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Exhibit 2.1
AMENDMENT NO. 1
TO
MASTER TRANSACTION AGREEMENT
AND
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AMENDMENT NO. 1 TO THE MASTER TRANSACTION AGREEMENT AND AGREEMENT OF
PURCHASE AND SALE OF ASSETS (the "AMENDMENT") is made as of May 30, 2001, by and
among MERITAGE CORPORATION, a Maryland corporation ("MERITAGE or PARENT");
HANCOCK-MTH BUILDERS, INC., an Arizona corporation ("BUILDER BUYER");
HANCOCK-MTH COMMUNITIES, INC., an Arizona corporation ("SALES BUYER," and
collectively with Builder Buyer, "BUYERS"); HC BUILDERS, INC., an Arizona
corporation ("SELLER"), and HANCOCK COMMUNITIES, L.L.C., an Arizona limited
liability company ("SELLER," and collectively with HC Builders, "SELLERS").
RECITALS
Parent, Buyers and Sellers are parties to a certain Master Transaction
Agreement ("MASTER AGREEMENT") and Agreement of Purchase and Sale of Assets
("ASSET AGREEMENT"), each dated as of May 7, 2001 (collectively, the
"AGREEMENTS").
Parent, Buyers and Sellers desire to revise certain terms of the
Agreements, and all acknowledge and agree that modification of the Agreements is
in each of their best interests and is made for good and valuable consideration,
the adequacy of which is hereby acknowledged.
Except as expressly provided in this Amendment, the Agreements will remain
unchanged and in full force and effect; however, nothing contained in the
Agreements will have the effect of preventing or limiting, in any way, the terms
of this Amendment. Furthermore, if any conflict arises between the terms of this
Amendment and the terms of the Agreements, this Amendment will govern as to the
conflicting terms.
The parties agree to amend the Agreements as follows:
MASTER AGREEMENT
1. The definition of "Adjusted Book Value" contained in Section 1.1 of the
Master Agreement is amended to read as follows:
"Adjusted Book Value" shall mean total equity of the Hancock Communities
Business as reflected on the Closing Balance Sheet, FINAL BALANCE SHEET, AND
ADJUSTED BALANCE SHEET, AS THE CASE MAY BE, which ARE to be prepared in
accordance with Adjusted GAAP, consistent with the March 31, 2001 balance sheet,
attached as SCHEDULE 2.5A(3).
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2. The definition of "Closing Balance Sheet" contained in Section 1.1 of
the Master Agreement is amended to read as follows:
"Closing Balance Sheet" shall mean an estimated closing balance sheet, as
of May 31, 2001, for the Hancock Communities Business, prepared in accordance
with Adjusted GAAP to be delivered to Parent and Buyers prior to the Closing.
3. Section 1.1 of the Master Agreement is amended to add the following
definition:
"FINAL BALANCE SHEET" shall mean a balance sheet reflecting the actual
closing balances for the Hancock Communities Business, prepared in accordance
with Adjusted GAAP, as of May 31.
4. The final paragraph of Section 2.4 of the Master Agreement is amended
to read as follows:
In addition, at Closing, Buyers shall pay off all (i) loans
due to Exeter outstanding as of the Closing (which Sellers advise
Parent and Buyers includes certain officer loans that Exeter intends
to pay off at Closing), and (ii) "equity" loans and real estate
loans due to American West outstanding as of the Closing, each as
set forth on Schedule 2.4 and reflected in the March 31, 2001
balance sheet set forth on Schedule 2.5A(3), together with all
accrued interest thereon; provided, that immediately prior to
Closing, Sellers shall apply all available cash and cash equivalents
to reduce the amounts of the loans described in clause (ii) of
this paragraph.
5. Section 2.5C of the Master Agreement is amended to read as follows:
Adjustment. For the purpose of making an initial determination of
Adjusted Book Value, Sellers shall deliver to Parent, a Closing Balance
Sheet, prepared in accordance with Adjusted GAAP consistent with Schedule
2.5A(3). For purposes of this Agreement and the transactions contemplated
hereby, the term "Adjusted GAAP" will mean GAAP except for the following
adjustments: (a) interest on loans due to Exeter (which Sellers advise
Parent and Buyers includes certain officer loans that Exeter intends to
pay off at Closing) shall be expensed rather than capitalized and (b)
Excluded Assets and Excluded Liabilities will be excluded; provided,
however, that reserves relating to Unassumed Construction Claims will be
included to reflect that Buyers will perform warranty repairs as provided
in Section 2.5E. No later than June 15, 2001, Sellers will deliver to
Parent a balance sheet reflecting the actual closing balances for the
Hancock Communities Business, prepared in accordance with Adjusted GAAP,
as of May 31, 2001 (the "Final Balance Sheet"). In the event that the
Adjusted Book Value reflected on the Closing Balance Sheet is different
from the Adjusted Book Value reflected on the Final Balance Sheet, the
Purchase Price will be adjusted on a dollar for dollar basis and payments
made promptly by and to the appropriate parties in immediately available
funds. Within 15 days of Sellers' delivery of the Final Balance Sheet,
Parent will conduct a review of the Final Balance Sheet (the "Buyer
Review") to
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verify the Adjusted Book Value, and, accordingly, the Purchase Price. In
connection with the Buyer Review, Parent will promptly advise Buyers of
any required adjustments to the Final Balance Sheet, and will provide
Sellers with an Adjusted Balance Sheet reflecting those adjustments and
the financial position of the Hancock Communities Business as of May 31,
2001. The Adjusted Balance Sheet will become final and binding on the
parties unless within 15 business days following delivery thereof to
Sellers, Sellers notify Parent in writing that Sellers object thereto. If
Sellers object to the Adjusted Balance Sheet, and after good faith
consultation with respect to the objection, the parties are unable to
reach an agreement within 15 days, then the parties shall resolve the
dispute in the manner provided in Exhibit I; provided, however, that the
arbitrator shall be an accounting firm of national repute (other than the
firms currently serving as auditor for Parent or Sellers) as may be
mutually agreed upon by Parent and Sellers (the "Accounting Arbitrator").
The determination of the Accounting Arbitrator shall be final and binding
on all parties, and judgment on the arbitration award may be enforced in
any court having jurisdiction over the subject matter of the controversy.
Buyers and Sellers shall each pay the cost of their own accounting and
other professionals and shall bear equally the fees and expenses of the
Accounting Arbitrator. In the event that the Adjusted Book Value, as
determined pursuant to the Buyer Review, is different from the Adjusted
Book Value reflected on the FINAL Balance Sheet, the Purchase Price will
be adjusted on a dollar for dollar basis and payments made promptly by and
to the appropriate parties in immediately available funds.
6. Section 6.6 of the Master Agreement is amended to read as follows:
Further Assurances. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary, proper, or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, the Asset Agreement and the Real Property
Agreement, including obtaining all necessary waivers, consents, and approvals
and effecting all necessary registrations and filings and submissions of
information requested by governmental authorities. Sellers agree that they, at
any time before or after the Closing, will execute, acknowledge, and deliver any
further consents, deeds, assignments, conveyances, and other assurances,
documents, and instruments of transfer either necessary to consummating the
sale, transfer, assignment, grant, and conveyance of the Acquired Assets as
contemplated in this Agreement, the Asset Agreement and the Real Property
Agreement or as reasonably requested by Parent, and will take any other action
consistent with the terms of this Agreement, the Asset Agreement or the Real
Property Agreement that may reasonably be requested by Parent, for the purpose
of assigning, transferring, granting, conveying, and confirming to Buyers, or
reducing to possession, any or all property to be conveyed and transferred by
this Agreement, the Asset Agreement or the Real Property Agreement. If requested
by Parent or Buyers, Sellers further agree to prosecute or otherwise enforce in
its name for the benefit of Parent or Buyers, any claims, rights, or benefits
that are transferred to Buyers by this Agreement and that require prosecution or
enforcement in its name. Any prosecution or enforcement of claims, rights, or
benefits under this Section (except with respect to obtaining necessary
consents) shall be solely at Buyers' expense, unless the prosecution or
enforcement is made necessary by a
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breach of this Agreement by Sellers. After the Closing and for a period of 6
months, the parties will cooperate in good faith and use commercially reasonable
efforts to resolve any issues which may arise in the transition of the Hancock
Communities Business.
7. A new Section 6.16 will be added to the Master Agreement to read as
follows:
Contractor's License. After the Closing, Sellers will continue to serve as
general contractor for home building operations to be conducted by Buyers until
(i) Buyers have obtained an appropriate contractor's license or (ii) June 30,
2001, whichever is earlier. Additionally, during this period Sellers will
attempt to ensure that a sufficient number of sub-contractors remain to conduct
the home-building operations of Hancock-MTH Builders, Inc. as conducted by
Sellers prior to the Closing. Notwithstanding anything to the contrary expressed
in this Agreement or any of the other Agreements, as defined in Section 11.16,
the effective date of any assignment of any contract with any sub-contractor of
HC Builders shall not occur prior to the earlier of (i) or (ii) above.
8. A new Section 6.17 will be added to the Master Agreement to read as
follows:
Post-Closing Matters. Promptly after the Closing, but in any event, on or
before June 30, 2001, Sellers shall use their commercially reasonable efforts to
accomplish the following: (i) obtain consents to assignments of all utility
contracts identified on Schedule 4.5, (ii) obtain consents to assignments of all
city development agreements identified on Schedule 4.5, (iii) obtain consents
estoppels and amendments from the current land owner under the Option Agreement
dated October 18, 1999, as amended, between Sellers and Pleasant Road Limited
Partnership which (1) provides the consent of such land owner to the assignment
of such Option Agreement to Buyers and the land bankers involved, (2) confirms
no present defaults exist under the Option Agreement, and (3) amends the Option
Agreement so that it confirms the Option Agreement extends through three years
and six months after the opening of escrow under the Option Agreement. All such
consents and other documents will be in form and substance reasonably acceptable
to Parent. Sellers' liability for any consequences from the failure to obtain
the foregoing consents shall be limited to Buyers' actual damages (not
consequential or other damages) and expenses (including attorneys' fees and
costs) and shall be subject to the provisions of the Indemnification Agreement,
including provisions therein concerning dollar limits, except as set forth in
Section 4B thereto.
9. A new Section 6.18 will be added to the Master Agreement to read as
follows:
Pleasant Valley Property.
(a) The Real Property Agreement contemplates the sale of real estate known
as the Pleasant Valley property. Builder Buyer is seeking to "land bank" the
Pleasant Valley property in conjunction with Builder Buyer's acquisition of
control over the Pleasant Valley property.
(b) Sellers have agreed that the proceeds of the sale of the Pleasant
Valley property will be allocated to and should be disbursed by the escrow agent
to American West Homes, Incorporated ("American West").
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(c) Sellers are still in the process of obtaining an Assignment and
Assumption Agreement to the option agreement, and consent to its assignment to a
third party.
(d) Therefore, the parties agree to defer the sale of the Pleasant Valley
property until the receipt of an Assignment and Assumption Agreement to the
option agreement and a consent from the seller to an assignment thereof (such
date being referred to as the "Extended Closing Date"), in each case in form and
substance reasonably acceptable to all parties (including if applicable the
"land banker"); provided however the Extended Closing Date will not be later
than June 8, 2001.
(f) During the deferral period, Meritage or Buyers effectively will pay
American West interest on the deferred purchase price at the rate of LIBOR plus
175 basis points, on the deferral purchase price related to the Pleasant Valley
Property.
(g) The Pleasant Valley property will be sold to a land banker or land
bankers identified by Builder Buyer prior to its closing if such transaction has
been finalized as of the Extended Closing Date, or to Builder Buyer if such
transaction has not been finalized as of such date.
(h) Pending closing of the Pleasant Valley property, all funds and
documents attributable to the sale of the Pleasant Valley Property will remain
in escrow.
10. Section 11.2 of the Master Agreement is amended to read as follows.
In line 1, the expression "The Agreements, as defined in Section 11.16,"
is substituted for the expression "This Agreement."
ASSET AGREEMENT
1. Section 1.2B of the Asset Agreement is amended to read as follows:
Any cash or cash equivalents (which remain on the balance sheet after
Sellers use existing cash and cash equivalents to pay off or pay down
outstanding American West loans), current assets, accounts receivable and notes
receivable;
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on the date first written above by their respective officers thereunder duly
authorized.
MERITAGE CORPORATION,
a Maryland corporation
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By:
Its:
HANCOCK-MTH BUILDERS, INC,
an Arizona corporation
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By:
Its:
HANCOCK-MTH COMMUNITIES, INC,
an Arizona corporation
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By:
Its:
[SIGNATURE PAGE TO AMENDMENT NO. 1]
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on the date first written above by their respective officers thereunder duly
authorized.
HC BUILDERS, INC.,
an Arizona corporation
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By:
Its:
HANCOCK COMMUNITIES, L.L.C.,
an Arizona limited liability company
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By:
Its:
Acknowledged and agreed to (as to Paragraph 9
only) by:
AMERICAN WEST HOMES, INCORPORATED
a Nevada corporation
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By:
Its:
[SIGNATURE PAGE TO AMENDMENT NO. 1]
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