agreement dated December 22, 1995 (the "Engagement
Agreement"), pursuant to which the Attorney provides certain services to the
Company and its subsidiary and affiliated corporations;
WHEREAS, each of the Company and the Attorney desires to amend the
Engagement Agreement as is provided in this Amendment to Engagement Agreement
(the "Amendment");
WHEREAS, the Board of Directors of the Company has reviewed this
Amendment with the advice of independent lega1 counsel;
WHEREAS, the Board of Directors of the Company believes this
Amendment to be reasonable in its terms;
WHEREAS, the Board of Directors of the Company believes that the
Company's entering into this Amendment is in the best interests of the
Company and its shareholders;
NOW, THEREFORE, in consideration of the premises, and the respective
covenants and agreements of each of the Company and
the Attorney contained in this Amendment, each of the Company and the
Attorney agrees as follows:
1. AMENDMENT OF CERTAIN PROVISIONS.
(a) Section 3.1 of the Engagement Agreement is deleted in its
entirety, and shall hereafter be of no further force or effect.
(b) Section 4.4(a) of the Engagement Agreement is deleted in its
entirety, and the following Section 4.4(a) is inserted in its place:
"(a) If the Company shall terminate this Agreement and
discharge the Attorney for any reason, then, simultaneously
with the termination of this Agreement, the Company shall
pay to the Attorney, in cash, all amounts which shall have
become payable by the Company to him pursuant to the provisions
of Sections 3.4 and 3.5 of this Agreement."
<PAGE>
(c) Section 4.4(b) of the Engagement Agreement is deleted in its
entirety, and the following Section 4.4(b) is inserted in its place:
"(b) If the Attorney shall terminate this Agreement and
withdraw from providing legal services to the Copany for any
reason, then, simultaneously with the termination of this
Agreement, the Company shall pay to the Attorney, in cash,
all amounts which shall have become payable by the Company to
him pursuant to the provisions of Sections 3.4 and 3.5 of
this Agreement."
2. CONSULTING AGREEMENT. Simultaneously with the execution anddelivery
of this Amendment, the Company and the Attorney are entering into a Consulting
Agreement in the form attached hereto as Exhibit A. If the Engagement Agreement
is terminated by either of the parties for any reason, then the Consulting
Agreement shall automatically, and without further action of the parties,
become effective.
3. NO OTHER MODIFICATIONS. Except as otherwise specifically set forth
in this Amendment, all of the provisions of the Engagement Agreement shall
remain in full force and effect, and unaffected hereby.
IN WITNESS WHEREOF, each of the parties hereto has executed and
delivered this Agreement as of the date first written above.
HOMEOWNERS GROUP, INC.
By /s/ CARL BUCCELLATO
------------------------------
Carl Buccellato, President
/s/ GARY D. LIPSON
----------------------------------
Gary D. Lipson
2
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is entered into as of April 29, 1996, by
and between HOMEOWNERS GROUP, INC., a Delaware corporation (the "Company"), and
GARY D. LIPSON (the "Consultant").
WITNESSETH:
WHEREAS, the Consultant has provided substantial and valuable
services to the Company and its subsidiary corporations and affiliated entities
over a period of several years;
WHEREAS, in providing such services, the Consultant has consistently
demonstrated diligence, ability, skill, expertise and efficiency, all for the
benefit of the Company and its subsidiary corporations and affiliated entities;
WHEREAS, the business of the Company and its subsidiary corporations
and affiliated entities is very complex;
WHEREAS, many of the business and contractual relationships of the
Company and its subsidiary corporations and affiliated entities are novel,
complex and difficult;
WHEREAS, the Consultant is knowledgeable about the businesses in
which the Company and its subsidiary corporations and affiliated entities are
engaged and about the Company and its subsidiary and affiliated corporations and
their respective operations, contractual relationships and affairs;
WHEREAS, the Company desires to insure the Consultant's availability
to provide consulting services to the Company and its subsidiary corporations
and affiliated entities on a continuing basis;
WHEREAS, the Company desires to insure that the Consultant is bound
by certain restrictions as are set forth herein;
WHEREAS, each of the Company and the Consultant has previously
entered into a certain Engagement Agreement dated December 22, 1995 (the
"Engagement Agreement"), pursuant to which the Consultant provides certain
services to the Company and its subsidiary and affiliated corporations;
WHEREAS, each of the Company and the Consultant has entered into an
Amendment to Engagement Agreement dated as of April 29, 1996, which provides,
among other things, that this Consulting Agreement (the "Agreement") shall
become effective if the Engagement Agreement is terminated by either of the
parties for any reason;
<PAGE>
WHEREAS, the Board of Directors of the Company has reviewed this
Agreement with the advice of independent legal counsel;
WHEREAS, the Board of Directors of the Company believes this
Agreement to be reasonable in its terms;
WHEREAS, the Board of Directors of the Company believes that the
engagement of the Consultant, on the terms set forth in this Agreement, is in
the best interests of the Company and its shareholders;
NOW, THEREFORE, in consideration of the premises, and the respective
covenants and agreements of each of the Company and the Consultant contained in
this Agreement, each of the Company and the Consultant agrees as follows:
ARTICLE I
PREMISES
The parties acknowledge and agree that each and every one of the
premises set forth above is true and correct.
ARTICLE II
ENGAGEMENT AND SERVICES
2.1 ENGAGEMENT. The Company engages the Consultant to provide
consulting and advisory services to the Company and its management, and the
Consultant accepts such engagement.
2.2 PROVISION OF SERVICES.
(a) During the Term (as such term is hereinafter defined), the
Consultant shall consult with, and give advice to, the Company and its
management if and when so requested by the Company and its management. The
Company shall give the Consultant reasonable notice of where and when his
consulting and advisory services are requested to be provided, and the
Consultant shall utilize reasonable efforts to be available as requested.
(b) During the Term, the Consultant shall not be required to provide
services to the Company for more than sixteen hours in any calendar month.
Unused hours in any calendar month shall not accumulate and shall not be usable
in any subsequent calendar month.
2
<PAGE>
2.3 OTHER SERVICES. Nothing contained in this Agreement shall be
deemed to prohibit the Company or any of its subsidiary or affiliated
corporations from engaging the Consultant to provide legal or other services
outside of the scope of this Agreement.
ARTICLE III
TERM OF AGREEMENT
The term of this Agreement shall be for a period of two years,
commencing as of the date that the Engagement Agreement is terminated by either
of the parties for any reason and continuing for a period of two years from and
after the date of any such termination (the "Term").
ARTICLE IV
FEES AND EXPENSES
4.1 CONSULTING FEE. In consideration of the services to be rendered
by the Consultant to the Company pursuant to this Agreement and in consideration
of the restrictive covenants of the Consultant set forth in Section 5.1 of this
Agreement, the Company shall pay to the Consultant, as a consulting fee, the
amount of Two Hundred Thousand Dollars ($200,000) (the "Consulting Fee"). The
Consulting Fee shall be deemed to have been earned by the Consultant immediately
upon his execution and delivery of this Agreement, and payment of the Consulting
Fee to the Consultant shall be the absolute and unconditional obligation of the
Company.
4.2 PAYMENT OF CONSULTING FEE. The Consulting Fee shall be paid by
the Company to the Consultant in twenty-four equal installments of Eight
Thousand Three Hundred Thirty-Three and Thirty-Three One Hundredths Dollars
($8,333.33) each, in advance, on the date that the Engagement Agreement is
terminated by either of the parties for any reason and thereafter on the first
day of each of the succeeding twenty-three calendar months during the Term.
4.3 EXPENSES. The Company shall advance to the Consultant or
reimburse him for all out-of-pocket costs and expenses incurred by him on the
Company's behalf. Such out-of-pocket costs and expenses may include, but are not
limited to, long-distance telephone and facsimile charges, photocopy expenses,
filing and recording fees, delivery charges and travel expenses. If a
substantial amount is required to be paid by the Consultant to any party on the
Company's behalf, the Consultant reserves the right, in his discretion, to
require the Company to advance such amount to him prior to its payment by the
Consultant.
3
<PAGE>
4.4 PAYMENT OF EXPENSES. After the conclusion of each calendar month,
the Consultant shall invoice the Company for expenses incurred by him on behalf
of the Company during such month. Any such invoice sent to the Company by the
Consultant shall be paid in full by the Company within thirty days after its
receipt thereof.
4.5 INTEREST. Any amount which is not paid by the Company to the
Consultant when due hereunder shall bear simple interest from the date such
payment was due to the date actually paid by the Company to the Consultant at
the highest rate of interest permitted by the laws of the State of Florida.
4.6 ACCELERATION. If the Company shall fail for any reason to make
any payment to the Consultant when due, then, at the option of the Consultant,
all remaining installments of the Consulting Fee shall become immediately due
and payable.
ARTICLE V
CERTAIN RESTRICTIONS ON THE CONSULTANT
5.1 CERTAIN RESTRICTIONS. The Consultant covenants and agrees with
the Company as follows:
(a) He shall not at any time, directly or indirectly, for himself or
any other person, firm, corporation, partnership, association or other entity
(collectively, a "Person") which competes in any manner with the Company or any
of its subsidiaries or affiliates in the United States of America (the
"Territory"), employ, attempt to employ or enter into any contractual
arrangement for employment with, any employee or former employee of the Company
or any of its subsidiaries or affiliates, unless such former employee shall not
have been employed by the Company or any of its subsidiaries or affiliates for a
period of at least one year.
(b) He shall not, during the Term of this Agreement, directly or
indirectly, (i) acquire or own in any manner any interest in, or loan any amount
to, any Person which competes in any manner with the Company or any of its
subsidiaries or affiliates in the Territory, (ii) be employed by or serve as an
employee, agent, officer, or director of, or as a consultant to, any Person,
other than the Company and its subsidiaries and affiliates, which competes in
any manner with the Company or its subsidiaries or affiliates in the Territory,
or (iii) compete in any manner with the Company or its subsidiaries or
affiliates in the Territory; provided, however, that the provisions of this
Section 5.1 (b) shall not be construed to limit or restrict in any manner the
ability of the Consultant to practice law or to represent any client. The
foregoing provisions of this Section 5.1 (b) shall not prevent the
4
<PAGE>
Consultant from acquiring and owning not more than three percent (3%) of the
equity securities of any Person whose securities are listed for trading on a
national securities exchange or are regularly traded in the over-the-counter
securities market.
(c) In the course of the Consultant's engagement by the Company, the
Consultant will have access to confidential or proprietary information of the
Company and its subsidiaries and affiliates. The Consultant shall not at any
time divulge or communicate to any Person, or use to the detriment of the
Company or its subsidiaries or affiliates, any such confidential or proprietary
information. The term "confidential or proprietary information" shall mean
information not generally available to the public, including without limitation
personnel information, financial information, customer lists, supplier lists,
ownership information, marketing plans and analyses, trade secrets, know-how,
computer software, management agreements and procedures and techniques of
operating and managing the business of the Company and its subsidiaries and
affiliates. The Consultant acknowledges and agrees that all confidential or
proprietary information is and shall remain the property of the Company and its
subsidiaries and affiliates, and agrees to maintain all such confidential or
proprietary information in strictest confidence.
5.2 REMEDIES. It is recognized and acknowledged by each of the
Company and the Consultant that a breach or violation by the Consultant of any
or all of his covenants and agreements contained in Section 5.1 of this
Agreement will cause irreparable harm and damage to the Company and its
subsidiaries and affiliates in a monetary amount which would be virtually
impossible to ascertain and, therefore, will deprive the Company of an adequate
remedy at law. Accordingly, if the Consultant shall breach or violate any or all
of his covenants and agreements set forth in Section 5.1 hereof, then the
Company and its subsidiaries and affiliates shall have resort to all equitable
remedies, including without limitation the remedies of specific performance and
injunction, both permanent and temporary, as well as all other remedies which
may be available at law.
5.3 INTENT. It is the intent of the parties that the restrictions set
forth in Section 5.1 hereof shall be enforced to the fullest extent permissible
under the laws and public policies of the jurisdiction in which enforcement of
such restrictions may be sought. If any provision contained in Section 5.1
hereof shall be adjudicated by a court of competent jurisdiction to be invalid
or unenforceable because of its duration or geographic scope, then such
provision shall be reduced by such court in duration or geographic scope or both
to such extent as to make it valid and enforceable in the jurisdiction where
such court is located, and in all other respects shall remain in full force and
effect.
ARTICLE VI
INDEMNIFICATION
The Company shall indemnify and hold harmless the Consultant from,
against and in respect of the full amount of any and all costs, losses, damages,
claims, causes of action, lawsuits,
5
<PAGE>
judgements, executions, liabilities, assessments, deficiencies, taxes,
penalties, interest and expenses, including without limitation any and all
reasonable fees and disbursements of legal counsel, arising from, in connection
with, or incident to the Consultant's retention as a consultant hereunder or the
Consultant's performing consulting or advisory services hereunder, other than
those resulting from the Consultant's willful misconduct or gross negligence.
ARTICLE VII
CLAIMS AND DISPUTES
7.1 JURISDICTION AND VENUE. Any claim or dispute arising out of,
connected with, or in any way related to this Agreement which results in
litigation shall be instituted by the complaining party and adjudicated either
in the Federal District Court for the Southern District of Florida or in the
Circuit Court for Dade or Broward County, Florida, and each of the parties to
this Agreement consents to the personal jurisdiction of and venue in such
courts. In no event shall either party to this Agreement contest the
jurisdiction or venue of such courts with respect to any such litigation.
7.2 SERVICE OF PROCESS. Each of the Company and the Consultant agrees
that service of any process, summons, notice or document, by United States
registered or certified mail, to its or his address set forth in or as provided
in Section 8.2 below shall be effective service of such process, summons, notice
or document for any action, suit or proceeding brought against it or him by the
other party in the Federal District Court for the Southern District of Florida
or in the Circuit Court for Dade or Broward County, Florida.
7.3 WAIVER OF TRIAL BY JURY. In recognition of the fact that the
issues which would arise under this Agreement are of such a complex nature that
they could not be properly tried before a jury, each of the Company and the
Consultant waives trial by jury.
7.4 ATTORNEYS' FEES AND EXPENSES. In the event that any litigation
shall arise between the Company and the Consultant based, in whole or in part,
upon this Agreement or any or all of the provisions contained herein, then, in
any such event, the prevailing party in any such litigation shall be entitled to
recover from the non-prevailing party, and shall be awarded by a court of
competent jurisdiction, any and all reasonable fees and disbursements of trial
and appellate counsel paid, incurred or suffered by such prevailing party as the
result of, arising from, or in connection with, any such litigation.
6
<PAGE>
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 GOVERNING LAW. This Agreement shall be governed by, and shall be
construed and interpreted in accordance, with the laws of the State of Florida,
without giving effect to the principles of conflicts of law thereof.
8.2 NOTICES. Any and all notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand, or when delivered by
United States mail, by registered or certified mail, postage prepaid, return
receipt requested, to the respective parties at the following respective
addresses:
If to the Company: Homeowners Group, Inc.
400 Sawgrass Corporate Parkway
Sunrise, Florida 33325
Attention: President
with a copy to: Paul Berkowitz, Esq.
Greenberg, Traurig
122l Brickell Avenue
Miami, Florida 33l33
If to the Consultant: Gary D. Lipson
914 Matanzas Avenue
Coral Gables, Florida 33146
or to such other address as either party may from time to time give written
notice of to the other in accordance with the provisions of this Section 8.2.
8.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Company and the Consultant with respect to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
arrangements, both oral and written, between the Company and the Consultant with
respect to such subject matter.
8.4 AMENDMENTS. This Agreement may not be amended or modified in any
manner, except by a written instrument executed by each of the Company and the
Consultant.
8.5 BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of, and shall be binding upon, each of the Company and the Consultant and their
respective heirs, personal representatives, executors, legal representatives,
successors and assigns.
7
<PAGE>
8.6 INDEPENDENT CONTRACTOR STATUS. The relationship between the
Company and the Consultant shall be that of an independent contractor. The
Consultant shall not be deemed to be a partner, joint venturer, franchisee,
employee or agent of the Company. Any consultation or advice rendered by the
Consultant may be accepted or rejected, in whole or in part, by the Company and
its management. The Consultant shall not have the power or authority to manage
the business, affairs or operations of the Company, to execute contracts or
agreements on behalf of the Company or otherwise to commit or bind the Company
to any obligation.
8.7 NO WAIVERS. The waiver by either party of a breach or violation
of any provision of this Agreement by the other party shall not operate nor be
construed as a waiver of any subsequent breach or violation. The failure by
either party to exercise any right or remedy it or he may possess shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
8.8 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of any or all of the provisions hereof.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the separate parties in separate counterparts, each of which
shall be deemed to constitute an original and all of which shall be deemed to
constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed and
delivered this Agreement as of the date first written above.
HOMEOWNERS GROUP, INC.
By /s/ CARL BUCCELLLATO
--------------------------
Carl Buccellato, President
/s/ GARY LIPSON
-----------------------------
Gary Lipson
8
<PAGE>
SECOND AMENDMENT TO ENGAGEMENT AGREEMENT
THIS SECOND AMENDMENT TO ENGAGEMENT AGREEMENT is entered into on May
14, 1996 by and between HOMEOWNERS GROUP, INC., a Delaware corporation (the
"Company"), and GARY D. LIPSON (the "Attorney");
WITNESSETH:
WHEREAS, each of the Company and the Attorney has previously entered
into a certain Engagement Agreement dated December 22, 1995 (the "Engagement
Agreement"), a certain Amendment to Engagement Agreement dated as of April 29,
1996 (the "Amendment"), and a certain Consulting Agreement dated as of April 29,
1996 (the "Consulting Agreement");
WHEREAS, each of the Company and the Attorney desires to modify the
arrangements between them set forth in the Engagement Agreement, the Amendment
and the Consulting Agreement, as is provided in this Second Amendment to
Engagement Agreement (the "Second Amendment");
WHEREAS, the Board of Directors of the Company has reviewed this second
Amendment with the advice of independent legal counsel;
WHEREAS, the Board of Directors of the Company believes this Second
Amendment to be reasonable in its terms;
WHEREAS, the Board of Directors of the Company believes that the
Company's entering into this Second Amendment is in the best interests of the
Company and its shareholders;
NOW, THEREFORE, in consideration of the premises, and the respective
covenants, agreements, acknowledgements and releases of each of the Company and
the Attorney contained in this Second Amendment, each of the Company and the
Attorney agrees as follows:
1. TERMINATION OF CERTAIN AGREEMENTS. The Amendments and the Consulting
Agreement are terminated and shall hereafter be of no force or effect.
2. ENGAGEMENT AGREEMENT. Notwithstanding the termination of the
Amendment and the Consulting Agreement pursuant to paragraph 1 above, all of the
provisions of the Engagement Agreement shall remain in full force and effect and
unaffected by the termination of the Amendment and the Consulting Agreement.
3. ACKNOWLEDGEMENT. THe Attorney acknowledges that he has been paid in
full for all services rendered by him and all out-of-pocket expenses incurred by
him for or on behalf of the Company and its subsidiary and affiliated
corporations through April 30, 1996.
<PAGE>
4. RELEASES.
(a) The Attorney remises, releases, acquits, satisfies, and
forever discharges the Company and each and every one of its subsidiary and
affiliated corporations, of and from all, and all manner of, action and actions,
cause and causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments, executions,
claims and demands whatsoever, in law or in equity, which the Attorney ever
had, now has, or which any heir, executor, personal representative, legal
representative, successor or assign of the Attorney hereafter can, shall or may
have, against the Company or any of its subsidiary or affiliated corporations,
for, upon or by reason of any manner, cause or thing whatsoever, from the
beginning of time to the date of this Second Amendment, other than the
covenants, agreements and obligations of the Company set forth in the Engagement
Agreement.
(b) The Company, for itself and for each and every one of its
subsidiary and affiiliated corporations, remises, releases, acqists, satisfies,
and forever discharges the Attorney and his heirs, executors, personal
representatives, legal representatives, successors and assigns, of and from all,
and all manner of, action and actions, cause and causes of action, suits, debts,
dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, executions, claims and demands whatsoever, in law or in equity, which
the Company or any of its subsidiary or affiliated corporations ever had, now
has, or which any heir, executor, personal representative, legal representative,
successor or assign of any of them hereafter can, shall or may have, against the
Attorney, for, upon or by reason of any matter, cause or thing whatsoever, from
the beginning of time to the date of this Second Amendment, other than the
covenants, agreements and obligations of the Attorney set forth in the
Engagement Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed and
delivered this Agreement on the date first written above.
HOMEOWNERS GROUP, INC.
By: /s/ CARL BUCCELLATO
------------------------------
Carl Buccellato, President
/s/ GARY D. LIPSON
----------------------------------
Gary D. Lipson
2
<PAGE>
Exhibit D
VOTING AGREEMENT
In consideration of The Cross Country Group, Inc., a Nevada corporation
("CCG"), HGI Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of CCG ("Acquisition"), entering into an Agreement and Plan of Merger
dated as of the date hereof (the "Merger Agreement"), with Homeowners Group,
Inc., a Delaware corporation (the "Company"), which provides, among other
things, that Acquisition, upon the terms and subject to the conditions thereof,
will be merged with and into the Company (the "Merger") and each outstanding
share of common stock, $.01 par value, of the Company (the "Company Common
Stock") will be converted into the right to receive $2.35, each of the
undersigned holders (the "Stockholders") of the shares of Company Common Stock
set forth in Schedule A attached hereto opposite his name agrees with CCG as
follows:
1. During the period (the "Agreement Period") beginning on the date
hereof and ending on the earlier of (i) the date the Merger is consummated or
(ii) the termination of the Merger Agreement in accordance with the terms
thereof, each of the Stockholders hereby agrees to vote all shares of Company
Common Stock which such Stockholder is entitled to vote to approve and adopt the
Merger Agreement, the Merger and all agreements related to the Merger and any
actions related thereto at any meeting or meetings of the stockholders of the
Company, and at any adjournment thereof, at which such Merger Agreement and
other related agreements (or any amended version or versions thereof), or such
<PAGE>
other actions with respect to the Merger of the Merger Agreement, are submitted
for the consideration and vote of the stockholders of the Company.
2. During the Agreement Period, each of the Stockholders hereby agrees
that he will not vote any shares of Company Common Stock in favor of the
approval of any other merger, consolidation, sale of assets, reorganization,
recapitalization, liquidation or winding up Company or any other extraordinary
transactions contemplated by the Merger Agreement.
3. Each of the Stockholders hereby represents and warrants that as of the
date hereof such Stockholder owns beneficially all of the shares of Company
Common Stock set forth opposite such Stockholder's name in Schedule A hereto and
has the full and unrestricted legal power, authority and right to enter into,
execute and deliver this Voting Agreement.
4. In the event the Merger is consummated, each Stockholder hereby agrees
that he shall not exercise, and hereby irrevocably waives, any and all rights
which such Stockholder may have to demand an appraisal by the Delaware Court of
Chancery of the fair value of the shares of Company Common Stock held by him
whether pursuant to Section 262 of the Delaware General Corporation Law, under
any other applicable statute, under Common Law or otherwise.
5. If any provision of this Voting Agreement shall be invalid or
unenforceable under applicable law, such provision shall be ineffective to the
extent of such invalidity or unenforceability
2
<PAGE>
only, without in any way affecting the remaining provisions of this Voting
Agreement.
6. This Voting Agreement may be executed in two or more counterparts
which together shall constitute a single agreement.
7. The parties hereto agree that if for any reason any party hereto shall
have failed to perform its obligations under this Voting Agreement then the
party seeking to enforce this Agreement against such non-performing party shall
be entitled to specific performance and injunctive and other equitable relief,
and the parties hereto further agree to waive any requirement for the securing
or posting of any bond in connection with the obtaining of any such injunctive
or other equitable relief. This provision is without prejudice to any other
rights that any party may have against any other party hereto for any failure to
perform its obligations under this Voting Agreement.
8. The parties hereto agree that the Stockholders are acting solely and
exclusively in their capacity as holders of shares of Company Common Stock.
9. This Voting Agreement shall be governed by and construed in accordance
with the substantive law of the State of Delaware without giving effect to the
principles or conflicts of law thereof.
10. Each of the Stockholders will, upon request, execute and deliver any
additional documents deemed by CCG to be necessary or desirable to complete and
effectuate the Irrevocable Proxy granted herein.
3
<PAGE>
11. This Agreement shall terminate at the Effective Time of the Merger or
upon the earlier termination of the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Voting
Agreement as of this 7th day of May, 1996.
THE CROSS COUNTRY GROUP, INC.
By: /s/ HOWARD WOLK
-------------------------
Howard Wolk
By: /s/ CARL BUCCELLATO
- ---------------------------------
Carl Buccellato
By: /s/ MELVIN STEWART
- ---------------------------------
Melvin Stewart
By: /s/ C. GREGORY MORRIS
- ---------------------------------
C. Gregory Morris
By: /s/ DIANE GRUBER
- ---------------------------------
Diane Gruber
By: /s/ GARY D. LIPSON
- ---------------------------------
Gary D. Lipson
By: /s/ MICHAEL A. NOCERO, JR.
- ---------------------------------
Michael A. Nocero, Jr.
4
<PAGE>
SCHEDULE A
NAME COMMON STOCK
Carl Buccellato 249,056
Melvin Stewart 305,375
C. Gregory Morris 0
Diane M. Gruber 10,050
Gary D. Lipson 16,000
Michael A. Nocero, Jr. 118,000
In the event any of the individuals named above exercise any options and
acquire Company Common Stock pursuant to said exercise, the shares obtained upon
exercise will be deemed to be subject to the provisions of this Agreement.
<PAGE>
EXHIBIT E
[Form of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A. Opinion]
[Closing Date]
Cross Country Group, Inc.
4040 Mystic Valley Parkway
Medford, MA 01255
Dear Sirs:
[Introduction]
1. The Company (i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, (ii) has
all requisite power and authority, corporate and otherwise, to own, operate and
lease the properties and assets it now owns, operates and leases to carry on its
business as now being conducted and (iii) is qualified or licensed to do
business and in good standing in every jurisdiction in which ownership,
operation or lease of property by it or the conduct of its business requires
such qualification or licensing, except for such failures, if any, to be so
qualified and isn good standing, which, when taken together with all such
failures, would not in the aggregate have a Material Adverse Effect on the
business, condition (financial or otherwise), operations, properties, assets,
liabilities of the Company and the Company Subsidiaries taken as a whole.
2. The Company has full corporate power and authority to execute and
deliver the Agreement and to consummate the transactions contemplated thereby.
The agreement has been duly executed and delivered by the Company and
constitutes (assuming due authorization, execution and delivery of the Agreement
by the other parties thereto) a valid, enforceable and binding agreement of the
Company, except to the extent that enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereinafter in effect relating to equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
Very truly yours,
<PAGE>
EXHIBIT F
[Form of Opinion of Lane Altman & Owens, LLP]
[Closing Date]
Homeowners Group, Inc.
400 Sawgrass Corporate Parkway
Sunrise, Florida 33325
Dear Sirs:
[Introduction]
1. Each of the Parent and Sub (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has all requisite power and authority, corporate and
otherwise, to own, operate and lease the properties and assets it now owns,
operates and leases and to carry on its business as now being conducted and
(iii) is qualified or licensed to do business as a foreign corporation and in
good standing in every jurisdiction in which the ownership, operation or lease
of property by it or the conduct of its business requires such qualification or
licensing, except for such failures to be so qualified and in good standing, if
any, which when taken together with all such other failures would not in the
aggregate have a Material Adverse Effect on the business, condition (financial
or otherwise), operations, properties, assets or liabilities of parent and its
subsidiaries taken as a whole.
2. Each of Parent and Sub has full corporate power and authority to execute
and deliver the Agreement and to consummate the transactions contemplated
thereby. The Agreement has been duly executed and delivered by Parent and Sub
and constitutes (assuming due athorization, execution and deliver of the
Agreement by the Company) a valid, enforceable and binding agreement of each of
Parent and Sub, except to the extent that enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereinafter in effect relating to equity (regardless
of whether enforceability is considered in a proceeding at law or in equity).
Very truly yours,
<PAGE>
DISCLOSURE SCHEDULE - SECTION 4.3
Regulatory filings required for transaction approval:
<TABLE>
<CAPTION>
STATE ENTITY REQUIREMENT
<S> <C> <C>
FL HAA, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
VA HAA of Virginia, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
CA HAA Home Protection of California, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
UT HAA of Utah, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
OR HAA of Utah, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
TX HAA, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
GA HAA of Georgia, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
AZ HAA of Arizona, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
MS HAA, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
NV HAA, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
IA HAA, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
NC HAA, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
WI HAA, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
ME HAA, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
OH HAA, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
CT HAA, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
NH HAA of Virginia, Inc. Filing and prior approval required under the
Insurance Holding Company System Regulatory Act
</TABLE>
<PAGE>
DISCLOSURE SCHEDULE - SECTION 4.3 (CONTINUED)
The CNA Holdback Agreement, dated as of December 1, 1993, requires prior written
consent of the parties for assignment. However, the agreement is silent for
mergers.
The General Agency Agreement with American International Group, Inc. terminates
automatically upon the effective date of the sale, transfer or merger of the
General Agent's (HOMG) business.
The Administration Agreement with New Hampshire Insurance Company, Inc.
terminates automatically upon the effective date of the sale, transfer or merger
of the Administrator's (HOMG) business.
The lease agreement between Homeowners Group, Inc. and CamTech Associates
requires the landlord's prior written consent to assign the lessee's interest,
which consent shall not be unreasonably withheld.
<PAGE>
<TABLE>
<CAPTION>
DISCLOSURE SCHEDULE 4.4
HOMEOWNERS GROUP, INC.
STOCK OPTIONS
- --------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE GRANT GRANT GRANT GRANT GRANT GRANT GRANT GRANT GRANT GRANT
NAME 07/15/88 04/28/89 05/25/90 10/31/90 07/25/91 07/08/92 09/23/93 10/05/93 12/15/94 12/22/95
$2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $3.00 $2.00 $0.75
$2.00
- --------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING:
- -----------------
EMPLOYEES
- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
James Accursio 1,500 1,500
Sharon Anderson 100 100
Charles Bascue 2,500 1,500 1,500
James Beach 540 1,000 1,000 1,000
Lisa Berry Phillips 250 500 1,000
Carl Buccellato 260,000
Karen Childress 5,000
Robin Cohen 1,000
Dave Dacon 100 100
Brenda Dailey 1,040 1,040 750 750
Sharon Dailey Downey 100 100 100
Samuel DiLorenzo 100
Colleen Doolin 5,000
Todd Ehlers 100
Elizabeth Flores 100
Sylvia Flores 100
Marie Garcia 100 100 100
Brenda Gonzales 100 100 100
Maxine Gutman 1,000
Jacquelyn Henry 100
Laila Hill 100 100 100
Marie Ingoglia 100 100 100
Shahema JaiJaiRam 100
Guido Jaramillo 100
Gail Johnson 100 100 100
Michael Jones 5,000 2,500 30,000
Judy Kelton 100 100 100
Eve Kelton 100 250 250 500
Mary Ann Linger 100 100 100
Marisa Losardo 100
Denise Mangos 100 100 100
Louise Martinez 100 100 100
Caryn Maxwell 1,000 1,000 750 750
Joyce Mine 100 100
Michael Mitcheom 25,000
Greg Morris 50,000 10,000
Amy Naples 100 100 100
Trenetha (Jean) Newton 100
Billie Passmore 100
Michelle Peiffer 100
Wendy Pejack 100
Dawn Penzetta 100 100 100
Jose Perdomo 100
Joseph Proeitti 1,000
James Riba 100 1,000 250 250
Evan Rothman 5,000
Tim Savage 1,000
Regina D. Smith 100 100
Carolyn Stoner 100 100 100
Olga Thompson 100
Amber West Nugent 100 100 100
Linda Zuelch 100 100
----- ----- ----- ----- ----- ------ ------ ------ ------ -------
TOTAL OUTSTANDING 4,100 8,650 9,550 5,000 9,250 30,000 50,000 10,000 45,000 260,000
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE TOTAL TOTAL OPT SHARES
NAME OPTION EXERCISE CURRENTLY ADDITIONAL SHARES EXERCISABLE IN
SHARES PRICE EXERCISABLE 1996 1997 1998 1999
- -----------------------------------------------------------------------------------------------------------------
OUTSTANDING:
- -----------------
EMPLOYEES
- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Accursio 3,000 6,000 3,000
Sharon Anderson 200 400 200
Charles Bascue 5,500 11,000 5,500
James Beach 3,500 7,000 3,500
Lisa Berry Phillips 1,750 3,500 1,250 500
Carl Buccellato 260,000 * 520,000 260,000
Karen Childress 5,000 10,000 2,500 2,500
Robin Cohen 1,000 2,000 500 500
Dave Dacon 200 400 200
Brenda Dailey 3,500 7,000 3,500
Sharon Dailey Downey 300 600 300
Samuel DiLorenzo 100 200 100
Colleen Doolin 5,000 10,000 2,500 2,500
Todd Ehlers 100 200 100
Elizabeth Flores 100 200 100
Sylvia Flores 100 200 100
Marie Garcia 300 600 300
Brenda Gonzales 300 600 300
Maxine Gutman 1,000 2,000 500 500
Jacquelyn Henry 100 200 100
Laila Hill 300 600 300
Marie Ingoglia 300 600 300
Shahema JaiJaiRam 100 200 100
Guido Jaramillo 100 200 100
Gail Johnson 300 600 300
Michael Jones 37,500 75,000 25,500 6,000 6,000
Judy Kelton 300 600 300
Eve Kelton 1,100 2,200 1,100
Mary Ann Linger 300 600 300
Marisa Losardo 100 200 100
Denise Mangos 300 600 300
Louise Martinez 300 600 300
Caryn Maxwell 3,500 7,000 3,500
Joyce Mine 200 400 200
Michael Mitcheom 25,000 50,000 5,000 5,000 5,000 5,000 5,000
Greg Morris 60,000 120,000 30,000 10,000 10,000 10,000
Amy Naples 300 600 300
Trenetha (Jean) Newton 100 200 100
Billie Passmore 100 200 100
Michelle Peiffer 100 200 100
Wendy Pejack 100 200 100
Dawn Penzetta 300 600 300
Jose Perdomo 100 200 100
Joseph Proeitti 1,000 2,000 500 500
James Riba 1,600 3,200 1,600
Evan Rothman 5,000 10,000 2,500 2,500
Tim Savage 1,000 2,000 500 500
Regina D. Smith 200 400 200
Carolyn Stoner 300 600 300
Olga Thompson 100 200 100
Amber West Nugent 300 600 300
Linda Zuelch 200 400 200
------- -------- ------- ------ ------ ------ -----
TOTAL OUTSTANDING 431,550 $863,100 359,550 31,000 21,000 15,000 5,000
<FN>
* 140,000 options granted under non-qualified option plan on December 22,
1995 and was exercisable immediately upon grant.
120,000 options were granted under the incentive stock option plan on
December 22, 1995, effective as of January 2, 1996 and was fully
exercisable on the effective date.
</FN>
</TABLE>
<PAGE>
DISCLOSURE SCHEDULE 4.4
HOMEOWNERS GROUP, INC.
STOCK OPTIONS
SUMMARY
RECONCILIATION OF TOTAL OPTIONS:
OUTSTANDING EXERCISABLE
----------- -----------
Total options, reconciliation
Incentive Stock Option Plan 140,000 140,000
Stock Option Plan 291,550 219,550
------- -------
431,550 359,550
======= =======
------- -------
Non-employee Director Stock Option Plan 117,500 62,500
======= =======
<PAGE>
<TABLE>
<CAPTION>
DISCLOSURE SCHEDULE
SECTION 4.4
NON-EMPLOYEE DIRECTOR (4/28/96)
STOCK OPTIONS SHARES ADDITIONAL SHARES EXERCISABLE IN
OPTIONS EXERCISE PRICE EXERCISABLE 1996 1997 1998 1999 2000
-------- -------------- ----------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIPSON 25,000 (1) 6.50 17,500 7,500
GRUBER 25,000 (1) 5.50 10,000 7,500 7,500
NOCERO 25,000 (1) 6.50 17,500 7,500
STEWART 25,000 (2) 0.75 2,500 2,500 5,000 7,500 7,500
WOODMAN 17,500 (3) 6.50 17,500
------- ------ ------ ------ ----- ----- -----
TOTAL OUTSTANDING 117,500 62,500 25,000 10,000 5,000 7,500 7,500
======= ====== ====== ====== ===== ===== =====
<FN>
(1) Current directors; options granted between 1991 and 1993.
(2) Current director; options granted 12/22/95.
(3) Director resigned 11/95, however, options for 17,500 shares were
exercisable at date of resignation, and remain so until 11/7/98 (3
years following resignation)
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DISCLOSURE SCHEDULE
SECTION 4.5
DATE & STATE # OF SHARES ISSUED # SHARES
COMPANY INCORPORATED FEIN SHAREHOLDER & OUTSTANDING AUTHORIZED
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Homeowners 07\02\80 - FL 65-0039830 HOMEOWNERS GROUP, INC. 1,000 10,000
Marketing
Services, Inc.
Parent of
British Ventures, Inc.
Homeowners 10\27\78 - FL 59-1855827 HOMEOWNERS GROUP, INC. 500 500
Association
of America,
Inc.
Parent of HAA
Home Protection
of California, Inc.
and HAA of
Virginia, Inc.
Homeowners 01\19\83 - FL 59-2253060 HOMEOWNERS GROUP, INC. 500 10,000
Marketing
Services
International,
Inc.
HOMS Insurance 08/11/83 - FL 59-2388171 HOMEOWNERS GROUP, INC. 500 500 **
Agency, Inc.
HMS Mortgage 08/05/83 -FL 59-2349385 HOMEOWNERS GROUP, INC. 100 500
Company, Inc.
HAA of Arizona 12/22/94 - AZ 65-0560475 HOMEOWNERS GROUP, INC. 500 10,000
HAA of Georgia 12/19/94 - GA 65-0560477 HOMEOWNERS GROUP, INC. 500 10,000
HAA of Utah 12/19/94 - UT 65-0560473 HOMEOWNERS GROUP, INC. 500 10,000
<FN>
** SECURITY INTEREST IN HOMS INSURANCE AGENCY COMMON STOCK PLEDGED TO CNA AS PART OF THE PLEDGE AND SECURITY AGREEMENT
BETWEEN HOMS INSURANCE AGENCY, INC. AND CONTINENTAL CASUALTY COMPANY, DATED DECEMBER 1, 1993.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DISCLOSURE SCHEDULE
SECTION 4.5
DATE & STATE # OF SHARES ISSUED # SHARES
COMPANY INCORPORATED FEIN SHAREHOLDER & OUTSTANDING AUTHORIZED
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Homeowners 10/04/84 - FL 65-0292864 HOMEOWNERS GROUP, INC. 100 10,000
Marketing
Services
Real Estate
Corporation
HAA of 01/30/85 - VA 59-2507367 HOMEOWNERS ASSN. OF AMERICA, INC. 50,000 50,000 PREFERRED
Virginia, 0 50,000 COMMON
Inc.
Wholly owned by
HAA
HAA Home 02/06/79 - CA 59-2673998 HOMEOWNERS ASSN. OF AMERICA, INC. 1,000 100,000
Protection
of California,
Inc.
Wholly owned by
HAA
HMS TEXAS, 03/10/88 - FL 65-0039829 HOMEOWNERS GROUP, INC. 100 10,000
INC.
British 11/7/91 - FL 65-0322118 HOMEOWNERS MARKEITNG SERVICES, INC 100 10,000
Ventures, Inc.
HAA Service 7/11/94-FL HOMEOWNERS GROUP, INC. 500 10,000
Corporation
IntelliSTAR FL General HOMEOWNERS MARKETING SERVICES, INC. 50% PARTNER
Partnership (Committed to funding 50% of
venture, per agreement)
</TABLE>
<PAGE>
DISCLOSURE SCHEDULE
SECTION 4.10
CERMAK V. HMS - Warranty Contract #20148146 - The Plaintiff has brought suit
against HMS and various other parties for alleged defects found in her home. The
suit was served upon HMS on November 17, 1994 and the claim is for $1 million.
Michael Richardson, Esquire is handling this case on HMS' behalf.
STATUS: The case is in the discovery stage and it is believed that the case will
be settled for under $10,000. Ms. Cermak is a pro se Plaintiff and she is suing
fifteen (15) other parties.
ESPINOSA ET AL. V. HAA (FORMALLY KNOWN AS MCCOY AND GONZALEZ V. HAA) - Warranty
Contract #23199099 - The Plaintiffs are the seller and the buyer of a home and
they have brought suit against HMS, HAA, HMS of Texas and Homeowners Group for
the denial of an electric claim in the amount of $2,329.00 in Texas. The
plaintiffs have requested certification of the suit as a class action. Andrew
Lehrman, Esquire from Sorrell, Anderson, Lehrman, Wanner and Thomas is defending
HMS in this action.
STATUS: The case is in the discovery stage. It is not believed that Plaintiff
will prevail with the request for certification as a class action.
MADISON V. HMS - WARRANTY CONTRACT #22545909 - The Plaintiff has brought suit in
Alabama for the denial of a warranty claim. The suit was brought on March 28,
1994 and the demand is for $125,000.00. The plaintiff never called HMS to make a
claim. Jim Williams, Esquire at Sirote and Permutt is handling this matter on
behalf of HMS.
STATUS: The Case is in the discovery stage.
BIRMINGHAM FIRE V. HOMS AND HOME MARKETING SERVICES - Birmingham Fire has
brought suit against HOMS and Home Marketing Services for indemnification
relative to their settlement of an Errors and Omissions claim in the SUN HARBOR
litigation. Plaintiff is seeking payment of $200,000 plus interest, attorneys
fees and costs, and additional amounts for punitive and exemplary damages. The
potential range of damages being sought is not yet determinable, as discovery
has not yet commenced. The suit was served upon HOMS on March 5, 1996 and is
pending in California. Executive Re has denied the tender of the claim. Marshall
Silberberg, Esquire at Baker, Silberberg and Keener in Irvine, California is
handling this matter on behalf of HOMS.
STATUS: An Answer is being prepared. Also, settlement discussions have
commenced, and a potential settlement payment of $50,000 has been discussed.
JOHNSTON AND STRASSBURG V. MITCHEOM, HMS, ASCLIC, WILLIS CORROON, AND HOMS -
Plaintiffs have brought suit in California for the denial of an Errors and
Omissions claim. The suit was served upon HMS on September 27, 1995 and is for
$50,000 plus attorney's fees and costs and punitive damages. Dean Alper, Esquire
is handling this matter on behalf of HMS.
STATUS: Motion For Summary Judgment is being prepared.
URMAN V. WONSON - Suit has been brought against Paul Wonson, an HMS of New
England employee for the failure to place appropriate coverage for Garden City
Homes. Suit was brought in Massachusetts on 10/2/92, in the amount of $680,000.
Jack Sims, Esquire of Sims and Sims is handling this case on behalf of HMS.
<PAGE>
HMS has won this case on Summary Judgment, however, this case has been appealed.
STATUS: Appeal brief has been filed. We are awaiting the decision.
WILLIAM'S V. REALTY WORLD CHABOT V. HOMS AND ASLIC - Realty World Chabot has
brought an action against HOMS for indemnity and insurance bad faith for a claim
which was denied by ASLIC. Realty World is seeking actual damages of $5,500 and
punitive damages in the sum of $500,000. The lawsuit was served upon HOMS on or
about 5/10/95. This matter is being handled by Dean Alper, Esquire, who has
filed a demurrer in this action.
STATUS: The trial date had been continued and Mr. Alper has advised the Company
that he believes this case can be dismissed as to HMSI.
NEMO ASSOCIATES V. HMSI - In February 1996, a lawsuit was filed against the
Company in the Court of Common Pleas of Bucks County, Pennsylvania, by the
former franchisee of the Pennsylvania territory, alleging breach of contact,
fraud and misrepresentation, and is seeking damages in the amount of $50,000,
trebled, reimbursement of costs and attorney's fees, and an injunction to
prevent the Company from terminating the franchise agreement. The Company
believes this suit is without merit, and has filed a motion to transfer the case
to Florida and a motion to dismiss the case. The suit was served upon HMSI on or
about February 21, 1996.
Arthur Pressman, Esquire at Abraham, Pressman and Bauer is handling this on
behalf of HMSI.
STATUS: On March 6, 1996 HMSI removed the case to the United States District
Court for the Eastern District of Pennsylvania. On March 12, 1996 HMSI filed a
Motion To Transfer and a Motion To Dismiss which are pending before the Court.
ACCELERATION NATIONAL INSURANCE COMPANY V. HOMEOWNERS MARKETING SERVICES, INC.,
ET AL - In December 1995, a verdict was rendered against Homeowners Marketing
Services, Inc., in the amount of $5,156,022. See section 4.17 regarding
settlement agreement.
* There are an additional thirteen (13) pending warranty lawsuits which have not
been listed in this report as the same are not believed to pose a Material
Adverse Effect on the business of the Company and the Company Subsidiaries taken
as a whole.
<PAGE>
<TABLE>
<CAPTION>
DISCLOSURE SCHEDULE SECT 4.12
STATE TYPE COMPANY FORM DATE DUE AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FLORIDA L Assoc to Properly
Manage Risk Florida Annual Report May 1 $ 200.00
FLORIDA L FL Inspect. Florida Annual Report May 1 $ 200.00
ARIZONA L HAA Business Corporation Annual Report April 15 $ 45.00
COLORADO L HAA Biennial Report April 30 $ 100.00
FLORIDA L HAA Florida Annual Report May 1 $ 200.00
FLORIDA L HAA Florida Annual Statement March 1 none
GEORGIA L HAA BR201, Corporation Annual Registration April 1 $ 15.00
IOWA L HAA License Fee February 28 varies
IOWA L HAA Annual Report March 31 none
MAINE L HAA Annual Licensing Fee October 20 $1,000.00
MAINE L HAA Form MBCA-13, Annual Report April 1 $ 60.00
MISSISSIPPI L HAA License Renewal March 31 $ 200.00
MISSISSIPPI L HAA Form A, Corporate Annual Report April 1 $ 25.00
NEVADA L HAA Annual Report February 28 $ 85.00
NEVADA L HAA Insurance License Fee March 1 $2,490.00
NORTH CAROLINA L HAA CAR4, Annual Report January 29 $ 10.00
OHIO L HAA Form 7, Annual Statement of Proportion of Capital Stock March 31 $ 10.00
OHIO L HAA 920-97, Report of Personal Property Business Status April 30 none
OHIO L HAA Annual Statement March 1 none
OHIO L HAA Annual Statement & License July 31 varies
OREGON L HAA Annual Report July 13 $ 220.00
TEXAS L HAA Annual Report April 1 $3,500.00
WISCONSIN L HAA Foreign Corporation Annual Report March 31 $ 50.00
WISCONSIN L HAA Annual Statement & License March 1 varies
WISCONSIN L HAA License Fee March 31 $ 25.00
FLORIDA L HAA Service Annual License Fee March 1 $ 200.00
ARIZONA L HAAAZ Business Corporation Annual Report April 15 $ 45.00
ARIZONA L HAAAZ Service License Fee March 31 $ 255.00
CALIFORNIA L HAAC Department of Insurance Filing Fee April 1 varies
GEORGIA L HAAGA Annual Registration April 1 $ 15.00
OREGON L HAAOR Annual Report March 22 $ 30.00
OREGON L HAAUT Insurance Report April 1 varies
UTAH L HAAUT Annual Report March 31 none
NEW HAMPSHIRE L HAAV Annual Report April 1 $ 100.00
NEW HAMPSHIRE L HAAV License Renewal June 15 $ 100.00
VIRGINIA L HAAV Annual Registration Fee April 1 $ 335.00
VIRGINIA L HAAV Annual Report March 1 none
VIRGINIA L HAAV License Tax 4/15, 6/15,
9/15, 12/15
VIRGINIA L HAAV Year End Premium License Tax Report March 1 varies
DELAWARE L HGI Annual Franchise Tax Report March 1 varies
FLORIDA L HGI Florida Annual Report May 1 $ 200.00
WEST VIRGINIA L HGI Renewal Application for Registration Certificate July 1 $ 15.00
ALABAMA L HMS Corporation Annual Report March 15 varies
ARIZONA L HMS Business Corporation Annual Report April 15 $ 45.00
ARKANSAS L HMS Franchise Tax Report June 1 varies
CALIFORNIA L HMS Statement by Foreign Corporation November 30 $ 5.00
CALIFORNIA L HMS Officer's Certificate-Foreign Corporation none
DELAWARE L HMS Foreign Annual Report June 30 $ 50.00
DISTRICT OF COLUMBIA L HMS Arena Fee Return June 15 varies
DISTRICT OF COLUMBIA L HMS Annual Report for Corporations April 15 $ 100.00
FLORIDA L HMS Florida Annual Report May 1 $ 200.00
HAWAII L HMS Foreign Corporation Annual Report June 30 $ 115.00
IDAHO L HMS Corporation Annual Report November 30 none
INDIANA L HMS Annual Report of Business Corporation November 30 $ 15.00
KANSAS L HMS Corporate Annual Report April 15 varies
KENTUCKY L HMS Annual Report June 30 $ 15.00
LOUISIANA L HMS Foreign Corporation Annual Report July 31 $ 25.00
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
DISCLOSURE SCHEDULE SECT 4.12
STATE TYPE COMPANY FORM DATE DUE AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MASSACHUSETTS L HMS Foreign Corporation Annual Report March 15 $ 85.00
MICHIGAN L HMS Annual Report May 15 $ 55.00
MINNESOTA L HMS Annual Registration By Foreign Corporation May 15 $ 60.00
MISSOURI L HMS Annual Registration Report April 15 $ 45.00
MONTANA L HMS Annual Corporation Report April 15 $ 10.00
NEW JERSEY L HMS Annual Report Filing Form December 31 $ 40.00
NEW MEXICO L HMS Biennial Profit Corporate Report March 15 $ 25.00
NORTH DAKOTA L HMS Foreign Corporation Annual Report April 1 $ 25.00
OHIO L HMS 920-97, Report of Personal Property Business Status April 30 none
OHIO L HMS Form 7, Annual Statement of Proportion of Capital Stock March 31 $ 10.00
OKLAHOMA L HMS Annual Franchise Tax Return July 1 varies
RHODE ISLAND L HMS Annual Report March 1 $ 50.00
SOUTH DAKOTA L HMS Annual Report June 30 $ 10.00
TENNESSEE L HMS Corporation Annual Report April 1 $ 20.00
UTAH L HMS Profit Corporation Annual Report September 30 $ 15.00
VERMONT L HMS Corporation Annual Report March 15 $ 100.00
WASHINGTON L HMS Corporate Annual Report/License Renewal December 31 $ 59.00
WEST VIRGINIA L HMS Renewal Application for Registration Certificate July 1 $ 15.00
WEST VIRGINIA L HMS Corporate License Tax Return July 1 $ 200.00
WYOMING L HMS Annual Profit Report June 1 $ 25.00
FLORIDA L HMS Purchasing Florida Annual Report May 1 $ 200.00
FLORIDA L HMS Real Estate Florida Annual Report May 1 $ 200.00
FLORIDA L HMS Real Estate Business & Professional Regulation License Renewal September 30 $ 75.00
FLORIDA L HMS Real Estate Mtg Brokerage Business License Renewal August 31 $ 300.00
FLORIDA L HMS So Fla Ltd Limited Partnership Annual Report December 31 $ 191.00
FLORIDA L HMS Warranty Florida Annual Report May 1 $ 200.00
FLORIDA L HMSI Florida Annual Report May 1 $ 200.00
INDIANA L HMSI Annual Report of Business Corporation October 30 $ 15.00
FLORIDA L HMSMtg Florida Annual Report May 1 $ 200.00
FLORIDA L HMSTX Florida Annual Report May 1 $ 200.00
TEXAS L HMSTX Texas Annual Franchise Tax May 15 none
ARIZONA L HOMS Business Corporation Annual Report April 15 $ 45.00
CALIFORNIA L HOMS Statement by Foreign Corporation November 30 $ 5.00
FLORIDA L HOMS Florida Annual Report May 1 $ 200.00
ILLINOIS L HOMS Foreign Corporation Annual Report December 31 varies
MISSOURI L HOMS Annual Registration Report April 15 $ 45.00
SOUTH DAKOTA L HOMS Annual Report April 30 $ 10.00
SOUTH DAKOTA L HOMS Application for Insurance License $ 50.00
WASHINGTON L HOMS Master License Service May 30 $ 84.00
WASHINGTON L HOMS Corporate Annual Report/License Renewal April 15 $ 59.00
WYOMING L HOMS Annual Profit Report June 1 $ 25.00
IOWA F HAA Annual Report March 31 none
MAINE F HAA Annual Statement March 31 none
MISSISSIPPI F HAA Premium Tax Return 4/20, 7/20,
10/20, 2/20 varies
MISSISSIPPI F HAA Annual Statement March 1 none
NEVADA F HAA Annual Financial Statement March 1 none
NEVADA F HAA Published Statement
NEVADA F HAA Quarterly Premium Tax Return 3/31, 6/30,
9/30, 12/31 varies
NEVADA F HAA Annual Premium Tax Return March 1 varies
OHIO F HAA Statement of Premium March 1,
October 31 varies
OHIO F HAA Premium Tax Return March 1 varies
OREGON F HAA Premium Tax Return April 1 varies
TEXAS F HAA Semi Annual Report February 15 none
WISCONSIN F HAA Warranty Plan March 31 none
WISCONSIN F HAA Use Tax Report none
ARIZONA F HAAAZ Annual Financial Statement & Certificate Renewal Appt. March 31 none
CALIFORNIA F HAAC SO-200, Statement of Domestic Stock February 28 $ 5.00
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
DISCLOSURE SCHEDULE SECT 4.12
STATE TYPE COMPANY FORM DATE DUE AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CALIFORNIA F HAAC Prepayment Return of Premium Tax 6/15, 9/15,
12/15 varies
CALIFORNIA F HAAC Publication
CALIFORNIA F HAAC Statement by Domestic Stock Corporation February 28 $ 5.00
CALIFORNIA F HAAC Quarterly Statement on Condition of Affairs Quarterly varies
CALIFORNIA F HAAC Valuation of Securities April 3 varies
CALIFORNIA F HAAC Securities Transaction Request
GEORGIA F HAAGA Quarterly Premium Tax Return 3/20, 6/20,
9/20, 12/20 varies
GEORGIA F HAAGA Annual Premium Tax Return March 1 varies
GEORGIA F HAAGA Local Premium Tax Return August 1 varies
GEORGIA F HAAGA Published Statement
UTAH F HAAUT Premium Tax Return March 31 varies
NEW HAMPSHIRE F HAAV Premium Tax Return March 1
VIRGINIA F HAAV Maintenance Assessment Report March 1 none
DELAWARE F HGI Quarterly Franchise Tax Return 6/1, 9/1, 12/1 varies
FLORIDA F HGI Annual Report of Property Presumed Abandoned November 1 none
FLORIDA F HGI DR405, Florida Tangible Return April 1 varies
FLORIDA F HGI & subs DR601, Florida Intangible Return June 30 varies
FLORIDA F HMS DR-15, Sales & Use Tax Return 20 of the month varies
MARYLAND F HMS Personal Property Return April 15 $ 100.00
MASSACHUSETTS F HMS Tax Disclosure Report June 30 none
CALIFORNIA F HMS N.CA 571-L, Business Property Statement April 1 none
MARYLAND F HMS Purchasing Premium Tax Report March 15 varies
WEST VIRGINIA F HMS Purchasing Premium Tax Return
NEW HAMPSHIRE F Annual Statement March 31 none
<FN>
LEGEND:
F = Other Filings
L = Licenses
All payments, approvals, authorizations, consents, licenses and registrations
set forth in this disclosure schedule section 4.12 generally have been
validly filed and will continue to be validly filed with the appropriate
state agency on or before the due dates referred to in this schedule.
</FN>
</TABLE>
Page 3
<PAGE>
DISCLOSURE SCHEDULE 4.13
HOMEOWNERS GROUP, INC - SCHEDULE OF AFFILIATES/AGREEMENT EXPIRATIONS/TERRITORIES
<TABLE>
<S> <C>
RAYJOE, INC. d/b/a O&A MARKETING SERVICES OF THE WEST, INC.
HMS OF ALABAMA AND NW FLORIDA d/b/a HMS OF KANSAS, MISSOURI. OKLAHOMA
RAY ABRELL DR. MICHAEL NOCERO/DR. KIM CARVASALE/DR. VIC GAMICCI
781 Springlake Drive Managed by CHARLES BASCUE
P.O. Box 7, Destin,FL 32541 c/o HMS TEXAS
904/837-9287 5177 Richmond Avenue, Suite 1050
AL Ofc: 334/277-6459 Houston, TX 77056
Wats: 800/476-1705 713/622-3605
Fax: 904/837-2544 Wats: 800/879-2828
TERMINATION DATE - JUNE 30, 1998 Fax: 713/622-1732
TERMINATION DATE - OCTOBER 31, 1995 *
SOUTHWEST MARKETING SERVICES, INC. d/b/a * CONTRACT NEGOTIATIONS IN PROGRESS; CURRENT
HMS OF THE SOUTHWEST (AZ/NM) AGREEMENT EXTENDED TO AUGUST 31, 1996
BECKY MERCER/DR. MICHAEL NOCERO
Administrative offices - LUTHY ENTERPRISES, INC. d/b/a
400 Sawgrass Corporate Parkway HMS OF LOUISIANA
Sunrise, FL 33325 VAL AND SHARI LUTHY
954/845-9100 8221 Summa Avenue, #C
800/327-9787 Baton Rouge, LA 70809
TERMINATION DATE - JULY 12, 1998 504/769-9739
LA Wats: 800/523-7628
BROKERS SERCVICES, INC. d/b/a TERMINATION DATE - JUNE 28, 1998
HMS OF ARKANSAS
BILL BROTHERS ERIE MARKETING SERVICES, INC. d/b/a
American Home Life Bldg. HMS OF MICHIGAN
1920 N. Main Street DPD ENTERPRISES, INC. d/b/a
N. Little Rock, AR 72114 HMS OF OHIO
501/758-2252 DAN DELAHUNT
Fax 501/758-2479 143 E. Water Street
TERMINATION DATE - OCTOBER 31, 1995 * Sandusky, OH 44870
* CONTRACT NEGOTIATIONS IN PROGRESS; CURRENT 419/626-8202
AGREEMENT EXTENDED TO SEPTEMBER 15, 1996 OH Wats: 800/521-8264
MI Wats: 800/523-7732
REAL ESTATE MARKETING SERVICES, INC. Fax: 419/626-0669
d/b/a HMS OF THE MIDATLANTIC STATES TERMINATION DATE (MI) - NOVEMBER 8, 1998
(MD/VA/WV/DC/DE) TERMINATION DATE (OH) - AUGUST 5, 1998
MICKEY NOCERA/ALAN PYLES
8300 Arlington Blvd. #B-2 RE BROKER SERVICES, INC. d/b/a
Fairfax, VA 22031 HMS OF MINNESOTA/WISCONSIN
703/876-0100 BILL ROSE
Wats: 800/843-4663 6119 Habitat Court
Fax: 703/876-0749 Edina, MN 55436
TERMINATION DATE - OCTOBER 31, 1995 * 612/935-9306
* CONTRACT NEGOTIATIONS IN PROGRESS; CURRENT MN Wats: 800/397-1700
AGREEMENT EXTENDED TO JUNE 6, 1996 Fax: 612/935-0254
TERMINATION DATE - OCTOBER 31, 1995 * *
CONTRACT NEGOTIATIONS IN PROGRESS; CURRENT
AGREEMENT EXTENDED TO SEPTEMBER 30, 1996
</TABLE>
CAROL EDWARDS d/b/a HMS OF NEVADA
CAROL EDWARDS
3690 East Desert Inn Rd.
Las Vegas, NV 89121
702/435-0735
Fax: 702/458-7076
TERMINATION DATE - JULY 19, 1999
BUCCEL ENTERPRISES, INC. d/b/a
HMS OF THE NORTHEAST (NY/NJ)
RICHARD BUCCELLATO/DIANE GRUBER
The Courts of Red Bank
130 Maple Avenue, #6-C
Red Bank, NJ 07701
908-842-6460
NY Wats: 800-257-7234
Fax: 908/758-1744
TERMINATION DATE - APRIL 30, 2006
PHREE ENTERPRISES, INC. d/b/a
HMS OF THE CAROLINAS (NC/SC)
PHILMAR, INC. d/b/a
HMS OF KENTUCKY
JOHN PHILLIPS/CHUCK MARTIN
2707-C Hwy 21 Business
Fort Mill, SC 29715
803-553-2570
TERMINATION DATE (NC/SC)- OCTOBER 31, 1995 *
TERMINATION DATE (KY) - OCTOBER 31, 1995 *
* CONTRACT NEGOTIATIONS IN PROGRESS; CURRENT
AGREEMENT EXTENDED TO SEPTEMBER 15, 1996
CURT HODGSON d/b/a
HMS OF WYOMING AND MONTANA
CURT HODGSON
5239 Highland Drive
Salt Lake City, UT 84117
801/277-3226
Wats: 800/766-4467
Fax: 801/27-0926
TERMINATION DATE - AUGUST 24, 1999
Page 1
<PAGE>
DISCLOSURE SCHEDULE 4.13
HOMEOWNERS GROUP, INC - SCHEDULE OF AFFILIATES/AGREEMENT EXPIRATIONS/TERRITORIES
<TABLE>
<S> <C>
SALES, MARKETING & DEVELOPMENT, INC. MARKETING SERVICES OF MISSISSIPPI, INC.
d/b/a HMS OF GEORGIA d/b/a HMS OF MISSISSIPPI
DAVID W. AND MARTHA SHERMAN CHRISTINE PERRY
P.O. Drawer 849 204 Sagewood Cove
Baldwin, GA 30511 (all mail) Ridgeland, MS 39157
1200 Smoke Rise Drive 601/856-5531
Baldwin, GA 30511 (UPS) TERMINATION DATE - NOVEMBER 8, 1998
706/776-7789
GA Wats: 800/749-6644 DARYL FARNSWORTH, CURT HODGSON
Fax: 706/776-6824 and CAROL EDWARDS d/b/a
TERMINATION DATE - AUGUST 17, 1998 HMS OF UTAH
CURT HODGSON
KNP ASSOCIATES, INC. d/b/a 5239 Highland Drive
HMS OF ILLINOIS Salt Lake City, UT 84117
MICKEY NOCERA/CARL KNIGHTEN 801/277-3226
525 W. Old N.W. Hwy. #203 Wats: 800/766-4467
Barrington, IL 60010 Fax: 801/27-0926
847/382-8500 TERMINATION DATE - AUGUST 24, 1999
IL Wats 800/747-8500
Fax: 708/382-0088
TERMINATION DATE - OCTOBER 31, 1995 *
* CONTRACT NEGOTIATIONS IN PROGRESS; CURRENT
AGREEMENT EXTENDED TO JUNE 6, 1996
</TABLE>
ENCORE MARKETING ENTERPRISES, INC.
d/b/a HMS OF RHODE ISLAND, CONNECTICUT
MAPLE AVENUE ENTERPRISES, INC.
d/b/a HMS OF MAINE, MASSACHUSETTS,
NEW HAMPSHIRE VERMONT
DIANE & RONALD GRUBER
The Courts of Red Bank
130 Maple Avenue, #6-C
Red Bank, NJ 07701
908/842-6460
NY Wats: 800/257-7234
Fax: 908/758-1744
TERMINATION DATES - APRIL 30, 2006
CEP, INC. d/b/a HMS OF TENNESSEE
DAN PIERCE
5123 Paddock Village Ct.
Suite B-21
Brentwood, TN 37027
615/377-0645 (#638)
TN Wats: 800-456-5799
Fax: 615-377-9683
TERMINATION DATE - AUGUST 11, 1999
Page 2
<PAGE>
DISCLOSURE SCHEDULE 4.13
HOMEOWNERS GROUP, INC - SCHEDULE OF AFFILIATES/AGREEMENT EXPIRATIONS/TERRITORIES
The following franchisees were audited during 1995, and certain defaults
under the terms of the franchise agreements were noted, and are being
resolved along with contract negotiations:
HMS of the MidAtlantic States
HMS of Illinois
HMS of the Carolinas
HMS of Kentucky
HMS of Minnesota/Wisconsin
The following franchisee was audited during 1995, and the franchise
agreement was terminated due to certain defaults. HMS began operating in
this territory in February 1996
HMS of Pennsylvania
HMS has entered into management agreements under which it manages the sales
and servicing in the field, and also performs certain administrative
functions, including accounting and reporting.
HMS of the Southwest
HMS of Kansas/Missouri/Oklahoma
HMSI has entered into an option agreement with Maple Avenue Enterprises, Inc.,
whereby Maple has the option to acquire the exclusive license to operate as
an HMSI affiliate in the state of Florida, at any time prior to April 30,
2006. In addition, if HMSI receives a bona fide third party offer for the
exclusive license for the Florida territory, prior to Maple's exercise of
its option, HMSI must notify Maple in writing, and Maple will have 10 days
from receipt of notice to either exercise its option or forfeit the option.
HMSI, in its sole discretion will determine the purchase price of the
Florida territory. Prior to the effective date of the merger agreement, this
option agreement will be canceled, at no cost to the Company, and the
franchisee will acknowledge in writing that it has no such rights in
connection with this option agreement.
HMSI has entered into an option agreement with Maple Avenue Enterprises, Inc.,
whereby Maple has the option to acquire the exclusive license to operate as
an HMSI affiliate in the state of Pennsylvania, at any time prior to April
30, 2006. In addition, if HMSI receives a bona fide third party offer for
the exclusive license for the Pennsylvania territory, prior to Maple's
exercise of its option, HMSI must notify Maple in writing, and Maple will
have 10 days from receipt of notice to either exercise its option or forfeit
the option. The option price for the Pennsylvania territory is $175,000.
HMSI may, at any time within 1 year of Maple's exercise of this option,
reacquire the exclusive license in the Pennsylvania territory, for an amount
equal to the $175,000 plus 15%, conditioned upon HMSI's offer to purchase
from Maple the affiliate rights in the states of Maine, Massachusetts, New
Hampshire and Vermont at a price and on terms acceptable to Maple. Prior to
the effective date of the merger agreement, this option agreement will be
canceled, at no cost to the Company, and the franchisee will acknowledge in
writing that it has no such rights in connection with this option agreement.
In addition to the aforementioned option agreements, Maple Avenue Enterprises,
Inc., Encore Marketing Services, Inc. and Bucell Enterprises, Inc. had
entered into Affiliation Agreement Amendments, dated as of April 26, 1996,
whereby the termination dates of such agreements were extended to April 30,
2006. Prior to the effective date of the merger agreement, these Amendments
to the Affiliation Agreements will be canceled, and each franchisee will
acknowledge in writing that it has no further rights in connection with such
amendments.
Page 1
<PAGE>
DISCLOSURE SCHEDULE - SECTION 4.18
U.S. SERVICE MARK REGISTRATION OWNED BY HOMG
- --------------------------------------------
MARK REQ. NO. REQ. DATE
---- -------- ---------
1. HOMEOWNERS ASSOCIATION 1,435,895 04/07/87
OF AMERICA
2. HOMEOWNERS MARKETING 1,435,894 04/07/87
SERVICES
3. ONE YEAR WARRANTY and 1,442,428 06/09/87
Roof Design
4. FOUR YEAR WARRANTY NEW 1,446,776 07/07/87
CONSTRUCTION and Roof
Design
5. REFNET 1,495,351 07/05/88
6. HMS and Roof Design 1,506,242 09/27/88
7. HAA and Roof Design 1,514,847 11/29/88
8. HMS BUYPHONE 1,589,510 03/27/90
9. HOMEOWNERS GROUP 1,591,185 04/10/90
10. HOMEOWNERS GROUP 1,591,186 04/10/90
and Roof Design
11. MASTERPLAN 1,660,416 10/08/91
12. HMS BUYERTRACK 1,685,812 05/05/92
13. HMS SELLERTRACK 1,688,463 05/19/92
14. HIGH-POWERED REAL ESTATE 1,691,481 06/09/92
INFORMATION FOR BETTER
BUSINESS PERFORMANCE
15. HMS RISK MANAGEMENT 1,699,930 07/07/92
SYSTEM
16. HAA ONE YEAR WARRANTY 1,705,962 08/04/92
and Roof Design
1
<PAGE>
MARK REQ. NO. REQ. DATE
---- -------- ---------
17. HMSI and Roof Design 1,712,079 09/01/92
18. HMS ONE YEAR WARRANTY 1,718,687 09/22/92
and Roof Design
19. HMS NETWORKING and 1,725,552 10/20/92
Design
20. HMS NETWORKING 1,727,484 10/27/92
21. HOME MARKETING SERVICES 1,745,372 01/05/93
(Supplemental Register)
22. HAA in Roof Design 1,780,574 07/06/93
23. HMS in Roof Design 1,780,575 07/06/93
24. THE POWER OF MEMBERSHIP 1,784,393 07/27/93
25. HOMEOWNERS GOLD KEY CLUB 1,790,609 08/31/93
26. INSPECTNET 1,836,409 05/10/94
27. HMS REFNET 1,880,019 02/21/95
28. HOMEWORK 800 1,897,083 05/30/95
29. HAA MEMBER-PAK 1,915,319 08/29/95
30. BUYERPAK 1,922,361 09/26/95
31. HAA and Roof Design 1,929,161 10/24/95
32. HAA 1,929,162 10/24/95
33. HOMEOWNERS ASSOCIATION 1,962,690 03/19/96
OF AMERICA
2
<PAGE>
MARK REQ. NO. REQ. DATE
---- -------- ---------
OTHER - LICENSED
1. PEOPLESOFT SOFTWARE
Modifications -
Significant to the
Business
OTHER - OWNED
2. EXPIRATION LIST -Pledged to
CNA, as part of the Pledge
and Security Agreement
between HOMS Insurance
Agency, Inc. and Continental
Casualty Company dated as of
Decemebr 1, 1993.
3
<PAGE>
DISCLOSURE SCHEDULE
SECTION 4.19
4.19(B)(I)
- ----------
Extensions for federal and state income tax returns for 1995 were filed on March
15, 1996. This practice of filing extensions is consistent with prior years.
4.19(B)(V)
- ----------
The Company has requested extensions for the filing of federal and state income
tax returns for 1995 which practice is consistent with prior years. These
returns have not been completed and thus not filed.
4.19(B)(VI)
- -----------
Waiver form 872 was executed with respect to the 1992 tax return which extended
the statute of limitations to June 30, 1997.
4.19(B)(VII)
- ------------
The statute of limitations for corporate income tax returns are open for 1992,
1993, 1994 and 1995 plus 1991 to the extent of the refund claim. There are
various open years for state returns shown on the attached schedule as to which
the Company knows of no deficiencies. The returns are subject to applicable
statutes of limitations for those states.
4.19(B)(VIII)
- -------------
The tax return for the year ended December 31, 1993 resulted in a refund request
(received) in the amount of $2,247,851 and the tax return for the year ended
December 31, 1994 resulted in a refund request (not yet received) in the amount
of $1,277,449. Although not formally notified of audit by the Internal Revenue
Service, IRC Section 6405(a) dictates that no income tax refund in excess of
$1,000,000 shall be made until after expiration of 30 days from the date upon
which a report giving the name of the taxpayer to whom the refund is to be made,
the amount of such refund and a summary of the facts and the decision of the
Secretary, is submitted to the Joint Committee on Taxation. If the Joint
Committee has any questions or advises the Service that it does not approve the
proposed refund, the case is sent back to the Service, and further investigation
is made (i.e., a possible audit). As the refund request for December 31, 1994
has not yet been received, there is the possibility that the 1994, as well as
1993, tax years may be selected for audit, due to the large refunds requested.
4.19(B)(IX)
- -----------
A power of attorney was issued to Deloitte & Touche with respect to the Form
1139 and Form 1120, as it relates to the Form 1139, requesting a refund from the
1994 tax return relating to 1993 and 1994 losses incurred and carried back to
1991 and 1992.
4.19(B)(XI)
- -----------
Although the Company and its subsidiaries currently have no formalized, written
tax sharing agreement in place, the Company allocates tax expenses to its
subsidiaries, in accordance with the subsidiary's proportion of taxable income,
relative to the consolidated group's taxable income. The Commonwealth of
Virginia has requested that HAA of Virginia, Inc. execute a formal tax sharing
agreement with the Company. Consequently, the Company currently plans to
document in writing the informal federal tax sharing arrangement that rules in
the absence of a formal agreement, which calls for tax liabilities/benefits to
be shared in proportion to the taxable income generated by each subsidiary of
the consolidated group.
<PAGE>
DISCLOSURE SCHEDULE
SECTION 4.19
STATE RETURNS OPEN FOR ASSESSMENT
- --------------------------------------------------------------------------------
ALABAMA 1992, 1993, 1994, 1995
ARIZONA** 1991, 1992, 1993, 1994, 1995
ARKANSAS 1992, 1993, 1994, 1995
CALIFORNIA 1991, 1992, 1993, 1994, 1995
COLORADO 1991, 1992, 1993, 1994, 1995
CONNECTICUT 1992, 1993, 1994, 1995
DELAWARE 1992, 1993, 1994, 1995
DISTRICT OF COLUMBIA 1992, 1993, 1994, 1995
FLORIDA 1994, 1995
GEORGIA 1992, 1993, 1994, 1995
HAWAII 1992, 1993, 1994, 1995
IDAHO 1992, 1993, 1994, 1995
ILLINOIS 1992, 1993, 1994, 1995
INDIANA** 1992, 1993, 1994, 1995
IOWA 1992, 1993, 1994, 1995
KANSAS 1992, 1993, 1994, 1995
KENTUCKY 1991, 1992, 1993, 1994, 1995
LOUISIANA 1992, 1993, 1994, 1995
MAINE 1992, 1993, 1994, 1995
MARYLAND 1992, 1993, 1994, 1995
MASSACHUSETTS 1992, 1993, 1994, 1995
MICHIGAN 1991, 1992, 1993, 1994, 1995
MINNESOTA 1992, 1993, 1994, 1995
MISSISSIPPI 1992, 1993, 1994, 1995
MISSOURI 1992, 1993, 1994, 1995
<PAGE>
MONTANA** 1990, 1991, 1992, 1993, 1994, 1995
NEBRASKA** 1992, 1993, 1994, 1995
NEVADA N/A
NEW HAMPSHIRE 1992, 1993, 1994, 1995
NEW JERSEY* 1990, 1991, 1992, 1993, 1994, 1995
NEW MEXICO 1992, 1993, 1994 1995
NEW YORK 1993, 1994, 1995
NORTH CAROLINA 1992, 1993, 1994, 1995
NORTH DAKOTA** 1989, 1990, 1991, 1992, 1993, 1994, 1995
OHIO 1992, 1993, 1994, 1995
OKLAHOMA 1992, 1993, 1994, 1995
OREGON 1992, 1993, 1994, 1995
PENNSYLVANIA 1994, 1995
RHODE ISLAND 1992, 1993, 1994, 1995
SOUTH CAROLINA 1992, 1993, 1994, 1995
SOUTH DAKOTA N/A
TENNESSEE 1991, 1992, 1993, 1994, 1995
TEXAS 1991, 1992, 1993, 1994, 1995
UTAH** 1992, 1993, 1994, 1995
VERMONT 1993, 1994, 1995
VIRGINIA 1992, 1993, 1994, 1995
WASHINGTON N/A
WEST VIRGINIA 1992, 1993, 1994, 1995
WISCONSIN 1991, 1992, 1993, 1994, 1995
WYOMING N/A
* YEARS 1990-1994 CURRENTLY UNDER AUDIT.
** AGREEMENT BETWEEN TAXPAYER AND INTERNAL REVENUE SERVICE TO EXTEND FEDERAL
STATUTE EXTENDS STATE AS WELL.
<PAGE>
DISCLOSURE SCHEDULE 4.20
The following agreements are in effect with respect to the Errors & Omissions
insurance program offered by the Company to its membership:
/bullet/ Novation agreement, dated as of December 1, 1993, by and among
Birmingham Fire Insurance Company of the State of Pennsylvania, POMG
Insurance Company, Ltd. and Continental Casualty Company.
/bullet/ Real Estate Errors & Omissions Program Administration and Holdback
Fund Agreement, dated as of December 1, 1993, between Continental
Casualty Company, Homeowners Group, Inc. and POMG Insurance Company,
Ltd. Under the Holdback Fund Agreement, the Company has an obligation
to CNA in the amount of $3,601,513, as of December 31, 1995. The
Company makes payments against this obligation through reductions in
the commission it earns on the premiums generated under the program.
Accordingly, the Company has agreed to meet certain premium volume
quotas, on an annualized basis, with scheduled minimum repayments.
Additionally, there is a specified minimum premium volume which must be
attained. If E&O premiums fall below the specified minimum premium
volume, CNA may review the program, give the Company an opportunity to
address the issue and then, at its option, may stop the program and
take ownership of the Company's expiration list. If, on an annual
basis, premium volume falls below the premium volume quota, but is
above the specified minimum premium volume, a cash payment equal to 5%
of the difference between the actual premium volume and premium volume
quota must be made to CNA, to be applied against the obligation to CNA.
In 1995, the premium volume quota was $20 million, and the specified
minimum premium volume was $15 million. The premium volume written was
$12 million, below both the premium volume quota and the specified
minimum premium volume. However, in March 1996, the Company and CNA
entered into an amendment of the agreement, modifying the specified
minimum premium volume levels to $12 million in 1995, $13 million in
1996, $15 million in 1997 and $20 million thereafter. If, on an annual
basis, premium volume falls below the premium volume quotas of $17
million in 1995, $18 million in 1996, and $20 million for each year
thereafter, but is above the specified minimum premium volume, a cash
payment equal to 5% of the difference between the actual premium volume
and the premium volume quota must be made to CNA, to be applied against
the obligation to CNA.
/bullet/ Pledge and Security Agreement (Expiration List), between HOMS Insurance
Agency, Inc. and Continental Casualty Company.
/bullet/ Pledge and Security Agreement (Tax Refund), between Homeowners Group,
Inc. and Continental Casualty Company.
/bullet/ Stock Pledge Agreement (security interest in the common stock of HOMS
Insurance Agency, Inc.), between Homeowners Group, Inc. and Continental
Casualty Company.
The Company is a party to the following insurance/reinsurance agreements:
/bullet/ Sphere Drake reinsurance proposal - in connection with the Real Estate
Errors and Omissions Program Administration and Holdback Fund and
Agreement dated as of December 1, 1993, the Company has guaranteed the
validity of the reinsurance contract, but does not assume credit risk
for non-collection. While Sphere Drake has not indicated that they
believe the contract to be invalid, they have not yet agreed to pay any
amounts under the coverage afforded, even though the program losses
have penetrated the coverage levels.
<PAGE>
In the normal course of business, the Company also has the following insurance
coverages:
<TABLE>
<CAPTION>
DESCRIPTION POLICY NUMBER INSURANCE COMPANY
- ----------- ------------- -----------------
<S> <C> <C>
/bullet/ D&O Insurance 445-95-15 National Union Fire
/bullet/ Professional Liability: 243-27-81 American Internat'l Specialty Lines
Insurance Agents & Brokers
/bullet/ Property coverage: building 3MF 767 111-01 Kemper National
and personal property
/bullet/ Inland Marine: accounts receivable, 3MF 767 111-01 Kemper National
business electronic equipment, valuable
papers and records and scheduled property
/bullet/ General Liability 3MG 767 111-01 Kemper National
/bullet/ Automobile Coverage 3MG 767 111-01 Kemper National
/bullet/ Workers Compensation - all except TX 3BA 052 608-00 Kemper Insurance Group
Texas only 3BA 052 656-01 Kemper Insurance Group
/bullet/ Umbrella Policy UMB9-87-37-71-00 Great American
</TABLE>
<PAGE>
DISCLOSURE SCHEDULE 4.22
Transactions with Affiliates are disclosed as follows:
Mr. Stewart's previous employment agreement was terminated by mutual
agreement effective December 31, 1994. Mr. Stewart has agreed to provide
consulting services upon the request of the Company through November 30,
1996. Under the severance arrangement, Mr. Stewart received a payment of
$50,000 on January 5, 1995 and currently receives payments of $15,922 per
month, through November 30, 1996. Ownership of the automobile previously
used by Mr. Stewart was transferred to him. He also receives the medical
benefits previously provided under his employment agreement. He has agreed
not to compete with the Company through January, 1998 and relinquished all
stock options held by him.
Homeowners Marketing Services International, Inc. ("HMSI"), a
wholly-owned subsidiary of the Company, is party to a franchise agreement
with Southwest Marketing Services, Inc. ("SMS"), a corporation owned 25% by
Michael A. Nocero, Jr., M.D., granting such corporation the exclusive right
to market HMS products and services and enroll Member-Brokers in Arizona
and New Mexico. In 1995, the Company paid $421,939 to SMS. The terms and
provisions of this franchise agreement are comparable to those entered into
with non-affiliated third parties.
Broker Marketing Services of Texas, Inc. ("BMST"), a corporation owned
100% by Dr. Nocero and HMS Texas, Inc., a wholly-owned subsidiary of the
Company, have entered into a partnership agreement for the operation of the
Texas territory. Pursuant to the terms of this partnership agreement, HMS
Texas, Inc. and BMST are each entitled to 45% of the profits and cash
distributions from the partnership, with a third-party manager entitled to
the remaining 10%. The partnership agreement names HMS Texas, Inc. as
managing partner with sole authority to make all major operational
decisions and provides for restrictions on transferability and rights of
first refusal with respect to interests in the partnership. In 1995,
distributions of $60,463 were paid to BMST.
HMS has also entered into a home inspection agreement with Arizona
Inspection Services, Inc. ("AIS"), a corporation owned 12.525% by Dr.
Nocero. The agreement authorizes AIS to perform home inspections in the
State of Arizona in connection with the issuance of HMS warranty plans. In
1995, the Company paid $780 in inspection fees to AIS. The terms and
provisions of this home inspection agreement are comparable to those
entered into with non-affiliated third parties.
HMSI is also party to a franchise agreement with O & A Marketing
Services of the West, Inc. ("O&A"), a corporation owned 20% by Dr. Nocero,
granting such corporation the exclusive right to market HMS products and
services and enroll Member-Brokers in Kansas, Missouri and Oklahoma. In
1995, the Company paid $645,287 to O&A. The terms and provisions of this
franchise agreement are comparable to those entered into with
non-affiliated third parties.
Homeowners Marketing Services, Inc. ("HMS"), a wholly owned subsidiary
of the Company, has entered into a partnership agreement with Professional
Forum Enterprises, Inc. ("PFE"), a corporation 80% owned by Michael A.
Nocero, Jr., M.D., to market Internet access and related products and
services to real estate professionals. Pursuant to the partnerships
agreement, HMS and PFE share in the partnership profits or losses at the
rate of 50% each, and both HMS and PFE are obligated to make joint
contributions to fund the partnership operations. During 1995, HMS
contributed $110,000 towards the joint funding of the partnership, and
purchased $59,239 in computer equipment on behalf of the partnership.
<PAGE>
In 1995, the Company paid approximately $103,180 in fees and
reimbursable expenses for consulting services rendered by Gary D. Lipson,
which fees and expenses the Company believes are more favorable to the
Company than those which would have been paid to an unrelated party.
On December 22, 1995, the Company and Mr. Lipson entered into an
Engagement Agreement pursuant to which Mr. Lipson agreed to make himself
available to provide legal services on behalf of the Company and its
subsidiaries for a minimum of five hundred hours per year at an hourly rate
of $200. Upon his execution of the Engagement Agreement, Mr. Lipson became
entitled to a non-refundable retainer of $100,000. The Company has the
right to terminate the Engagement Agreement at any time. If the Company
terminates the Engagement Agreement without cause (as such term is defined
in the Agreement), then the Company is obligated to immediately pay the
non-refundable retainer to Mr. Lipson.
On April 29, 1996, the Company and Mr. Lipson entered into an Amendment
to Engagement Agreement. Pursuant to the Amendment to Engagement Agreement,
Mr. Lipson voluntarily gave up his right to the non-refundable retainer and
the Company and Mr. Lipson entered into a separate Consulting Agreement.
The Consulting Agreement becomes effective if and when the Engagement
Agreement is terminated for any reason by either of the parties. Pursuant
to the Consulting Agreement, Mr. Lipson has agreed to make himself
available to provide consulting services to the Company and its
subsidiaries, for a period of twenty four months from and after the date of
termination of the Engagement Agreement in consideration of a monthly fee
of $8,333.33 for the term of the Consulting Agreement. On May 6, 1996, the
Engagement Agreement was terminated, and the Consulting Agreement became
effective. Prior to the effective date of the merger agreement, the
Consulting Agreement will be terminated according to section 6.5 of the
merger agreement.
HMSI is also party to a franchise agreement with HMS of the Northeast
("Northeast") of which Diane M. Gruber is Executive Vice President.
Northeast has the exclusive right to market HMS products and services and
enroll Member-Brokers in New Jersey and New York. In 1995, the Company paid
$466,521 to Northeast. HMSI has also entered into an agreement with a firm
that is the Company's franchisee for Rhode Island and Connecticut
("HMSRIC") of which Diane Gruber, with her spouse, owns 100% of the stock.
This firm has the exclusive right to market HMS products and services and
enroll Member-Brokers in Rhode Island and Connecticut. In connection with
the purchase of these territories, HMSRIC owes HMSI $13,004, under a
promissory note issued at the time of purchase. In 1995, the Company paid
$32,325 to HMSRIC. The terms and provisions of the franchise agreements
with Northeast and HMSRIC are comparable to those entered into with
non-affiliated third parties. In connection with the franchise operations,
these two firms have purchased computer equipment through HMS, and
currently owe $7,224 and $1,885 under promissory notes issued to HMS.
HMSI has also entered into an agreement with a firm ("Maple") that is
the Company's franchisee for Massachusetts, Maine, Vermont and New
Hampshire of which Diane Gruber, with her spouse, owns 50% of the stock.
Maple has the exclusive right to market HMS products and services and
enroll Member-Brokers in Massachusetts, Maine, Vermont and New Hampshire.
In connection with this arrangement, Maple owes HMSI $68,574 under a
promissory note issued at the time of purchase of the franchised territory.
In 1995, the Company paid $129,865 to Maple. The terms and provisions of
the franchise agreements with Maple are generally comparable to those
entered into with non-affiliated third parties. Maple has an option to
purchase the franchise rights to the state of Florida, the option price of
which is determinable by the Company. Maple also has an option to purchase
the franchise rights to the state of Pennsylvania for $175,000. In addition
to these options, if HMSI receives a bona fide third party offer for either
territory prior to Maple's exercise of its options, HMSI must notify Maple
in writing, and Maple will have 10 days from receipt of such notice to
either exercise its option or forfeit the option. HMSI may reacquire the
Pennsylvania territory, within 1 year of the sale to Maple, for the amount
of $175,000 plus 15%, subject to reacquiring the franchise rights for
Maine, Massachusetts, New Hampshire and Vermont, at a price and on terms
acceptable to Maple. Prior to the effective date of the merger
<PAGE>
agreement, these option agreements will be canceled, at no cost to the
Company, and the franchisee will acknowledge in writing that it has no
further rights under the previously issued option agreements.
In addition to the aforementioned option agreements, Maple, Encore
Marketing Services, Inc., which is also owned by Diane Gruber, with her
spouse, and Buccell Enterprises, Inc., which is owned by Richard Buccellato
and managed by Diane Gruber, had entered into Affiliate Amendment
Agreements, dated as of April 26, 1996, whereby the termination dates of
such agreements were extended to April 30, 2006. Prior to the effective
date of the merger agreement, these Amendments to the Affiliation
agreements will be canceled, at no cost to the Company, and each franchisee
will acknowledge in writing that it has no further rights in connection
with such amendments.
<PAGE>
INDEMNIFICATION AGREEMENTS
The following current and former directors have executed indemnification
agreements with the Company:
RICHARD ABEDON
CARL BUCCELLATO
MICHAEL A. NOCERO, JR. M.D.
J. HANLEY SAYERS, JR.
JERRY CAMPORA
DIANE M. GRUBER
GARY D. LIPSON
MELVIN STEWART
DEAN S. WOODMAN
<PAGE>
DISCLOSURE SCHEDULE 4.23
EMPLOYEE BENEFIT PLANS
Section 125 Cafeteria plan - allows pre-tax deductions of employee contributions
for health/dental insurance.
BENEFIT COMPANY POLICY #
- ------- ------- --------
Medical insurance program Prudential 57408
Dental insurance program CIGNA 2192691
AD&D insurance program Prudential 57408
Short term disability plan HMS-self insured n/a
Long term disability plan Prudential 57408
Medical Executive Reimbursement Plan: Lincoln National Life G40000-2587
- - self insurance for services/benefits Insurance Company
not covered in basic plan.
Executive Life; Carl Buccellato Transamerica Occidental 41034317
Life insurance; Melvin Stewart Life Insurance Company 41034363
under contract terms (through November 1996)
Company sponsored 401-k plan, Northwestern National GA-51026-2
which includes a Company match of 15% Life
of the first 5% of employee contributions
Incentive stock option plan/Non-qualified stock option plan/Non-employee
Directors stock option plan
Manager's incentive bonus plan (excludes CEO/CFO)
Auto allowance for sales personnel, executives and certain office staff who use
personal auto for business purposes
Paid vacation plan, which allows 2 weeks per full year of service, from the
second through fourth years of service; three weeks of vacation in the fifth
year through the ninth year of service; four weeks of vacation in the tenth
through nineteenth year of service and five weeks of vacation in the twentieth
year of service and beyond. Employees hired in the first quarter of the year are
eligible for two weeks of vacation; new hires in the second quarter are eligible
for one week of vacation in the year of hire. New hires after July 31 are not
eligible for vacation in the year of hire. Unused vacation is generally lost if
not taken, unless approval is obtained in advance from the employee's
supervisor.
Personal holidays are granted at two per year, which are lost if not taken.
Sick pay is accrued at the rate of 0.5 days per month of service.
Bereavement leave is available at three to five days, depending on the
relationship of the deceased to the employee.
Overtime pay, for non-exempt employees is paid at the rate of 1.5 times the
normal hourly rate, for hours worked in excess of forty per week. Vacation time,
sick time, or other time off is not considered hours worked for such
calculation.
Severance policy followed by the company is to provide two weeks severance pay
for each year of service, in addition to any accrued but unused vacation pay.
Employment contracts - Carl Buccellato (filed with 10-K), Mike Jones, Greg
Morris, Caryn Maxwell (all call for a minimum of six months and a maximum of
twelve months ("the severance period") of severance pay upon termination. Actual
length of the Severance Period determined at the discretion of the Chief
Executive Officer; sample filed with 1993 10-K). Employment contract with Tom
Green, the former owner of the Pacific Northwest territory as part of the
acquisition of the territory, for a three year term, beginning March 1996.
<PAGE>
DISCLOSURE SCHEDULE SECTION 4.25
The Company has entered into certain leases in the ordinary course of
business, related to personal property, including computer and telephone
equipment. Relative to these leases, the leased property is subject to a
security interest by the lessor, as noted in UCC filings. In addition,
Acceleration National Insurance Company has a lien on the Federal tax
refund due the Company, to satisfy the December 13, 1995 judgment against
HMS, a wholly owned subsidiary of the Company.
The following lessors have UCC filings on record:
AT&T Credit Corporation - Conversant telephone equipment
Amplicon, Inc. - Computer hardware
The CIT Group, Inc. - Computer hardware
PeopleSoft Credit Corporation - PeopleSoft license agreement and Software
Acceleration National Insurance Company, Inc. - lien on Federal tax refund
<PAGE>
DISCLOSURE SCHEDULE 4.26
LEASED OFFICE SPACE
EXPIRATION CURRENT
DATE OF ANNUAL
BASE LEASE
PROPERTY LEASE TERM AMOUNT
- -------------------------------------------------------------------
400 SAWGRASS CORP PKWY 12/31/2005 $390,827
New England - Cummings 8/31/2000 10,800
Northern Cal - Desco II 12/31/2000 37,944
Texas - Keppel Houston Group 5/31/98 26,009
Page 1
<PAGE>
<TABLE>
<CAPTION>
DISCLOSURE SCHEDULE 4.27
OTHER MATERIAL CONTRACTS WITH
ANNUAL PAYMENTS IN EXCESS OF $50,000 PER YEAR
ANNUAL
PARTY DESCRIPTION AMOUNT
- ------------------------------------------------------------------------------------
<S> <C> <C>
ONE STOP CONSULTING CONSUMER REACH $60,000
ONE STOP CONSULTING NETWORKING MAGAZINE 85,000
MEL STEWART CONSULTING 104,454
HMS RISK MANAGEMENT ADVISORY CENTER RISK MANAGEMENT SERVICES 60,000
HMS MANAGED LEGAL CARE RISK MANAGEMENT SERVICES 72,000
AT&T TELEPHONE SERVICE - TARIFF 600,000 - minimum annual commitment
</TABLE>
<TABLE>
<CAPTION>
OTHER AGREEMENTS WHICH COULD RESULT IN PAYMENTS IN EXCESS OF $50,000:
PARTY DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C>
A+ STRATEGIC ALLIANCES Marketing agreement; fees based on warranty production
INTERCOUNTY MORTGAGE Marketing agreement; fees based on warranty production
VISBY MARKETING GROUP Marketing agreement; fees based on warranty production THE
PERSONAL MARKETING COMPANY Product marketing and fulfilment; fees based on program/unit volume
INNOVATIVE MARKETING TECHNOLOGIES Product storage, assembly and fulfilment: fees based on volume
ARTHUR ANDERSEN & COMPANY Fees on system project based on support provided
COMPUTER TASK GROUP Support of current systems to further the system project
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
OTHER AGREEMENTS WHICH COULD RESULT
IN RECEIPTS IN EXCESS OF $50,000:
PARTY DESCRIPTION
- --------------------------------------------------------------------------------
AMERICAN BANKERS INSURANCE CO. Sponsorship agreement; earnings contingent upon volume
BEFORE YOU MOVE Sponsorship agreement; earnings contingent upon volume
BRINKS HOME SECURITY Sponsorship agreement; earnings contingent upon volume
COUNTRYWIDE FINANCIAL CORP Sponsorship agreement; earnings contingent upon volume
MARYLAND INSURANCE Sponsorship agreement; earnings contingent upon volume
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
OTHER AGREEMENTS (PREVIOUSLY DISCLOSED)
WHICH COULD RESULT IN PAYMENTS IN
EXCESS OF $50,000:
PARTY DESCRIPTION
- --------------------------------------------------------------------------------
FRANCHISEES Franchise agreements - see Disclosure Schedule 4.13
AFFILIATES Various agreements - see Disclosure Schedule 4.22
VARIOUS BENEFIT PROVIDERS/EMPLOYEES Employee benefit plans/Contracts - See Disclosure Schedule 4.23
</TABLE>
Page 1
<PAGE>
DISCLOSURE SCHEDULE 4.28
MATERIAL DISPUTES, DISAGREEMENTS WITH OR IMPENDING LOSS OF
CUSTOMERS, EMPLOYEES, SUPPLIERS, LANDLORDS, LICENSEES
NAME RELATIONSHIP
- -----------------------------------------------------
HMS of the MidAtlantic States Franchisee
HMS of Illinois Franchisee
HMS of Minnesota/Wisconsin Franchisee
HMS of the Carolinas Franchisee
HMS of Kentucky Franchisee
Pursuant to the terms of the franchise agreements, each of the above named
franchisees have been audited, and certain deficiencies noted under which
the franchisees were in default of certain terms of the franchisee
agreements.
Page 1
<PAGE>
Disclosure Schedules -- Schedule 7.1
Sidney D. Wolk
Nathan T. Wolk
Howard L. Wolk
Jeffrey C. Wolk
Thomas Graham
<PAGE>
DISCLOSURE SCHEDULE -- SECTION 9.9
1. Cancel Affiliation Agreement Amendments dated April 26, 1996 with:
a. Buccell Enterprises, Inc. - regarding New Jersey and New York
b. Maple Avenue Enterprises, Inc. - regarding Maine, Massachusetts, Vermont
and New Hampshire.
c. Encore Marketing Services, Inc. - regarding Connecticut and Rhode Island
2. Cancel Option Agreement dated April 26, 1996 with Maple Avenue Enterprises,
Inc. regarding State of Florida as amended by Option Agreement Amendment
dated April 26, 1996.
3. Cancel Option Agreement dated April 26, 1996 with Maple Avenue Enterprises,
Inc. regarding State of Pennsylvania.
4. Amend Homeowners Marketing Services, Inc. International Affiliation
Agreements, dated June 21, 1993 with Buccell Enterprises, Inc. regarding
States of New Jersey and New York to provide for expiration date of June 21,
1998.
5. Amend Homeowners Marketing Services, Inc. International, Inc. Affiliation
Agreements dated June 21, 1993 with Encore Marketing Enterprises, Inc.
regarding States of Connecticut and Rhode Island to provide for expiration
date of June 21, 1998.
6. Terminate Severance Agreement with Michael Jones dated January 22, 1996.
