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STOCK PURCHASE AGREEMENT
AMONG
ORLEANS HOMEBUILDERS, INC.
PARKER & LANCASTER CORPORATION
AND
THE STOCKHOLDERS NAMED IN SCHEDULE 1.1
Dated as of October 12, 2000
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TABLE OF CONTENTS
Page
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SECTION 1. ACQUISITION OF SHARES............................................1
1.1 Sale and Purchase of Shares........................................1
SECTION 2. PURCHASE PRICE AND PAYMENT.......................................1
2.1 Purchase Price.....................................................1
2.2 Payment............................................................2
2.3 Allocation of Consideration........................................3
2.4 Additional Payment at Closing......................................3
SECTION 3...................................................................3
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING SELLERS.................3
4.1 Power and Authorization............................................3
4.2 No Conflicts.......................................................4
4.3 Ownership of the Shares............................................4
4.4 Brokers............................................................5
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING COMPANY.................5
5.1 Organization and Good Standing.....................................5
5.2 Power and Authorization............................................5
5.3 No Conflicts.......................................................6
5.4 Capitalization.....................................................7
5.5 Investments and Subsidiaries.......................................7
5.6 Compliance with Laws...............................................8
5.7 Litigation.........................................................8
5.8 Financial Statements...............................................8
5.9 [INTENTIONALLY OMITTED]............................................9
5.10 Inventory..........................................................9
5.11 Warranties.........................................................9
5.12 Real Property......................................................9
5.13 Personal Property.................................................12
5.14 List of Properties, Contracts, etc................................12
5.15 Contracts.........................................................14
5.16 Insurance.........................................................14
5.17 Previously Constructed Homes......................................14
5.18 Suppliers.........................................................15
5.19 Taxes.............................................................15
5.20 Employee Benefits.................................................16
5.21 Labor Matters.....................................................18
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5.22 Directors, Officers and Employees.................................19
5.23 Affiliate Agreements..............................................19
5.24 Environmental Matters.............................................20
5.25 Absence of Certain Changes and Events.............................23
5.26 Books and Records.................................................24
5.27 Brokers...........................................................24
5.28 Disclosure........................................................24
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER.........................25
6.1 Organization and Good Standing....................................25
6.2 Power and Authorization...........................................25
6.3 No Conflicts......................................................25
6.4 Brokers...........................................................26
6.5 Financing.........................................................26
6.6 Reports; Current Information......................................26
6.7 Disclosure........................................................26
SECTION 7. OBLIGATIONS OF THE PARTIES UNTIL CLOSING........................27
7.1 Conduct of Business Pending Closing...............................27
7.2 Negative Covenants................................................28
7.3 Access to Information; Confidentiality............................28
7.4 Best Efforts......................................................29
7.5 Consents..........................................................29
7.6 Financial Information.............................................30
SECTION 8. CERTAIN CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.............30
8.1 Representations and Warranties....................................30
8.2 Performance of Covenants..........................................30
8.3 Approvals.........................................................30
8.4 Legal Matters.....................................................30
8.5 Financial Condition...............................................30
8.6 Employment Agreements.............................................30
8.7 Resignation of Directors and Officers.............................31
8.8 Opinion of Counsel................................................31
SECTION 9. CERTAIN CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS............31
9.1 Representations and Warranties....................................31
9.2 Performance of Covenants..........................................31
9.3 Approvals.........................................................31
9.4 Legal Matters.....................................................31
9.5 Employment Agreements.............................................31
9.6 Non-Competition Agreements........................................31
9.7 Release of Guarantees.............................................31
9.8 Opinion of Counsel................................................32
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SECTION 10. CLOSING........................................................32
10.1 Time and Place of Closing......................................32
10.2 Deliveries at the Closing......................................32
10.3 Default by Any Seller at the Closing...........................34
10.4 Accounts Receivable From Employees of Company..................34
10.5 Remittance of Payments.........................................34
10.6 Confidential Information.......................................34
SECTION 11. TERMINATION AND ABANDONMENT....................................35
11.1 Termination....................................................35
11.2 Procedure for Termination......................................35
SECTION 12. INDEMNIFICATION................................................35
12.1 Indemnification by Sellers.....................................35
12.2 Indemnification by Buyer.......................................36
12.3 Inter-Party Claims.............................................36
12.4 Third Party Claims.............................................36
12.5 Limitations and Requirements...................................37
12.6 Reimbursement Separate From Indemnity..........................39
12.7 Limited Right of Set-Off.......................................39
SECTION 13. MISCELLANEOUS..................................................40
13.1 Meaning of Knowledge and Severally But Not Jointly.............40
13.2 Survival.......................................................40
13.3 Disclosure Statement...........................................40
13.4 Further Assurances.............................................41
13.5 Costs and Expenses.............................................41
13.6 Public Announcements...........................................41
13.7 Notices........................................................41
13.8 Assignment and Benefit.........................................42
13.9 Arbitration....................................................42
13.10 Amendment, Modification and Waiver.............................43
13.11 Governing Law..................................................43
13.12 Section Headings and Defined Terms.............................44
13.13 Severability...................................................44
13.14 Counterparts...................................................44
13.15 Entire Agreement...............................................44
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered
into as of October 12, 2000 among Orleans Homebuilders, Inc., a Delaware
corporation ("Buyer"), Parker & Lancaster Corporation, a Virginia corporation
("Company") and the shareholders of the Company identified on Schedule 1.1 (the
"Sellers").
A. Buyer desires to acquire Company.
B. Collectively the Sellers own all of the issued and
outstanding shares of Common Stock of the Company.
C. The Sellers desire to sell, and Buyer desires to purchase,
all of the issued and outstanding shares of common stock of the Company at the
price and upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. ACQUISITION OF SHARES
1.1 Sale and Purchase of Shares. Subject to the terms and conditions of
this Agreement, at the Closing (as herein defined), each Seller shall sell,
transfer and deliver to Buyer the shares of the common stock of the Company set
forth beside his name on Schedule 1.1 hereto, in the aggregate constituting all
of the outstanding shares of the capital stock of Company (collectively, the
"Shares"), and Buyer shall purchase the Shares for the consideration set forth
in Section 2.
SECTION 2. PURCHASE PRICE AND PAYMENT
2.1 Purchase Price. The aggregate purchase price for the Shares shall be
the sum of the following (collectively, the "Purchase Price"):
(a) $6,260,627;
(b) if fiscal year Pre-tax Profits from Market Operations (as defined
below) exceeds $1,750,000 for any of the fiscal years ended June 30, 2001, 2002
or 2003, an amount equal to such excess multiplied by 0.25, subject to a
cumulative limit of payments under this subsection 2.1(b) of $1,250,000; and
1
(c) 150,000 shares of common stock of Buyer ("Buyer Common Shares")
(subject to adjustment for stock splits, dividends paid in capital stock of
Buyer, subdivisions, reclassifications, recapitalizations, and the like).
"Pre-tax Profits from Market Operations" means the net income before
income taxes and without any deduction for costs related to the transactions
contemplated hereby or corporate overhead or additional costs associated with
assimilating the Company into Buyer's operations and accounting system (but with
deduction for the salary of Thomas Vesey or his successor), arising from the
sale of homes constructed by Company, Buyer, or an entity owned directly or
indirectly by Buyer, in the states of Virginia, North Carolina, and South
Carolina; provided that in the event additional capital is required to be
contributed by Buyer to the Company, the Pre-Tax Profits from Market Operations
for purposes of making the calculations required by clause (b) of Section 2.1
shall be reduced by 25% of the average amount of such contribution outstanding
during the applicable fiscal year that is in excess of the cumulative
distributions theretofore made by the Company to Buyer or any subsidiary
thereof. Buyer shall maintain books and records sufficient to permit the
determination of revenues derived from and expenses and taxes chargeable to
Market Operations.
No adjustment shall be made to the Purchase Price with respect to the
items listed on Schedule 2.1 hereto (the "Distribution Items"), all of which
shall be treated as assets of the Company upon consummation upon purchase of the
Shares by Buyer, and which may be purchased from Buyer, at Buyer's option, by J.
Russell Parker, III at the prices shown on Schedule 2.1 on or after the Closing
Date (as defined in Section 10.1 below).
2.2 Payment. The Purchase Price shall be paid as follows:
(a) $1,000,000 of the Purchase Price payable pursuant to subsection
2.1(a) shall be paid on the Closing Date by delivery of the subordinated
promissory notes of Buyer in favor of each Seller, substantially in the forms
attached hereto as Exhibit A (the "Notes");
(b) the remainder of the Purchase Price payable pursuant to subsection
2.1(a) shall be paid on the Closing Date by wire transfer pursuant to
instructions previously given by Sellers to Buyer for that purpose or by
certified or bank cashier's checks payable to the order of each Seller (the
"Closing Stock Payment");
(c) Buyer shall pay Sellers by wire transfer pursuant to instructions
previously given by Sellers to Buyer for that purpose or by certified or bank
cashier's checks payable to the order of each Seller the portion of the Purchase
Price payable pursuant to subsection 2.1(b), if any, within 60 days after the
end of the fiscal year with respect to which such payment is due; and
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(d) Buyer shall deliver to Sellers the 150,000 Buyer Common Shares
deliverable to Sellers pursuant to subsection 2.1(c) in four installments of
37,500 shares (each, an "Installment") allocated among the Sellers as set forth
on Schedule 1.1. Buyer shall deliver one Installment on each of the first four
anniversaries of the Closing Date (or the next business day if such day is a
holiday and/or banks are closed). Each Seller may cause Buyer to acquire all or
a portion of the Buyer Common Shares delivered to such Seller in accordance with
this subsection 2.2(d) and not previously sold, at a price of three dollars and
thirty-three cents ($3.33) per share (subject to adjustment for stock splits,
dividends paid in capital stock of Buyer, subdivisions, reclassifications,
recapitalizations, and the like) during the Put Exercise Period hereinafter
defined. At any time after July 31, 2005, Buyer shall give notice to each Seller
of its right pursuant to the preceding sentence (the "Put Right"). Any Seller
wishing to exercise his Put Right shall give notice to such effect to the
Company stating the number of shares as to which the Put Right is being
exercised within 30 days after receipt of the notice of such right from Buyer
(failure to give such notice within such period shall constitute a waiver of
such Seller's rights to cause Buyer to repurchase shares hereunder). Buyer shall
repurchase the shares which are subject to the exercise of the Put Right within
60 days after a Seller gives the notice referred in the previous sentence and
shall pay for such shares by wire transfer or other means satisfactory to such
Seller.
2.3 Allocation of Consideration. The Purchase Price shall be allocated,
paid and delivered to Sellers in the respective amounts set forth on Schedule
1.1 hereto.
2.4 Additional Payment at Closing. To reimburse the Company for certain
costs incurred to acquire all of the membership interests of Parker Lancaster,
Tidewater, L.L.C., a Virginia limited liability company, Buyer shall pay the
Company a total of $250,058 on the Closing Date by wire transfer pursuant to
instructions previously given by the Company to Buyer for that purpose or by a
certified or bank cashier's check payable to the order of the Company (the
"Closing Tidewater Payment").
SECTION 3.
[INTENTIONALLY OMITTED]
SECTION 4. REPRESENTATIONS AND WARRANTIES
REGARDING SELLERS
Each Seller, severally and not jointly, hereby represents and warrants
to Buyer as of the date of this Agreement and as of the Closing Date as follows:
4.1 Power and Authorization. Such Seller has full capacity, legal right,
power and authority to enter into and perform his obligations under this
Agreement and under the other documents required to be delivered by such Seller
prior to or at the Closing (the "Seller Transaction Documents"). This Agreement
has been duly and validly executed and delivered by such Seller and constitutes
the legal, valid and binding obligation of such Seller enforceable against him
in accordance with its terms, except as limited by applicable bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally, and principles of equity (whether considered and applied in a
proceeding in equity or at law). When executed and delivered as contemplated
herein, each of the Seller Transaction Documents shall constitute the legal,
valid and binding obligation of such Seller that is a party thereto, enforceable
against him in accordance with its terms, except as limited by applicable
bankruptcy, reorganization, insolvency, or similar laws affecting creditors'
rights generally, and principles of equity (whether considered and applied in a
proceeding in equity or at law).
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4.2 No Conflicts.
(a) The execution, delivery and performance of this Agreement and the
Seller Transaction Documents do not and will not (with or without the passage of
time or the giving of notice):
(i) violate or conflict with the certificate or articles of
incorporation or bylaws (or other organizational documents) of Company
or any Company Subsidiary;
(ii) violate or conflict with any law (including, without
limitation, principles of common law), statute, regulation, permit,
license, certificate, judgment, order, award or other decision or
requirement of any arbitrator, court, government or governmental agency
or instrumentality (domestic or foreign) (collectively, "Laws"),
binding upon any Seller; or
(iii) result in, require or permit the creation or imposition
of any restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance of any nature upon or
with respect to the Shares.
(b) Each consent or approval of, or registration, notification, filing
and/or declaration with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person required to be given or made
by any Seller in connection with the execution, delivery and performance of this
Agreement and the other agreements and instruments contemplated herein has been
obtained or made or will be obtained or made prior to the Closing without
payment of premium or penalty by, or loss of benefit to, Company or any Company
Subsidiary (as defined in Section 5.5(b)).
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of any
Seller, threatened, that question any of the transactions contemplated by, or
the validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, could reasonably be
expected to have a material adverse effect upon the ability of any Seller to
enter into or perform his obligations under this Agreement or any such other
agreements or instruments. No Seller has received any request from any
governmental agency or instrumentality for information with respect to the
transactions contemplated hereby.
4
4.3 Ownership of the Shares. Such Seller owns the Shares ascribed to him on
Schedule 1.1, beneficially and of record, free and clear of any restriction,
mortgage, deed of trust, pledge, lien, security interest or other charge, claim
or encumbrance of any kind, and there has been no event or action taken (or
failure to take action) by or against such Seller which might result in the
creation of any restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance of any kind on any Shares. Except
as set forth in Section 4.3 of the Disclosure Statement, there are no
shareholder or other agreements affecting the right of such Seller to convey the
Shares to Buyer or any other right of such Seller with respect to the Shares,
all of which agreements shall be terminated prior to Closing, and such Seller
has the absolute right, authority, power and capacity to sell, assign and
transfer the Shares ascribed to him on Schedule 1.1 to Buyer free and clear of
any restriction, mortgage, deed of trust, pledge, lien, security interest or
other charge, claim or encumbrance. Upon delivery to Buyer of the certificates
for the Shares at the Closing, Buyer will acquire good, valid and marketable
title to the Shares, free and clear of any restriction, mortgage, deed of trust,
pledge, lien, security interest or other charge, claim or encumbrance.
4.4 Brokers. No person acting on behalf of such Seller or any affiliate of
a Seller or under the authority of any of the foregoing is or will be entitled
to any brokers' or finders' fee or any other commission or similar fee, directly
or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement, other than SunTrust Equitable
Securities, whose fees and expenses shall be paid by Sellers and not by Company
or any Company Subsidiary.
SECTION 5. REPRESENTATIONS AND WARRANTIES
REGARDING COMPANY
The Sellers, severally and not jointly, and Company, jointly and
severally with the Sellers, hereby represent and warrant to Buyer as of the date
of this Agreement and as of the Closing Date as follows:
5.1 Organization and Good Standing. Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has all necessary corporate power and authority to
carry on its business as presently conducted, to own and lease the assets which
it owns and leases and to perform all its obligations under each agreement and
instrument by which it is bound. Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
identified in Section 5.1 of the Disclosure Statement, which includes each
jurisdiction in which its ownership or leasing of assets or properties or the
nature of its activities requires such qualification.
5.2 Power and Authorization. Company has full legal right, power and
authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Company Transaction Documents")
required to be delivered by it prior to or at the Closing. The execution,
delivery and performance by Company of this Agreement and the Company
Transaction Documents have been duly authorized by all necessary corporate
action by the Company. This Agreement has been duly and validly executed and
delivered by Company and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms. When executed and delivered
as contemplated herein, each of the Company Transaction Documents shall
constitute the legal, valid and binding obligation of Company, enforceable
against it in accordance with its terms, except as limited by applicable
bankruptcy, reorganization, insolvency, or similar laws affecting creditors'
rights generally, and principles of equity (whether considered and applied in a
proceeding in equity or at law).
5
5.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement and the
Company Transaction Documents do not and will not (with or without the passage
of time or the giving of notice):
(i) violate or conflict with the certificate or articles of
incorporation or bylaws (or other organizational documents) of Company
or any Company Subsidiary or any Law binding upon Company or any
Company Subsidiary;
(ii) violate or conflict with, result in a breach of, or
constitute a default or otherwise cause any loss of benefit under any
agreement or other obligation to which Company or any Company
Subsidiary is a party or by which it any of them or their assets are
bound, or give to others any rights (including rights of termination,
foreclosure, cancellation or acceleration), in or with respect to
Company or any Company Subsidiary or any of their assets; or
(iii) result in, require or permit the creation or imposition
of any restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance upon or with respect to
the Shares, Company, any Company Subsidiary or any of their assets.
(b) Section 5.3(b) of the Disclosure Statement sets forth each consent
or approval of, or registration, notification, filing and/or declaration with,
any court, government or governmental agency or instrumentality, creditor,
lessor or other person required to be given or made by Company or any Company
Subsidiary in connection with the execution, delivery and performance of this
Agreement and the other agreements and instruments contemplated herein. Except
as set forth in Section 5.3(b) of the Disclosure Statement, there are no such
consents, approvals, registrations, notifications, filings or declarations which
have been obtained or made or will be obtained or made involving payment of
premium or penalty by, or loss of benefit to, Company or any Company Subsidiary.
Upon consummation of the transactions contemplated by this Agreement, Company
and each Company Subsidiary will be entitled to continue to use all of the
assets and properties now used by them immediately prior to such consummation.
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of Company
or any Company Subsidiary, threatened, that question any of the transactions
contemplated by, or the validity of, this Agreement or any of the other
agreements or instruments contemplated hereby or which, if adversely determined,
could reasonably be expected to have a material adverse effect upon Company's
ability to enter into or perform its obligations under this Agreement or any of
the other agreements or instruments contemplated hereby. Neither Company nor any
Company Subsidiary has received any request from any governmental agency or
instrumentality for information with respect to the transactions contemplated
hereby.
6
5.4 Capitalization. Company's authorized, issued and outstanding capital
stock or other securities are fully and accurately set forth in Section 5.4 of
the Disclosure Statement. No person has any preemptive or other similar rights
with respect to any such equity interests or other securities and there are no
offers, options, warrants, rights, agreements or commitments of any kind
(contingent or otherwise) relating to the issuance, conversion, registration,
voting, sale or transfer of any equity interests or other securities of Company
(including, without limitation, the Shares) or obligating Company or any other
person to purchase or redeem any such equity interests or other securities. The
Shares constitute all of the issued and outstanding shares of capital stock of
Company and have been duly authorized and are validly issued and outstanding,
fully paid and nonassessable, and such issuance was not in violation of
applicable securities laws.
5.5 Investments and Subsidiaries.
(a) Except as set forth in Section 5.5 of the Disclosure Statement, the
Business is and has been conducted solely by and through Company and no other
person, and Company does not directly or indirectly own, control or have any
investment or other interest in any corporation, partnership, joint venture,
business trust or other entity and neither Company nor any Company Subsidiary
has agreed, contingently or otherwise, to share any profits, losses, costs or
liabilities, or to indemnify any person or entity or to guaranty the obligations
of any person or entity.
(b) Section 5.5 of the Disclosure Statement separately identifies each
corporation, partnership, joint venture, business trust and other entity of
which Company directly or indirectly owns or controls more than 50% of the
voting stock or equivalent ownership interest or the assets and liabilities of
which are (or, at any time during the last three years have been) consolidated
in Company's consolidated financial statements (each, a "Company Subsidiary"),
the jurisdiction of organization and the type of legal entity thereof. Each
Company Subsidiary is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and has all necessary power
and authority to carry on its business as presently conducted, to own or lease
the assets which it owns or leases and to perform all of its obligations under
each agreement and instrument to which it is a party or by which it is bound.
Each Company Subsidiary is duly qualified to do business and is in good standing
under the laws of each jurisdiction in which its ownership or leasing of assets
or properties or the nature of its activities requires such qualification.
(c) The authorized, issued and all outstanding capital stock and other
securities of each Company Subsidiary and the record and beneficial ownership
thereof are fully and accurately set forth in Section 5.5 of the Disclosure
Statement. Except as set forth in Section 5.5 of the Disclosure Statement, no
person has any preemptive or other similar rights with respect to any such
equity interests or other securities and there are no offers, options, warrants,
rights, agreements or commitments of any kind (contingent or otherwise) relating
to the issuance, voting, conversion, registration, sale or transfer of any
equity interests or other securities of any Company Subsidiary, or obligating
Company, any Company Subsidiary or any other person to purchase or redeem any
such equity interests or other securities or to make capital contributions,
advances or loans to or on behalf of any Company Subsidiary. All of the issued
and outstanding shares of capital stock (or equivalent equity interests) of each
Company Subsidiary have been duly authorized and are validly issued and
outstanding, fully paid and non-assessable, and such issuance was not in
violation of applicable securities laws.
7
5.6 Compliance with Laws.
(a) Except as set forth in Section 5.6(a) of the Disclosure Statement,
and subject to remainder of this paragraph, Company is and each Company
Subsidiary is in compliance in all material respects with all Laws applicable to
the Company, and since July 1, 1997, the Company has not received any written
notice from a governmental authority of an alleged, actual or potential
violation of or failure to comply with any Law. No representation or warranty is
made in this Section 5.6(a) with respect to compliance with Laws relating to
matters covered by Sections 5.17 (Previously Constructed Homes), 5.19 (Taxes),
5.20 (Employee Benefits), 5.21 (Labor Matters), or 5.24 (Environmental Matters).
To the Knowledge of the Company, Company has complied with all material
provisions of applicable building codes, except as set forth in Section 5.6(a)
of the Disclosure Statement.
(b) All federal, foreign, state, local and other governmental consents,
licenses, permits, franchises, grants and authorizations (collectively,
"Authorizations) required for the operation of the business of Company and each
Company Subsidiary as currently conducted and as conducted during the last five
years are in full force and effect, and to the Knowledge of Company neither
Company nor any Company Subsidiary has received any written notice of any claim
or charge that Company or any Company Subsidiary is in violation of or in
default under any such Authorization. No proceeding is pending or, to the
knowledge of Company, threatened by any person to revoke or deny the renewal of
any Authorization of Company or any Company Subsidiary.
5.7 Litigation. Except as set forth in Section 5.7 of the Disclosure
Statement, there are no pending actions, suits, proceedings (arbitration or
otherwise) or investigations to which Company or any Company Subsidiary, or
their directors, officers or shareholders in their capacities as such, is a
party before or by any court or governmental agency or instrumentality, or
before an arbitrator of any kind. To the knowledge of Company and each Company
Subsidiary, except as set forth in Section 5.7 of the Disclosure Statement, no
such action, suit, proceeding or investigation is presently threatened in
writing. There are no unsatisfied judgments, penalties or awards against Company
or any Company Subsidiary.
5.8 Financial Statements.
(a) Section 5.8 of the Disclosure Statement includes: (i) the
consolidated balance sheets of Company and all Company Subsidiaries as of June
30, 2000 (including the notes thereto, the "Balance Sheet") and as of June 30,
1998 and 1999, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the fiscal years then ended, together with the
report thereon of L.P. Martin & Company, independent accountants (the "Audited
Financial Statements"), including all notes thereto. Such financial statements
and notes accurately and fairly present the consolidated financial condition,
cash flows (in the case of the Audited Financial Statements) and results of
operations of Company as at the respective dates thereof and for the periods
therein referred to, all in accordance with GAAP consistently applied.
8
(b) The Balance Sheet reflects all material liabilities of Company and
all Company Subsidiaries, whether absolute, accrued or contingent, as of the
respective dates thereof required to be reflected or disclosed in a balance
sheet (or the notes thereto) prepared in accordance with GAAP. Except as
identified in Section 5.8 of the Disclosure Statement, Company does not and the
Company Subsidiaries do not have any material liabilities that are not reflected
in the Balance Sheet (or the notes thereto) or the Interim Balance Sheet of the
type which would be required to be disclosed in the financial statements of the
Company under GAAP other than current liabilities (within the meaning of GAAP)
incurred since the date thereof in the ordinary course of business consistent
with past practice.
5.9 [INTENTIONALLY OMITTED].
5.10 Inventory.
(a) Except as set forth in Section 5.10 of the Disclosure Statement,
all inventory of Company and the Company Subsidiaries is valued on Company's
consolidated books and records at the lower of cost or fair market value
thereof, and is usable or saleable in the ordinary course of business consistent
with past practice. A true and complete listing of all inventory of Company and
each Company Subsidiary as of a recent date has been delivered to Buyer.
(b) To the Knowledge of Company, there are no present design,
manufacturing or other defects with respect to homes currently in inventory,
including defects presently existing as a result of "shrink-swell" or similar
soil conditions. No homes have been sold by Company or any Company Subsidiary
under an understanding that such homes would be returnable.
5.11 Warranties. Except as set forth in Section 5.11 of the Disclosure
Statement: (a) neither Company nor any Company Subsidiary has made any express
warranties to third parties with respect to any homes manufactured or sold by
Company or any Company Subsidiary; and (b) there are no express warranties
outstanding with respect to any such homes or services. A copy of each standard
warranty of Company and each Company Subsidiary is included in Section 5.11 of
the Disclosure Statement. Neither the Company nor any Company Subsidiary has
modified or expanded its warranty obligations beyond those set forth in such
standard warranties.
5.12 Real Property.
(a) Except as set forth in Section 5.12(a) of the Disclosure Statement,
the Owned Real Property (as defined below), and to the Knowledge of the Company,
the Land Contract Real Property (as defined below) and the Option Real Property
(as defined below) (collectively, the "Real Property"): (i) have (or do as a
matter of right) all necessary access to and from public highways, streets, and
roads, and no pending or threatened proceeding exists that would reasonably be
expected to limit or result in the termination of such access; (ii) are (or may
as a matter of right be) connected to and serviced by public electric, public
gas, public sewage, public storm drains, public telephone and public water
facilities, which facilities are operational and in compliance, in all material
respects, with all applicable Laws; and (iii) meet the conditions for the
issuance of a building permit for the construction and sale of single family
homes or, in the case of Muirfield Green in the Brandermill subdivision,
condominiums. The Real Property constitutes all of the Real Property that
Company or any Company Subsidiary owns or has a right to acquire.
9
(b) Section 5.12(b) of the Disclosure Statement lists all of the real
property that Company or any Company Subsidiary owns, and Company is the sole
owner of good, valid, marketable and insurable (at standard rates) fee simple
title to all such real property, including, without limitation, all buildings,
structures, fixtures and improvements thereon (the "Owned Real Property"), in
each case free and clear of any restriction, mortgage, deed of trust, pledge,
lien, security interest, or other lien or encumbrance, except Permitted
Encumbrances, as set forth in Section 5.12(b) of the Disclosure Statement or as
disclosed in title reports and surveys made available to Buyer and listed on
Section 5.12(b) of the Disclosure Statement. "Permitted Encumbrances" means (i)
liens for current state and local property taxes or assessments not yet due or
delinquent or which are being contested in good faith; (ii) mechanics',
carriers', workers', repairers' and other similar liens arising or incurred in
the ordinary course of business relating to obligations as to which there is no
default on the part of the Company or its Subsidiaries; (iii) exceptions shown
on the surveys or other title records made available to Buyer on or before the
date hereof and which do not materially affect the current use of such Real
Property; (iv) mortgages on the landlord's interest in property leased to the
Company or its Subsidiaries; (v) liens and encumbrances reflected in the balance
sheet in the Balance Sheet (or notes thereto or the Interim Balance Sheet; (vii)
Liens incurred or created since May 31, 2000 in the ordinary course of business;
and (vii) such other Liens, imperfections in title, charges, rights of way, land
use ordinances and zoning plans which do not materially interfere with the
current use of such Real Property.
(c) Section 5.12(c) of the Disclosure Statement describes each lease
pursuant to which Company or any Company Subsidiary is the lessee with respect
to any real property (the "Leased Real Property"). Company has all right, title
and interest in all material leasehold estates and other material rights
purported to be granted to them by the agreements, arrangements, contracts,
commitments and leases listed and set forth in Section 5.12(c) of the Disclosure
Statement.
(d) Section 5.12(d) of the Disclosure Statement lists all written and
oral agreements, arrangements, contracts and commitments to which Company or any
Company Subsidiary is a party pursuant to which Company or any Company
Subsidiary is obligated to purchase any developed or undeveloped real property,
whether or not subject to conditions precedent (the "Land Contract Real
Property") or possesses an option or other rights to acquire any developed or
undeveloped real property, whether or not subject to conditions precedent (the
"Option Real Property").
10
(e) Except as set forth in Section 5.12(e) of the Disclosure Statement
with respect to any agreements, arrangements, contracts, covenants, conditions,
deeds of trust, rights-of-way, easements, mortgages, restrictions, surveys,
title insurance policies, and other documents granting Company or any Company
Subsidiary title to or an interest in or a right or an option to acquire real
property, no breach or event has occurred that, with or without the giving of
notice or the passage of time, would constitute a breach or event of default, by
Company or any Company Subsidiary, or to the knowledge of Company, any other
party thereto.
(f) No Owned Real Property, and to the Knowledge of the Company, no
Land Contract Real Property or Option Real Property is the subject of any
condemnation, eminent domain, or similar proceedings and, to the Knowledge of
Company, no condemnation, eminent domain, or similar proceeding is threatened
with respect to the Real Property.
(g) The buildings and other improvements on the Owned Real Property,
and to the Knowledge of the Company, the Land Contract Real Property and the
Option Real Property, do not violate (i) any applicable Law, including without
limitation, any building, set-back, or zoning Law, or (ii) any restrictive
covenant affecting any such real property and conform in all material respects
to the appropriate governmental authority's subdivision standards, except to the
extent that any violation of, or nonconformance with an applicable Law would not
inhibit materially Company's or any Company Subsidiary's ability to construct
and sell single family homes or, in the case of Muirfield Green in the
Brandermill subdivision, condominiums.
(h) There are no parties in possession of any portion of the Owned Real
Property, or to the Knowledge of the Company, the Land Contract Real Property or
the Option Real Property, as lessees, tenants at sufferance, or trespassers.
(i) Except as set forth in Section 5.12(i) of the Disclosure Statement,
there are no unpaid charges, debts, liabilities, claims or obligations arising
from the construction, occupancy, ownership, use, or operation of the Owned Real
Property, or to the Knowledge of the Company, the Land Contract Real Property or
the Option Real Property. Except as set forth in Section 5.12(i) of the
Disclosure Statement, no Owned Real Property, and to the Knowledge of the
Company no Land Contract Real Property and no Option Real Property is subject to
any condition or obligation to any governmental entity or other person requiring
Company, any Company Subsidiary or any transferee thereof to donate land, money
or other property or to make on-site or off-site public improvements.
(j) Except for tap fees and other expenses as may be incurred in the
ordinary course of business, neither Company or any Company Subsidiary has an
obligation to pay any developer related charges or any charges or assessments
for public improvements made to Owned Real Property, or to the Knowledge of the
Company, the Land Contract Real Property or the Option Real Property, including
without limitation, any charges or assessments for construction of sewer lines,
water lines, storm drainage systems, electric lines, natural gas lines, roads
and curbs. Neither Company or any Company Subsidiary has an obligation to pay
any developer related charges or any charges or assessments for public
improvements made to previously sold homes, including without limitation, any
charges or assessments for construction of sewer lines, water lines, storm
drainage systems, electric lines, natural gas lines, roads and curbs.
11
(k) Except as set forth in Section 5.12(k) of the Disclosure Statement,
there is no moratorium applicable to any of the Owned Real Property, or to the
Knowledge of the Company, the Land Contract Real Property or the Option Real
Property on (i) the issuances of building permits for the construction of houses
or certificates of occupancy therefor, or (ii) the purchase of sewer or water
taps.
(l) Except as set forth in Section 5.12(l) of the Disclosure Statement
or to the extent that the ability to build on the Real Property in compliance
with Laws without extraordinary site preparation measures is not affected, the
Owned Real Property and, to the Knowledge of the Company, the Land Contract Real
Property and the Option Real Property (i) are not located within a "critical,"
"preservation," "conservation" or similarly designated area and (ii) the
buildable area of the property does not contain wetlands.
(m) Except as set forth in Section 5.12(m) of the Disclosure Statement,
to the extent that the ability to build on the Real Property in compliance with
Laws without extraordinary site preparation measures is not affected, none of
the Owned Real Property or the Sold Real Property and, to the knowledge of the
Company, the Land Contract Real Property and the Option Real Property is
reclaimed marsh or swampland or has been used as a grave site, land fill or for
any industrial purpose whatsoever.
5.13 Personal Property. Except as set forth in Section 5.13(a) of the
Disclosure Statement, Company and each Company Subsidiary owns all of their
personal property reflected in the Balance Sheet as owned by them and all
personal property acquired after June 30, 2000, except personal property which
has been sold or disposed of in the ordinary course of business, free and clear
of any mortgage, deed of trust, pledge, lien, security interest or other charge,
claim or encumbrance; provided that the art work and other accessories in the
office of J. Russell Parker, III are and shall remain his personal property and
not the property of the Company.
5.14 List of Properties, Contracts, etc. Section 5.14 of the Disclosure
Statement lists or describes the following:
(a) Each vehicle, item of machinery, equipment and other tangible asset
(other than real property) carried as an asset on the records of or leased by
Company or any Company Subsidiary with a fair market or book value in excess of
$10,000 in respect of any item;
(b) Each material Authorization;
(c) Each (i) fictitious business name, tradename, registered and
unregistered trademark, service mark and related application (together with the
names Parker & Lancaster Corporation and P&L Realty, Inc., the "Intellectual
Property"), and (ii) license and permit issued or granted by any person relating
to any of the foregoing; in each case owned, leased, used or held by, granted to
or licensed by Company or any Company Subsidiary as either licensor or licensee,
together with all other interests therein granted by Company or any Company
Subsidiary to any other person, all agreements with respect to any of the
foregoing to which Company or any Company Subsidiary is a party and any lien,
encumbrance, adverse claim, opposition or claim of infringement with respect to
any of the foregoing;
12
(d) Each outstanding loan or advance (excluding certain advances to
employees for ordinary and necessary business expenses made in the ordinary
course of business) by Company or any Company Subsidiary to any person
(including any Seller and any officer, director of employee of Company or any
Company Subsidiary);
(e) Each contract, agreement, purchase order or other commitment
involving the performance of services or delivery of goods or materials by or to
Company or any Company Subsidiary (excluding contracts for the sale of homes,
but including listing agreements) involving payments of more than $10,000 over
its remaining term and which is not terminable by Company or a Company
Subsidiary on 90 days' notice, without premium or penalty (each, a "Material
Contract");
(f) Each capital project currently undertaken or which has been
approved by Company or any Company Subsidiary involving an estimated expenditure
of more than $25,000 and all agreements, contracts, purchase orders or
commitments with respect thereto;
(g) Each contract, agreement or commitment to which Company or any
Company Subsidiary is a party or is otherwise bound providing for payments
(contingent or otherwise) to or by any person or entity based on sales,
purchases or profits, other than direct payments for goods and salesperson's
commission arrangements set forth in the Disclosure Statement;
(h) Each form of contract, agreement or commitment currently used by
Company or any Company Subsidiary as a standard form in the ordinary course of
business;
(i) Each policy and binder of insurance (including without limitation,
property, casualty, liability, life, health, accident, workers' compensation and
disability insurance and bonding arrangements) owned by, or maintained for the
benefit of, or respecting which any premiums are paid directly or indirectly by
Company or any Company Subsidiary;
(j) Each outstanding power-of-attorney or similar power granted by
Company or any Company Subsidiary for any purpose whatsoever;
(k) Each evidence of indebtedness, note, advance, guaranty or letter of
credit entered into, issued or to be issued by Company or any Company
Subsidiary, and all loan and other agreements relating thereto;
(l) Each deed of trust, pledge, lien, security interest or other
charge, claim and encumbrance of any nature relating to the Owned Real Property
or material personal property of Company or any Company Subsidiary; and
(m) Each bank or other financial institution in which Company or any
Company Subsidiary has a deposit account, line of credit or safe deposit box,
the relevant account or other identifying number, and the names of all persons
authorized to act or deal in connection therewith.
13
Sellers have caused Company to make available to Buyer true and
complete copies of each agreement or other document required to be disclosed on
the Disclosure Statement.
5.15 Contracts. Except as set forth in Section 5.15 of the Disclosure
Statement, each Material Contract to which Company or any Company Subsidiary is
a party was made in the ordinary course of business, is in full force and effect
and is valid, binding and enforceable against the parties thereto in accordance
with its terms. Except as set forth in Section 5.15 of the Disclosure Statement,
the Company has not received any written notice of cancellation of, or any
written notice of a material dispute under, any Material Contract. To the
Knowledge of the Company, no other party is in default in any material respect
under any Material Contract, and there has not occurred any event which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute such a default. Except as described in Section
5.15 of the Disclosure Statement, Company has and each Company Subsidiary has
performed in all material respects all obligations required to be performed by
them under each such contract, agreement and commitment, and no condition exists
or event has occurred which with notice or lapse of time would constitute a
material default or a basis for delay or non-performance by Company or any
Company Subsidiary or, to the knowledge of Company and each Company Subsidiary,
by any other party thereto.
5.16 Insurance.
(a) The insurance policies listed in Section 5.14 of the Disclosure
Statement are valid and enforceable policies and, except as set forth in Section
5.14 of the Disclosure Statement, will not be affected by, terminate or lapse by
reason of the transactions contemplated by this Agreement.
(b) Neither Company nor any Company Subsidiary has received any written
notice of cancellation of any policy or binder of insurance identified in
Section 5.14 of the Disclosure Statement. Neither Company nor any Company
Subsidiary has, within the last five years, been refused any insurance nor has
its coverage been limited.
5.17 Previously Constructed Homes.
(a) Except as set forth in Section 5.17 of the Disclosure Statement,
all of the homes previously Constructed by Company or any Company Subsidiary
were of a quality salable in the ordinary course of business, consistent with
the practices and standards of the home building industry and in substantial
compliance with all Laws, including without limitation, any building, setback,
subdivision or zoning Law, consistent with the practices followed in
homebuilding industry in the markets in which the Company operates. As used in
this Agreement "Constructed" means homes for which construction has been
completed and a certificate of occupancy has been issued.
14
(b) Section 5.17 of the Disclosure Statement lists to the Knowledge of
the Company all repairs made after sale of Constructed homes by or on behalf of
Company or any Company Subsidiary during the three fiscal years ended June 30,
2000, which involved (i) an aggregate repair cost in excess of $5,000 per home
or (ii) a material recurring problem (the same material problem occurring in
more than five (5) homes). Buyer acknowledges that the information set forth
with respect to the representation in this Section 5.17(b) is purely an estimate
based upon the Knowledge of the Company and is not obtainable from the Company's
records.
(c) Section 5.17 of the Disclosure Statement sets forth (i) the total
dollar amount of all warranty claims paid by the Residential Warranty
Corporation (the "Warranty Company") on behalf of Company or any Company
Subsidiary in each of the three fiscal years ended June 30, 2000, (ii) the total
dollar amount of all deductibles paid by Company or any Company Subsidiary in
each of the three fiscal years ended June 30, 2000, and (iii) the total dollar
amount and a brief description of all pending warranty claims, other than claims
for punchlist and similar items involving in any case less than $5,000 in the
aggregate per home. All homes previously Constructed by Company or any Company
Subsidiary during the three fiscal years ended June 30, 2000, or currently in
the inventory of the Company were enrolled in the Warranty Company's warranty
program prior to their completion and are currently enrolled in such program.
Section 5.17 of the Disclosure Statement sets forth, as of the date hereof, the
Warranty Company's builder rating for Company and each of the Company
Subsidiaries.
(d) To the Knowledge of Company, there are no design, manufacturing or
other defects with respect to homes previously Constructed by Company.
5.18 Suppliers. Section 5.18 of the Disclosure Statement lists the names of
the ten suppliers from whom Company and the Company Subsidiaries made the most
purchases during fiscal 1999 and fiscal 2000 and the aggregate expenditures
attributable to each in each such year. No supplier that accounted for more than
$500,000 of the consolidated purchases of Company and the Company Subsidiaries
during the fiscal year ended June 30, 2000, has terminated or materially
reduced, or to the Knowledge of Company has given notice that it intends to
terminate or materially reduce, the amount of business done with Company or any
Company Subsidiary.
5.19 Taxes.
(a) Except as set forth in Section 5.19 of the Disclosure Statement,
all federal, state, local and foreign returns and reports relating to Taxes (as
defined herein), or extensions relating thereto, required to be filed by or with
respect to Company or any Company Subsidiary (including, without limitation, all
federal and state consolidated and combined tax returns and reports for any
consolidated group of which Company or any Company Subsidiary has been a member
July 1, 1997 (the "Consolidated Group") have been timely filed and are true and
complete.
(b) All federal, state, local and foreign income, profits, franchise,
sales, use, payroll, premium, occupancy, property, severance, excise,
withholding, customs, unemployment, transfer and other taxes, including
interest, additions to tax and penalties (collectively "Taxes") due or properly
shown to be due on any return referred to in Section 5.19(a) by Company or any
Company Subsidiary with respect to taxable periods ending on or prior to the
date hereof have been fully and timely paid, or, in the case of Taxes not yet
due, fully provided for on the books of account of Company; and there are no
levies, liens, or other encumbrances relating to Taxes existing, threatened or
pending with respect to any asset of Company or any Company Subsidiary.
15
(c) Except as set forth in Section 5.19 of the Disclosure Statement, no
claim of deficiency has been made (and is currently pending) by the Internal
Revenue Service ("IRS") or any other taxing authority in connection with any of
the returns and reports referred to in subsection (a) above and no waivers of
statutes of limitations have been given with respect to any such returns and
reports or with respect to any Taxes.
(d) Section 5.19 of the Disclosure Statement identifies all federal,
state, local and foreign income, franchise and sales and use tax returns of or
with respect to Company or any Company Subsidiary as to which a deficiency was
asserted in writing for tax years after 1994, or as to which the Company has
received written notice are currently under examination by the IRS or by other
taxing authorities. Except as and to the extent shown in Section 5.19 of the
Disclosure Statement, all deficiencies asserted or assessments made as a result
of such examinations have been fully paid, and there are no other unpaid
deficiencies asserted or assessments made by any taxing authority against
Company or any Company Subsidiary.
(e) Neither Company nor any Company Subsidiary: has filed any consent
under section 341(f)(1) of the Internal Revenue Code of 1986, as amended (the
"Code") or agreed to have the provisions of Code section 341(f)(2) apply to any
dispositions of "subsection (f) assets" as such term is defined in Code section
341(f)(4); has agreed to or is required to make any adjustments under Code
section 481(a) by reason of a change in accounting method or otherwise; employs
the LIFO method of accounting for inventories for federal income tax purposes;
has made a transfer of intangible property on which Code section 367(d) or 482
will require the recognition of additional income for any period after the date
hereof; or owns stock in a "passive foreign investment company" within the
meaning of Code section 1296(a).
(f) Neither Company nor any Company Subsidiary has incurred any
deferred gain on any intercompany transaction (as set forth in Treasury
regulation ss.1.1502-13) involving any other member of the Consolidated Group,
nor will any deferred income or gain or excess loss account be required to be
taken into account by Company or any Company Subsidiary under the federal
consolidated return regulations (including, but not limited to, Treasury
regulations ss.ss.1.1502-13(f)(1)(iii), 1.1502-13(f)(1)(iv), 1.1502-14(d)(3) and
1.1502-19(b)(2)(i)) by reason of the transactions contemplated in this
Agreement. Neither Company nor any Company Subsidiary is a party to any tax
sharing agreement or tax indemnification agreement.
16
5.20 Employee Benefits.
(a) Section 5.20 of the Disclosure Statement contains a complete and
correct list of all benefit plans, arrangements, commitments and payroll
practices (whether or not employee benefit plans ("Employee Benefit Plans") as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), including, without limitation, sick leave, vacation pay,
severance pay, salary continuation for disability, consulting or other
compensation arrangements, retirement, deferred compensation, bonus, incentive
compensation, stock purchase, stock option, health including hospitalization,
medical and dental, life insurance and scholarship programs maintained for the
benefit of any present or former employees of Company, any Company Subsidiary or
any ERISA Affiliate (as defined below) or to which Company, any Company
Subsidiary or any ERISA Affiliate has contributed or is or was within the last
three years obligated to make payments. Company has made available to Buyer,
with respect to all such plans, arrangements, commitments and practices, true,
complete and correct copies of the following: all plan documents, handbooks,
manuals, collective bargaining agreements and similar documents governing
employment policies, practices and procedures; the most recent summary plan
descriptions and any subsequent summaries of material modifications for each
Title I plan; Forms series 5500 as filed with the IRS for the three most recent
plan years; the most recent report of the enrolled actuary for all defined
benefit plans, funded welfare plans or other plans requiring actuarial
valuation; all trust agreements with respect to employee benefit plans; plan
contracts with service providers or with insurers providing benefits for
participants or liability insurance for fiduciaries and other parties in
interest or bonding; most recent annual audit and accounting of plan assets for
all funded plans; and most recent IRS determination letter for all plans
qualified under Code section 401(a). As used herein, "ERISA Affiliate" shall
refer to any trade or business, whether or not incorporated, under common
control with the Company within the meaning of Section 414(b), (c), (m) or (o)
of the Code.
(b) With respect to each Employee Benefit Plan required to be listed on
Section 5.20 of the Disclosure Statement: (i) each Employee Benefit Plan has
been administered in substantial compliance with its terms, and is in compliance
in all material respects with the applicable provisions of ERISA, the Code and
all other applicable Laws (including, without limitation, funding, filing,
termination, reporting and disclosure and continuation coverage obligations
pursuant to Title V of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA)); (ii) the Company has made or provided for all
contributions required under the terms of such Plans; (iii) no "Employee Pension
Benefit Plan" (as defined in Section 3(2) of ERISA) has been the subject of a
"reportable event" (as defined in Section 4043 of ERISA) and there have been no
"prohibited transactions" (as set forth in Section 4975 of the Code or in Part 4
of Subtitle B of Title I of ERISA) with respect to any Employee Benefit Plan;
(iv) there are and during the past three years there have been no inquiries,
proceedings, claims or suits pending or threatened by any governmental agency or
authority or by any participant or beneficiary against any of the Employee
Benefit Plans, the assets of any of the trusts under such Plans or the Plan
sponsor or the Plan administrator, or against any fiduciary of any of such
Employee Benefit Plans with respect to the design or operation of the Employee
Benefit Plans; (v) the actuarial present value of accumulated benefits (both
vested and unvested) of each of the Employee Pension Benefit Plans which are
defined benefit plans, are fully funded in accordance with the actuarial
assumptions used by the Pension Benefit Guaranty Corporation ("PBGC") to
determine the level of funding required in the event of the termination of such
Plan; (vi) each Employee Pension Benefit Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code is and has from its
inception been so qualified, and any trust created pursuant to any such Employee
Pension Benefit Plan is exempt from federal income tax under Section 501(a) of
the Code and the IRS has issued each such Plan a favorable determination letter
which is currently applicable; and (vii) neither Company, any Company Subsidiary
nor any ERISA Affiliate is aware of any circumstance or event which would
jeopardize the tax-qualified status of any such Employee Pension Benefit Plan or
the tax-exempt status of any related trust, or which would cause the imposition
of any liability, penalty or tax under ERISA or the Code with respect to any
Employee Benefit Plan.
17
(c) Neither Company, any Company Subsidiary, nor any ERISA Affiliate
maintains or has ever maintained or been obligated to contribute to a
"Multiemployer Plan" (as such term is defined by Section 4001(a)(3) of ERISA).
(d) With respect to each Employee Benefit Plan maintained by Company,
any Company Subsidiary or any ERISA Affiliate: (i) no unsatisfied liabilities to
participants, the IRS, the United States Department of Labor ("DOL"), the PBGC
or to any other person or entity have been incurred as a result of the
termination of any Employee Benefit Plan; (ii) no Employee Pension Benefit Plan,
which is subject to the minimum funding requirements of Part 3 of subtitle B of
Title I of ERISA or subject to Section 412 of the Code, has incurred any
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Code and there has been no waived funding deficiency within
the meaning of Section 303 of ERISA or Section 412 of the Code; (iii) there has
been no event with respect to an Employee Pension Benefit Plan which would
require disclosure under Sections 4062(c), 4063(a) or 4041(e) of ERISA.
(e) All reports and information required to be filed with the DOL, IRS
and PBGC with respect to each Employee Benefit Plan required to be listed on
Section 5.20 of the Disclosure Statement have been filed and all annual reports
(including Form 5500 series) of such Plans were certified without qualification
by each Plan's accountants and actuaries.
(f) Any bonding required under ERISA with respect to any Employee
Benefit Plan required to be listed on the Disclosure Statement has been obtained
and is in full force and effect and no funds held by or under the control of
Company are plan assets.
(g) Except as set forth in Section 5.20 of the Disclosure Statement,
neither Company, any Company Subsidiary, nor any ERISA Affiliate maintains any
retired life and/or retired health insurance plans which provide for continuing
benefits or coverage for any employee or any beneficiary of an employee after
such employee's termination of employment.
(h) Except as set forth in Section 5.20 of the Disclosure Statement,
the consummation of the transactions contemplated by this Agreement will not,
alone or together with any other event, (i) entitle any person to severance pay,
unemployment compensation or any other payment, (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due to any such
employee, or (iii) result in any liability under Title IV of ERISA or otherwise.
5.21 Labor Matters.
(a) Except as set forth in Section 5.21 of the Disclosure Statement:
(i) no application or petition for certification of a collective bargaining
agent is pending and none of the employees of Company or any Company Subsidiary
are, or during the last five years have been, represented by any union or other
bargaining representative; (ii) during the last five years, no union has
attempted to organize any group of the Company's employees and no group of the
Company's employees has sought to organize themselves into a union or similar
organization for the purpose of collective bargaining; (iii) during the last
five years there has not been and there is not currently pending any labor
arbitration or proceeding in respect of the grievance of any employee, any
application, charge or complaint filed by any employee or union with the
National Labor Relations Board or any comparable state or local agency, any
strike, slowdown, picketing or work stoppage by any employees at any facility of
Company or any Company Subsidiary, any lockout of any such employees (iv) no
agreement restricts Company or any Company Subsidiary from relocating, closing
or terminating any of their operations or facilities or any portion thereof, and
(v) to the Knowledge of Company, no such agreement, action, proceeding or
occurrence has been threatened in writing by any person.
18
(b) Except as set forth in Section 5.21 of the Disclosure Statement,
neither the Company nor any Company Subsidiary has since July 1, 1997, been
cited for violations of the Occupational Safety and Health Act of 1970, 29
U.S.C. sec. 651 et seq. ("OSHA"), any regulation promulgated pursuant to OSHA or
any other Law establishing standards of workplace safety, or paid any fines or
penalties with respect to any such citation.
(c) Attached to the Disclosure Statement are true and correct copies of
each OSHA Form No. 200 completed and maintained by Company or any Company
Subsidiary at each of its work establishments for 1998, 1999 and 2000.
5.22 Directors, Officers and Employees. Section 5.22 of the Disclosure
Statement sets forth the following information for each director, officer and
employee of Company and each Company Subsidiary and each consultant and
independent contractor regularly retained, in each case whose aggregate
compensation for the fiscal year ended June 30, 2000 exceeded $50,000 or whose
current aggregate annual rate of compensation exceeds such amount (including
each such person on leave or layoff status): employer; employee name and job
title; current annual rate of compensation (identifying bonuses separately) and
any change in compensation since the date of the Balance Sheet; accrued vacation
pay and any automobile leased or owned by Company or any Company Subsidiary
primarily for use by any of the foregoing persons. Except as set forth in
Section 5.22 of the Disclosure Statement, to the Knowledge of Company, none of
their employees, directors or officers is a party to, or is otherwise bound by,
any agreement or arrangement with any person or entity other than Company or a
Company Subsidiary which limits or adversely affects the performance of his
duties, the ability of Company and Company Subsidiaries to conduct their
businesses, or his freedom to engage in any of the businesses conducted by
Company or any Company Subsidiary. Section 5.22 of the Disclosure Statement
lists each employment, severance or change of control agreement to which Company
or any Company Subsidiary is a party or is otherwise bound.
5.23 Affiliate Agreements. Except as set forth in Section 5.23 of the
Disclosure Statement, there are no, and since July 1, 1997 there have not been
any, agreements or transactions between Company or any Company Subsidiary on the
one hand and any Seller or any present or former director, shareholder or
officer of any Company Subsidiary or Company or any member of such person's
immediate family (a "Related Party") providing for the furnishing of services
(other than as an employee) by, rental of any assets from or to, or otherwise
requiring payments to any Related Party. Except as set forth in Section 5.23 of
the Disclosure Statement, no such Related Party has, or since July 1, 1997 has
had, any interest in any material property (real or personal, tangible or
intangible) sold to, purchased by or otherwise used in or pertaining to the
business of Company or any Company Subsidiary, or any direct or indirect
interest in any person or entity which has had business dealings or a financial
interest in any transaction with Company or any Company Subsidiary or which is
in competition with any business of Company or any Company Subsidiary. Except as
described in Section 5.23 of the Disclosure Statement, all agreements between
Company or any Company Subsidiary and all Related Parties are terminable by
Company or such Company Subsidiary, as the case may be, upon 30 days' notice or
less, without payment of penalty or premium of any kind.
19
5.24 Environmental Matters.
(a) Except as set forth in Section 5.24 of the Disclosure Statement:
(i) The Company and each Company Subsidiary, including all of
their businesses and operations are and always have been operated in
compliance with all Environmental Laws (as defined below); provided
that, with respect to periods prior to the acquisition or lease, or
after the disposition, of any Real Property by the Company or a Company
Subsidiary, the foregoing representation and warranty is given only to
the Knowledge of the Company.
(ii) To the Knowledge of the Company, there are no conditions
on, about, beneath or arising from any currently Owned Real Property
("Current Real Property"), which are reasonably expected, under any
Environmental Law, (A) to give rise to liability or the imposition of a
statutory lien, or (B) to require any "Response," "Removal" or
"Remedial Action" (as those terms are defined below);
(iii) At the time of disposition thereof, there were no
conditions on, about, beneath or arising from any real property which
was, but is no longer, owned, used or leased to or by Company or any
Company Subsidiary, including without limitation real property that
includes homes which were previously constructed and/or sold by Company
or any Company Subsidiary ("Former Real Property") which resulted from
action taken by the Company during its period of ownership, use or
lease and are reasonably expected, under any Environmental Law, (A) to
give rise to liability or the imposition of a statutory lien, or (B) to
require any "Response," "Removal" or "Remedial Action";
(iv) Neither Company nor any Company Subsidiary has received
any written notification of a release or threat of a release of a
"Hazardous Substance" (as defined below) with respect to any Current
Real Property or Former Real Property;
(v) No Hazardous Substances have been used, handled,
generated, processed, treated, stored, transported to or from,
released, discharged or disposed of by Company, any Company Subsidiary,
or, to the Knowledge of the Company, any third party on, about or
beneath any Current Real Property;
(vi) During Company's or any Company Subsidiary's ownership,
use or lease of the Former Real Property, no Hazardous Substances were
used, handled, generated, processed, treated, stored, transported to or
from, released, discharged or disposed of by Company, Company
Subsidiary, or any third party on, about or beneath the former Real
Property;
20
(vii) There are no above or underground storage tanks,
asbestos containing materials, or transformers containing or
contaminated with PCB's on, about or beneath the Current Real Property;
provided that, with respect to periods prior to the acquisition or
lease, or after the disposition, of any Real Property by the Company or
a Company Subsidiary, the foregoing representation and warranty is
given only to the Knowledge of the Company. During Company's or any
Company's Subsidiary's ownership, use or lease of the Former Real
Property, there were no above or underground storage tanks, asbestos
containing materials, or transformers containing or contaminated with
PCB's on, about or beneath the Former Real Property; provided that,
with respect to periods prior to the acquisition or lease, or after the
disposition, of any Real Property by the Company or a Company
Subsidiary, the foregoing representation and warranty is given only to
the Knowledge of the Company.
(viii) Since July 1, 1997, there has not been:
(A) any written claim, written demand, investigation,
enforcement action, Response, Removal, Remedial Action,
statutory lien or other governmental or regulatory action
instituted or threatened in writing against Company or any
Company Subsidiary or the Current, or Former Real Property
pursuant to any of the Environmental Laws;
(B) any written claim, written demand, written notice
or suit, made or threatened in writing by any person against
Company; any Company Subsidiary, the Current Real Property or
the Former Real Property claiming (1) damage, loss or injury
resulting from, or claimed to result from, any Hazardous
Substance on, about, beneath or arising from the Current or
Former Real Property or (2) any alleged violation of the
Environmental Laws by Company or any Company Subsidiary; or
(C) any written communication to or from any
governmental or regulatory agency arising out of or in
connection with Hazardous Substances on, about, beneath,
arising from or generated at the Current Real Property or
Former Real Property, including without limitation, any notice
of violation, citation, complaint, order, directive, request
for information or response thereto, notice letter, demand
letter or compliance schedule; provided that, with respect to
periods prior to the acquisition or lease, or after the
disposition, of any Real Property by the Company or a Company
Subsidiary, the foregoing representation and warranty is given
only to the Knowledge of the Company.
21
(ix) None of the Real Property contains, and none of the homes
or other real property previously sold by Company or any Company
Subsidiary contained at the time it was sold by Company or a Company
Subsidiary, a level of radon above action levels of the United States
Environmental Protection Agency; provided that, with respect to periods
prior to the acquisition or lease, or after the disposition, of any
Real Property by the Company or a Company Subsidiary, the foregoing
representation and warranty is given only to the Knowledge of the
Company.
(x) Since July 1, 1997, no wastes generated by Company or any
Company Subsidiary have ever been sent, transferred, transported by the
Company, or to the Knowledge of the Company, any other person , to, or,
to the Knowledge of the Company, treated, stored, or disposed of at any
site listed or formally proposed for listing on the National Priority
List promulgated pursuant to "CERCLA" (as defined below) or to any site
listed on any state list of sites requiring or recommended for
investigation or clean-up. None of the Current Real Property or Former
Real Property is listed on the National Priorities List or any state
list of sites requiring or recommended for investigation or clean up.
(b) As used in this Agreement:
(i) the term "Environmental Laws" means all applicable Laws
relating to pollution or contamination of the environment, including
but not limited to CERCLA and SARA (as defined in clause (ii) below),
or otherwise relating to emissions, discharges, releases or threatened
releases of Hazardous Substances or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Substances.
(ii) the terms "Response," "Removal" and "Remedial Action"
shall have the meanings ascribed to them in Sections 101(23)-101(25) of
the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act ("SARA"), 42 U.S.C. ss.ss. 9601(23)-9601(25).
(iii) The term "Hazardous Substances" or "Hazardous Substance"
shall mean any substance regulated under any of the Environmental Laws
including, without limitation, any substance which is: (A) petroleum,
asbestos or asbestos-containing material, or polychlorinated biphenyls;
(B) defined, designated or listed as a "Hazardous Substance" pursuant
to Sections 307 and 311 of the Clean Water Act, 33 U.S.C. ss.ss.1317,
1321, Section 101(14) of CERCLA, 42 U.S.C. ss.9601; (C) listed in the
United States Department of Transportation Hazardous Material Tables,
49 C.F.R. ss.172.101; (D) defined, designated or listed as a "Hazardous
Waste" under Section 1004(5) of the Resource and Conservation and
Recovery Act, 42 U.S.C. 6903(5).
22
(c) Notwithstanding any other provision of this Agreement, this Section
5.24 contains the exclusive representations and warranties of the Sellers and
Company with respect to environmental matters.
5.25 Absence of Certain Changes and Events.
(a) Since the date of the Balance Sheet, except as set forth in Section
5.25 of the Disclosure Statement, Company and the Company Subsidiaries have
conducted their businesses only in the usual and ordinary course consistent with
past practice and there has not been any:
(i) declaration or payment of any dividend or other
distribution or payment in respect of the shares of capital stock of
Company or any Company Subsidiary or any repurchase or redemption of
any such shares of capital stock or other securities;
(ii) payment by Company or any Company Subsidiary of any bonus
or increase of any compensation payable to any shareholder, director or
officer or, except in the ordinary course of business consistent with
past practice, employee or entry into (or amendment of) any employment,
severance or similar agreement with any shareholder, director, officer
or employee;
(iii) adoption of or change in any Employee Benefit Plan or
labor policy;
(iv) damage, destruction or loss to any material asset or
property of Company or any Company Subsidiary, whether or not covered
by insurance;
(v) except for agreements for the construction or sale of
homes in the ordinary course of business, entry into any agreement
involving payments in excess of $10,000;
(vi) sale (other than sales of inventory in the ordinary
course of business), assignment, conveyance, lease, or other
disposition of any material asset or property of Company or any Company
Subsidiary or mortgage or pledge, or to the Knowledge of Company
imposition of any lien, on any material asset or property of Company or
any Company Subsidiary;
(vii) discharge or satisfaction of any lien, claim or
encumbrance, other than in the ordinary course of business consistent
with past practice;
(viii) write-down or write-off of the value of any asset
except for write-downs and write-offs in the ordinary course of
business consistent with past practice and at a rate no greater than
that during the twelve months ended June 30, 2000, or any cancellation
or waiver of any other claim or right with a value in the aggregate in
excess of $10,000;
23
(ix) material change in the business or operations of Company
or any Company Subsidiary or in the manner of conducting the same or
entry by Company or any Company Subsidiary into any transaction, other
than in the ordinary course of business consistent with past practice
(it being understood that the timing of the closing of home sales
relative to the close of the Company's fiscal year on June 30,
generally results in higher revenues in the fourth fiscal quarter and
lower revenues in the first fiscal quarter); or
(x) change in the accounting methods, principles or practices
followed by Company or any Company Subsidiary, except as required by
GAAP, or any change in any of the assumptions underlying, or methods of
calculating, any bad debt, contingency or other reserve;
(xi) agreement, whether or not in writing, to do any of the
foregoing by Company or any Company Subsidiary.
(b) Since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties, assets, or
condition (financial or otherwise) of Company or any Company Subsidiary.
5.26 Books and Records.
(a) The copies of the certificate or articles of incorporation of
Company and each Company Subsidiary, as certified by the Secretaries of State of
their respective jurisdictions of incorporation, and of their bylaws (or of
their other comparable organizational documents), as certified by their
secretaries, which have been made available to Buyer are true, complete and
correct and are in full force and effect as of the date hereof.
(b) The stock records of Company and each Company Subsidiary fairly and
accurately reflect the record ownership of all of their outstanding shares of
capital stock. Complete and accurate copies, as of the date hereof, of all
minute books and stock records of the Company and the Company Subsidiaries have
been made available to Buyer.
5.27 Brokers. Except for SunTrust Equitable Securities, no person acting on
behalf of Company, any Related Party or any of their affiliates or under the
authority of any of the foregoing is or will be entitled to any brokers' or
finders' fee or any other commission or similar fee, directly or indirectly,
from any of such parties in connection with any of the transactions contemplated
by this Agreement.
5.28 Disclosure. All documents and other papers delivered by or on behalf
of Company or Sellers in connection with the transactions contemplated by this
Agreement are accurate and complete in all material respects and are authentic.
None of the representations and warranties of the Sellers or Company made in
this Section 5 contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. Except for the
representations and warranties contained in this Section 5, neither the Company,
the Sellers nor any other Person makes any express or implied representation or
warranty on behalf of the Company or the Sellers, and the Company and the
Sellers disclaim any such representation or warranty, whether by the Company or
any of its officers, directors, employees, agents or representatives or any
other Person, with respect to the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby or the business or
assets of the Company, notwithstanding the delivery or disclosure to Buyer, any
of its officers, directors, employees, agents or representatives or any other
Person of any documentation or other information with respect to the foregoing.
24
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as of the date of this
Agreement and of the Closing Date as follows:
6.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary corporate power and authority to carry on its business as
presently conducted, to own and lease the assets which it owns and leases and to
perform all of its obligations under each agreement and instrument by which it
is bound.
6.2 Power and Authorization. Buyer has full legal right, power and
authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Buyer Transaction Documents")
required to be delivered by it prior to or at the Closing. The execution,
delivery and performance by Buyer of this Agreement and the Buyer Transaction
Documents have been duly authorized by all necessary corporate action. This
Agreement has been duly and validly executed and delivered by Buyer and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms. When executed and delivered as contemplated herein,
each of the Buyer Transaction Documents shall constitute the legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms, except as limited by applicable bankruptcy, reorganization, insolvency,
or similar laws affecting creditors rights generally, and principles of equity
(whether considered and applied in a proceeding in equity or at law).
6.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement and the
Buyer Transaction Documents do not and will not (with or without the passage of
time or the giving of notice):
(i) violate or conflict with Buyer's certificate of
incorporation or bylaws or any Law binding upon Buyer; or
(ii) violate or conflict with, result in a breach of, or
constitute a default or otherwise cause any loss of benefit under any
material agreement or other material obligation to which Buyer is a
party.
(b) No consents or approvals of, or registrations, notifications,
filings and/or declarations with, any court, government or governmental agency
or instrumentality, creditor, lessor or other person are required to be given or
made by Buyer in connection with the execution, delivery and performance of this
Agreement and the other agreements and instruments contemplated herein, other
than such as have been obtained or made or which the failure to obtain would not
have a material adverse affect on Buyer's ability to consummate the transactions
contemplated herein and therein.
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of Buyer,
threatened, that question any of the transactions contemplated by, or the
validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, could reasonably be
expected to have a material adverse effect upon the ability of Buyer to enter
into or perform its obligations under this Agreement or any of the other
agreements or instruments contemplated hereby. Buyer has not received any
request from any governmental agency or instrumentality for information with
respect to the transactions contemplated hereby.
25
6.4 Brokers. No person acting on behalf of Buyer or any of its affiliates
or under the authority of any of the foregoing is or will be entitled to any
brokers' or finders' fee or any other commission or similar fee, directly or
indirectly, from any of such parties in connection with any of the transactions
contemplated by this Agreement.
6.5 Financing. Buyer has on the date of execution of this Agreement and
will have on the Closing Date sufficient available funds under its existing
credit lines to pay the Purchase Price and to pay all fees and expenses required
to be paid in connection with the transactions contemplated hereby.
6.6 Reports; Current Information. Since January 1, 1997, Buyer has made all
filings required to be made with the Securities and Exchange Commission ("SEC")
by the applicable due dates for such filings or in accordance with Rule 12b-25
under the Securities Exchange Act of 1934, as amended. No such filing by Buyer
(a) contained any untrue statement of material fact; or (b) omitted to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made not misleading. The authorized
and issued capital stock of Buyer is set forth in Buyer's Annual Report on Form
10-K, as filed with the SEC on September 14, 2000 with respect to the fiscal
year ended June 30, 2000.
6.7 Disclosure. All documents and other papers delivered by or on behalf of
Buyer in connection with the transactions contemplated by this Agreement are
accurate and complete in all material respects and are authentic. None of the
representations and warranties of Buyer made in this Section 6 contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. Except for the representations and warranties
contained in this Section 6, neither Buyer nor any other Person makes any
express or implied representation or warranty on behalf of the Buyer, and Buyer
disclaims any such representation or warranty, whether by Buyer or any of its
officers, directors, employees, agents or representatives or any other Person,
with respect to the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, notwithstanding the delivery or
disclosure to the Company or Sellers or (as applicable) to any of their
officers, directors, employees, agents or representatives or any other Person of
any documentation or other information with respect to the foregoing.
SECTION 7. OBLIGATIONS OF THE PARTIES UNTIL CLOSING
7.1 Conduct of Business Pending Closing. Except as contemplated herein,
between the date hereof and the Closing, without the prior written consent of
Buyer, which will not be unreasonably withheld or delayed, Sellers will cause
Company to:
26
(a) use reasonable best efforts to maintain its and any Company
Subsidiary's corporate existence, to pay and discharge all debts, liabilities
and obligations as they become due, and to operate in the ordinary course in a
manner, including marketing and sales activities, consistent with past practice,
and the provisions of this Agreement and in compliance with all material
respects with all applicable Laws;
(b) maintain its and any Company Subsidiary's facilities and assets in
the same state of repair, order and condition as they were on the date hereof,
reasonable wear and tear excepted;
(c) use reasonable efforts to maintain its and any Company Subsidiary's
books and records in accordance with past practice, and maintain in full force
and effect all Authorizations and all insurance policies and binders;
(d) use reasonable efforts to preserve intact its and any Company
Subsidiary's present business organization and maintain their relations and
goodwill with the suppliers, customers, employees and others having a business
relationship with it any of them;
(e) promptly advise Buyer of the written threat or commencement against
Company, any Company Subsidiary, or any Seller of any action, suit, proceeding,
arbitration or investigation known to any Seller by, against or affecting
Company, any Company Subsidiary or any of their operations or assets, or which
challenges the validity of this Agreement or any action taken or to be taken in
connection with this Agreement or the ability of Company or any Seller to
consummate the transactions contemplated herein or therein; and
(f) promptly advise Buyer in the event it actually knows that any
representation or warranty of Company or Sellers set forth in this Agreement is
untrue in a material respect.
7.2 Negative Covenants. Except as expressly provided herein, between the
date hereof and the Closing, without the prior written consent of Buyer, Company
shall not, and Sellers shall not cause or permit Company to:
(a) make any change in Company's or any Company Subsidiary's authorized
or issued capital stock; grant any stock option or other right to purchase
shares of Company's or any Company Subsidiary's capital stock or other
securities; issue or make any commitment to issue any security by Company or any
Company Subsidiary, including any security convertible into capital stock; grant
any registration rights; or purchase, redeem, retire or make any other
acquisition of any shares of any capital stock or other securities; declare or
pay any dividend or other distribution or payment in respect of shares of
capital stock of Company or any Company Subsidiary;
27
(b) amend the certificate or articles of incorporation or bylaws (or
equivalent governing documents) of Company or any Company Subsidiary;
(c) fail to pay or discharge when due any liability or obligation of
Company or any Company Subsidiary;
(d) enter into any agreement, commitment or transaction other than in
the ordinary course of business, consistent with past practice, or which is
material to the business, operations or financial condition of Company or any
Company Subsidiary, whether or not in the ordinary course of business; or
(e) enter into any contract with any Seller or any Related Party.
7.3 Access to Information; Confidentiality.
(a) Prior to the earlier of Closing or termination pursuant to Section
11.1, Company shall, and each Seller shall cause Company and each Company
Subsidiary to, upon reasonable prior notice and during ordinary business hours,
give Buyer and its authorized representatives reasonable access to all of its
personnel, books, records, plants, offices and other facilities and properties,
and permit Buyer to make such inspections thereof as Buyer may reasonably
request, and cause its officers and advisors to furnish Buyer with such
financial, operating and other information regarding Company's and each Company
Subsidiary's business, agreements, commitments, liabilities, personnel and
properties as Buyer may reasonably request. Buyer shall not contact any of the
Company's and any Company Subsidiary's clients, customers, vendors, lessors,
licensors or suppliers, without the prior consent of Company, which shall not be
unreasonably withheld. Buyer acknowledges that certain of the information which
may be made available to it is proprietary and includes confidential
information.
(b) Buyer agrees at all times, (i) to keep confidential all information
provided to it, (ii) not to use the confidential information on its own behalf,
except in connection with the transactions contemplated hereby, or on behalf of
any other person, firm or entity, and (iii) not to disclose the confidential
information to any third party (other than to Buyer's counsel, accountants and
other consultants in connection with the transactions contemplated hereby)
without the advance written authorization of the Company; provided that Buyer
shall have no such obligations with respect to confidential information that (A)
was lawfully obtained by it not subject to restrictions of confidentiality; (B)
is a matter of public knowledge; or (C) has been or is hereafter publicly
disclosed other than by or through Buyer or by a third party in violation of its
obligation to the Company. In the event this Agreement is terminated, Buyer will
promptly return to the Company all documents, and other materials furnished to
Buyer or any of its representatives and all copies thereof, and will promptly
and completely destroy all work papers made or prepared by Buyer or any of its
representatives relating to the transactions contemplated hereby, whether
obtained before or after the execution of this Agreement. In the event of a
breach or threatened breach by Buyer of the provisions of this Section 7.3, the
Company shall be entitled to an injunction restraining Buyer from disclosing, in
whole or in part, the confidential information.
28
(c) Sellers agree at all times, (i) to keep confidential all
information provided by or on behalf of Buyer to them, (ii) not to use the
confidential information on their own behalf, except in connection with the
transactions contemplated hereby, or on behalf of any other person, firm or
entity, and (iii) not to disclose the confidential information to any third
party (other than to Sellers' counsel, accountants and other consultants in
connection with the transactions contemplated hereby) without the advance
written authorization of the Company; provided that Sellers shall have no such
obligations with respect to confidential information that (A) was lawfully
obtained by it not subject to restrictions of confidentiality; (B) is a matter
of public knowledge; or (C) has been or is hereafter publicly disclosed other
than by or through Sellers or by a third party in violation of its obligation to
Buyer. In the event this Agreement is terminated, Sellers will promptly return
to Buyer all documents and other materials furnished to Sellers or any of its
representatives and all copies thereof, and will promptly and completely destroy
all work papers made or prepared by Sellers or any of its representatives
relating to the transactions contemplated hereby, whether obtained before or
after the execution of this Agreement. In the event of a breach or threatened
breach by Sellers of the provisions of this Section 7.3, the Company shall be
entitled to an injunction restraining Sellers from disclosing, in whole or in
part, the confidential information.
7.4 Best Efforts. Prior to the earlier of Closing or termination pursuant
to Section 11.1, each party hereto shall use best efforts to cause to occur the
transactions contemplated hereby and by the Transaction Documents, and to cause
all conditions to the performance of the parties hereto that are within its
control to be satisfied. No party shall take any action to cause any such
covenant, agreement, transaction or condition not to occur, be satisfied or be
performed, as the case may be.
7.5 Consents. Prior to the Closing, Company and each Seller shall, and each
Seller shall cause Company and each Company Subsidiary to, use best efforts to
obtain (and cooperate with the other parties hereto in obtaining) all consents,
permits, Authorizations, approvals of, and exemptions by, any regulatory
authority or third party necessary for the consummation of the transactions
contemplated by this Agreement and the Seller Transaction Documents or the
Company Transaction Documents.
7.6 Financial Information. Until the earlier of Closing or termination
pursuant to Section 11.1, Company and Sellers shall provide Buyer, within 20
days after the end of each month, with an unaudited consolidated balance sheet
and income statement of Company as of and for the month then ended, prepared on
the same basis as the interim financial statements referred to in Section 5.8,
and certified as such by the chief financial officer of Company.
29
SECTION 8. CERTAIN CONDITIONS
PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of Buyer to consummate the acquisition of the Shares is
subject to the fulfillment by or at the Closing of each of the following
conditions:
8.1 Representations and Warranties. Company's and each Seller's
representations and warranties contained in this Agreement 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, except for representations and warranties qualified by
materiality, which shall be true and correct in all respects.
8.2 Performance of Covenants. Company and each Seller shall have performed
or complied in all material respects with all of the agreements in this
Agreement to be performed or complied with by them prior to or at the Closing,
except for agreements qualified by materiality, which shall be conformed and
complied with in all respects.
8.3 Approvals. The consents or approvals set forth in Schedule 8.3 shall
have been obtained and no such consent or approval: (a) shall have been
conditioned upon the modification, cancellation or termination of any material
lease, commitment, agreement, easement, right or Authorization of Company or any
Company Subsidiary; or (b) shall impose on the Buyer, any Company Subsidiary or
Company any material condition, provision or requirement not presently imposed
upon Sellers, such Company Subsidiary or Company.
8.4 Legal Matters. The Closing shall not violate any order or decree of any
court or governmental body of competent jurisdiction and no suit, action,
proceeding or investigation, shall be pending or threatened (other than the
Buyer or an affiliate of Buyer) which questions the validity or legality of this
Agreement or the transactions contemplated hereby.
8.5 Financial Condition. The Net Worth of Company as of June 30, 2000,
shall be greater than $5,500,000. "Net Worth" shall have the meaning ascribed to
it in Section 2.
8.6 Employment Agreements. Each of the Sellers shall have entered into an
Employment Agreement with Company (the "Employment Agreements"), including
covenants not to compete, satisfactory to the parties in form and substance.
30
8.7 Resignation of Directors and Officers. Buyer shall have received
resignations from such of the officers and directors of Company and each Company
Subsidiary as it shall have requested in writing no less than five days before
the Closing Date.
8.8 Opinion of Counsel. Buyer shall have received an opinion satisfactory
to Buyer of McGuireWoods LLP, counsel for Company and Sellers, dated as of the
Closing, with respect to the transactions contemplated by this Agreement.
SECTION 9. CERTAIN CONDITIONS
PRECEDENT TO SELLERS' OBLIGATIONS
The obligation of Sellers to consummate the sale of the Shares is
subject to the fulfillment by or at the Closing of each of the following
conditions:
9.1 Representations and Warranties. Buyer's representations and warranties
contained in this Agreement shall be deemed to have been made again at and as at
the Closing and shall then be true and correct in all material respects, except
for representations and warranties qualified by materiality, which shall be true
and correct in all respects.
9.2 Performance of Covenants. Buyer shall have performed or complied in all
material respects with all of the agreements in this Agreement to be performed
or complied with by it prior to or at the Closing, except for agreements,
covenants and conditions qualified by materiality, which shall be conformed and
complied with in all respects.
9.3 Approvals. The consents or approvals set forth in Schedule 8.3 shall
have been obtained.
9.4 Legal Matters. The Closing shall not violate any order or decree of any
court or governmental body of competent jurisdiction and no suit, action,
investigation, or legal or administrative proceeding shall be pending (other
than any Seller or an affiliate of any Seller) which questions the validity or
legality of this Agreement or the transactions contemplated hereby.
9.5 Employment Agreements. Company shall have entered in the Employment
Agreements with and paid the consideration specified therein to have been paid
on or prior to Closing.
9.6 Non-Competition Agreements. Company shall have entered into the
Non-Competition Agreements with and paid the consideration specified therein to
have been paid on or prior to Closing.
9.7 Release of Guarantees. At Closing, Buyer shall have taken all actions
and acquired all consents, releases and agreements necessary to obtain a
complete release of J. Russell Parker, III and his spouse as personal guarantors
of the indebtedness of the Company to Bank of America, First Union National
Bank, SouthTrust Bank and Citizens & Farmers Bank (the "Personal Guaranties").
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9.8 Opinion of Counsel. Sellers shall have received an opinion satisfactory
to Sellers of Drinker Biddle & Reath LLP, counsel for Buyer, dated as of the
Closing, with respect to the transactions contemplated by this Agreement.
SECTION 10. CLOSING
10.1 Time and Place of Closing. The closing of the purchase and sale of the
Shares (the "Closing") pursuant to this Agreement shall take place at the
offices of McGuireWoods LLP, One James Center, 901 East Cary Street, Richmond,
Virginia on October ___, 2000 commencing at 11:00 A.M., local time, or at such
other time and place as the parties may agree (the "Closing Date"). Subject to
Section 12, failure to consummate the Closing shall not result in the
termination of this Agreement or relieve any person of any obligation hereunder.
10.2 Deliveries at the Closing. At the Closing, in addition to the other
actions contemplated elsewhere herein:
(a) Each Seller shall deliver, or shall cause to be delivered, to Buyer
the following:
(i) certificates representing all of the Shares owned by such
Seller, duly endorsed for transfer or with stock powers affixed thereto
executed in blank in proper form for transfer;
(ii) a certificate, dated the Closing Date and signed by such
Seller, to the effect set forth in Sections 8.1, 8.2 and 8.3;
(iii) such other documents and instruments as Buyer may be
reasonably request to effectuate or evidence the transactions
contemplated by this Agreement.
(b) Sellers shall, jointly and severally, cause Company to deliver to
Buyer the following:
(i) a certificate, dated the Closing Date and signed by the
President or Vice President of Company, to the effect set forth in
Sections 8.1, 8.2 and 8.3;
(ii) copies of Company's and each Company Subsidiary's
certificates or articles of incorporation and bylaws, or the
corresponding charter documents, and all amendments thereof to date,
certified as of a recent date by the Secretary of State or
corresponding certifying authority of each such entity's respective
jurisdiction of organization and by the Secretary or an Assistant
Secretary of Company each such entity;
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(iii) certificates of good standing of a recent date for
Company and each Company Subsidiary, certified by the Secretaries of
State or corresponding certifying authorities of each such entity's
respective jurisdiction of organization and of each state in which such
entities are qualified to do business;
(iv) copies of the resolutions of the board of directors or
corresponding governing body of Company authorizing the execution,
delivery and performance of this Agreement and the other agreements and
instruments referred to herein, certified as of the Closing Date by the
Secretary or an Assistant Secretary of Company;
(v) the original corporate seals, minute books and stock
transfer and record books of Company and each Company Subsidiary as
they exist on the Closing Date and such of their files, books and
records as Buyer may request;
(vi) the original certificates representing the capital stock
or corresponding interests of each Company Subsidiary directly or
indirectly owned by Company; and
(vii) such other documents and instruments as Buyer may
reasonably request to effectuate or evidence the transactions
contemplated by this Agreement.
(c) Buyer shall deliver, or shall cause to be delivered, to Sellers the
items set forth below:
(i) the Closing Stock Payment and the Closing Tidewater
Payment;
(ii) the Notes;
(iii) a certificate, dated the Closing Date signed by the Vice
Chairman, Chief Executive Officer or a Vice President of Buyer, to the
effect set forth in Sections 9.1, 9.2 and 9.3;
(iv) a copy of Buyer's certificate of incorporation and bylaws
and all amendments thereof to date, certified as of a recent date by
the Secretary of State of Delaware and by the Secretary or an Assistant
Secretary of Buyer, and accompanied by a certificate of good standing
as of a recent date for Buyer, certified by the Secretary of State of
Delaware;
(v) a copy of the resolutions of the board of directors of
Buyer authorizing the execution, delivery and performance by Buyer of
this Agreement and the other agreements and instruments referred to
herein, certified as of the Closing by the Secretary or an Assistant
Secretary of Buyer; and
(vi) such other documents and instruments as Sellers may
reasonably request to effectuate or evidence the transactions
contemplated by this Agreement.
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10.3 Default by Any Seller at the Closing. If any Seller shall fail or
refuse to deliver any of the Shares as provided in Section 3.1(a) or to take any
other action required by this Agreement to have been taken prior to or at the
Closing, such failure or refusal shall not relieve such Seller or any other
Seller of their obligations under this Agreement and Buyer, at its option and
without prejudice to its rights against any such defaulting Seller, may either
(i) acquire all the Shares which the non-defaulting Sellers have agreed to sell
to Buyer hereunder pursuant to the allocation set forth in Schedule 1.1 hereto
(in consideration for which the Purchase Price shall be reduced by the amount
which would otherwise have been payable to the defaulting Seller), or (ii)
determine to not make such acquisition and terminate all of its obligations
hereunder. Sellers acknowledge that the Shares are unique and agree that in
addition to any other remedies against a defaulting Seller, Buyer shall have the
right, without limitation, to seek and obtain all available equitable remedies
to enforce delivery of the Shares hereunder, including, without limitation, an
action or suit for specific performance.
10.4 Accounts Receivable From Employees of Company. With respect to any
accounts or notes receivable from employees of the Company or any Company
Subsidiary to the Company or any Company Subsidiary that exist at the close of
business on the Closing Date and that remain unpaid and uncollected 180 days
following the Closing, and with respect to the receivable for Baird as
identified in Section 5.14(d) of the Disclosure Statement (collectively, the
"Covered Receivables"), J. Russell Parker, III shall pay to Buyer, within five
business days after receipt of a listing of all such Covered Receivables, the
unpaid balance thereof. If the amount of such payment shall be in dispute, J.
Russell Parker, III shall pay the undisputed portion, if any, and the parties
shall attempt in good faith to resolve the dispute. If the parties are unable to
resolve the dispute within 30 days following receipt by J. Russell Parker, III
of such listing of unpaid Covered Receivables, the dispute shall be resolved by
arbitration in accordance with Section 13.8. Buyer shall cause any Covered
Receivable for which Buyer has been paid under this Section to be assigned to J.
Russell Parker, III. Any proceeds received thereafter with respect to such
assigned receivables shall be the property of J. Russell Parker, III, and if
received by Buyer, the Company or any other Seller, shall be paid to J. Russell
Parker, III. Prior to such assignment, Buyer shall use reasonable efforts to
collect, in accordance with their terms, all Covered Receivables and, upon prior
notice, shall provide J. Russell Parker, III or his designated representatives
during normal business hours with reasonable access to Company's books and
records concerning the Covered Receivables.
10.5 Remittance of Payments. From and after the Closing, Sellers shall
immediately remit to Company, in the form received, any payments which they or
any affiliate may receive (such as payments of accounts receivable) which
properly belong to Company or any Company Subsidiary.
10.6 Confidential Information. From and after the Closing, unless expressly
consented to in writing by Buyer, Sellers shall not, and shall use best efforts
to cause all affiliates not to, directly or indirectly, use or disclose to any
third person, any trade secret, financial data, customer list, pricing or
marketing policies or plans or other proprietary or confidential information
relating to Buyer, any Company Subsidiary or Company.
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SECTION 11. TERMINATION AND ABANDONMENT
11.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing:
(a) by Buyer or Sellers owning not less than 51% of the Shares, if the
Closing has not occurred by November 10, 2000;
(b) by mutual consent of Buyer and Sellers owning not less than 51% of
the Shares;
(c) by Buyer, pursuant to Section 10.3 or if any representation or
warranty of any Seller made in or pursuant to this Agreement is untrue or
incorrect in any material respect, any Seller materially breaches the covenants
or other terms of this Agreement or any of the conditions precedent to Closing
contained in Section 8 are not satisfied; or
(d) by Sellers owning not less than 51% of the Shares, if any
representation or warranty of Buyer made in or pursuant to this Agreement is
untrue or incorrect in any material respect, Buyer materially breaches the
covenants or other terms of this Agreement or any of the conditions precedent to
Closing contained in Section 9 are not satisfied.
11.2 Procedure for Termination. A party terminating this Agreement pursuant
to Section 11.1 shall give written notice thereof to each other party hereto,
whereupon this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned without further action by any party; provided,
however, that if such termination is by Buyer pursuant to Section 11.1(c) as a
result of an intentional misrepresentation by any Seller of any material
representation or warranty contained in this Agreement or an intentional breach
by any Seller of any material covenant contained in this Agreement, or if such
termination is by Sellers pursuant to Section 11.1(d) as a result of an
intentional misrepresentation by Buyer of any material representation or
warranty contained in this Agreement or an intentional breach by Buyer of any
material covenant contained in this Agreement, nothing herein shall affect the
non-breaching party's right to damages on account of such other party's breach.
SECTION 12. INDEMNIFICATION
12.1 Indemnification by Sellers. Subject to Sections 12.5 and 13.2, in the
event the Closing hereunder is consummated, Sellers shall severally and not
jointly, indemnify and hold Buyer, Company and their respective officers,
directors and shareholders harmless against and in respect of any and all
losses, costs, expenses, claims, damages, obligations and liabilities, including
interest, penalties and reasonable attorneys fees and disbursements (after
taking into account any Net Tax Benefit (hereinafter defined) realizable by, and
insurance and indemnity proceeds paid by third parties to, Buyer, the Company or
the indemnified party with respect thereto, net of any costs of collection)
("Damages"), which Buyer or any such person may suffer, incur or become subject
to arising out of, based upon or otherwise in respect of: (a) any breach of any
representation or warranty of Company or such Seller made in or pursuant to this
Agreement (other than the representations and warranties set forth in Section
5.17 for which there shall be no obligation to indemnify, unless such breach is
willful, other than as set forth in Section 12.6 below); (b) any breach of the
covenants in Sections 7.2 or 10.4 of this Agreement; and (c) any liability of
Company or any Company Subsidiary for money borrowed existing on the Closing
Date and not reflected in the Balance Sheet or disclosed in this Agreement or
the Disclosure Statement other than money borrowed in the ordinary course of
35
business in connection with the acquisition of assets or the repayment of
liabilities. "Net Tax Benefit" means the tax effect of any item of loss,
deduction or credit or any other item (including increase in tax basis of assets
of Company or any Company Subsidiary) which decreases Taxes paid or payable
including any interest in respect thereto or interest that would have been
payable but for such item, net of increase in Tax resulting from the receipt of
the indemnity payment. In addition to the foregoing, J. Russell Parker, III
shall indemnify Buyer and hold Buyer harmless from the combined state and
federal tax, if any, incurred by Buyer arising from any purchase of any of the
Distributions Items from Buyer by J. Russell Parker, III in accordance with
Section 2.1 hereof.
12.2 Indemnification by Buyer. In the event the Closing hereunder is
consummated, Buyer shall indemnify and hold Sellers harmless against and in
respect of any and all Damages which Sellers may suffer, incur or become subject
to arising out of, based upon or otherwise in respect of: (a) any breach of any
representation or warranty of Buyer made in or pursuant to this Agreement; or
(b) any breach of any covenant in Sections 7.2 or 10.4 of this Agreement. To the
extent that Buyer does not obtain complete releases of the Personal Guaranties
in accordance with Section 9.7 hereof and such condition to closing is waived by
the other parties hereto, Buyer shall fully indemnify J. Russell Parker, III and
his spouse against, and shall hold each of them completely harmless from, any
liabilities, damages, costs, expenses or obligations of any kind or nature
arising directly or indirectly in connection with the Personal Guaranties,
including but not limited to reasonable legal fees and costs.
12.3 Inter-Party Claims. A party seeking indemnification pursuant to this
Section (the "Indemnified Party") shall notify the other party or parties from
whom such indemnification is sought (the "Indemnifying Party") of the
Indemnified Party's assertion of such claim for indemnification, specifying the
basis of such claim. The failure of the Indemnified Party to give notice of a
claim promptly after becoming aware of the existence of the basis of such claim
shall reduce and limit the Indemnified Party's rights under this Section 12.3 to
the extent failure to give prompt notice prejudices the Indemnifying Parties
ability to mitigate the Damages arising therefrom. The Indemnified Party shall
thereupon give the Indemnifying Party reasonable access to the books, records
and assets of the Indemnified Party which evidence or support such claim or the
act, omission or occurrence giving rise to such claim and the right, upon prior
notice during normal business hours, to interview any appropriate personnel of
the Indemnified Party related thereto.
12.4 Third Party Claims.
(a) Each Indemnified Party shall promptly notify the Indemnifying Party
of the assertion in writing by any third party of any claim with respect to
which the indemnification set forth in this Section relates (which shall also
constitute the notice required by Section 12.3). The failure of the Indemnified
Party to give such notice shall reduce and limit the Indemnified Party's rights
under this Section 12.4(a) to the extent failure to give prompt notice
prejudices the Indemnifying Parties ability to defend such third party claim or
to mitigate the Damages arising therefrom. The Indemnifying Party shall have the
right, upon notice to the Indemnified Party within ten business days after the
receipt of notice from the Indemnified Party, to undertake the defense of such
36
claim with counsel satisfactory to the Indemnified Party (it being agreed that
Drinker Biddle & Reath LLP and McGuireWoods LLP are satisfactory) or, with the
consent, which shall not unreasonably be withheld or delayed, of the Indemnified
Party, to settle or compromise such claim. The failure of the Indemnifying Party
to give such notice and to so undertake and diligently prosecute the defense of
or to settle or compromise such a claim shall constitute a waiver of the
Indemnifying Party's rights under this Section 12.4(a) and shall preclude the
Indemnifying Party from disputing the manner in which the Indemnified Party may
conduct the defense of such claim or the reasonableness of any amount paid by
the Indemnified Party in satisfaction of such claim.
(b) The election by the Indemnifying Party, pursuant to Section
12.4(a), to undertake the defense of a third-party claim shall not preclude the
party against which such claim has been made also from participating or
continuing to participate in such defense, so long as such party bears its own
legal fees and expenses for so doing.
(c) Notwithstanding anything herein to the contrary, if a party
receives notice from a taxing authority proposing an adjustment to any Taxes for
which any other party hereto may be obligated to indemnify under this Agreement,
the indemnified party shall give prompt notice thereof to the indemnifying party
that describes such proposed adjustment in reasonable detail. The failure to
give such prompt notice shall reduce and limit the obligations of the
indemnifying party to the extent such failure prejudices the ability of the
indemnifying party to contest such Taxes.
12.5 Limitations and Requirements.
(a) Sellers shall have no obligation to indemnify Buyer or any other
person against Damages pursuant to Section 12.1(a) or (b) of this Agreement
arising out of or based upon any breach of any representation, warranty or
covenant made in or pursuant to this Agreement or any Seller Transaction
Document or Company Transaction Document unless and until the aggregate of all
such Damages suffered or incurred by Company, Buyer and such persons exceeds
$200,000 (the "Deductible"); in which event Company, Buyer and such persons
shall be entitled to indemnification for the full amount of all Damages up to
the Cap (hereinafter defined) suffered or incurred in excess of $200,000;
provided, however, that the above limitation shall not be applicable to any
claim for Damages based upon a willful breach of any representation or warranty,
or upon a breach of any representation or warranty made in or pursuant to
Sections 4.3, 5.4 or 5.19 hereof or the covenants in Sections 7.2 and 10.4;
provided further that the Deductible for breach of the representations and
warranties in Section 5.19 in so far as they relate to income Taxes shall be
$10,000.
(b) In the absence of fraud, Sellers shall not be obligated to
indemnify Buyer or any other person against Damages pursuant to Section 12.1 of
this Agreement arising out of or based upon any inaccuracy in or breach of any
representation or warranty made in or pursuant to this Agreement or any Seller
Transaction Document or Company Transaction Document to the extent that payments
thereof by Sellers to Buyer or other Indemnified Parties or reasonably paid to
third parties for the benefit of Buyer pursuant to the terms of this Agreement
exceed $3,000,000 (the "Cap") in the aggregate; provided, however, that the
above limitation shall not be applicable to any claim for Damages based upon a
willful breach of any representation or warranty, or upon a breach of any
representation or warranty made in or pursuant to Sections 4.3, 5.4 or 5.19
hereof. On the first and each subsequent anniversary of the Closing Date, the
remaining Cap shall be reduced by a sum equal to $750,000, less the amount of
pending indemnity claims.
37
(c) Except as may otherwise expressly be provided in this Agreement, no
claim arising out of or based upon any inaccuracy in or breach of any
representation, warranty or covenant contained in this Agreement or any
Transaction Document shall be made unless a claim arises and written notice
pursuant to Section 12.3 is delivered to the Indemnifying Party on or before the
Survival Date set forth therein.
(d) Sellers shall have no rights, hereunder or otherwise, to make any
claim, whether for indemnification or contribution or otherwise, against the
Company with respect to (i) any inaccuracy in or breach of any representation or
warranty of Sellers or Company made in or pursuant to this Agreement or any
Company Transaction Document, (ii) any breach or non-fulfillment of any covenant
or obligation of Sellers or Company contained in this Agreement or any Company
Transaction Document; or (iii) any matter arising entirely from events occurring
prior to Closing, as to which matters the Sellers hereby irrevocably release the
Company from liability.
(e) Notwithstanding any other provision of this Agreement, Sellers
shall not be liable for any Damages suffered by a Buyer to the extent that an
amount has been reserved, provided or allowed for in the Balance Sheet of the
Company, and no party shall be required to pay Damages with respect to any claim
which is contingent unless and until such contingent claim becomes an actual
liability of the indemnified party and is due and payable, so long as such claim
was timely submitted pursuant to this Section 12.
(f) Notwithstanding any other provision of this Agreement, an
indemnified party's liability under this Section 12 shall be reduced and limited
to the extent that the liability results from a failure on the part of any
indemnified party or any Affiliate to exercise good faith in not jeopardizing or
prejudicing the interests of the indemnifying party or otherwise arises out of
any action taken or omitted to be taken by an indemnified party or its
Affiliates.
(g) No party to this Agreement, nor any Indemnified Party, shall seek
or be entitled to damages for lost profits, harm or injury to reputation or lost
opportunities in any claim for indemnification under this Section 12, nor shall
such party or Indemnified Party accept payment of any award or judgement for
such indemnification to the extent that such award or judgement includes such
damages.
(h) Notwithstanding anything herein to the contrary, the Sellers shall
not be liable for indemnification pursuant to Section 12.1 to the extent that
there exists insurance or other third party indemnity obligations which would
otherwise diminish the amount of damages, and then only unless and until the
Company shall have used commercially reasonable efforts to collect under such
insurance or other indemnity obligation; provided that in the event an
Indemnifying Party makes and indemnification payment hereunder for a claim that
is the subject of a later insurance or indemnity payment by a third party, the
Indemnified Party will pay over to the Indemnifying Party the lesser of (i) the
amount of such insurance or third party indemnity payment (net of any costs of
collection) or (ii) the amount paid by the Indemnifying Party in respect of such
claim.
38
(i) The indemnification provided in this Section 12 shall constitute
the exclusive remedy for breach of the representations, warranties, covenants
and agreements contained in this Agreement and any other matters arising out of,
relating to or connected with this Agreement or the transactions contemplated
hereby, and whether any claims or causes of action asserted with respect to such
matters are brought in contact, tort or any other legal theory whatsoever.
Notwithstanding the forgoing sentence, nothing in this Section 12.5(e) shall in
any way limit the rights or any of the remedies that the parties may seek
against each other in the event of fraud.
12.6 Reimbursement Separate From Indemnity. If the amount expended by
Company after the Closing Date for repairs and replacements (including 30-day
punchlist items) on homes Completed and for which closing of the sale thereof
has occurred prior to Closing exceeds in the aggregate $600,000 for the twelve
month period following the Closing Date; or $200,000 for the corresponding
twelve-month period ending in October 12, 2002; or $100,000 for the
corresponding twelve-month period ending in October 12, 2003; or $100,000 for
the corresponding twelve-month period ending in October 12, 2004, respectively,
Buyer shall be entitled to reimbursement by Sellers, severally and not jointly,
for all such excess expenditures in each of such fiscal years, which shall be
paid in full within 30 days of a request therefor in writing to the Sellers
accompanied by a listing of such expenditures in reasonable detail.
12.7 Limited Right of Set-Off. In the event that Buyer determines in good
faith that the amount of Damages (after giving effect to Section 12.5) for which
it is entitled to indemnification pursuant to Section 12.1 is more than 20% of
the aggregate principal amount remaining to be paid to Sellers under all of the
Notes, Buyer and Company shall have a right of set-off with respect to the
amount of such Damages (the "Set-Off Amount"), subject to a final determination
of the actual amount of indemnification (the "Actual Amount") and to the
following provisions of this Section. Any Set-Off Amount shall decrease the
payments due under the Notes, on a pro rata basis as indicated on Schedule 1.1,
beginning on the next occurring payment date (the "Set-Off Date"). If the
Set-Off Amount is in excess of the Actual Amount (upon determination thereof),
such excess shall be treated as outstanding principal under the Notes, allocated
on a pro rata basis, bearing interest from the Set-Off Date at the interest rate
stated under the Notes, with payment of the resulting principal and interest to
be due within ten (10) business days of the date on which the Actual Amount is
determined. If any set-off occurs hereunder, the Notes shall remain in full
force and effect until there is a final determination of the Actual Amount and
full payment under the Notes as required by this Section.
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SECTION 13. MISCELLANEOUS
13.1 Meaning of Knowledge and Severally But Not Jointly. All references in
this Agreement to Knowledge of the Company respecting a particular matter shall
conclusively be deemed and presumed to mean the actual knowledge only of the
persons listed in Schedule 13.1. References in this Agreement to the effect that
the Sellers are "severally and not jointly" liable or obligated, whether under
Sections 4 or 12 or otherwise, shall conclusively be deemed and presumed to mean
that any liability or obligation of the Sellers shall be allocated and limited
in accordance with the "Allocation Percentages" of the Purchase Price to the
Sellers, as set forth in paragraph (c) on Schedule 1.1 hereof, with the
understanding that the enforcement of such liabilities or obligations may be
pursued, in the sole discretion of Buyer or Company, against all or any of the
Sellers.
13.2 Survival. The representations and warranties made by the parties in
this Agreement (including the Disclosure Statement) or any Transaction Document
will survive the Closing solely for the purposes of Sections 12.1 and 12.2 and
shall terminate on the earlier of (a) 30 days after receipt of Buyer of the
audited financial statements for Buyer for the fiscal year ending June 30, 2001
and (b) September 30, 2001, after which no party may bring any action or present
any claim for a breach of such representations and warranties (the "Survival
Date"); provided that (i) the Survival Date for the representations and
warranties in Section 5.24 shall be August 31, 2004, and (ii) the Survival Date
for the representations and warranties in Section 5.19 shall be the date of
expiration of the applicable statute of limitations; provided that a claim for
indemnification pursuant to Section 12.1 or 12.2 shall survive the Survival
Date, if written notice, given in good faith, of the specific claim (including
appropriate details) thereof is given to the Sellers or Buyer, as the case may
be, on or before the Survival Date. The representations in Sections 4.3 and 5.4
shall survive indefinitely. None of the covenants and agreements contained in
this Agreement shall survive the Closing Date, except for the covenants in
Sections 7.2, 10.4 and 12 of this Agreement, and such surviving covenants shall
survive only for such period as is prescribed by the applicable statute of
limitations.
13.3 Disclosure Statement.
(a) Certain of the representations and warranties set forth in this
Agreement contemplate that there will be a Disclosure Statement setting forth
information that might be "material" or have a "material adverse effect." The
Company and Sellers may, at their option, include in such Disclosure Statement
items that are not material or are not likely to have a material adverse effect
in order to avoid any misunderstanding, and any such inclusion shall not be
deemed to be an acknowledgment or representation that such items are material or
would have a material adverse effect, to establish any standard of materiality
or material adverse effect, or to define further the meaning of such terms for
purposes of this Agreement.
(b) Any matter disclosed for any purpose in any Section of the
Disclosure Statement shall be deemed disclosed for any other purpose in such or
any other Section of the Disclosure Statement if it would reasonably be
understood to relate to matters called for by such other Section.
40
13.4 Further Assurances. Each party hereto shall use best efforts to comply
with all requirements imposed hereby on such party and to cause the transactions
contemplated hereby to be consummated as contemplated hereby and shall, from
time to time and without further consideration, either before or after the
Closing, execute such further instruments and take such other actions as any
other party hereto shall reasonably request in order to fulfill its obligations
under this Agreement and to effectuate the purposes of this Agreement and to
provide for the orderly and efficient transition of the ownership of Company to
Buyer. Sellers shall, for five years after the Closing, retain their various
books and records relating to Company and the Company Subsidiaries and shall,
upon prior notice, provide Buyer and its authorized representatives reasonable
access thereto. Each party shall promptly notify the other parties of any event
or circumstance known to such party that could prevent or delay the consummation
of the transactions contemplated hereby or which would indicate a breach or
non-compliance with any of the terms, conditions, representations, warranties or
agreements of any of the parties to this Agreement.
13.5 Costs and Expenses. Except as otherwise expressly provided herein,
each party shall bear its own expenses in connection herewith. Any and all
transfer, sales, use, documentary and similar taxes and recording and filing
fees incurred in connection with the transactions contemplated herein shall be
borne by Sellers (and not by Company).
13.6 Public Announcements. Prior to the Closing, neither Company, Sellers
nor Buyer shall make any public announcement or disclosure relating to the
transactions contemplated herein without the prior agreement of each other party
hereto, provided that each party shall use best efforts to consult with the
other in advance of any disclosure required by law, but the agreement of the
other parties hereto shall not be required.
13.7 Notices. All notices or other communications permitted or required
under this Agreement shall be in writing and shall be sufficiently given if and
when hand delivered to the persons set forth below or if sent by documented
overnight delivery service or registered or certified mail, postage prepaid,
return receipt requested, or by telecopy, receipt acknowledged, addressed as set
forth below or to such other person or persons and/or at such other address or
addresses as shall be furnished in writing by any party hereto to the others.
Any such notice or communication shall be deemed to have been given as of the
date received, in the case of personal delivery, or on the date shown on the
receipt or confirmation therefor in all other cases.
To Buyer: Orleans Homebuilders, Inc.
One Greenwood Square
Bensalem, PA 19020
Telephone: (215) 245-7500
Fax: (215) 633-2350
Attention: Benjamin D. Goldman
with a copy to: Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103
Telephone: (215) 988-2700
Fax: (215) 988-2757
Attention: Howard A. Blum, Esq.
41
To Sellers: To the addresses set forth in the
employment records of the Company
with a copy to: McGuireWoods LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219
Telephone: (804) 775-4322
Fax: (804) 698-2069
Attention: Leslie A. Grandis
13.8 Assignment and Benefit.
(a) Buyer may assign this Agreement in whole to any subsidiary or to
any person which becomes a successor in interest (by purchase of assets or
stock, or by merger or otherwise) to Buyer. Sellers shall not assign this
Agreement or any rights hereunder, or delegate any obligations hereunder,
without prior written consent of Buyer. Subject to the foregoing, this Agreement
and the rights and obligations set forth herein shall inure to the benefit of,
and be binding upon, the parties hereto, and each of their respective
successors, heirs and assigns.
(b) This Agreement shall not be construed as giving any person, other
than the parties hereto and their permitted successors, heirs and assigns, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any of the provisions herein contained, this Agreement and all provisions and
conditions hereof being intended to be, and being, for the sole and exclusive
benefit of such parties, and permitted successors, heirs and assigns and for the
benefit of no other person or entity.
13.9 Arbitration.
(a) All disputes arising out of or relating to this Agreement
(excluding disputes arising under Section 10.5 hereof or the other written
agreements or instruments contemplated herein, which shall be governed by their
own terms) which cannot be settled by the parties shall promptly be submitted to
and determined in arbitration in Richmond, Virginia pursuant to the rules and
regulations then obtaining of the American Arbitration Association; provided
that nothing herein shall preclude the Buyer from seeking, in any court of
competent jurisdiction, damages, specific performance or other equitable
remedies in the case of any breach or threatened breach by any Seller of Section
1 hereof. The decision of the arbitrator shall be final and binding upon the
parties and judgement upon such decision may be entered in any court of
competent jurisdiction.
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(b) Discovery shall be allowed pursuant to the intendment of the United
States Federal Rules of Civil Procedure and as the arbitrators determine
appropriate under the circumstances.
(c) Such arbitrators shall be required to apply the contractual
provisions hereof in deciding any matter submitted to them and shall not have
any authority, by reason of this Agreement or otherwise, to render a decision
that is contrary to the mutual intent of the parties as set forth in this
Agreement.
13.10 Amendment, Modification and Waiver. The parties may amend or modify
this Agreement in any respect, and Buyer, on the one hand, and Sellers owning,
in the aggregate, Shares constituting at least 51% of those shares to be sold to
Buyer hereunder, on the other hand, may: (a) extend the time for the performance
of any of the obligations of the other, (b) waive any inaccuracies in
representations and warranties by the other, (c) waive compliance by the other
with any of the obligations contained in this Agreement, or (d) waive the
fulfillment of any condition precedent to the performance under this Agreement
of the waiving party. Any such amendment, modification, extension or waiver
shall be in writing. The waiver by a party of any breach of any provision of
this Agreement shall not constitute or operate as a waiver of any other breach
of such provision or of any other provision hereof, nor shall any failure to
enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof.
13.11 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the Commonwealth of
Virginia (and United States federal law, to the extent applicable), irrespective
of the principal place of business, residence or domicile of the parties hereto,
and without giving effect to otherwise applicable principles of conflicts of
law.
EACH OF SELLERS HEREBY AGREES THAT ANY ACTION OR PROCEEDING ARISING IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREUNDER
PERMITTED TO BE BROUGHT IN COURT BY THE TERMS OF THIS AGREEMENT SHALL BE BROUGHT
AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE COMMONWEALTH OF VIRGINIA, IN THE
CITY OF RICHMOND OR IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT
OF VIRGINIA. SELLERS EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF SUCH
COURTS FOR THE PURPOSE OF ANY SUCH ACTION OR PROCEEDING AND IRREVOCABLY AGREE TO
BE BOUND BY ANY JUDGMENT RENDERED BY SUCH COURTS IN CONNECTION WITH SUCH ACTION
OR PROCEEDING. THE SELLERS HEREBY APPOINT J. RUSSELL PARKER, III AS THE SOLE
AGENT FOR SERVICE OF PROCESS FOR ANY ACTION OR PROCEEDING BEFORE ARBITRATORS OR
IN SUCH COURTS. EACH SELLER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION SUCH SELLER MAY HAVE, NOW OR HEREAFTER, TO THE
VENUE OF ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH ACTION OR
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
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13.12 Section Headings and Defined Terms. The section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement. The terms defined herein and in
any agreement executed in connection herewith include the plural as well as the
singular and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herewith and
therewith.
13.13 Severability. The invalidity or unenforceability of any particular
provision, or part of any provision, of this Agreement shall not affect the
other provisions or parts hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions or parts were omitted.
13.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
13.15 Entire Agreement. This Agreement, together with the Disclosure
Statement and the agreements, exhibits, schedules and certificates referred to
herein or delivered pursuant hereto, constitute the entire agreement between the
parties hereto with respect to the purchase and sale of the Shares and supersede
all prior agreements and understandings. Without limiting the scope of the
foregoing, the parties specifically acknowledge and agree that all employment
agreements, shareholder agreements, subscription agreements and any similar
agreements regarding the Shares that any Seller entered into at any time prior
to the Closing hereunder, including without limitation (a) the Shareholders
Agreement dated June 1993 (regarding Class B shareholders of the Company), (b)
the Shareholders Agreement dated July 1998 (regarding Class C shareholders of
the Company), and (c) the Executive Subscription Agreements, are hereby
terminated and superseded in all respects, and the applicable Sellers hereby
waive any and all rights arising under such agreements with respect to the
transactions contemplated by this Agreement. The submission of a draft of this
Agreement or portions or summaries thereof does not constitute an offer to
purchase or sell the Shares, it being understood and agreed that neither Buyer
nor Sellers shall be legally obligated with respect to such a purchase or sale
or to any other terms or conditions set forth in such draft or portion or
summary unless and until this Agreement has been duly executed and delivered by
all parties.
(Next Page is Signature Page)
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the first date written above.
Buyer: Orleans Homebuilders, Inc.
By: /s/ Benjamin D. Goldman
-------------------------------
Name: Benjamin D. Goldman
-------------------------------
Title: Vice Chairman
-------------------------------
Company: Parker & Lancaster Corporation
By: /s/ J. Russell Parker, III
--------------------------
J. Russell Parker, III
President
Sellers:
/s/ Michelle Canovai
-----------------------------------
Michelle Canovai
/s/ Jeffrey C. Guernier
-----------------------------------
Jeffrey C. Guernier
/s/ J. Phillip Harris
-----------------------------------
J. Phillip Harris
/s/ J. Russell Parker, III
---------------------------
J. Russell Parker, III
/s/ L. Anthony Piccola
-----------------------------------
L. Anthony Piccola
/s/ Scott C. Smith
-----------------------------------
Scott C. Smith
45
Schedules and Exhibit to Stock Purchase Agreement*
--------------------------------------------------
Schedule 1.1 Allocation of Consideration Among Selling Stockholders.
Schedule 2.1 Distribution Items.
Schedule 8.3 Required Third Party Consents to Transaction.
Schedule 13.1 Definition of "Knowledge" of Sellers.
Disclosure Statement Information Concerning Sellers' Representations and
Warranties Regarding Parker & Lancaster Corporation.
Exhibit A Form of Note.
*Copies will be furnished to the Commission upon request.