EXHIBIT (c)(2)
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This Amendment, dated as of this 31st day of October, 1996, is entered
into by and among The Cross Country Group, Inc. ("Parent"), CC Acquisition
Corporation ("Merger Sub"), and Homeowners Group, Inc. (the "Company").
WHEREAS, Parent, CHGI Acquisition Corporation, a wholly-owned
subsidiary of Parent (the "Sub") and the Company entered into an Agreement and
Plan of Merger dated as of May 14, 1996 (the "Agreement"); and
WHEREAS, Sub assigned its rights and obligations under the Agreement to
Merger Sub pursuant to a written assignment dated June 13, 1996; and
WHEREAS, Parent, Merger Sub and the Company desire to amend the
Agreement.
NOW, THEREFORE, in consideration of the premises and agreements herein
contained, Parent, Merger Sub and the Company agree as follows, effective as of
the date hereof, with capitalized terms not otherwise defined herein having the
same meaning as set forth in the Agreement:
1. The term "Sub" wherever it appears in the Agreement shall be deleted
and replace by "Merger Sub."
2. Article III, Section 3.1, Exchange Ratio, subparagraph (c) shall be
deleted in its entirety and replaced with the following:
"(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withdrawn or lost such rights, and is otherwise entitled to such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 canceled
and converted into the right to receive $2.06 (the "Merger Price") in
cash, without interest thereon."
3. Amendment to Schedule 4.3. Schedule 4.3 of the Agreement is hereby
amended in its entirety to read as provided in Exhibit A attached hereto.
4. Amendment to Schedule 4.4. Schedule 4.4 of the Agreement is hereby
amended in its entirety to read as provided in Exhibit B attached hereto.
5. Article IV, Section 4.6, SEC Reports, shall be amended by adding the
following sentence at the end thereof:
"Notwithstanding the foregoing, the Company shall be permitted to file
a Report on Form 8-K reflecting the execution of this Amendment."
6. Article IV, Section 4.7, Financial Statements, shall be deleted in
its entirety and replaced by the following:
"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, June 30 and
September 30, 1996, and as of March 31, June 30 and September
30, 1995, and unaudited consolidated statements of operations
and changes in financial position for the respective three,
six and nine 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 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."
7. Article IV, Section 4.8, Absence of Undisclosed Liabilities, shall
be deleted in its entirety and replaced by the following:
"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
-2-
Financial Statements for the fiscal year then ended, and except for
payment to certain Franchises (as said term is defined in Section 4.13
hereof) in the amounts of $591,965, 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 September 30, 1996."
8. Amendment to Schedule 4.10. Schedule 4.10 of the Agreement is hereby
amended in its entirety to read as provided in Exhibit C attached hereto.
9. Amendment to Schedule 4.13. Schedule 4.13 of the Agreement is hereby
amended in its entirety to read as provided in Exhibit D attached hereto.
10. Article IV, Section 4.14, Franchise Agreements, shall be amended by
adding the following sentence at the end thereof:
"Parent acknowledges that, as set forth in Section 9.12
hereof, certain of the franchise agreements have been amended since May
14, 1996, that it has participated in the negotiation of such
amendments and that it has received copies of the same and agrees that
no such amendment shall be deemed a breach of the terms of this
Agreement."
11. Article IV, Section 4.17, Settlement Agreement, shall be deleted in
its entirety and replaced by the following:
"4.17 Settlement Agreement. On May 2, 1996, the Company and
Homeowners Marketing Services, Inc., a wholly owned subsidiary of the
Company ("HMS"), entered into a binding settlement agreement with
Acceleration National Insurance Company ("ANIC") providing that (i)
ANIC would 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 agreement was amended on May 7, 1996
by a First Amendment to May 2, 1996 Agreement for Satisfaction of
Judgment. Effective as of October 31. 1996, The Cross Country Group,
L.L.C., an affiliate of Parent, purchased the rights of ANIC and
entered into a new Settlement Agreement with HMS and the Company (the
"Settlement Agreement"). The
-3-
Company has not and will not further alter or amend the Settlement
Agreement without the prior written consent of the Parent."
12. Amendment to Schedule 4.19. Schedule 4.19 of the Agreement is
hereby amended in its entirety to read as provided in Exhibit E attached hereto.
13. Amendment to Schedule 4.20. Schedule 4.20 of the Agreement is
hereby amended in its entirety to read as provided in Exhibit F attached hereto.
14. Article IV, Section 4.21, Officers' and Directors' Liability
Insurance, shall be deleted in its entirety and replaced by the following:
"4.21 Officers' and Directors' Liability Insurance. The
Company has heretofore delivered to 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 $153,900."
15. Amendment to Schedule 4.22. Schedule 4.22 of the Agreement is
hereby amended in its entirety to read as provided in Exhibit G attached hereto.
16. Amendment to Schedule 4.23. Schedule 4.23 of the Agreement is
hereby amended in its entirety to read as provided in Exhibit H attached hereto.
17. Amendment to Schedule 4.25. Schedule 4.25 of the Agreement is
hereby amended in its entirety to read as provided in Exhibit I attached hereto.
18. Amendment to Schedule 4.27. Schedule 4.27 of the Agreement is
hereby amended in its entirety to read as provided in Exhibit J attached hereto.
19. Amendment to Schedule 4.28. Schedule 4.28 of the Agreement is
hereby amended in its entirety to read as provided in Exhibit K attached hereto.
20. Article VI, Section 6.1, Conduct of the Company's Business,
subparagraph (a), shall be amended by adding the following sentence at the end
thereof:
"Notwithstanding the foregoing, the termination of the
employment of Xxxxxxx Xxxxx shall not be deemed to be a breach of this
subparagraph."
-4-
21. Article VI, Section 6.1, Conduct of the Company's Business,
subparagraph (f), shall be amended by adding the following sentence at the end
thereof:
"Notwithstanding the foregoing, the Company shall be permitted
to enter into: (i) the Settlement Agreement as set forth in Section
7.14 hereof and (ii) a modification of its agreements with AIG as set
forth in Exhibit L attached hereto, neither of which shall be deemed to
be a breach of this subparagraph."
22. Article VI, Section 6.1, Conduct of the Company's Business,
subparagraph (h), shall be deleted in its entirety and replaced by the
following:
"(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 $140,000 after May 14, 1996
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 after May 14, 1996 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 after May 14, 1996 shall not exceed
$265,000 in the aggregate, and any such loans or advances shall be
repayable to the Company within a period not to exceed six months."
23. Article VI, Section 6.1, Conduct of the Company's Business, shall
be amended by adding the following subsection (m) thereto:
"(m) From and after the date of this Amendment, the Company
will not amend or terminate any existing, or enter into new, agreements
with any Franchisees (except as provided in Section 9.12 hereof) or
with any third party with respect to sale of the Company's products and
services, without in each case the consent of the Parent."
-5-
24. Article VI, Section 6.2, Rights Agreement, shall be amended by
adding the following sentences at the end thereof:
"The Company shall, immediately upon execution of this
Amendment, further amend the Rights Agreement to permit the acquisition
of shares of Company Common Stock by the Merger Sub under the
conditions set forth in the Amendment to the Rights Plan in the form of
Exhibit M attached hereto. The Company shall issue a press release with
respect to such amendment within one business day of the execution of
the Amendment to Agreement and Plan of Merger."
25. Article VI, Section 6.3, Termination of Employment, shall be
deleted in its entirety and replaced by the following:
"6.3 Termination of Employment. At the closing: (i) the
Company shall cause to be terminated the Employment Agreement between
the Company and Xxxx Xxxxxxxxxx dated as of December 22, 1995, existing
as of the date of the Merger Agreement and attached hereto as Exhibit
N; and (ii) the Surviving Corporation shall pay to Xxxx Xxxxxxxxxx the
amount as set forth in the Settlement Agreement as provided in Section
6.4 hereof."
26. Article VI, Section 6.4, Consulting Agreement, shall be deleted in
its entirety and replaced by the following:
"6.4 Xxxxxxxxxx Settlement 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 Settlement
Agreement with Xxxx Xxxxxxxxxx, as provided in Exhibit N-1."
27. Article VI, Section 6.6, Mutual Releases, shall be deleted in its
entirety and replaced by the following:
"6.6 Mutual Releases. At the Closing the Company shall cause
each of its directors to execute and deliver to Parent and Merger Sub
(and each director and principal stockholder thereof ("Parent
Affiliate")), and Parent and Merger Sub (and each Parent Affiliate)
shall execute and deliver to each of the Company's directors, mutual
releases releasing and further discharging each other party 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 such party's tenure as a director of the Company, this
Agreement, 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
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): (i) as a defense of any claim or
-6-
action commenced against it by any party released in accordance with
this Section or (ii) in connection with an action brought by a person
or party unaffiliated with Parent, Merger Sub or any Parent Affiliate;
and further provided that notwithstanding the foregoing, the release of
Xxxx Xxxxxxxxxx shall be as set forth in Exhibit N-1 hereto."
28. Article VII, Section 7.11, Indemnification of Officers and
Directors of the Company, shall be deleted in its entirety and replaced by the
following:
"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 annual premiums on such officers' and directors' liability
insurance in excess of $171,000."
29. Article VII, Additional Agreements, shall be amended by adding the
following Section:
"7.14 Modification of Settlement Agreement. The Company shall,
and Parent shall cause The Cross Country Group, L.L.C., as the assignee
of the rights of ANIC to, enter into the Settlement Agreement
(substantially in the form of Exhibit O hereto) contemporaneously with
the execution of this Amendment which shall provide for, among other
things, agreement of The Cross Country Group, L.L.C. to take no action
with respect to realization on its rights under the Settlement
Agreement prior to the earlier of: (a) January 31, 1997 and (b) the
termination of its obligations under this Agreement in consideration
for the guarantee of the obligation of HMS under the Settlement
Agreement by the Company, the pledge by the Company of the shares of
HMS and Homeowners Marketing Services International, Inc. ("HMSII")
owned by the Company to The Cross Country Group, L.L.C. to secure the
guarantee and the grant by HMS and HMSII of a security interest in
their respective assets in favor of The Cross Country Group, L.L.C. to
further secure such guarantee."
30. Article IX, Section 9.9, Agreements with Affiliates, shall be
amended by adding the
-7-
following sentence at the end thereof:
"Parent and Merger Sub hereby acknowledge that the conditions set forth
by this Section 9.9 have been satisfied and no further action with
respect to such matters shall be required so long as no further
modification of such agreements, understandings, commitments or
arrangements is made."
31. Article IX, Section 9.10, Binding Settlement Agreement, shall be
deleted in its entirety.
32. Article IX, Conditions to the Obligations of Parent and Sub, shall
be amended by adding the following section:
"9.12 Franchise Agreement - Amendment and Estoppel Agreement.
The Company shall have caused HMSI to: (i) enter into and execute an
amendment to existing franchise agreements (including franchise
agreements whose terms have been extended to December 31, 1996) with
all Franchisees upon terms and conditions satisfactory to Parent, and
(ii) have obtained estoppel letters from all Franchisees which shall
contain a waiver of any and all claims the Franchisees have or may have
under the existing franchise agreements including, without limitation,
a waiver of all claims for profit sharing for 1996."
33. Article XI, Section 11.1, Time and Place, shall be deleted in its
entirety and replaced by the following:
"11.1 Time and Place. Subject to the provisions of Articles
VII, IX, X and XII hereof, the closing (herein sometimes referred to as
the 'Closing') of the transactions contemplated hereby shall take place
not later than five (5) business days after the satisfaction or waiver
of the conditions to Closing contained in Articles VIII, IX and X, at
the offices of Xxxx Xxxxxx & Xxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx at 1:00 p.m., local time (the 'Closing Date'), or at such
other place or at such other time as the Parent, Sub and the Company
may mutually agree upon for the Closing to take place."
34. Article XII, Section 12.1, Termination, subparagraph (b)(i), shall
be deleted in its entirety and replaced by the following:
"(i) the Merger shall not have been consummated on or before
the later of: (A) March 1, 1997, or (B) two business days after the
Company's stockholders' meeting;".
35. Article XII, Section 12.1, Termination, subparagraph (c)(i), shall
be deleted in its entirety and replaced by the following:
"(i) the Merger shall not have been consummated on or before
Xxxxx 0,
-0-
0000,".
00. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
37. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to principles of conflicts of laws.
38. Except as modified by this Amendment, the terms of the Merger
Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, each party has executed this Amendment to Agreement
and Plan of Merger as of the date first set forth above.
THE CROSS COUNTRY GROUP, INC.
By:/s/ Xxxxxx Xxxx
-----------------------------------------
Name: Xxxxxx Xxxx
Title: President
CC ACQUISITION CORPORATION
By:/s/ Xxxxxx Xxxx
-----------------------------------------
Name: Xxxxxx Xxxx
Title: President
HOMEOWNERS GROUP, INC.
By:/s/ C. Xxxxxxx Xxxxxx
-----------------------------------------
Name: C. Xxxxxxx Xxxxxx
Title: Vice President, Treasurer and
Chief Financial Officer
-9-
EXHIBIT LIST
Exhibit A Schedule 4.3
Exhibit B Schedule 4.4
Exhibit C Schedule 4.10
Exhibit D Schedule 4.13
Exhibit E Schedule 4.19
Exhibit F Schedule 4.20
Exhibit G Schedule 4.22
Exhibit H Schedule 4.23
Exhibit I Schedule 4.25
Exhibit J Schedule 4.27
Exhibit K Schedule 4.28
Exhibit L Modification Agreements with AIG
Exhibit M Amendment to Rights Plan
Exhibit N Employment Agreement between the Company and Xxxx
Xxxxxxxxxx dated as of December 22, 1995
Exhibit N-1 Xxxxxxxxxx Settlement Agreement with Xxxx Xxxxxxxxxx
Exhibit O Settlement Agreement
-10-
