EXHIBIT (c)(8)
TAX CONTINGENCY SETTLEMENT AGREEMENT
This Tax Contingency Settlement Agreement, dated as of
[________________], 1997, is entered into between HAC, Inc., a Florida
corporation ("HAC"), and Xxxxxx Xxxxxxx of Hollywood, Florida, Xx. Xxxxxxx
Xxxxxx, of Orlando, Florida, and Xxxxx Xxxxxx of Red Bank, New Jersey, as
representatives of those stockholders of Homeowners Group, Inc., a Delaware
corporation ("HOMG") who tender Shares pursuant to the Offer or whose Shares are
converted in the Merger (as hereinafter defined) (individually and collectively,
the "Stockholder Representatives").
RECITALS:
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1. HOMG, and CC Acquisition Corporation ("Merger Sub") have entered
into an Agreement and Plan of Merger dated as of May 14, 1996, as amended most
recently by Fourth Amendment to Agreement and Plan of Merger dated September 9,
1997 (the "Fourth Amendment") (the Agreement and Plan of Merger as so amended is
referred to herein as the "Merger Agreement").
2. Merger Sub has made a tender offer (the "Offer") for all of the
shares of common stock, $.01 par value of HOMG (the "Company Common Stock") not
held by Merger Sub or any other affiliate of Merger Sub at a cash price of $.55
per share (the "Cash Price"), and such Offer is expected to be consummated on or
about October [ ], 1997, unless extended ("Consummation of the Offer").
3. It is contemplated that following the Consummation of the Offer, and
in accordance with the terms of the Merger Agreement, Merger Sub will merge into
HOMG (the "Merger") for consideration equal to the Cash Price, with HOMG being
the surviving corporation (the "Surviving Corporation").
4. As additional consideration for both the Offer and the Merger, the
sum of $1.51 for each share of Company Common Stock acquired for the Cash Price
is to be deposited in escrow to cover the Tax Claims, as set forth in that
certain Escrow Agreement dated as of even date herewith.
5. The purpose of this Tax Contingency Settlement Agreement is to
establish procedures for the resolution of the Tax Claims:
NOW, THEREFORE, in consideration of the premises and of other good and
valuable considerations, the parties hereto hereby agree as follows:
1. Definitions. Except as hereinafter defined, capitalized terms used
in this Agreement will have the meanings set forth in the Merger Agreement.
(a) "Escrow Agent" shall mean ( ) or such successor as is selected
pursuant to Section 5(e) of the Escrow Agreement.
(b) "Escrow Agreement" shall mean that certain agreement of even
date herewith by and among HAC, Inc., the Stockholder
Representatives and the Escrow Agent.
(c) "Escrow Fund" shall mean the amount deposited by HAC with the
Escrow Agent pursuant to Section 1 of the Escrow Agreement,
which Escrow Fund shall consist of a Cash Escrow or an L/C
Escrow, as defined in the Escrow Agreement.
(d) "Exchange Agent" shall mean Continental Stock Transfer and
Trust Company.
(e) "Stockholder Representatives" shall mean Xxxxxx Xxxxxxx, Xx.
Xxxxxxx Xxxxxx and Xxxxx Xxxxxx or such successors as are
selected pursuant to Section 7 of the Escrow Agreement.
(f) "Tax Claims" shall mean any liability for income taxes arising
out of or related to the Notices of Proposed Adjustment that
the Company received from the Internal Revenue Service (the
"IRS"), copies of which are attached hereto as Exhibit A,
together with any penalties, interest, costs and expenses
(including without limitation attorneys' fees) incurred by or
assessed against the Company, the Surviving Corporation, any
subsidiary of the Company or the Surviving Corporation, or any
of their respective officers, directors, representatives,
agents or employees in connection with the assertion,
collection, settlement, defense or investigation of any such
liabilities.
(g) "Tax Recovery" shall mean any reimbursement on account of Tax
Claims pursuant to Section 3 hereof.
2. Settlement of Tax Claims. HAC shall use its best efforts consistent
with reasonable business practices to cause HOMG to achieve a resolution of the
Tax Claims. Upon receipt from the IRS of a proposed settlement of the Tax Claims
(the "Proposed Settlement") HAC will advise the Stockholder Representatives in
writing of the Proposed Settlement and all costs and expenses associated
therewith (the "Settlement Amount"). HAC shall have the right, in its sole
discretion, to either accept or reject the Proposed Settlement. If HAC elects to
accept the Proposed
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Settlement, it shall notify the Stockholder Representatives in writing. Within
five (5) days after receipt of such notification, HAC and the Stockholder
Representatives shall direct the Escrow Agent to draw on the L/C Escrow and/or
disburse the Escrow Fund as follows:
A. To the Escrow Agent in payment of all costs, expenses and
indemnities of the Escrow Agent.
B. To HAC, the Settlement Amount increased by all interest accrued on
such portion of the Escrow Fund multiplied by a fraction (i) the numerator of
which is equal to the number of shares of Company Common Stock either accepted
in the Offer or converted in the Merger and (ii) the denominator of which is the
number of shares of Company Common Stock issued and outstanding as of the date
hereof ("Outstanding Shares").
C. To the Exchange Agent (for distribution to the former stockholders
of HOMG) the balance of the Escrow Fund increased by all interest accrued on
such portion of the Escrow Fund.
Solely for sake of example, assuming (i) 5,558,350 Shares outstanding,
and (ii) all Shares not now owned by HAC or its affiliates, approximately
4,000,000 Shares, are tendered in the offer or converted in the Merger, then
aproximately 71% (4,000,000/5,558,350) of any Settlement Amount, net of
expenses, will be distributed to HAC to cover the liability to the IRS, and the
remainder of the Escrow Funds, if any will be distributed to the former
stockholders of the Company who tendered their Shares or whose Shares were
converted in the Merger.
3. Reimbursement by Professionals. HAC may, in its sole and absolute
discretion, seek to cause HOMG to recover all or any portion of the Settlement
Amount from any person or entity that it considers to bear responsibility
therefor. If HOMG receives a recovery on account of the Tax Claims (the "Tax
Recovery") then HOMG shall notify the Stockholder Representatives of the amount
of the Tax Recovery and all costs and expenses incurred by HAC or HOMG
(including, without limitation, attorneys' fees) in connection with the
assertion collection, settlement, prosection or the investigation of the Tax
Recovery. Ten days after such notice, HAC shall apply and distribute the Tax
Recovery as follows:
A. To HAC or HOMG in reimbursement of all verified out-of-pocket costs
and expenses incurred by HAC or HOMG to third parties (including, without
limitation, attorneys' fees) in connection with the assertion, collection,
settlement, prosecution or investigation of the Tax Recovery.
B. To HAC or HOMG in compensation for their internal costs and expenses
in connection therewith an amount equal to 25% of the amount set forth in
subparagraph A above.
C. To HOMG, the amount, if any, by which the Settlement Amount exceeds
the amount deposited with the Escrow Agent pursuant to Section 1 of the Escrow
Agreement.
D. To HOMG, the Net Tax Recovery (equal to the Tax Recovery reduced by
the foregoing payments) multiplied by a fraction (x) the numerator of which is
equal to (i) the number of Outstanding Shares reduced by (ii) the number of
shares of Company Common Stock either accepted in the Offer or converted in the
Merger, and (y) the denominator of which is the number of Outstanding Shares .
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E. The balance of the Net Tax Recovery shall be distributed:
(i) 25% to HOMG, and up to a maximum of $1.51 per share
(ii) 75% to the Exchange Agent (for distribution to the
former Stockholders of HOMG).
4. Notices. All notices, requests, instructions and demands that may be
given by any party hereto to any other party in the course of the transactions
herein contemplated will be in writing and will be deemed given when posted in
the United States mail, certified return receipt requested, addressed to the
respective parties as follows:
(a) If to HAC, Inc.: HAC, Inc.
0000 Xxxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attn:__________________
Phone: (000) 000-0000
Fax: (000) 000-0000
(b) If to Stockholder
Representatives: Xxxxxx Xxxxxxx
0000 Xxxxx 00xx Xxxxxx
Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Xx. Xxxxxxx Xxxxxx
Central Florida Cardiology Group
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Xxxxx Xxxxxx
Xxxxxx Enterprises
000 Xxxxx Xxxxxx, Xxxxx 0X
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
5. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their permitted assigns.
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6. Amendment and Termination. This Agreement may be amended by and upon
the written agreement of HAC and Stockholder Representatives.
7. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without giving
effect to conflicts of law principles.
8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute but one and the same Instrument.
9. Captions and Paragraph Headings. Captions and paragraph headings
used herein are for convenience only and are not part of this Agreement and will
not be used in construing it.
10. Responsibility of the Parties. Neither HAC nor the Stockholder
Representatives, nor any directors, officers, employees or representatives of
any of them, shall be liable to anyone for any action taken or permitted to be
taken by such party except in the case of gross negligence or willful
misconduct.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers hereunto duly authorized, as of the day
and year first above written.
HAC, INC.
By:_____________________________________
Title
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STOCKHOLDER REPRESENTATIVES
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Xxxxxx Xxxxxxx
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Xx. Xxxxxxx Xxxxxx
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Xxxxx Xxxxxx
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