Exhibit 10.2
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COLONY CONSTRUCTION COMPANY
STOCK PURCHASE AGREEMENT
Dated as of May 13, 2002
among
LARRY GODWIN,
ROBERT GODWIN,
COLONY COMMUNITIES, INC.
and
STANDARD PACIFIC CORP.
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................................................................ 1
ARTICLE II STOCK PURCHASE........................................................................ 7
2.1 Sale and Delivery........................................................................... 7
2.2 Closing Payment............................................................................. 7
2.3 Earnout..................................................................................... 7
2.4 Closing..................................................................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS........................................ 11
3.1 Ownership of Shares......................................................................... 11
3.2 Authorization, Validity, and Effect of Agreements........................................... 11
3.3 No Violations; Consents..................................................................... 11
3.4 No Brokers.................................................................................. 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS AS TO THE SUBJECT COMPANIES............. 12
4.1 Existence; Good Standing; Compliance with Law............................................... 13
4.2 Capitalization.............................................................................. 13
4.3 Subsidiaries................................................................................ 14
4.4 Material Contracts; No Violation............................................................ 14
4.5 Financial Statements; No Undisclosed Liabilities........................................... 17
4.6 Permits; Compliance; Litigation............................................................. 18
4.7 Absence of Certain Changes.................................................................. 18
4.8 Taxes....................................................................................... 19
4.9 Certain Employee Plans...................................................................... 20
4.10 Labor Matters............................................................................... 22
4.11 Environmental Matters....................................................................... 23
4.12 Related Party Transactions.................................................................. 25
4.13 Restrictions on Business Activities......................................................... 26
4.14 Real Property............................................................................... 26
4.15 Intellectual Property....................................................................... 30
4.16 Insurance................................................................................... 30
4.17 Assets Other than Real Property Interests................................................... 32
4.18 Antitakeover Statutes....................................................................... 32
4.19 Warranties.................................................................................. 32
4.20 Suppliers and Subcontractors................................................................ 33
4.21 Investment Purpose.......................................................................... 33
4.22 Access to Information....................................................................... 33
4.23 Disclosure.................................................................................. 33
i
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER.............................................. 34
5.1 Existence; Good Standing; Corporate Authority; Compliance with Law........................ 34
5.2 Authorization, Validity, and Effect of Agreements......................................... 34
5.3 No Violation.............................................................................. 35
5.4 No Brokers................................................................................ 35
5.5 Funds..................................................................................... 35
5.6 Investment Purpose........................................................................ 35
5.7 Access to Information..................................................................... 35
5.8 Disclosure................................................................................ 36
5.9 SEC Filings............................................................................... 36
ARTICLE VI COVENANTS........................................................................... 36
6.1 Conduct of Business....................................................................... 36
6.2 Further Action............................................................................ 38
6.3 Access to Information; Confidentiality.................................................... 39
6.4 Publicity................................................................................. 40
6.5 Expenses.................................................................................. 40
6.6 Employee Benefits......................................................................... 40
6.7 Third Party Offers........................................................................ 40
6.8 Restrictive Covenants..................................................................... 41
6.9 Company Directors......................................................................... 43
6.10 Corporate Actions......................................................................... 43
6.11 Securities Restrictions................................................................... 45
6.12 Warranty Indemnification.................................................................. 46
6.13 Insurance Rights and Indemnification...................................................... 46
6.14 Release of Guaranties or Indemnification.................................................. 47
ARTICLE VII SURVIVAL; INDEMNIFICATION.......................................................... 47
7.1 Survival of Representations and Warranties................................................ 47
7.2 Indemnification........................................................................... 47
7.3 Time Limitations.......................................................................... 48
7.4 Other Limitations......................................................................... 48
7.5 Set-Off................................................................................... 49
7.6 Procedures Relating to Indemnification Involving Third Party Claims....................... 49
7.7 Other Claims.............................................................................. 50
7.8 Sole and Exclusive Remedy................................................................. 51
ARTICLE VIII TAX MATTERS....................................................................... 51
8.1 Section 338(h)(10) Elections.............................................................. 51
8.2 Indemnification Obligations With Respect to Taxes......................................... 52
8.3 Tax Returns and Payment Responsibility.................................................... 54
ii
8.4 Contest Provisions.................................................................. 55
8.5 Assistance and Cooperation.......................................................... 55
8.6 Retention of Records................................................................ 56
8.7 Other Provisions.................................................................... 56
ARTICLE IX CONDITIONS..................................................................... 56
9.1 Conditions to Each Party's Obligation to Effect the Stock Purchase.................. 56
9.2 Conditions to Obligations of Buyer.................................................. 57
9.3 Conditions to Obligations of the Sellers............................................ 58
ARTICLE X TERMINATION..................................................................... 59
10.1 Termination by Mutual Consent....................................................... 59
10.2 Termination by Either Buyer or Sellers.............................................. 59
10.3 Termination by Sellers.............................................................. 59
10.4 Termination by Buyer................................................................ 60
10.5 Effect of Termination............................................................... 60
ARTICLE XI MISCELLANEOUS.................................................................. 60
11.1 Entire Agreement; Assignment........................................................ 60
11.2 Validity............................................................................ 61
11.3 Notices............................................................................. 61
11.4 Governing Law....................................................................... 62
11.5 Construction........................................................................ 63
11.6 Counterparts........................................................................ 63
11.7 Parties In Interest................................................................. 63
11.8 Waiver.............................................................................. 63
11.9 Amendments.......................................................................... 63
11.10 Further Assurances.................................................................. 63
11.11 Cumulative Remedies................................................................. 63
iii
Exhibits
Exhibit A HBG Assignment
Exhibit B Florida Pines Purchase Agreement
Exhibit C High Grove Purchase Agreement
Exhibit D Accredited Investor Questionnaire
Exhibit E Opinion of Counsel to Sellers
Exhibit F Opinion of Counsel to Buyer
Exhibit G Business Plan
Company Disclosure Schedule
Schedule 3.1(a) Company Stock Ledger
Schedule 3.1(b) Voting Trusts/Shareholder Agreements
Schedule 4.4(a) Material Contracts
Schedule 4.4(b) Contracts with Seller Affiliates
Schedule 4.4(c) Contract Defaults
Schedule 4.4(d) Consents and Approvals
Schedule 4.5(a) Financial Statements
Schedule 4.5(c) Undisclosed Liabilities
Schedule 4.5(d) Company Debt
Schedule 4.6(b) Company Permits
Schedule 4.6(d) Company Litigation
Schedule 4.6(e) Company Initiated Litigation
Schedule 4.7 Absence of Certain Changes
Schedule 4.8(i) Foreign Tax Jurisdictions
Schedule 4.9(a) Company Benefit Plans
Schedule 4.9(c) Company Benefits Relating to Retired or Former Employees
Schedule 4.9(f) Change in Control Arrangements
Schedule 4.11 Environmental Matters
Schedule 4.12 Related Party Contracts
Schedule 4.14(a) Real Property Owned by the Company
Schedule 4.14(f) Real Estate Projects
Schedule 4.14(g) Real Property Subject to Repurchase
Schedule 4.14(h) Backlog of Home Sales on Each Company Project
Schedule 4.15 Intellectual Property
Schedule 4.16(a) Insurance
Schedule 4.16(b) Risk Sharing Contracts
Schedule 4.16(c) Sufficiency of Insurance Policies
Schedule 4.16(d) Material Open Insurance Claims
Schedule 4.17 Liens Against Company Assets
Schedule 4.19 Warranties
Schedule 4.20 Suppliers/Subcontractor Terminations
Schedule 5.4 Buyer's broker
iv
EXECUTION COPY
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), is dated as of May
13, 2002, by and among Larry Godwin, an individual, Robert Godwin, an individual
(collectively, "Sellers"), Standard Pacific Corp., a Delaware corporation
("Standard Pacific") and Colony Communities, Inc., a Delaware corporation and
wholly owned subsidiary of Standard Pacific ("Buyer").
WHEREAS, the Sellers will collectively own as of the time of Closing
1073 shares (the "Shares") of common stock, no par value ("Company Common
Stock"), of Colony Construction Company, a Florida corporation (the "Company"),
which will represent all of the issued and outstanding shares of Company Capital
Stock;
WHEREAS, subject to all the terms and conditions of this Agreement, the
Sellers have agreed to sell the Shares to Buyer, and Buyer has agreed to
purchase the Shares from Sellers (the "Stock Purchase"), in exchange for the
consideration set forth in this Agreement; and
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Stock Purchase, and
also to prescribe various conditions to such transactions.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and for
other good and valuable consideration, intending to be legally bound herein, the
Sellers and Buyer agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"3(3) Plans" is defined in Section 6.6(a)(i).
"2001 Balance Sheet" is defined in Section 4.5.
"Acceptance Notice" is defined in Section 2.3(b).
"Affiliate", as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
Contract or otherwise.
"Agreement" is defined in the introductory paragraph of this Agreement.
"Allocation Agreement" is defined in Section 8.1(b).
"Annual Statements" is defined in Section 4.5(a).
"Business" means the business of developing residential real estate and
constructing single family homes and multi-family residential units.
"Business Day" means any day other than a day on which banks in the
State of California are authorized or required to close or the national
securities exchanges in the United States are closed.
"Buyer" is defined in the introductory paragraph of this Agreement.
"Buyer Common Stock" means the common stock of Standard Pacific, $0.01
par value.
"Capital Stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other equity ownership
interests entitling the holder thereof to vote with respect to matters involving
the issuer thereof.
"Cash Payment" is defined in Section 2.2(a).
"Closing" and "Closing Date" are defined in Section 2.4(a).
"Closing Payment" is defined in Section 2.2(b).
"Code" means the Internal Revenue Code of 1986, as amended (or any
successor thereto).
"Colony Communities" means Colony Communities, a Florida general
partnership (or a partnership of another name to be created by Buyer prior to
Closing).
"Company" is defined in the first recital of this Agreement.
"Company Benefit Plans" means each of the following which is sponsored,
maintained or contributed to by the Company for the benefit of the current or
former employees, officers or directors of any of the Company, or has been so
sponsored, maintained or contributed to within six years prior to the Closing
Date: (i) each "employee benefit plan," as such term is defined in Section 3(3)
of ERISA (including, but not limited to, employee benefit plans, such as foreign
plans, which are not subject to the provisions of ERISA), and (ii) each stock
option plan, bonus plan or arrangement, incentive award plan or arrangement,
change in control or severance pay plan, policy, or agreement, deferred
compensation agreement or arrangement, or supplemental income arrangement, and
each other employee benefit plan, program or practice which is not described in
clause (i) of this sentence; provided, however, that such term shall not include
collective bargaining agreements, employment agreements or consulting
agreements.
"Company Common Stock" is defined in the first recital of this
Agreement.
"Company Disclosure Schedule" is defined in the introductory paragraph
of Article III.
"Company Permits" is defined in Section 4.l(c).
"Company Pre-Tax Income" shall mean, with respect to any measurement
period, the net income (or loss) of the Company, prior to federal and state
income taxes, for such measurement period calculated in accordance with the
standards, principles, practices and policies used by Buyer in connection with
financial statements and in accordance with GAAP; provided, however, that the
calculation of Company Pre-Tax Income shall be adjusted to exclude the impact of
any purchase accounting adjustments relating to Buyer's acquisition of the
Company, including any write-up or write-down of assets resulting from such
purchase accounting.
"Competing Business" is defined in Section 4.12(b)(ii).
"Confidentiality Agreement" is defined in Section 10.5.
"Contracts" shall mean all contracts, agreements, and other instruments
and understandings of any kind, including, without limitation, change in control
or severance agreements, deferred compensation agreements and employment
agreements, and all amendments, supplements, modifications, extensions or
renewals in respect of the foregoing, in each case, whether written or oral.
"Corporate Dividend" is defined in Section 6.10.
"Costs" is defined in Section 11.4.
"Damages" is defined in Section 7.2(a).
"Debt" means (i) any indebtedness of the Company, whether or not
contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or other similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or banker's acceptances or representing
capitalized lease obligations, (ii) any balance deferred and unpaid of the
purchase price of any property, (iii) all indebtedness of others secured by a
Lien on any asset of the Company (whether or not such indebtedness is assumed by
the Company) and, (iv) to the extent not otherwise included by clauses (i)
through (iii), any guaranty by the Company of any indebtedness of any other
Person.
"Differing Party" is defined in Section 2.3(b).
"Earnout Cap" is defined in Section 2.3(a).
"Earnout Payment" is defined in Section 2.3(a).
"Entitlements" is defined in Section 4.14(f)(iii).
"Environmental Laws" is defined in Section 4.11.
"Environmental Matters" is defined in Section 4.11.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (or any successor thereto).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" is defined in Section 4.5(a).
"Florida Pines" means Florida Pines LTD, a Florida limited partnership
"Florida Pines Purchase Agreement" means a purchase agreement,
substantially in the form of Exhibit B, by and between Florida Pines and Colony
Communities.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time and applied on a consistent basis throughout the
periods involved.
"Governmental Entity" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing which has or claims to have competent jurisdiction over the
relevant Persons or its business, property, assets or operations.
"Gross Up Amount" is defined in Section 8.1(d)."Guaranty" is defined in
Section 6.14.
"Hazardous Materials" is defined in Section 4.11.
"HBG" is defined in Section 2.4(b)(i)(B)
"HBG Assignment" is defined in Section 2.4(b)(i)(B).
"High Grove Purchase Agreement" means a purchase agreement,
substantially in the form of Exhibit C, by and among the Sellers and Colony
Communities.
"Insurance Policies" is defined in Section 4.16(a).
"Intellectual Property" is defined in Section 4.15(a).
"Interim Statements" is defined in Section 4.5(a).
"LHL" means LHL Corporation, a Florida corporation.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, whether or
not the same is required to be accrued on the financial statements of such
Person and whether or not the same is disclosed on any schedule to this
Agreement.
"Lien" or "Liens" means all liens (including judgment and mechanics'
liens, regardless of whether liquidated), mortgages, assessments, security
interests, easements, claims, pledges, trusts (constructive or otherwise), deeds
of trust, option or other charges, title defect or objection,
encumbrances, restrictions or other Contracts having the same economic effect as
any of the foregoing.
"Material Adverse Effect" means with respect to any Person a material
adverse effect on (i) the business, assets, condition (financial or otherwise),
results of operations or prospects of such Person, taken as a whole with its
Subsidiaries, or (ii) the ability of such Person to consummate the transactions
contemplated hereby.
"Material Contracts" is defined in Section 4.4(c).
"Maximum Warranty Amount" is defined in Section 6.12.
"Objection Notice" is defined in Section 2.3(b).
"Order" is defined in Section 9.1(b).
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, joint venture, association, organization or other
entity or group (which term shall include a "group" as such term is defined in
Section 13(d)(3) of the Exchange Act) or Governmental Entity.
"Projects" is defined in Section 4.14(f)(i).
"Pro-Rata Portion" with respect to Larry Godwin means 68.97% and with
respect to Robert Godwin means 31.03%.
"Purchase Price" means the sum of (i) the Closing Payment plus (ii) the
Earnout as described in Section 2.2.
"Redetermined Gross Up Amount" is defined in Section 8.1(e).
"Release" is defined in Section 4.11.
"SEC" means the United States Securities and Exchange Commission.
"Section 338(h)(10)" is defined in Section 8.1.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" is defined in the introductory paragraph of this Agreement.
"Shares" is defined in the first recital of this Agreement.
"Standard Pacific" is defined in the introductory paragraph of this
Agreement.
"Stockholders Equity" means the stockholder's equity of the Company
determined in accordance with GAAP, consistent with past practices of the
Company and before purchase accounting adjustments.
"Stockholders Equity Adjustment Amount" is defined in Section 6.10.
"Stockholders Equity Acceptance Notice" is defined in Section 6.10.
"Stockholders Equity Objection Notice" is defined in Section 6.10.
"Stock Payment" is defined in Section 2.2(b).
"Stock Purchase" is defined in the second recital of this Agreement.
"Straddle Periods" is defined in Section 8.2(a)(ii).
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any
corporation, limited liability company, partnership, joint venture or other
entity of which such Person (either alone or through or together with any other
subsidiary), owns, directly or indirectly, securities or other interests the
holders of which are generally entitled to more than 50% of the vote for the
election of the board of directors or other similar governing body of such
corporation or other legal entity, or otherwise having the power to direct the
business and policies of that Person.
"Tax" or "Taxes" means (A) all federal, state, local, foreign, and
other net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs duties or other taxes, fees, assessments or charges of
any kind whatsoever, together with any interest and any penalties, additions to
tax or additional amounts with respect thereto, (B) any Liability for payment of
amounts described in clause (A) whether as a result of transferee Liability,
joint and several liability for being a member of an affiliated, consolidated,
combined or unitary group for any period, or otherwise through operation of law,
and (C) any Liability for the payment of amounts described in clauses (A) or (B)
as a result of any tax sharing, tax indemnity or tax allocation agreement or any
other express or implied Contract to indemnify any other Person.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Acquisition" is defined in Section 6.7(b).
"Third Party Claim" is defined in Section 7.6(a).
"Transaction Documents" is defined in Section 3.2
"Unrelated Accounting Firm" is defined in Section 2.3(b).
"Valuations" is defined in Section 8.1(b).
"Warranty Threshold" is defined in Section 6.12.
"Warranty Claim" means any claim based upon any theory of product
liability, builder's liability or express or implied warranty which is related
to the development of a Project or the development, construction or sale of any
home.
ARTICLE II
STOCK PURCHASE
2.1 Sale and Delivery. At the Closing, on the terms and subject
to the conditions set forth herein, the Sellers shall sell and deliver to Buyer
the Shares, and Buyer shall purchase and accept the Shares from the Sellers for
the consideration described in this Section 2.
2.2 Closing Payment. At the Closing, Standard Pacific shall
cause the Buyer to:
(a) pay by wire transfer of immediately available funds, (i)
Nine Million Six Hundred Fifty Five Thousand Eight Hundred Dollars
($9,655,800) to Larry Godwin and (ii) Four Million Three Hundred Forty
Four Thousand Two Hundred Dollars ($4,344,200) to Robert Godwin
(equaling an aggregate total payment of $14 Million Dollars,
collectively, the "Cash Payment"); and
(b) issue the number of shares of Buyer Common Stock
calculated pursuant to this Section 2.2(b), 68.97% to Larry Godwin and
31.03% to Robert Godwin (the "Stock Payment" and, collectively with the
Cash Payment, the "Closing Payment"). The aggregate number of shares of
Buyer Common Stock comprising the Stock Payment will be determined by
dividing Four Million Dollars ($4,000,000) by the average closing price
of the Buyer common stock over the 10 day period ending three days
prior to the Closing Date: provided, however, that in no event shall
the price used for such purpose be less than $26 per share or more than
$30 per share.
2.3 Earnout.
(a) Standard Pacific shall cause Buyer to pay to each Seller his
Pro-Rata Portion of an aggregate amount equal to 20% of the positive Company
Pre-Tax Income for each of the three years ending December 31, 2003, 2004 and
2005 (each an "Earnout Payment" and collectively, the "Earnout"); provided,
however, that in no event will the aggregate amount of the Earnout exceed Seven
Million Dollars (the "Earnout Cap"). Said Earnout is deemed part of the Purchase
Price. If the amount of Company Pre-Tax Income is negative with respect to any
particular year, such negative amount shall be carried forward to the following
year and such negative amount shall be included in the calculation of the
Earnout Payment for such following year; provided, further, after calculation of
the Earnout Payment for such following year, if any negative amount carried
forward remains as of the end of such following year, that negative amount shall
be carried forward to subsequent years and included in the calculation of the
Earnout Payment for such subsequent years.
(b) Not later than ten (10) days after the audit committee of the
Board of Director's of Standard Pacific approves Standard Pacific's year-end
financial statements, Buyer shall prepare and deliver to each Seller its
calculation of the Earnout Payment for the immediately preceding fiscal year.
Within 30 days following Buyer's notification to the Sellers of its calculation
of the applicable Earnout Payment, the Sellers shall deliver to Buyer a notice
of objection signed by both Sellers (an "Objection Notice") or a notice of
acceptance signed by either Seller (an "Acceptance Notice") with respect to the
calculation of the Earnout Payment. Buyer shall provide the Sellers and their
accountants and other representatives, upon reasonable advance notice, access to
the books and records of the Company relating to the calculation of the Earnout
Payment as may be reasonably requested by the Sellers. Buyer's Calculation of
each Earnout Payment shall be final and binding on the parties if an Acceptance
Notice is delivered to Buyer or if no Objection Notice is delivered to Buyer
within such 30 day period. Any Objection Notice shall specify the items
disputed, shall describe the reasons for the objection thereof, shall state the
amount in dispute and shall state Sellers' calculation of the Earnout Payment.
If an Objection Notice is given, the Sellers and Buyer shall consult with each
other with respect to the objection. If the parties are unable to reach
agreement within 15 days after an Objection Notice has been given, any
unresolved disputed items shall be promptly referred to KPMG LLP, provided
however, if either of the parties has used the services of KPMG LLP at any time
in the six month period prior to such selection of an accounting firm, then the
unresolved items shall be promptly referred to such other accounting firm
mutually agreed to by the parties (KPMG LLP, if neither of the parties had used
KPMG LLP's services at any time during the six month period prior to KPMG LLP's
selection, or such other firm are referred to herein as the "Unrelated
Accounting Firm"). The Unrelated Accounting Firm shall be directed to render a
written report on the unresolved disputed issues as promptly as practicable (but
in no event later than 45 days following submission of the matter to the
Unrelated Accounting Firm) and to resolve only those issues of dispute set forth
in the Objection Notice. The resolution of the dispute by the Unrelated
Accounting Firm shall be final and binding on the parties. The fees and expenses
of the Unrelated Accounting Firm shall be borne equally between the Sellers and
Buyer; provided, however, that if the Earnout Payment calculated by one of the
parties (the "Differing Party") pursuant to this subsection differs from the
final determination of the Unrelated Accounting Firm by more than twenty percent
to the detriment of such Differing Party, then such Differing Party shall be
responsible for the payment of all of the fees and expenses of the Unrelated
Accounting Firm.
(c) If either Seller delivers to Buyer the Acceptance Notice
referred to in Section 2.3(b) or the Sellers fail to deliver an Objection Notice
within the 30 day period required by Section 2.3(b) with respect to any Earnout
Payment, Buyer shall pay to the Sellers any amounts which Buyer's calculation
shall indicate to be owed to the Sellers within five Business Days after the
delivery of such Acceptance Notice or the expiration of such 30 day period, as
the case may be. Alternatively, if the Sellers deliver to Buyer the Objection
Notice referred to in Section 2.3(b), within five Business Days after such
delivery, Buyer shall pay the undisputed portion, if any, of the amount owed
and, within five Business Days after the resolution of any dispute by the
parties or the Unrelated Accounting Firm relating to the Objection Notice, Buyer
shall pay the remainder owed, if any. Any payment pursuant to this Section 2.3
shall be considered an adjustment to the Purchase Price, and shall be made in
immediately available funds. If Buyer has not delivered its calculation of the
Earnout Payment for any applicable fiscal
year to the Sellers by January 31 of the following fiscal year, Buyer shall be
obligated to pay simple interest thereon at the rate of eight percent (8%) per
annum calculated beginning on February 1 of such following fiscal year and
ending on the day prior to the date of payment.
(d) From the Closing Date until January 1, 2006 (or until the
payment in full of the Earnout, if earlier), Standard Pacific:
(i) shall not, without the prior written consent of the Sellers,
such consent not to be unreasonably withheld, conditioned or delayed, commingle
the business of the Company with any other division of Standard Pacific;
provided, however, that the Sellers acknowledge and agree that (A) Standard
Pacific may restructure the business of the Company into any number of separate
entities so long as such restructuring does not result in the commingling of the
business of the Company with any other division of Standard Pacific (all
reference to the Company in this Section 2.3 include the business of the Company
restructured as described in this Section 2.3(d)(i)) and (B) Standard Pacific
will sweep cash out of the Company in the manner that Standard Pacific sweeps
cash from Standard Pacific's other divisions (such swept cash to be treated as a
non-interest bearing intercompany receivable of the Company in the same manner
as Standard Pacific's other divisions);
(ii) shall not burden the Company with debt incurred on behalf of
the operations of Standard Pacific other than the operations of the Company;
provided, however, that the Sellers acknowledge and agree that (A) the Company
will be a guarantor of various obligations of Standard Pacific, but any payments
made by the Company in respect of any guarantees will be disregarded for
purposes of calculating Company Pre Tax Income, (B) general corporate overhead
will be allocated to the Company in the same manner as such overhead is
allocated to Standard Pacific's other divisions from time to time, (C) the cost
of insurance will be allocated to the Company in the same manner as it is
allocated to Standard Pacific's other divisions based on claims history, product
type, volume and other relevant factors; and (D) intercompany interest will be
charged on qualified assets (as described in SFAS 34 "Capitalization of
Interest"), stale inventory, investments in joint ventures and on such other
assets as Standard Pacific may charge its other divisions from time to time.
(iii) shall provide to the Company an amount of capital reasonably
necessary to accomplish the Company's business plan attached hereto as Exhibit G
(the "Business Plan"); provided, however, that the Sellers acknowledge and agree
that the Business Plan may be revised in such a manner so as to result in a
reduction in the amount of capital reasonably necessary to accomplish the
revised Business Plan either, (A) by the mutual agreement of Standard Pacific
and the Sellers, or (B) by Standard Pacific, acting alone, if the Company fails
to meet or exceed budgeted Company Pre-Tax Income as set forth in the Business
Plan for any particular year.
2.4 Closing.
(a) The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at the offices of Gibson, Dunn & Crutcher
LLP, 4 Park Plaza, Irvine, California 92614 at 10:00 a.m. (local time) on the
second Business Day after the last of the conditions to Closing set forth in
Sections 9.2 and 9.3 have been satisfied or waived by the party
or parties entitled to waive the same or such other date and time as to which
the parties may agree in writing (the "Closing Date").
(b) At the Closing:
(i) Each Seller shall deliver, or cause to be delivered,
to Buyer, against payment by Buyer to each Seller of such Seller's
pro-rata portion of the Closing Payment:
(A) the stock certificate or certificates
representing the Shares owned by the Seller, duly endorsed for
transfer, or accompanied by duly executed assignments separate
from the certificate or other documentation reasonably requested
by Buyer to transfer the Shares in the stock records of the
Company, transferring to Buyer full and exclusive ownership of the
Shares;
(B) an assignment agreement substantially in the form
of Exhibit A in favor of Colony Communities, duly executed and
delivered by HBG Management Corporation, a Florida corporation
("HBG", assigning to the Company those contracts to purchase land
associated with the Young Pine Property (Orange County), LaDuke
Property (Osceola County) and RAO 532 Property (Polk County) (the
"HBG Assignment");
(C) fully executed copies of the Florida Pines
Purchase Agreement and the closing documents evidencing
consummation of the transactions contemplated by the Florida Pines
Purchase Agreement
(D) fully executed copies of the High Grove Purchase
Agreement and the closing documents evidencing consummation of the
transactions contemplated by the High Grove Purchase Agreement;
and
(E) all other documents, certificates and other
instruments required to be delivered, or caused to be delivered,
by each Seller pursuant hereto.
(ii) Buyer shall deliver, or cause to be delivered, to each
Seller, against delivery of the certificate or certificates
representing the Shares of such Seller (properly endorsed for transfer
or accompanied by proper assignments), the HBG Assignment, the Florida
Pines Purchase Agreement and the High Grove Purchase Agreement:
(A) the Seller's pro-rata portion of the Cash
Payment;
(B) a stock certificate issued in the name of such
Seller representing such Seller's pro-rata portion of the Stock
Payment;
(C) all of the documents, certificates and other
instruments required to be delivered, or caused to be delivered,
by Buyer pursuant hereto;
(D) either a release from, or indemnification of
Larry Godwin with respect to, each Guaranty as contemplated by
Section 6.14.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as set forth in the disclosure schedule delivered by the Sellers
to Buyer at or prior to the execution hereof that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this
Agreement (the "Company Disclosure Schedule"), each Seller, jointly and
severally, represents and warrants to Buyer, as of the date of this Agreement
and as of the Closing Date, as follows:
3.1 Ownership of Shares. Each Seller will own of record and
beneficially as of the Closing Date the shares of Company Common Stock set forth
next to such Seller's name on Schedule 3.1(a), free and clear of all Liens. Such
shares of Company Common Stock will be, as of the Closing Date, duly registered
solely in the name of such Seller on the stock register records of the Company.
Upon delivery to Buyer at the Closing of the certificates representing the
Shares, Buyer will own the Shares, free and clear of any Liens, and will receive
good and marketable title to the Shares. The certificates evidencing the Shares
were not issued directly or indirectly in respect of any certificates issued in
replacement of any lost, damaged, mutilated or destroyed certificates evidencing
any shares of Capital Stock of the Company or any of its predecessors. The
Shares represent all of the issued and outstanding Capital Stock of the Company.
Other than this Agreement, the Shares are not subject to any voting trust
agreement or other similar Contract, including any such Contract restricting or
otherwise relating to the voting, dividend rights or disposition of the Shares,
except for those Contracts listed on Schedule 3.1(b) which will be terminated
prior to the Closing Date.
3.2 Authorization, Validity, and Effect of Agreements. Each of the
Sellers, LHL, HBG and Florida Pines has all requisite power and authority to
execute and deliver this Agreement, the HBG Assignment, the Florida Pines
Purchase Agreement and the High Grove Purchase Agreement (collectively, the
"Transaction Documents") and all agreements and documents contemplated herein or
therein to be executed and delivered by it and to consummate the transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by each Seller and constitutes, and the Transaction Documents and all
agreements and documents contemplated hereby or thereby to be executed by each
Seller, LHL, HBG and Florida Pines (when executed and delivered pursuant hereto)
will constitute, the valid and legally binding obligations of each of the
Sellers, LHL, HBG and Florida Pines, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium, or
other similar laws relating to creditors' rights and general principles of
equity, whether at equity or law.
3.3 No Violations; Consents.
(a) The execution and delivery by the Sellers of this Agreement,
LHL of the High Grove Purchase Agreement, HBG of the HBG Assignment, and Florida
Pines of the Florida Pines Purchase Agreement, and the other agreements or
documents contemplated hereby or thereby and the consummation of the
transactions contemplated herein or therein in accordance with the terms hereof
or thereof will not:
(i) conflict with or result in a breach of any provisions
of the articles of incorporation or by-laws of the Company, LHL or HBG
or the organizational documents and operating agreement of Florida
Pines; or
(ii) violate any judgment, order or decree, or statute,
law, ordinance, rule or regulation applicable to either of the Sellers
or the Company, their respective properties or assets, or the
properties that are the subject of any of the Transaction Documents
(b) No consent, approval or authorization of, or declaration,
filing or registration with, any Governmental Entity or any other Person is
required to be made by or with respect to either Seller or the Company in
connection with the execution, delivery and performance of this Agreement, LHL
in connection with the execution, delivery and performance of the High Grove
Purchase Agreement, HBG in connection with the execution, delivery and
performance of the HBG Assignment, and Florida Pines in connection with the
execution, delivery and performance of the Florida Pines Purchase Agreement, or
the other agreements or documents contemplated hereby or thereby or the
consummation of the transactions contemplated hereby or thereby, or conduct by
the Company of its business following the Closing as conducted on the date
hereof, other than those that may be required solely by reason of Buyer's
participation in the transactions contemplated hereby.
3.4 No Brokers. No broker, finder or similar agent has been employed
by or acted on behalf of, directly or indirectly, either of the Sellers, LHL,
HBG, Florida Pines or any of their Affiliates (including the Company) in
connection with this Agreement, the other Transaction Documents or the
transactions contemplated hereby or thereby. None of the Sellers, HBG, LHL
Florida Pines nor any of their Affiliates has entered into any arrangement or
other Contract of any kind with any Person, or taken any other actions, which
would obligate Buyer, the Company or Colony Communities to pay any brokerage
commission, finder's fee or any similar compensation in connection with this
Agreement, the other Transaction Documents or the transactions contemplated
hereby or thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AS TO THE SUBJECT COMPANIES
Except as set forth in the Company Disclosure Schedule, each
Seller, jointly and severally, represents and warrants to Buyer, as of the date
of this Agreement and as of the Closing Date, as follows:
4.1 Existence; Good Standing; Compliance with Law.
(a) The Company, HBG, and LHL are corporations duly
incorporated, validly existing and in good standing under the laws of Florida.
Florida Pines is a partnership duly organized, validly existing and in good
standing under the laws of Florida. The Company is not, and is not required to
be, licensed or qualified to do business as a foreign corporation under the laws
of any other state of the United States. The Company, HBG and LHL have all
requisite corporate power and authority to own, operate and lease their
properties and assets and carry on their businesses as now conducted. Florida
Pines has all partnership power and authority to own, operate and lease its
properties and assets and carry on its business as now conducted. The copies of
the Company's articles of incorporation and by-laws previously delivered to or
made available to Buyer are true, correct and complete.
(b) The Company, LHL, HBG and Florida Pines are not in
violation of any order or decree of any Governmental Entity, any law, ordinance,
governmental rule or regulation to which they or any of their respective
properties or assets is subject or any non-governmental restriction as to
property or asset use, except where such violation, individually or in the
aggregate, does not and would not reasonably be expected to have a Material
Adverse Effect on the Company or the properties that are the subject of any of
the Transaction Documents.
(c) The Company has obtained all licenses, permits, easements,
variances, exemptions, consents, certificates, orders, approvals and other
authorizations (collectively, the "Company Permits") and has taken all actions
required by applicable law or regulations of any Governmental Entity in
connection with its respective business as now conducted (or to the extent such
actions are currently required, in connection with the business reasonably
anticipated to be conducted over the next six months), except where the failure
to obtain any such Company Permit or to take any such action, individually or in
the aggregate, does not and would not reasonably be expected to have a Material
Adverse Effect on the Company.
4.2 Capitalization. The authorized Capital Stock of the Company
consists of, and at all times since inception has consisted of, 100,000 shares
of Company Common Stock. There are 1,073 shares of Company Common Stock issued
and outstanding. The Company does not have, and has never had, any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with its shareholders on any matter and there are no,
and have never been any, equity equivalent interests in the ownership or
earnings of the Company. All issued and outstanding Capital Stock of the Company
is duly authorized, validly issued, fully paid and nonassessable, and none of
such Capital Stock has been issued in violation of or is subject to any purchase
option, call, right of first refusal, preemptive, subscription or similar right
under any provision of applicable law, the articles of incorporation of the
Company, or any Contract to which the Company is subject, bound by or a party
thereto or otherwise. There are no, and there have never been any, options,
warrants, calls, subscriptions, convertible securities, convertible debt or
other rights or other Contracts which obligate the Company to issue, transfer or
sell any Capital Stock of the Company or any securities exercisable or
exchangeable for, or convertible into, such Capital Stock. There are no
obligations, contingent or otherwise, of the Company to repurchase, redeem or
otherwise acquire any of its Capital Stock or to make any investment (in the
form of a loan, capital contribution or otherwise) in any Person.
4.3 Subsidiaries. The Company has no Subsidiaries and does not
own, and has never owned, directly or indirectly, any interest or investment
(whether equity or debt) in any other Person.
4.4 Material Contracts; No Violation.
(a) Except as set forth in Schedule 4.4(a) of the Company
Disclosure Schedule, the Company is not a party to nor is the Company or its
assets or business bound by any and, with respect to the real property that is
the subject of the Transaction Documents none of LHL, HBG or Florida Pines is a
party to, nor is the real property that is the subject of the Transaction
Documents bound by any:
(i) real property purchase, sale or option Contract,
other than Contracts for sales of completed homes to individual
homebuyers in the ordinary course of business;
(ii) Contract with any Governmental Entity that relates
to real property owned by the Company or that is the subject of any of
the Transaction Documents, including development agreements, that have
aggregate future liability or anticipated receipts in excess of
$250,000 (other than Contracts for the payment of impact fees pursuant
to impact fee schedules);
(iii) performance bond in an amount in excess of
$250,000;
(iv) Contract relating to community development
districts;
(v) Contract not entered into in the ordinary course of
business;
(vi) employment Contract;
(vii) employee collective bargaining agreement or other
Contract with any labor union;
(viii) covenant of the Company not to compete;
(ix) Contract with (A) either Seller or any Affiliate of
either Seller (other than the Company), or (B) to the knowledge of the
Sellers and the Company, any current or former officer, director or
employee of either Seller or any Affiliate of either Seller (other than
the Company);
(x) any Contract with any current or former officer,
director or employee of the Company (other than advances to employees
not in excess of $10,000 and employment Contracts covered by clause
(vi) above);
(xi) lease, sublease or similar Contract with any Person
under which (A) the Company, LHL, HBG or Florida Pines is a lessor or
sublessor of, or makes available for use to any Person, (1) any real
property of the Company or any of the real property that is the subject
of the Transaction Documents, or (2) any portion of any
premises otherwise occupied by the Company, or (B) Company is a lessee
or sublessee of, or holds or uses any real property owned by any other
Person;
(xii) lease or similar Contract with any Person under
which (A) the Company is lessee or sublessee of, or holds or uses, any
machinery, equipment, vehicle or other tangible personal property owned
by any Person (except personal property leases and installment and
conditional sales agreements having annual payments of less than
$100,000), or (B) the Company is a lessor or sublessor of, or makes
available for use by any Person, any tangible personal property owned
or leased by the Company, in any such case which has a future liability
or receivable, as the case may be, in excess of $100,000;
(xiii) Contract for the future purchase of materials,
supplies or equipment for the construction of homes (A) with a future
liability in excess of $500,000, or (B) which obligates the Company to
use the services of the supplier of such materials, supplies or
equipment for future Projects that have not yet been bid;
(xiv) management, consulting, financial advisory or other
similar type of Contract (other than Contracts for architectural,
geotechnical, design and engineering services relating to a single
project);
(xv) license, option or other Contract relating in whole
or in part to the Intellectual Property set forth in Schedule 4.15 of
the Company Disclosure Schedule;
(xvi) Contract under which the Company has borrowed any
money from, or issued any note, bond, debenture or other evidence of
Debt or reimbursement obligation to, any Person or any other note,
bond, debenture or other evidence of Debt issued to any Person, in any
such case which individually is in excess of $50,000;
(xvii) Contract (including so-called take-or-pay or
keep-well agreements) under which (A) any Person has directly or
indirectly guaranteed Debt or other obligations of the Company, or (B)
the Company has directly or indirectly guaranteed or directly or
indirectly assumed Debt or other obligations of any Person (in each
case other than endorsements for the purpose of collection in the
ordinary course of business), in any such case which individually is in
excess of $50,000;
(xviii) Contract under which the Company has, directly or
indirectly, made any advance, loan or extension of credit, in any such
case which individually is in excess of $50,000;
(xix) Contract which contemplates the granting of a
security interest in any property of the Company or any of the real
property that is the subject of the Transaction Documents, which
security interest (A) secures any Debt for borrowed money in excess of
$50,000, (B) secures any obligation in excess of $50,000 to pay the
deferred purchase price of stock or assets acquired by the Company, or
(C) secures any obligation of, or is held by, either Seller or any
Affiliate of either Seller;
(xx) Contract providing for indemnification of any
Person with respect to liabilities relating to any current or former
business of the Company or any of its Affiliates or any predecessor of
such Persons;
(xxi) power of attorney (other than powers of attorney
entered into in the ordinary course of business);
(xxii) tax sharing or tax allocation agreement;
(xxiii) joint venture or partnership agreement or similar
Contract; and
(xxiv) Contract to which the Company has future liability
or anticipated receipts in excess of $50,000 (other than a Contract
listed above or which would have been listed above but for a dollar or
other materiality threshold).
(b) Schedule 4.4(b) sets forth a list of each Contract between
(i) either of the Sellers or any of their Affiliates on the one hand and (ii)
any officer, director or employee of the Company on the other hand.
(c) Except as set forth in Schedule 4.4(c) of the Company
Disclosure Schedule, (i) all Contracts listed in Schedule 4.4(a) to the Company
Disclosure (collectively, the "Material Contracts") are valid, binding and in
full force and effect and are enforceable by the Company, LHL, HBG or Florida
Pines, in accordance with their terms, subject to applicable bankruptcy,
insolvency, moratorium, fraudulent conveyance, reorganization or other similar
laws relating to creditors' rights and general principles of equity, whether at
equity or at law, (B) each Seller, the Company, LHL, HBG and Florida Pines have
performed all material obligations required to be performed by them to date
under the Material Contracts and they are not (with or without the lapse of time
or the giving of notice, or both) in breach or default in any material respect
thereunder, and (C) to the knowledge of each Seller, LHL, HBG, Florida Pines and
the Company, no other party to any of the Material Contracts is (with or without
the lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder. A copy of each Material Contract has been made
available to Buyer, and such copies are true, complete and correct.
(d) Neither the execution and delivery by the Sellers of this
Agreement, LHL of the High Grove Purchase Agreement, HBG of the HBG Assignment,
and Florida Pines of the Florida Pines Purchase Agreement, nor the consummation
by Sellers, LHL, HBG or Florida Pines of the transactions contemplated herein or
therein in accordance with the terms hereof or thereof, will violate, or
conflict with, or result in a breach of any provision of, or constitute a
material default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the triggering of any payment obligations under, or result in the
creation of any Lien upon any of the material properties of either Seller or the
Company (including the Shares) or any of the real property that is the subject
of the Transaction Documents under, or result in being declared void, voidable,
or without further binding effect, any of the terms, conditions or provisions of
any Material Contract. Except as set forth on Schedule 4.4(d) of the Company
Disclosure Schedule, no consent of or approval of any
party to a Material Contract is required in connection with the execution,
delivery and performance of this Agreement, the other Transaction Documents or
the other agreements or documents contemplated hereby or thereby or the
consummation of the transactions contemplated hereby and thereby.
(e) Sellers have provided Buyer with a complete and accurate copy of the
standard form home sales contract and master subcontractor contract used by the
Company at present and during each of the preceding three calendar years. The
foregoing standard form contracts are generally used by the Company in the
ordinary course of its business to sell homes and secure subcontractor services.
4.5 Financial Statements; No Undisclosed Liabilities.
(a) Schedule 4.5(a) of the Company Disclosure Schedule sets forth true
and complete copies of the balance sheets and related statements of operations,
retained earnings and cash flows for the Company for the years ended December 31
2000 and 2001, in each case reviewed by the independent public accountants of
the Company whose reports are attached thereto (the "Annual Statements") and the
balance sheets and related statements of operations for the three month period
ended as of March 31, 2001 and 2002 and for the one month period ended April 30,
2002 (the "Interim Statements" and, together with the Annual Statements, the
"Financial Statements"). The December 31, 2001 balance sheet is referred to
herein as the "2001 Balance Sheet."
(b) Each of the Financial Statements (i) has been prepared based on the
books and records of the Company in accordance with GAAP, subject in the case of
the Interim Statements to normal, recurring year-end adjustments (which will
not, individually or in the aggregate be material), and the Company's normal
accounting practices, consistent with past practice and with each other, and
present fairly the financial condition, results of operations and statements of
cash flow of the Company as of the dates or for the periods indicated; (ii)
contains and reflects all necessary adjustments, accruals, provisions and
allowances for a fair presentation of the financial condition and the results of
operations of the Company for the periods covered by such financial statement,
subject in the case of the Interim Statements to normal, recurring year-end
adjustments (which will not, individually or in the aggregate be material);
(iii) to the extent applicable, contains and reflects adequate provisions for
all reasonably anticipated Liabilities for all Taxes with respect to the periods
then ended and all prior periods; and (iv) with respect to Contracts for the
sale of homes or the provision of services by the Company, contains and reflects
adequate reserves for all reasonably anticipated losses and costs and expenses
in excess of receipts. No financial statements of any Person other than the
Company are required by GAAP to be included in the Financial Statements. The
Financial Statements do not contain any items of a special or nonrecurring
nature, except as expressly stated therein.
(c) Except as set forth on Schedule 4.5(c) of the Company Disclosure
Schedule, there are no Liabilities of the Company other than: (i) Liabilities
accrued on the 2001 Balance Sheet; (ii) Liabilities specifically disclosed and
identified as such in the schedules of this Agreement; and (iii) Liabilities
incurred since the date of the 2001 Balance Sheet that have been incurred in the
ordinary course of business of the Company and that do not, and will not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(d) The Debt as disclosed on Schedule 4.5(d) of the Company Disclosure
Schedule represents all of the Debt of the Company and all of the Debt that
encumbers any of the real property that is the subject of the Transaction
Documents that will be outstanding as of the Closing Date.
4.6 Permits; Compliance; Litigation.
(a) None of the Company, LHL, HBG or Florida Pines are party or subject
to or in default under any judgment, order, injunction or decree of any
Governmental Entity or arbitration tribunal applicable to it or any of its
respective properties, assets, operations or business.
(b) The Company is in material compliance with the terms of the Company
Permits. Schedule 4.6(b) of the Company Disclosure Schedule sets forth a list of
the material Company Permits. No material Company Permit will be subject to
suspension, modification, revocation or nonrenewal as a result of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(c) The Company is, and at all times has been, in material compliance
with all material applicable laws and governmental regulations.
(d) Schedule 4.6(d) of the Company Disclosure Schedule sets forth a
list and description of all pending or, to the knowledge of either Seller or the
Company, threatened lawsuits or claims against the Company or any of its
properties, assets, operations or businesses or any of the real property that is
the subject of the Transaction Documents. To the knowledge of each Seller and
the Company, no event has occurred or circumstance exists that may give rise to
or serve as the basis for the commencement of any such lawsuit or claim.
(e) Except as set forth in Schedule 4.6(e) of the Company Disclosure
Schedule, there is no lawsuit or claim by the Company pending against any other
Person.
4.7 Absence of Certain Changes. Except as disclosed in Schedule 4.7 of the
Company Disclosure Schedule, since December 31, 2001 the Company has conducted
its business only in the ordinary course of such business consistent with past
practice and there has not been:
(i) any event or events which, individually or in the aggregate, has
or would reasonably be expected to have a Material Adverse Effect on the
Company;
(ii) any declaration, setting aside or payment of any dividend or
other distribution with respect to the Capital Stock of the Company or any
redemption or repurchase of any such Capital Stock, or any other payment of
any kind to either Seller or any Affiliate of either Seller;
(iii) any material change in the accounting principles, practices or
methods of the Company;
(iv) any increase in the salaries or other compensation payable to any
officer, director or employee of the Company (except for normal increases
for employees in the
ordinary course of business consistent with past practice) or any
increase in, or addition to, other benefits to which such officer,
director or employee may be entitled (except as required by the terms
of plans as in effect on the date of this Agreement and which are
listed on Schedule 4.7 of the Company Disclosure Schedule or as
required by law);
(v) any incurrence or assumption by the Company of
indebtedness for borrowed money or incurrence or assumption of any
guarantee;
(vi) any material adverse change or threat of a material
adverse change, in the Company's relations with, or any loss or
threat of loss, of any of the Company's important suppliers or
customers or key employees;
(vii) any termination, cancellation or waiver of any Contract or
other right material to the operation of the business of the Company;
or
(viii) any material damage, destruction or loss, whether or not
covered by insurance, adversely affecting the properties, assets,
business or prospects of the Company or the real property that is the
subject of any of the Transaction Documents, or any deterioration in
the operating condition or other impairment in the value of the assets
of the Company which would, individually or in the aggregate, be
material to the Company.
4.8 Taxes.
(a) All Tax Returns that were required to be filed with
respect to the Company have been accurately prepared and timely filed. All such
Tax Returns are true, correct, and complete in all material respects and such
Tax Returns contain all disclosures and other items required to avoid additional
Taxes or other adverse Tax consequences. The Company has at all times complied
with applicable laws pertaining to Taxes, including, without limitation, all
applicable laws relating to record retention.
(b) The Company has timely paid all Taxes that have become due
or payable (without regard to whether or not such Taxes are shown on any Tax
Return) and has adequately provided in the financial statements (in accordance
with GAAP) for all Taxes that have accrued but are not yet due or payable.
(c) No claim has been made by any taxing authority in any
jurisdiction where the Company does not file Tax Returns that the Company is or
may be subject to Tax by that jurisdiction. No extensions or waivers of statutes
of limitations with respect to any Tax Returns have been given by or requested
from the Company.
(d) The Company is not a party to any action, proceeding or
audit relating to Taxes by any taxing authority for which the Company or Buyer
could be held liable or has knowledge of any pending or threatened action,
proceeding or audit by any taxing authority. All deficiencies asserted or
assessments made against the Company as a result of any examinations by any
taxing authority have been fully paid. No issue has been raised in any such
examination, audit, or other proceeding which by application of the same or
similar principles, reasonably
could be expected to result in a proposed deficiency in Taxes of the Company for
any other period.
(e) There are no Liens for Taxes (other than for current Taxes
not yet due and payable) upon the assets of the Company. None of the assets of
the Company (i) is property that is required to be treated as being owned by any
other Person pursuant to the so-called "safe harbor lease" provisions of former
Section 168(f)(8) of the Code; (ii) directly or indirectly secures any debt the
interest on which is tax exempt under Section 103(a) of the Code; or (iii) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(f) The Company is not a party to or bound by any closing
agreement, offer in compromise, or other agreement with any taxing authority
that could affect Taxes for which the Company or Buyer may be liable.
(g) The Company has not been a member of an affiliated group
of corporations, within the meaning of Section 1504 of the Code, or a member of
a combined, consolidated or unitary group for state, local or foreign Tax
purposes.
(h) The Company is not a party to any plan or other Contract
that has resulted or would result, separately or in the aggregate, in connection
with this Agreement, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code.
(i) Schedule 4.8(i) of the Company Disclosure Schedule sets
forth (i) all foreign jurisdictions in which the Company is subject to Tax, is
engaged in business or has a permanent establishment, and (ii) all elections
pursuant to Treas. Reg.(S) 301.7701-3 that have been made by business entities
in which the Company owns an equity interest.
(j) The Company has not been a "distributing corporation" or a
"controlled corporation" in connection with a distribution described in Section
355 of the Code.
(k) The Company has not filed a consent under Section 341 of
the Code.
(l) The Company filed a timely and complete election to be
taxed as an "S" corporation pursuant to Sections 1361, et seq., of the code
commencing with its first taxable year beginning on August 12, 1991. At all
times since such date, and through the Closing Date, the Company has continued
to qualify as an "S" corporation for federal and state income tax purposes. The
Company has never been a "C" corporation and has never engaged in the
acquisition of any assets from a C corporation in a carryover basis transaction.
The Company has not paid compensation to any shareholder which may be deemed to
be "excessive" compensation for income tax purposes.
(m) The acquisition of the stock of the Company is a
"qualified stock purchase" under Section 338.
4.9 Certain Employee Plans.
(a) (i) Each Company Benefit Plan complies, and has been
administered, in all material respects in accordance with its governing
documents and all applicable requirements
of law, and (ii) no "prohibited transaction" (as such term is defined in Section
406 of ERISA and Section 4975 of the Code) or termination has occurred with
respect to any Company Benefit Plan which under either circumstance presents a
risk of material Liability by the Company to any Governmental Entity or other
Person, including a Company Benefit Plan. The Company Benefit Plans are listed
on Schedule 4.9(a) of the Company Disclosure Schedule and copies or descriptions
of all material Company Benefit Plans have previously been provided to Buyer.
There has also been furnished to Buyer, with respect to each Company Benefit
Plan required to file such report and description, the most recent two (2)
annual Form 5500 filings, including attachments, and the summary plan
description.
(b) Each Company Benefit Plan intended to qualify under
Section 401(a) of the Code is so qualified and a determination letter has been
issued by the IRS with respect to the qualification of such Company Benefit Plan
and no circumstances exist which would adversely affect such qualification. A
copy of each determination letter referred to in the preceding sentence has
previously been furnished to Buyer. As to any Company Benefit Plan intended to
be qualified under Section 401(a) of the Code, there has been no termination or
partial termination of the Company Benefit Plan within the meaning of Section
411(d)(3) of the Code. There is no trust funding a Company Benefit Plan which is
intended to be exempt from federal income taxation pursuant to Section 501(c)(9)
of the Code. No Company Benefit Plan nor any other benefit plan maintained or
contributed to by the Company is subject to Title IV of ERISA or is subject to
Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code.
(c) Except as required by applicable law or as set forth
on Schedule 4.9(c) of the Company Disclosure Schedule, the Company does not
provide any health, welfare or life insurance benefits to any of its former or
retired employees.
(d) Company Benefit Plans.
(i) The Company has in all material
aspects performed all obligations, whether arising by operation of law or by
contract, required to be performed by it in connection with the Company Benefit
Plans,
(ii) there have been no defaults or
violations by any other party to the Company Benefit Plans, and
(iii) there are no actions, suits, or
claims pending (other than routine claims for benefits) or threatened
against, or with respect to, any of the Company Benefit Plans or their
assets, which under any of the circumstances present a risk of material
Liability to the Company to any Governmental Entity or other Person,
including a Company Benefit Plan. There is no matter pending (other
than routine qualification determination filings) with respect to any
of the Company Benefit Plans before any Governmental Entity. All
contributions required to be made to the Company Benefit Plans pursuant
to their terms and the provisions of ERISA, the Code, or any other
applicable law have been timely made.
(e) No act, omission or transaction has occurred which
would result in imposition on any of the Company of (i) breach of fiduciary duty
liability damages under Section
409 of ERISA, (ii) a civil penalty assessed pursuant to subsections (c), (i) or
(l) of Section 502 of ERISA, or (iii) a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code. With respect to any employee benefit plan, within the
meaning of Section 3(3) of ERISA, which is not listed on Schedule 4.9(a) of the
Company Disclosure Schedule but which is sponsored, maintained, or contributed
to, or has been sponsored, maintained, or contributed to within six years prior
to the Closing Date, by any corporation, trade, business, or entity under common
control with any of the Company, within the meaning of Section 414(b), (c), (m)
or (o) of the Code or Section 4001 of ERISA, (A) no withdrawal liability, within
the meaning of Section 4201 of ERISA, has been incurred, which withdrawal
liability has not been satisfied, (B) no liability to the Pension Benefit
Guaranty Corporation has been incurred by any such entity, which liability has
not been satisfied, (C) no accumulated funding deficiency, whether or not
waived, within the meaning of Section 302 of ERISA or Section 412 of the Code
has been incurred, and (D) all contributions (including installments) to such
plan required by Section 302 of ERISA and Section 412 of the Code have been
timely made.
(f) Except as disclosed in Schedule 4.9(f) of the Company
Disclosure Schedule, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (i) require the
Company to make a larger contribution to, or pay greater benefits or provide
other rights under, any Contract or Company Benefit Plan than it otherwise
would, whether or not some other subsequent action or event would be required to
cause such payment or provision to be triggered, or (ii) create or give rise to
any additional vested rights or service credits under any Contract or Company
Benefit Plan. Except as otherwise set forth on Schedule 4.9(f) of the Company
Disclosure Schedule, the Company is not a party to any Contract, nor has the
Company established any other policy or practice, requiring it to make a payment
or provide any other form of compensation or benefit to any person performing
services for the Company upon termination of such services which would not be
payable or provided in the absence of the consummation of the transactions
contemplated by this Agreement.
(g) In connection with the consummation of the
transactions contemplated by this Agreement, no payments of money or other
property, acceleration of benefits, or provisions of other rights have or will
be made under any Company Benefit Plan, Contract or under any other agreement
that would result in imposition of the sanctions imposed under Sections 280G and
4999 of the Code, whether or not some other subsequent action or event would be
required to cause such payment, acceleration, or provision to be triggered.
4.10 Labor Matters.
(a) The Company is not a party to, or bound by, any
collective bargaining agreement or Contract with a labor union or labor
organization. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of each Seller and the Company, threatened against
the Company or relating to its business. To the knowledge of each Seller and the
Company, there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of the Company. There are no controversies pending or, to the
knowledge of each Seller and the Company, threatened between the Company and any
of its employees, which, individually or in the aggregate, would have a Material
Adverse Effect on the Company. Neither Seller, nor the Company has received
notice of any strikes, slowdowns, work stoppages, lockouts, or threats thereof,
by or with respect to any employees of the Company.
(b) No executive officer or director of the Company or
any other employee of the Company, is a party to, or is otherwise bound by, any
Contract, including any confidentiality, noncompetition, or proprietary rights
agreement, between such officer, director or employee and any other Person that
in any way adversely affects or will affect (i) the performance of his or her
duties as an officer, director or employee of the Company, or (ii) the ability
of the Company to conduct its business, including any such Contract with either
Seller or their Affiliates (other than the Company). No key employee or any
director of the Company has threatened to terminate his or her employment with
the Company, as a result of the transaction contemplated hereby or otherwise.
(c) The Company has in place all material employee
policies required by applicable law, and there have been no material violations
of any such employee policies. No charges have been filed claiming employment
discrimination or unfair labor practices against or involving the Company, and
to the knowledge of each Seller and the Company, no such charges are threatened.
4.11 Environmental Matters. The Sellers have made
available to Buyer all environmental assessments and reports relating to
environmental conditions with respect to the real property owned or leased by
the Company, LHL, HBG, and Florida Pines which are in the possession of any of
Seller, LHL, Florida Pines, HBG or the Company or any of their agents. Except as
set forth on Schedule 4.11 of the Company Disclosure Schedule:
(i) the Company, LHL, HBG and Florida Pines have
been and currently are in compliance with all applicable Environmental
Laws;
(ii) with regard to the properties currently or
formerly owned or operated by the Company and the properties that are
the subject of any of the Transaction Documents (including soils,
groundwater, surface water, buildings, or other structures), during the
period of ownership or operation by the Company, LHL, HBG or Florida
Pines or Any Affiliate of either Seller or any of them, there was and
has been no Release of any Hazardous Materials, in any amount or
concentration (x) that could reasonably be expected to threaten human
health or welfare, (y) that exceeds any applicable standard
promulgated, enacted, or issued by any Governmental Entity, or (z) that
could reasonably be expected to result in any Liability under the
Environmental Laws.
(iii) with regard to the properties currently or
formerly owned or operated by the Company and the properties that are
the subject of any of the Transaction Documents (including soils,
groundwater, surface water, buildings, or other structures), prior to
the period of ownership or operation by the Company, LHL, HBG, Florida
Pines or any Affiliate of either Seller or any of them, to the
knowledge of each Seller, LHL, HBG, Florida Pines and the Company,
there was no Release of any Hazardous Materials, in any amount or
concentration (x) that could reasonably be expected to threaten human
health or welfare, (y) that exceeds any applicable standard
promulgated, enacted or issued
by any Governmental Entity, or (z) that could reasonably be expected to
result in any Liability under the Environmental Laws;
(iv) the Company has not disposed or arranged to
dispose of any Hazardous Materials on any third party property which
could result in any Liability under the Environmental Laws;
(v) none of the Company, LHL, HBG, Florida Pines
or the Sellers has received any notices, demand letters, complaints,
claims or requests for information from any Governmental Entity or any
other Person indicating that the Company may be in violation of, or
liable under, any Environmental Law or that LHL, HBG or Florida Pines
may be in violation of, or liable under, any Environmental Law with
respect to the properties that are the subject of any of the
Transaction Documents;
(vi) none of the Company or its respective
properties, or the properties that are the subject of any of the
Transaction Documents, are subject to any order or decree of any
Governmental Entity or any Contract with any Government Entity arising
under any Environmental Law, or is a party to any indemnity or other
Contract with any third party which could result in any Liability under
any Environmental Law;
(vii) to the knowledge of each Seller, LHL, HBG,
Florida Pines and the Company, there are no circumstances, conditions,
or activities involving the Company, LHL, HBG, or Florida Pines that
could reasonably be expected to result in any Liability under any
Environmental Law or in any restriction pursuant to any Environmental
Law on the ownership, use, or transfer of any property now owned by the
Company or the properties that are the subject of any of the
Transaction Documents;
(viii) to the knowledge of each Seller, LHL, HBG,
Florida Pines and the Company, no properties currently owned by the
Company or that are the subject of any of the Transaction Documents
contain any underground storage tank, asbestos containing material,
lead based products (including paint), or polychlorinated biphenyls;
and
(ix) the properties currently owned or operated
by the Company or that are the subject of any of the Transaction
Documents are not subject to any Liens imposed by any Governmental
Entity in connection with the presence on or off such property of any
Hazardous Materials.
For the purposes of this Agreement, "Environmental Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. 11001 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901
et seq., the Toxic Substances Control Act, 15 U.S.C. 2601 et seq., the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. 136 et seq., the Clean Air
Act, 42 U.S.C. 7401 et seq., the Clean Water Act (Federal Water Pollution
Control Act), 33 U.S.C. 1251 et seq., the Safe Drinking Water Act, 42 U.S.C.
300f et seq., the Occupational Safety and Health Act, 29 U.S.C. 641 et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. 1801 et seq., as any of the
above statutes have been or may be amended from time to time, all rules and
regulations promulgated
pursuant to any of the above statutes, and any other foreign, federal, state or
local law, statute, ordinance, permit, order, decree, rule or regulation or
other directive related to or governing Environmental Matters as the same have
been or may be amended from time to time, including any common law cause of
action providing any right or remedy with respect to Environmental Matters, and
all applicable decisions, orders, and decrees of any Governmental Entity
relating to Environmental Matters.
"Environmental Matters" means all matters involving pollution,
wetlands and other natural resources, protection of the environment, noise,
human health, and occupational health and safety.
"Hazardous Materials" means any substance or material that is
defined under the Environmental Laws as a "hazardous substance," "regulated
substance," "pollutant," "contaminant," "hazardous waste," "extremely hazardous
substance," "toxic substance," or "hazardous material," or that is otherwise
defined in or regulated under the Environmental Laws, including, without
limitation, petroleum, asbestos-containing materials, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials, and radon.
"Release" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing, or dumping into the soil, surface waters, groundwaters, land, stream
sediments, surface or subsurface strata, ambient air, or any other environmental
medium.
4.12 Related Party Transactions.
(a) There are no Contracts or transactions between the
Company, on the one hand, and either Seller, any of their Affiliates or any
current or former officer, director or 5% or greater stockholder of the Company
or any Affiliate thereof or any immediate family member of any of the foregoing
Persons, on the other hand, except as set forth on Schedule 4.12 of the Company
Disclosure Schedule. Except as set forth on Schedule 4.12 of the Company
Disclosure Schedule, no current officer or employee of the Company provides any
services to, including without limitation serving on the board of directors of,
any Affiliate of either Seller.
(b) Except as set forth in Schedule 4.12 of the Company
Disclosure Schedule, neither Seller, nor any Affiliate of the Company, any
officer or director of the Company or any Affiliate, or any immediate family
member of any of the foregoing Persons:
(i) has, or since the first day of the next to
last completed fiscal year of the Company has had, any interest in any
property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to the business of the Company;
(ii) is, or since the first day of the next to
last completed fiscal year of the Company has owned (of record or as a
beneficial owner), an equity interest or any other financial or profit
interest in, a Person that has (A) had business dealings or a material
financial interest in any transaction with the Company, or (B) engaged
in competition with the Company with respect to any line of the
products or services of the Company (a "Competing Business") in any
market presently served by the Company except for ownership (of record
or as a beneficial owner) of less than one percent of the
outstanding capital stock of any Competing Business that is publicly
traded on any national, regional or foreign recognized exchange, the
NASDAQ, Stock Market or the over-the-counter market; or
(iii) is a party to any Contract with, or has any
claim or right against, the Company.
4.13 Restrictions on Business Activities.
(a) There is no judgment, injunction, order, decree,
statute, ordinance, rule, regulation, moratorium, or other action by a
Governmental Entity, pending before a Governmental Entity or, to either Seller
or the Company's knowledge, being considered by a Governmental Entity, which has
or would have the effect of restricting the conduct of business by any of the
Company.
(b) None of the Sellers, the Company nor any Affiliate,
nor any director, officer, agent, employee, consultant or contractor of any of
such Persons, has directly or indirectly: (i) made any improper or illegal
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (A) to obtain favorable treatment in securing business,
(B) to pay for favorable treatment for business secured, (C) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company or any Affiliate of the Company or either Seller, or (D) in
violation of any applicable law; or (ii) established or maintained any fund or
asset that has not been recorded in the books and records of the Company.
4.14 Real Property.
(a) Schedule 4.14(a) of the Company Disclosure Schedule
lists all real property owned or leased by the Company or that is the subject of
any of the Transaction Documents, the locations of real property leased by the
Company, and the real property that the Company has the right or obligation to
purchase. The Company, LHL, HBG and Florida Pines have good, marketable and
indefeasible title in fee simple, or as to optioned property or property subject
to a purchase contract, has the right to acquire good, marketable and
indefeasible title in fee simple (or as to leased property, has good and valid
title to the leasehold estate), to the real property purported to be owned,
optioned, under contract or leased by it on Schedule 4.14(a) of the Company
Disclosure Schedule, free and clear of all Liens, except Liens for Taxes and
assessments not yet due and payable, Liens relating to the indebtedness
described on Schedule 4.5(d) of the Company Disclosure Schedule, and such Liens
or other imperfections of title as do not or will not, individually or in the
aggregate, materially interfere with the present use or intended use by the
Company or Colony Communities or materially affect the value or marketability of
the property affected thereby.
(b) None of the Company, LHL, HBG or Florida Pines has
been given, nor have any of them received, any notice that a breach or an event
of default exists, and no condition or event has occurred that with the giving
of notice, the lapse of time, or both would constitute a breach or event of
default, by any of the Company, LHL, HBG or Florida Pines or,
to the knowledge of each Seller, LHL, HBG, Florida Pines and the Company, any
other Person with respect to any covenants, conditions, deeds, deeds of trust,
rights-of-way, easements, mortgages, restrictions, surveys, title insurance
policies, or other Contracts granting, constituting or evidencing a conveyance
by or to any of the Company, LHL, HBG or Florida Pines of title to or an
interest in or otherwise affecting the real property or the ownership thereof
which, individually or in the aggregate, is material to the ownership, use or
development of such parcel of real property by the Company, LHL, HBG or Florida
Pines. No condemnation, eminent domain, or similar proceeding exists, is pending
or, to the knowledge of each Seller, LHL, HBG, Florida Pines and the Company, is
threatened with respect to, or that could affect, any real property owned,
leased, optioned, or under contract by the Company, LHL, HBG or Florida Pines.
No developer-related charges or assessments by proffers to any public authority
or any other Person for public improvements or otherwise made against any of the
real property that is the subject of the Transaction Documents or any property
developed by the Company are unpaid or incomplete (other than those reflected on
the Interim Financial Statements or incurred since the date of such statements
in the ordinary course of business consistent with past practices, and other
than standard development agreements such as impact fee and water and sewer
connection fee agreements paid on a per unit basis at the time of applying for a
building permit or certificate of occupancy), except for charges or assessments
that would not, individually or in the aggregate, have a Material Adverse Effect
on the Company.
(c) The real property of the Company and the real
property that is the subject of any of the Transaction Documents to be used for
homebuilding and any improvements located thereon conform, in all material
respects, to the appropriate Governmental Entity's standards. There is no
material impediment to the development of (or to approval for the development
of) undeveloped real property in the manner in which the Company currently
anticipates building thereon, nor are there any moratoriums on such development.
The developed real property of the Company and the developed portion of the real
property that is the subject of any of the Transaction Documents has access to
streets, and is serviced, in all material respects, by all utilities, water and
other services, as is necessary to construct homes on such property, and such
utilities, water and other services are adequate for the current and intended
use of such property. The undeveloped real property of the Company and that is
the subject of any of the Transaction Documents has access to streets, and such
real property is serviced, in all material respects, by all utilities, water and
other services, as is necessary for the development thereof or such utilities,
water and other services are or will, upon completion of agreements currently in
effect with respect thereto, be available, in all material respects, to such
property.
(d) All leases pursuant to which the Company leases from
others real or personal property are valid and effective in accordance with
their respective terms, and there is not under any of such leases, any existing
material default or event of default (or event which with notice or lapse of
time, or both, would constitute a default).
(e) There are no material encroachments on the real
property owned, leased, under contract or optioned by the Company or the real
property that is the subject of any of the Transaction Documents, nor any
encroachments by improvements on such real property onto any easements or any
adjoining property or which would otherwise conflict with the property rights of
any other Person.
(f) Except as set forth in Schedule 4.14(f) of the
Company Disclosure Schedule:
(i) The Company has not developed, constructed or
otherwise participated and does not currently intend to develop,
construct or otherwise participate in any real estate projects other
than the projects identified on Schedule 4.14(a) or (f) of Company
Disclosure Schedule (the "Projects"). Schedule 4.14(f) of Company
Disclosure Schedule includes as of March 31, 2002 the total number of
units developed and under development, and the total units remaining
unsold.
(ii) All work performed by the Company or by
subcontractors on behalf of the Company on or in any of the properties
involved in the Projects has been or shall be performed in substantial
accordance with the plans and specifications approved by all
Governmental Entities (including VA and FHA, as applicable), in
compliance with all applicable laws, ordinances, and regulations, and
in a good and workmanlike manner, free from any defect or Lien, other
than inchoate mechanics' liens for amounts not yet due. Each property
involved in the Projects complies in all material respects with all
laws, including, without limitation, applicable zoning, land use,
subdivision, parking, traffic and fire safety laws and building codes,
and none of the Company, LHL, HBG or Florida Pines has received any
notice from any Governmental Entity as to any violation of any law. The
Company has complied with all such laws in all material respects.
(iii) The approvals, consents, licenses, permits,
waivers or other authorizations issued, granted or otherwise made
available by any Governmental Entity pertaining to the Projects
(collectively, the "Entitlements"), and any Contracts (for example, and
not in limitation, proffers and subdivision improvement agreements)
executed in connection therewith, are in full force and effect and no
party thereto is in default thereunder. All material Entitlements
necessary or appropriate for the development and construction of the
Projects are in full force and effect, without default, and are
enforceable in accordance with Florida law. Neither the Company, nor to
the knowledge of each Seller and the Company, the fee owner, if the
Company is not the fee owner of any property involved in any of the
Projects, is in default under, and the Company has not received any
notice that any event has occurred which with the giving of notice or
the passage of time, or both, would constitute a default under any
Entitlements, transaction, covenant, condition, restriction, easement,
encumbrance or other Contract pertaining to the property involved in
any Project. All subdivision improvement bonds and other sureties or
assurances relating in any way to any such property and required by any
applicable Governmental Entity or pursuant to any Entitlements have
been posted and are being maintained in accordance with the
requirements of such applicable Governmental Entitles and/or
Entitlements and no claim has been made thereunder or thereto.
(iv) (A) The Company is not obligated to pay nor
is it otherwise subject to any monetary charges, assessments or fees
imposed by any Governmental Entity or quasi-governmental entity (such
as special districts, improvement districts or the like) in connection
with receipt by the Company of the Entitlements or otherwise relating
to the development or improvement of the Projects.
(B) Except for obligations contained in
the Contracts listed in Schedule 4.4(a) of the Company Disclosure
Schedule, none of the Company, LHL, HBG or Florida Pines has any
development or improvement obligations with respect to the Projects.
(v) The Company (or to knowledge of each Seller
and the Company, the fee owner, if the Company is not the fee owner)
has not made any oral or, except for the Entitlements, written
commitments or representations to, or understandings or Contracts with,
any Person or any adjoining property owner which would in any way be
binding on the Company and would interfere with the Company's ability
to develop and improve any of the properties involved in the Projects
with residential developments in accordance with the Entitlements, and
neither the Company, nor the fee owner, shall make or enter into any
such commitment, representations, understandings or Contracts without
Buyer's written consent.
(vi) No plated lot involved in the Projects is
located in an area designated as having special flood hazards or
designated as a wetland by the Army Corps of Engineers. No property
involved in the Projects is located in an area that is designated, or
in the process of being designated, as a critical habitat for any
threatened or endangered species under the endangered Species Act of
1973, as amended, or designated under any other law for the
preservation of fish, wildlife, plants, insects, forests or wetlands,
or for the preservation of any historical or archeological site under
the National Historic Preservation Act of 1979, as amended, or
designated under any other law, that would limit, impair, delay or
prohibit the construction and development of the Project in accordance
with the existing or proposed plans therefor.
(vii) None of the Company, LHL, HBG or Florida
Pines has received any notice from its insurance carriers of any
defects or inadequacies in any of the properties involved in the
Projects, or any portion thereof, which would adversely affect the
insurability of any properties or the cost of any such insurance. There
are no pending insurance claims with respect to any portion of any such
properties.
(viii) There are no soil conditions that would
require construction of foundations different than those customarily
built in residential projects in the areas in which the Projects are
located, nor, any seismic safety problems relating to any of the
properties involved in the Projects, any recent seismic activity
affecting any such properties or any active fault bisecting, underlying
or adjacent to any such properties. Each of the Company and its
contractors have installed foundations appropriate and customary for
the applicable soil conditions.
(ix) All work performed with respect to the
Projects has been approved by holders of security interests in the
Projects to the extent required by the applicable Contracts.
(x) Other than in connection with its sales of
homes to buyers in the ordinary course of business, the Company has not
assigned to any third party any of its
respective development or other rights with respect to the properties involved
in the Projects.
(g) Except as set forth on Schedule 4.14(g) of the
Company Disclosure Schedule, since December 31, 2001 no real property owned by
the Company or that is the subject of any of the Transaction Documents has
become subject to repurchase by any Person, whether as a result of the failure
of the Company or any other party to begin construction thereon or to complete
construction thereon within the time period required or otherwise.
(h) The backlog of home sales of each of the Projects as
of the date of the Interim Statements is set forth in Schedule 4.14(h). All of
the home purchase Contracts representing the backlog of home sales set forth on
Schedule 4.14(h) have been incurred in the ordinary course of business. The
Sellers are not aware of any reason that the cancellation rates for such backlog
would be expected to exceed those experienced by the Company during the period
covered by the Financial Statements.
4.15 Intellectual Property.
(a) Schedule 4.15 of the Company Disclosure Schedule sets
forth a true and complete list of all patents, trademarks, trade names, service
marks, internet domain names and copyrights and applications for registration of
any of the foregoing, technology, know-how, computer software programs or
applications, and tangible or intangible intellectual property and proprietary
rights, whether or not subject to statutory registration or protection
(collectively, "Intellectual Property"), owned, used, filed by or licensed to
any of the Company, in each case which are, individually or in the aggregate,
material to the financial condition, operating results, assets or operations of
the Company. Except as set forth in Schedule 4.15 of the Company Disclosure
Schedule, the Company owns, free and clear of any and all Liens, or is licensed
or otherwise possess legally enforceable rights to use, without payment to any
other Person, all Intellectual Property that is used in the business of the
Company as currently conducted, except where the failure to own, be licensed or
to possess such rights would not have, individually or in the aggregate, a
Material Adverse Effect on the Company, and the consummation of the transactions
contemplated hereby will not conflict with, alter or impair any such rights.
(b) To the knowledge of each Seller and the Company, the
conduct of the business of the Company does not conflict with the valid
Intellectual Property rights of others and there are no conflicts with or
infringements of any of the Intellectual Property of the Company by any other
Person. No other Person has any rights in or right to use any of the
Intellectual Property owned by any of the Company.
4.16 Insurance.
(a) Schedule 4.16(a) of the Company Disclosure Schedule
contains a true and complete list of all liability, property, workers'
compensation, directors' and officers' liability and other insurance policies in
effect at any time since January 1, 1998 (except in the case of liability
insurance, which shall be listed from January 1, 1992) that insure or did insure
the business, operations or employees of the Company or affect or relate to the
ownership, use or operation of any of the assets (both past and present) of the
Company or the properties that are
the subject of any of the Transaction Documents, whether issued to the Company
or to any other Person for the benefit of the Company or with respect to the
properties that are the subject of any of the Transaction Documents (the
"Insurance Policies"). For each Insurance Policy, Schedule 4.16(a) of the
Company Disclosure Schedule lists (i) the names and addresses of the insurers,
(ii) the names of the Persons to whom such policies have been issued, (iii) the
expiration dates thereof, (iv) whether the policies are currently in effect, (v)
the annual premiums and payment terms thereof, (vi) whether it is a "claims
made" or an "occurrence" policy, (vii) any self insured retention or deductible,
(viii) the aggregate limit of the policy and the currently available limit, and
(ix) a brief description of the interests insured thereby. The Sellers have
provided Buyer with true, accurate and complete copies of each Insurance Policy.
(b) Schedule 4.16(b) of the Company Disclosure Schedule lists
any Contract, other than a policy of insurance, for the transfer or sharing of
any risk by the Company; and all obligations of the Company to third parties
with respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) Except as set forth in Schedule 4.16(c) of the Company
Disclosure Schedule, (i) the insurance coverage provided by any of the Insurance
Policies will not terminate or lapse by reason of the transactions contemplated
by this Agreement, (ii) the Insurance Policies were placed (at the time of
placement and as of the date hereof) with insurers who are financially sound and
reputable and, in light of the respective business, operations and assets of the
Company, are or were in amounts and have or had coverages that are reasonable
and customary for Persons engaged in such businesses and operations and having
such assets; (iii) neither the Company, nor the Person to whom such policy has
been issued has received notice that any insurer under any Insurance Policy is
denying liability with respect to a claim thereunder or defending under a
reservation of rights clause, or, to the knowledge of either Seller and the
Company, indicated any intent to do so or not to renew any such policy; (iv) the
Insurance Policies are sufficient for compliance with all applicable laws and
Contracts to which the Company is a party or by which it is bound; and do not
provide for any retrospective premium adjustment or other experienced-based
liability on the part of the Company, (v) no side agreements or other Contracts
exist that alter the terms of the Insurance Policies, and (vi) none of the
liability Insurance Policies contain any mold, soils attached product or
completed operations exclusions from coverage.
(d) Each current Insurance Policy is valid and binding and in
full force and effect, no premiums due thereunder have not been paid and neither
the Company nor the Person to whom such policy has been issued has received any
notice of cancellation or termination in respect of any such policy or is in
default thereunder. Schedule 4.16(d) of the Company Disclosure Schedule contains
a listing of all material open claims made or otherwise asserted by the Company
against any Insurance Policy. All material claims under the Insurance Policies
have been filed in a timely fashion. To the knowledge of each Seller and the
Company, the activities and operations of the Company have been conducted in a
manner so as to conform in all material respects to all applicable provisions of
the Insurance Policies. The Company has not failed to disclose any fact to the
insurance companies or failed to take any other action, the consequences of
which non-disclosure or failure to take action would render any Insurance Policy
void, or voidable, or suspend, impair or defeat in whole or in part such
insurance
coverage. Neither of the Sellers nor the Company has received (A) any refusal of
coverage from any insurer from which the Company sought coverage, (B) any notice
that a defense will be afforded with reservation of rights, or (C) any notice of
cancellation or any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer of any policy is
not willing or able to perform its obligations thereunder
4.17 Assets Other than Real Property Interests.
(a) The Company owns all material assets reflected on the
2001 Balance Sheet, or thereafter acquired, except those sold or otherwise
disposed of since December 31, 2001 in the ordinary course of business
consistent with past practice and not in violation of this Agreement, in each
case free and clear of all Liens except:
(i) such Liens as are set forth in Schedule 4.17
of the Company Disclosure Schedule;
(ii) mechanics', carriers', workmen's, repairmen's
or other like Liens arising or incurred in the ordinary course of
business, Liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the
ordinary course of business and Liens for Taxes or assessments which
are not due and payable or which may thereafter be paid without
penalty;
(iii) mortgages, liens, security interests and
encumbrances which secure debt that is reflected as a Liability on the
2001 Balance Sheet or the existence of which is expressly indicated in
the notes thereto; and
(iv) other imperfections of title or encumbrances,
if any, which, do not, individually or in the aggregate, materially
impair the assets or the intended use thereof.
(b) All the material tangible personal property of the
Company has been maintained in accordance with the past practice of the Company
and generally accepted industry practice and is in good operating condition and
repair, ordinary wear and tear excepted. The assets owned or leased by the
Company include all of the properties and other assets necessary for the Company
to conduct its business in the manner presently conducted.
(c) All of the books and records of the Company
(including without limitation, the financial records) are true, complete and
accurate in all material respects and have been maintained in accordance with
sound business practices. True, complete and accurate copies of such records
have been made available to Buyer.
4.18 Antitakeover Statutes. Florida Statute Section 6.07.
0902 (Control Share Acquisition Statute) does not apply to the transactions
contemplated herein and the Board of Directors of the Company is not required to
take any action under the terms thereof. No other "fair price", "moratorium",
"control share acquisition" or other similar antitakeover statute or regulation
under the laws of Florida is applicable to the transactions contemplated hereby.
4.19 Warranties. Schedule 4.19 of the Company Disclosure
Schedule sets forth complete and accurate copies of the written warranties and
guaranties by the Company
currently in effect with respect to their respective products. There have not
been any material deviations from such warranties and guaranties, and neither
the Company, nor any of its salespersons, employees and agents is authorized to
undertake obligations to any customer or to other third parties in excess of
such warranties or guaranties. Neither the Company, nor any of its salespersons,
employees and agents has made any oral warranty or guaranty with respect to the
products of the Company. The reserve for warranty costs included in the 2001
Balance Sheet and the Interim Statements sets forth the reasonable judgment of
management of the Company of the estimate of the aggregate liability (whether
accrued, absolute or contingent) of the Company in respect of warranty
obligations.
4.20. Suppliers and Subcontractors. The documents and information
supplied by each Seller, the Company or any of their respective representatives
in connection with this Agreement with respect to relationships and volumes of
business done with the significant suppliers and subcontractors of the Company
are accurate in all material respects. Except as set forth in Schedule 4.20 of
the Company Disclosure Schedule, during the last 12 months, the Company has not
received any notices of termination or threats of termination from any of the
five largest suppliers or ten largest subcontractors for the Company.
4.21 Investment Purpose. Each Seller is an "accredited investor," as
such term is defined in Regulation D of the Securities Act and will acquire the
Buyer Common Stock for his own account and not with a view to a sale or
distribution thereof in violation of any securities laws. Each Seller has
completed, executed and delivered to Buyer an Accredited Investor Questionnaire
substantially in the form of Exhibit D. Each Seller acknowledges (i) that the
Buyer Common Stock has not been registered under applicable securities laws and
will be subject to restriction on transfer under such securities laws and will
not sell or distribute any of the Buyer Common Stock in violation of any
securities laws and (ii) Sellers will be contractually prohibited from
transferring any of the Buyer Common Stock for a period of two (2) years
following the Closing Date in accordance with Section 6.11. Each Seller has the
present intention of holding the Buyer Common Stock for investment purposes.
4.22 Access to Information. During the course of the negotiation of
this Agreement, each Seller reviewed or has been afforded the opportunity to
review all information provided to it by Buyer and has had the opportunity to
ask questions of and receive answers to its satisfaction from representatives of
Buyer concerning the Buyer, the Buyer Common Stock, and to obtain certain
additional information reasonably requested by the Sellers. Each Seller hereby
acknowledges and affirms that it has relied solely on the representations of
Buyer made in Section 5 of this Agreement and not on any other representations
made by or on behalf of Buyer. The foregoing shall not be deemed to affect the
representations and warranties and indemnities made by Buyer hereunder.
Notwithstanding any "due diligence" investigations made by the Sellers, no
information shall be deemed to have been disclosed for purposes of the
representations and warranties made in Section 5 by Buyer unless contained in
the Buyer Disclosure Schedule.
4.23 Disclosure. No representation or warranty of the Sellers
contained in this Agreement, and no statement contained in any document,
certificate or schedule furnished or to be furnished by or on behalf of either
Seller or the Company to Buyer or any of its representatives pursuant to this
Agreement, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading or necessary to fully and fairly
provide the information required to be provided in any such document,
certificate or schedule. The descriptions set forth in the Company Disclosure
Schedule are accurate descriptions of the matters disclosed therein. Copies of
all documents heretofore or hereafter delivered or made available by either
Seller or the Company to Buyer pursuant hereto were or will be complete and
accurate records of such documents.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer and Standard Pacific, jointly and severally, represent and
warrant to the Sellers, as of the date of this Agreement and as of the Closing
Date, as follows:
5.1 Existence; Good Standing; Corporate Authority; Compliance with
Law. Buyer and Standard Pacific are corporations duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Buyer and
Standard Pacific are duly licensed or qualified to do business as foreign
corporations and are in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by them
therein or in which the transaction of their business makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect on Buyer or Standard Pacific. Buyer and
Standard Pacific have all requisite corporate power and authority to own,
operate and lease their properties and carry on their businesses as now
conducted. Neither Buyer nor Standard Pacific is in violation of any order or
decree of any Governmental Entity, or any law, ordinance, or regulation to which
Buyer, Standard Pacific or any of their properties or assets is subject, except
where such violation, individually or in the aggregate, has not and would not
reasonably be expected to have a Material Adverse Effect on Buyer or Standard
Pacific. Buyer and Standard Pacific have obtained all material licenses, permits
and other authorizations and have taken all actions required by applicable law
or regulations of any Governmental Entity in connection with their businesses as
now conducted.
5.2 Authorization, Validity, and Effect of Agreements. Buyer and
Standard Pacific have the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated herein, as
applicable. The consummation by Buyer and Standard Pacific of the transactions
contemplated herein has been duly authorized by all requisite corporate action.
This Agreement constitutes, and all agreements and documents contemplated herein
to be executed by Buyer and Standard Pacific (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of Buyer and Standard Pacific, enforceable in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance, reorganization or other similar laws relating
to creditors' rights and general principles of equity, whether at equity or at
law.
5.3 No Violation. Neither the execution and delivery by Buyer or
Standard Pacific of this Agreement, nor the consummation by Buyer or Standard
Pacific of the transactions contemplated herein in accordance with the terms
hereof, will:
(i) conflict with or result in a breach of any provisions of
the articles of incorporation or by-laws of Buyer or Standard Pacific;
(ii) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate
the performance required by, or result in the creation of any Lien upon any
of the material properties of Buyer or Standard Pacific under, or result in
being declared void, voidable, or without further binding effect, any of
the terms, conditions or provisions of any material Contract to which Buyer
or Standard Pacific is a party, or by which Buyer or Standard Pacific or
any of their properties is bound or affected; or
(iii) require any material consent, approval or authorization
of, or declaration, filing or registration with, any Governmental Entity or
other Person.
5.4 No Brokers. Except as disclosed on Schedule 5.4, neither Buyer
nor Standard Pacific has entered into any Contract with any Person, or taken any
other action, which may result in the obligation of any other party to this
Agreement to pay any finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby.
5.5 Funds. Buyer will have at the Closing Date, the funds necessary
to consummate the Stock Purchase and the transactions contemplated herein on a
timely basis in accordance with this Agreement.
5.6 Investment Purpose. Buyer is an "accredited investor," as such
term is defined in Regulation D of the Securities Act and will acquire the
Shares for its own account and not with a view to a sale or distribution thereof
in violation of any securities laws and will not sell or distribute any of the
Shares in violation of any securities laws. Buyer has the present intention of
holding the Shares for investment purposes.
5.7 Access to Information. During the course of the negotiation of
this Agreement, Buyer and Standard Pacific reviewed or have been afforded the
opportunity to review all information provided to it by the Sellers and have had
the opportunity to ask questions of and receive answers to their satisfaction
from representatives of the Sellers concerning the Company, the Shares, and to
obtain certain additional information reasonably requested by them. The
foregoing shall not be deemed to affect the representations and warranties and
indemnities made by the Sellers hereunder. Notwithstanding any "due diligence"
investigations made by Buyer or Standard Pacific, no information shall be deemed
to have been disclosed for purposes of the representations and warranties made
by the Sellers in Sections 3 and 4 unless contained in the Company Disclosure
Schedule.
5.8 Disclosure. No representation or warranty of the Buyer or
Standard Pacific contained in this Agreement, and no statement contained in any
document, certificate or schedule furnished or to be furnished by or on behalf
of Buyer or Standard Pacific to Sellers or any of their representatives pursuant
to this Agreement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary to fully and fairly
provide the information required to be provided in any such document,
certificate or schedule. The descriptions set forth in the Buyer Disclosure
Schedule are accurate descriptions of the matters disclosed therein. Copies of
all documents heretofore or hereafter delivered or made available by Buyer and
Standard Pacific to the Sellers pursuant hereto were or will be complete and
accurate records of such documents.
5.9 SEC Filings. Since December 31, 1999, Standard Pacific has timely
filed all reports and registration statements and other documents required to be
filed with the SEC under the rules and regulations of the SEC and all such
reports and registration statements or other documents have complied in all
material respects, as of their respective filing dates and effective dates, as
the case may be, with all the applicable requirements of the Securities Act of
1933 and the Securities Exchange Act of 1934. As of the respective filing and
effective dates, none of such reports or registration statements or other
documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE VI
COVENANTS
6.1 Conduct of Business. Except as (i) expressly contemplated in this
Agreement, or (ii) as expressly agreed to in writing by Buyer, during the period
from the date of this Agreement to the earlier of the termination of this
Agreement or the Closing Date, the Sellers shall use their best efforts to cause
the Company:
(a) to conduct its operations according to the usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(b) to preserve intact its business organization and goodwill, keep
available the services of its officers and employees and maintain satisfactory
relationships with its customers, suppliers and other Persons having business
relationships with it;
(c) to confer on a regular basis with one or more representatives of
Buyer, including to report operational matters of materiality and any proposals
of the Company to engage in material transactions, and to provide such
information as Buyer may reasonably request;
(d) not to amend the organizational documents of the Company without
the previous written consent of Buyer;
(e) to promptly notify Buyer of (i) any material change in the
condition (financial or otherwise) of the Company's business, properties,
assets, liabilities, prospects or the
normal course of its businesses or in the operation of its properties, (ii) any
material litigation or material complaints, investigations or hearings of any
Governmental Entity (or communications indicating that the same may be
contemplated); or (iii) the breach in any material respect of any representation
or warranty or covenant contained herein;
(f) to promptly deliver to Buyer any material report, statement,
schedule or correspondence filed or submitted by the Company to, or received by
the Company from, any Governmental Entity;
(g) not to (i) issue any Capital Stock, effect any stock split or
combination, reclassify its stock or otherwise change its capitalization as it
exists on the date of this Agreement, (ii) grant, confer or award any option,
warrant, conversion right or other right not existing on the date hereof to
acquire any of its Capital Stock, (iii) increase any compensation or benefits or
enter into or amend any employment, severance, termination or similar Contract
with any of its present or future employees, officers or directors, except for
normal increases in compensation and benefits to employees consistent with past
practice and the payment of cash bonuses to employees pursuant to and consistent
with existing plans or programs, (iv) adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan) or amend any
existing employee benefit plan in any material respect, except for changes which
may be required by applicable law, or (v) increase the amount, or expand the
scope, of any indemnification currently provided for employees, officers or
directors;
(h) not to (i) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any of its Capital Stock (other than the
Corporate Dividend); or (ii) directly or indirectly redeem, purchase or
otherwise acquire any of its Capital Stock, or make any commitment for any such
action;
(i) not to sell, lease or otherwise dispose of any assets, or enter
into any commitment to do so; provided that the sale of completed homes to
individual homebuyers by the Company in the ordinary the course of business
shall not be a violation of this clause (i);
(j) not to (i) incur or assume any long-term or short-term Debt or
issue any Debt securities, including without limitation, any Debt that Buyer
shall payoff at the Closing; (ii) assume, guaranty, endorse or otherwise become
liable or responsible (whether directly, indirectly, contingently or otherwise)
for the obligations of any other Person; (iii) modify in any manner adverse to
any of the Company any outstanding Debt or obligation of the Company; (iv)
pledge or otherwise encumber Capital Stock of any of the Company; or (v)
mortgage or pledge any of its material assets, tangible or intangible, or create
or suffer to create any material Lien of any kind in respect to such asset
except in the ordinary course of business consistent with past practices;
(k) not to change any of its accounting principles or practices, except
as requested by Buyer or otherwise required pursuant to GAAP;
(l) not, without the prior consent of Buyer (which will not be
unreasonably withheld) to:
(i) acquire (by merger, consolidation or acquisition of stock
or assets) any Person or division thereof or any Capital Stock therein;
(ii) enter into any Contract which would be required to be
listed on Schedule 4.4(a), or amend any Material Contract;
(iii) authorize any new capital expenditure or expenditures
(except in the ordinary course of business consistent with past
practice or pursuant to Contracts listed in Schedule 4.4(a) of the
Company Disclosure Schedule) which, individually, is in excess of
$250,000 or, in the aggregate, are in excess of $500,000; or
(iv) enter into any Contract to purchase any real property;
(m) not to pay, discharge or satisfy any Liabilities, other than the
payment, discharge or satisfaction in the ordinary course of business of
Liabilities reflected, reserved against or disclosed in the Interim Financial
Statements or incurred in the ordinary course of business thereafter consistent
with past practice;
(n) not to settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated herein;
(o) not to permit the Company to make any material Tax election
(other than in a manner consistent with prior practices of the Company), file
any Tax Return (other than Tax Returns due), settle or compromise any material
Tax liability (other than Taxes due) or agree to an extension of a statute of
limitations with respect to any material amount of Tax (other than extensions
for filing Tax Returns), except to the extent the amount of any such Tax,
settlement or compromise has been reserved for in the Interim Financial
Statements; provided, the Buyer shall not unreasonably withhold or delay consent
as to such matters;
(p) not to loan or advance any amount to, or sell, transfer or lease
any of its assets to, or enter into any Contract or other transaction with, or
otherwise make any payments to either Seller or any of their Affiliates or (with
the exception of payments of salary in the ordinary course, consistent with past
practice) any officer or director thereof;
(q) not to take any action that would knowingly result in a breach of
any representation, warranty or covenant of Sellers contained in this Agreement;
and
(r) not to permit the Company to take any action having the same or
similar effect, or being of the same or similar nature, as any of the actions
described in Sections 6.1(a) through (q).
6.2 Further Action.
(a) Upon the terms and subject to the conditions of this Agreement,
the Sellers, on the one hand, and Buyer and Standard Pacific, on the other hand,
shall use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated in
this Agreement, to obtain in a timely manner all material waivers, consents and
approvals, and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied in all material respects all conditions
precedent to its obligations under this Agreement.
(b) From the date of this Agreement until the termination of
this Agreement or the Closing Date, no party shall take any action which would
(i) materially adversely affect the ability of any party to this Agreement to
obtain any consents, approvals, or authorizations required for the transactions
contemplated herein, or (ii) materially adversely affect the ability of any
party to perform its covenants and agreements under this Agreement.
6.3 Access to Information; Confidentiality.
(a) From the date hereof until the termination of this
Agreement or the Closing Date, upon reasonable notice and subject to applicable
laws, the Sellers shall cause the Company to afford Buyer and its accountants,
counsel, and other representatives, during normal business hours, access to all
of the Company properties and assets, books, Contracts, and records reasonably
requested by Buyer. Buyer shall, and shall cause its respective advisors and
representatives to:
(i) conduct its investigation in such a manner that will
not unreasonably interfere with the normal operations, customers or
employee relations of the Company, and
(ii) treat as confidential in accordance the terms of
the Confidentiality Agreement all such information obtained hereunder
or in connection herewith and not otherwise known to them prior to
disclosure hereunder.
(b) From the date hereof until the termination of this
Agreement or the Closing Date, each party shall furnish promptly to the other: a
copy of all filings made with any Governmental Entity in connection with the
transactions contemplated in this Agreement and all written communications
received from such Governmental Entities related thereto.
(c) Each party shall promptly notify the other orally and in
writing of:
(i) the occurrence or non-occurrence of any fact or
event which would be reasonably likely (A) to cause any representation
or warranty contained in this Agreement of such party to be untrue or
inaccurate in any material respect at any time or (B) to cause any
covenant, condition or agreement under this Agreement of such party not
to be complied with or satisfied in any material respect;
(ii) any failure of such party to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that no such notification shall
affect the representations or warranties of any party or the
conditions to the obligations of any party hereunder; and
(iii) any notice or other communication from any third party
alleging that the consent of such Third Party is or may be required in
connection with the transactions contemplated in this Agreement.
6.4 Publicity. The initial press release relating to this
Agreement shall be in the form heretofore approved by the parties hereto, and
thereafter until the Closing Date the Sellers, the Company, Standard Pacific and
Buyer shall, subject to their respective legal obligations (including
requirements of stock exchanges and other similar Governmental Entities),
consult with each other, and use reasonable efforts to agree upon the text of
any press release, before issuing any such press release or otherwise making
public statements with respect to the transactions contemplated hereby and in
making any filings with any Governmental Entity or with any national securities
exchange with respect thereto.
6.5 Expenses. Except as set forth herein, all costs and expenses
(including fees of attorneys and accountants) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, provided however if the Stock Purchase is consummated,
the Sellers shall pay all costs and expenses (including fees of attorneys and
accountants) of the Sellers and the Company incurred in connection with this
Agreement and the transactions contemplated hereby.
6.6 Employee Benefits.
(a) Company employees shall be entitled to employee benefits that
are substantially equivalent to those provided to similarly situated employees
of Standard Pacific. Such benefits shall be provided though Company Benefit
Plans, Standard Pacific benefit plans, Buyer benefit plans, or a combination of
the foregoing, as determined by Standard Pacific after consultation with the
Company. Following the Closing, Standard Pacific shall cause Standard Pacific or
Buyer to recognize each continuing Company employee's years of service with the
Company prior to the Closing Date for determining the level of benefits to be
provided under applicable vacation plans and policies and for eligibility and
vesting determinations under any applicable 401(k) plan. For purposes of this
section 6.6, "continuing Company employee" means an employee of the Company as
of the Closing Date. Unless Buyer and the Sellers otherwise agree in writing,
Buyer shall cause the Company to maintain in full force and effect, until
January 31, 2003, the medical and dental plans of the Company as such plans
exist on the Closing Date.
(b) Nothing contained in this Section 6.6 is intended to confer
upon any Company employee any right to continued employment or any right to
wages or benefits at any time after the Closing Date.
6.7 Third Party Offers.
(a) From and after the date of this Agreement until the earlier
of the Closing or termination of this Agreement, each of the Sellers, their
Affiliates and their respective officers, directors, employees, representatives
(including, without limitation, any investment banker, attorney or accountant)
and agents shall immediately cease any discussions or negotiations with any
parties with respect to any Third Party Acquisition, and neither of the
Sellers, nor any of their Affiliates shall, nor shall either Seller authorize or
permit any of its Affiliates or their respective officers, directors, employees,
representatives (including, without limitation, any investment banker, attorney
or accountant) or agents to, directly or indirectly, encourage, solicit,
participate in or initiate any inquiries, discussions or negotiations with or
provide any information or access to any Person concerning any potential Third
Party Acquisition or that may reasonably be expected to lead to any Third Party
Acquisition or attempted Third Party Acquisition, or otherwise facilitate any
effort or attempt to make or implement a Third Party Acquisition. Each Seller
shall promptly communicate to Buyer the existence or occurrence and the terms of
any potential Third Party Acquisition or contact related to any potential Third
Party Acquisition that Sellers, the Company or any of their Affiliates, or their
respective officers, directors, employees, representatives or agents, receive in
respect of such a proposed transaction, and the identify of the Person from whom
such proposal or contact was received.
(b) "Third Party Acquisition" means the acquisition by a Person or
group, other than Buyer or any Affiliate of Buyer, of more than ten percent, in
a single transaction or series of transactions, of the Capital Stock or the
assets of the Company, whether by sale of Capital Stock, sale, lease or other
disposition of assets, merger or otherwise.
(c) The Sellers represent and warrant to Buyer that each of the
Sellers and his Affiliates and their respective officers, directors, employees,
representatives (including, without limitation, any investment banker, attorney
or accountant) or agents have terminated any and all existing discussions with
third parties relating to a Third Party Acquisition.
6.8 Restrictive Covenants.
(a) Non-Competition. The Sellers recognize that the covenants of each
Seller contained in this Section 6.8(a) (the "Covenant Not to Compete") are an
essential part of this Agreement and that but for the agreement of each Seller
to comply with such covenants Buyer and Standard Pacific would not enter into
this Agreement. The Sellers acknowledge and agree that the Covenant Not to
Compete is necessary to protect the Business acquired by Buyer, including
without limitation, goodwill, and that irreparable harm and damage will be done
to Buyer and Standard Pacific if any Seller competes with Buyer in any way
prohibited by the Covenant Not to Compete. In addition, the Sellers acknowledge
that the Purchase Price is consideration for professional relationships and
marketplace reputation developed by the Company and the Sellers and the Covenant
Not to Compete is necessary for Buyer and Standard Pacific to receive the full
benefit of this Agreement. After the Closing, each Seller shall not
individually, or in concert, directly or indirectly:
(i) engage or become interested in, as owner, employee, partner,
through equity ownership (not including up to a 1% passive equity interest in a
public company), investment of capital, lending of money or property, rendering
of services, or otherwise, either alone or in association with others, any
business competitive with the Business (including within the definition of the
Business, without limitation, any business of the type or types conducted by the
Company at any time during the two (2) year period preceding the Closing Date or
under development by the Company on the Closing Date),
(ii) take any action intended to advance an interest of any
competitor of the Business, or encourage any other person to take such action;
or
(iii) take any material action intended to cause any customer or
prospective customer to use the services or purchase the products of any
competitor of the Business.
This Covenant Not to Compete shall be limited to any county or any
other political subdivision of the state of Florida where the Company generated
revenue at any time during the two (2) year period preceding the Closing Date.
This Covenant Not to Compete shall bind each Seller for the five (5) year period
immediately following the Closing Date, provided however, that if the employment
of any Seller is terminated by Buyer without cause, then after termination of
such Seller's employment with the Company, such Seller will no longer be subject
to the covenants contained in Sections 6.8(a)(i) and (ii). The parties hereto
agree that the duration and area for which the Covenant Not to Compete set forth
in this Section 6.8(a) is to be effective are reasonable.
(b) Non-Diversion. For five (5) years following the Closing Date, each
of the Sellers shall not, and shall cause their Affiliates not to, divert or
attempt to divert or take advantage of or attempt to take advantage of any
actual or potential business or opportunities of Buyer or its Affiliates of
which any of the Sellers become aware which relate to the Business, or any part
thereof and which are located in any county or any other political subdivision
of the State of Florida where the Company generated revenue at any time during
the two (2) year period preceding the Closing Date. This Section 6.8(b) is in
addition to and not by way of limitation of any other duties the Sellers may
have to Buyer or its Affiliates.
(c) Non-Recruitment. For a period of four (4) years from the Closing,
the Sellers shall not, and the Sellers shall cause each of their Affiliates not
to, directly or indirectly:
(i) perform any action, activity or course of conduct consisting
of or encouraging the following: (A) soliciting, recruiting or hiring
any employees of the Company; (B) soliciting or encouraging any
employee of the Company to leave the employment of the Company; and (C)
disclosing or furnishing to anyone any confidential information
relating to the Company or otherwise using such confidential
information for Seller's own benefit or the benefit of any other
Person; and
(ii) solicit or encourage any contractor, subcontractor or other
supplier of the Company to terminate or adversely alter in any
material respect any relationship such supplier, may have with any of
the Company, Buyer or any affiliate of Buyer or any of their
successors.
(e) Remedies. The covenants contained in this Section 6.8 impose a
reasonable restraint on the Sellers in light of the activities and business of
the Company and future plans of Buyer. The Sellers acknowledge that if they
violate any of the covenants contained in this Section 6.8 (collectively, the
"Restrictive Covenants"), it will be difficult to determine the resulting
damages to Buyer and, in addition to any other remedies Buyer may have, Buyer
shall be entitled to temporary injunctive relief without being required to post
a bond and permanent injunctive relief
without the necessity of proving actual damages. Each Seller shall be severally
liable to pay all costs, including reasonable attorneys' fees and expenses, that
Buyer may incur in enforcing or defending, to any extent, any of the Restrictive
Covenants breached by such Seller, whether or not litigation is actually
commenced and including litigation of any appeal defended by Buyer where such
party succeeds in enforcing any of the Restrictive Covenants. Buyer may elect to
seek one or more remedies at its discretion on a case by case basis. Failure to
seek any or all remedies in one case shall not restrict Buyer from seeking any
remedies in another situation. Such action by Buyer shall not constitute a
waiver of any of its rights.
(f) Severability and Modification of any Unenforceable Covenant.
Each of the Restrictive Covenants will be read and interpreted with every
reasonable inference given to its enforceability. However, if any term,
provision or condition of the Restrictive Covenants is held by a court or
arbitrator to be invalid, void or unenforceable, the remainder of the provisions
thereof shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. If a court or arbitrator should determine any of the
Restrictive Covenants are unenforceable because of over-breadth, then the court
or arbitrator shall modify such covenant so as to make it enforceable to the
fullest extent the court or arbitrator deems reasonable and enforceable under
the prevailing circumstances. The Covenant Not to Compete shall be deemed to be
a series of separate covenants, one for each and every county or other political
subdivision of the State of Florida where the Covenant Not to Compete is
intended to be effective. Any violation of the provisions of this Section 6.8
shall automatically toll and suspend the five year period set forth in Section
6.8(a) and the four year period set forth in Section 6.8(c) for the duration of
such violations.
(g) Nothing contained in this Section 6.8 is intended to confer
upon either Seller any right to continued employment or any right to wages or
benefits at any time after the Closing Date. Each Seller expressly acknowledges
that such Seller's employment with the Company will be "at-will" which means
that the Company will have the right to terminate either Seller's employment
with the Company at any time and for any reason, with or without cause or
notice, without payment, penalty or further obligation; provided, however, that
any such termination of employment will in no way affect Buyer's obligations to
make any Earnout Payment.
6.9 Company Directors. The Sellers shall cause each of Larry
Godwin and Robert Godwin to resign from his osition on the Company's Board of
Directors effective as of the Closing Date.
6.10 Corporate Actions.
(a) Corporate Dividend. Prior to the Closing, the Sellers shall
cause the Company to declare and pay a dividend (the "Corporate Dividend") on
the Shares in the amount of $2,459,939, which amount is an estimate of
Stockholder's Equity as of the Closing Date. The dividend shall be distributed
in the form of a promissory note to each stockholder of the Company representing
such stockholder's pro-rata share of the Corporate Dividend. Buyer shall,
immediately following the Closing, cause the Company to repay the promissory
notes in full.
(b) Adjustment. If payment of the Corporate Dividend does not
result in the Stockholder's Equity being equal to zero on the Closing Date, an
adjustment payment shall be
made as described below. Such adjustment shall provide for (i) a pro-rata
payment to the Sellers of the amount by which the Stockholder's Equity is
greater than zero as of the Closing Date or (ii) a payment by the Sellers to
Buyer in the event the Stockholder's Equity is less than zero as of the Closing
Date. The net adjustment shall be referred to herein as the "Stockholder's
Equity Adjustment Amount" and shall be calculated and paid by the owing party as
set forth in this Section 6.10.
(c) Within 90 days following the Closing, Buyer shall prepare and
deliver to the Sellers its calculation of the Stockholder's Equity Adjustment
Amount. Within 30 days following Buyer's notification to the Sellers of its
calculation of the Stockholder's Equity Adjustment Amount, the Sellers shall
deliver to Buyer a notice of objection signed by both Sellers (a "Stockholder's
Equity Objection Notice") or a notice of acceptance signed by either Seller (a
"Stockholder's Equity Acceptance Notice") with respect to the calculation of the
Stockholder's Equity Adjustment Amount. Buyer shall provide the Sellers and
their accountants and other representatives, upon reasonable advance notice,
access to such books and records of the Company relating to the calculation of
the Stockholder's Equity Adjustment Amount as may be reasonably requested by the
Sellers. Buyer's Calculation of the Stockholder's Equity Adjustment Amount shall
be final and binding on the parties if a Stockholder's Equity Acceptance Notice
is delivered to Buyer or if no Stockholder's Equity Objection Notice is
delivered to Buyer within such 30 day period. Any Stockholder's Equity Objection
Notice shall specify the items disputed, shall describe the reasons for the
objection thereof, shall state the amount in dispute and shall state Sellers'
calculation of the Stockholder's Equity Adjustment Amount. If a Stockholder's
Equity Objection Notice is given, the Sellers and Buyer shall consult with each
other with respect to the objection. If the parties are unable to reach
agreement within 15 days after a Stockholder's Equity Objection Notice has been
given, any unresolved disputed items shall be promptly referred to KPMG LLP,
provided however, if either of the parties has used the services of KPMG LLP at
any time in the six month period prior to such selection of an accounting firm,
then the unresolved items shall be promptly referred to an Unrelated Accounting
Firm. The Unrelated Accounting Firm shall be directed to render a written report
on the unresolved disputed issues as promptly as practicable (but in no event
later than 45 days following submission of the matter to the Unrelated
Accounting Firm) and to resolve only those issues of dispute set forth in the
Stockholder's Equity Objection Notice. The resolution of the dispute by the
Unrelated Accounting Firm shall be final and binding on the parties. The fees
and expenses of the Unrelated Accounting Firm shall be borne equally between the
Sellers and Buyer; provided, however, that if the Stockholder's Equity
Adjustment Amount calculated by one of the parties (the "Differing Party")
pursuant to this subsection differs from the final determination of the
Unrelated Accounting Firm by more than twenty percent to the detriment of such
Differing Party, then such Differing Party shall be responsible for the payment
of all of the fees and expenses of the Unrelated Accounting Firm.
(c) If either Seller delivers to Buyer the Stockholder's Equity
Acceptance Notice referred to in Section 6.10(b) or the Sellers fail to deliver
a Stockholder's Equity Objection Notice within the 30 day period required by
Section 6.10(b), either Buyer or the Sellers, as the case may be, shall pay to
the other party any amounts which Buyer's calculation shall indicate to be owed
to the other party within five Business Days after the delivery of such
Stockholder's Equity Acceptance Notice or the expiration of such 30 day period,
as the case may be. Alternatively, if the Sellers deliver to Buyer the
Stockholder's Equity Objection Notice
referred to in Section 6.10(b), within five Business Days after such delivery,
the owing party shall pay the undisputed portion, if any, of the amount owed
and, within five Business Days after the resolution of any dispute by the
parties or the Unrelated Accounting Firm relating to the Stockholder's Equity
Objection Notice, the owing party shall pay the remainder owed, if any. Any
payment pursuant to this Section 6.10 shall be made in immediately available
funds.
6.11 Securities Restrictions.
(a) Neither of the Sellers shall, without the prior
written consent of Buyer (which consent may be withheld in Buyer's sole
discretion), (i) directly or indirectly, sell, offer, contract or grant any
option to sell (including without limitation any short sale), pledge, transfer,
establish an open "put equivalent position" within the meaning of Rule 16a-1(h)
under the Securities Exchange Act of 1934, or otherwise dispose of any Buyer
Common Stock acquired by such Sellers in connection with this Agreement, or (ii)
enter into any swap or other agreement that transfers, in whole or in part, any
of the economic consequences of ownership of any Buyer Common Stock acquired by
such Sellers in connection with this Agreement (whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Buyer
Common Stock, other securities, cash or otherwise), or publicly announce his
intention to do any of the foregoing, for a period commencing on the Closing
Date and continuing through the close of trading on the date that is the second
anniversary of the Closing Date. The Sellers acknowledge and consent to the
entry of stop transfer instructions with the Buyer's transfer agent and
registrar against the transfer of shares of Buyer Common Stock held by each
Seller except in compliance with the foregoing restrictions.
(b) In addition to the contractual restrictions on
transfer set forth in Section 6.11(a), the Buyer Common Stock (or interests
therein) held by the Sellers cannot be offered, sold or transferred unless such
Buyer Common Stock is registered and qualified under the Securities Act and
applicable state securities laws or exemptions from such registration and
qualification requirements are available, or such registration and qualification
requirements are inapplicable, as reflected in an opinion of counsel to any
transferring Seller in form and substance reasonably satisfactory to Buyer. In
the absence of an effective registration statement covering the Shares or an
available exemption from registration under the Securities Act, the Shares must
be held indefinitely, and may not be sold pursuant to Rule 144 promulgated under
the Securities Act unless all of the conditions of that rule are met. The
Sellers acknowledge that they will not have any right to demand registration of
any of the Buyer Common Stock held by them, or to participate in any
registration of Buyer Common Stock undertaken by Standard Pacific.
(c) The certificates issued to the Sellers representing
the Buyer Common Stock will bear a legend to the effect set forth below, and
appropriate stop transfer instructions against the Shares will be placed with
any transfer agent of Buyer to ensure compliance with the restrictions set forth
herein.
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT
BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER SUCH
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UNLESS STANDARD PACIFIC CORP.
HAS RECEIVED AN OPINION OF COUNSEL TO THE HOLDER OF THE SHARES OR OTHER
EVIDENCE, SATISFACTORY TO STANDARD PACIFIC CORP. AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED. IN ADDITION, THE TRANSFER, SALE, ASSIGNMENT,
PLEDGE, MORTGAGE, HYPOTHECATION, ENCUMBRANCE, GIFT OR OTHER DISPOSITION OF THE
SHARES REPRESENTED HEREBY IS RESTRICTED BY AN AGREEMENT, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF STANDARD PACIFIC CORP."
6.12 Warranty Indemnification. The Sellers, for a period
of five (5) years following the Closing Date, subject to a maximum out-of-pocket
liability of Four Million Dollars ($4,000,000) (the "Maximum Warranty Amount"),
shall jointly and severally indemnify, defend and hold harmless Standard
Pacific, Buyer and the Company for any Liability incurred by such Persons as a
result of Warranty Claims that relate to real property developed or homes sold
or constructed by the Company and its Affiliates prior to the Closing Date, to
the extent that such Liabilities exceed the sum of (i) the warranty reserve on
the financial statements of the Company as of the Closing Date, which amount
shall be mutually agreed by the parties at the Closing, and calculated in
accordance with GAAP and consistent with the standards, principles, practices
and policies used in connection with the Financial Statements, and (ii) U.S.
$100,000 (the "Warranty Threshold"). The indemnity described in the immediately
preceding sentence shall include, without limitation, all costs and
out-of-pocket expenses and a reasonable allocation of labor costs for persons
performing or directly overseeing the work Buyer deems reasonably necessary to
address such Warranty Claims. Sellers acknowledge that the Maximum Warranty
Amount is exclusive of all insurance proceeds, meaning that Sellers shall be
obligated to pay up to Four Million Dollars ($4,000,000) in Warranty Claims that
are not paid by insurance and that exceed the Warranty Threshold. Sellers shall
be obligated to promptly pay to Buyer the amount of all Warranty Claims in
excess of the Warranty Threshold irrespective of whether such amounts may be
potentially covered by insurance. If an amount initially paid by the Sellers
with respect to a Warranty Claim is later reimbursed by applicable insurance,
Standard Pacific shall cause Buyer to promptly reimburse Sellers for such
payment and the reimbursed payment will not count against the Maximum Warranty
Amount. If at any time Seller's no longer continue to serve as officers of the
Company, Standard Pacific shall cause the Company to provide written notice to
the Sellers of all Warranty Claims reasonably expected to result in settlement
and/or repair expenses in excess of $25,000. The Company shall take reasonable
actions to defend all Warranty Claims and to seek recovery with respect to such
claims under applicable insurance policies in effect immediately prior to the
Closing. The Sellers, at their sole expense, shall have the right to participate
in the defense of all Warranty Claims; provided, however, that the Company shall
have the sole right to control the defense and settlement of each such Warranty
Claim.
6.13 Insurance Rights and Indemnification. The Sellers
shall use their best efforts to cause Buyer and the Company to be named as an
additional insured as of the Closing (in form reasonably acceptable to Buyer
with applicable deductibles to be paid by Buyer or the Company) on all insurance
policies of the Sellers or their respective Affiliates that cover any of the
Liabilities of the Company arising with respect to acts or omissions on or prior
to the Closing Date, except to the extent such Liabilities are retained by the
Sellers pursuant to Section 7.2(a). In the event that the Sellers are unable to
add Buyer and the Company as an additional insured
pursuant to this Section 6.13, the Sellers shall afford the benefits of such
insurance rights to Buyer and the Company with respect to such Liabilities.
6.14 Release of Guaranties or Indemnification.
(a) Larry Godwin has executed certain guaranties solely for
the purpose of guaranteeing the payment by the Company (or certain entities
acquiring land for the benefit of the Company) of certain amounts owed by the
Company (or certain entities acquiring land for the benefit of the Company)
(each a "Guaranty" and collectively, the "Guaranties"). Set forth in Schedule
6.14 of the Company Disclosure Schedule, with respect to each Guaranty, is the
other party thereto, the entity that is the beneficiary of the Guaranty and the
amount guaranteed. The Sellers acknowledge that to the extent Larry Godwin has
entered into any guaranty that is not solely for the benefit of the Company such
guaranty will not be considered a Guaranty for purposes hereof and Buyer will
have no obligation to release or indemnify Larry Godwin with respect to such
guaranty.
(b) Buyer shall use reasonable efforts to cause Larry Godwin
to be released, as of the Closing Date, from any and all obligations under the
Guaranties. In the event that Buyer is unable to obtain a full and complete
release of Larry Godwin from any Guaranty, Standard Pacific shall cause Buyer to
indemnify Larry Godwin from any Damages Larry Godwin suffers or incurs to the
extent arising from any claim, action, suit, proceeding, or investigation, based
on actions or events after the Closing relating to such Guaranty, and shall
execute and deliver to Larry Godwin such other agreements or documents as
reasonably requested by Larry Godwin to properly evidence such indemnification
obligation.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall survive for two
years following the Closing Date. Notwithstanding the foregoing, the
representations and warranties set forth in Sections 3.1, 3.4, 4.2, 4.3, 4.8,
4.9, 4.11 and 4.12 shall survive for the applicable statute of limitations
period.
7.2 Indemnification.
(a) The Sellers shall, jointly and severally, indemnify
Standard Pacific, Buyer, their Affiliates (including the Company following the
Closing) and each of their respective officers, directors, employees,
stockholders, agents and representatives against and hold them harmless from any
loss, liability, diminution in value, claim, damage or expense (including
reasonable legal fees and expenses) (collectively "Damages") suffered or
incurred by any such indemnified party to the extent arising from (i) any breach
of any representation or warranty of either Seller contained in this Agreement,
or contained in any certificate delivered pursuant hereto or any breach of any
representation or warranty of LHL, HBG or Florida Pines in the Transaction
Documents; (ii) any breach of any covenant of the Sellers contained in this
Agreement or any breach of any covenant of LHL, HBG or Florida Pines contained
in the Transaction Documents; (iii) the business and operations of any business
owned or operated by
either of the Sellers or any of their Affiliates (other than the Company)
whether before or after the Closing Date; (iv) any Warranty Claims relating to
homes sold by the Company on or prior to the Closing Date, to the extent such
Damages exceed the Warranty Threshold and subject to the Maximum Warranty
Amount; and (v) any transaction between the Company and/or either of the Sellers
and either of Melissa Meloon or Douglas "Chip" Shively involving any Capital
Stock of the Company. The express written waiver by Buyer and Standard Pacific
of any condition set forth in Section 9.2 based on the inaccuracy of any
representation or warranty, or on the nonperformance of or noncompliance with
any covenant or obligation, will not preclude any right of Buyer or Standard
Pacific to indemnification, payment of Damages, or other remedy based on such
representation, warranty, covenant, and obligation.
(b) Buyer and Standard Pacific shall, jointly and
severally, indemnify the Sellers and their Affiliates and each of their
respective officers, directors, employees, stockholders, agents and
representatives against and hold them harmless from any Damages suffered or
incurred by any such indemnified party to the extent arising from (i) any breach
of any representation or warranty of Buyer contained in this Agreement or
contained in any certificate delivered pursuant hereto; (ii) any breach of any
covenant of Buyer contained in this Agreement, and (iii) any claim made under
any Contract disclosed in Schedule 5.4 for brokerage, commission, finders' fee
or any similar compensation. The express written waiver by the Sellers of any
condition set forth in Section 9.3 based on the inaccuracy of any representation
or warranty, or on the nonperformance of or noncompliance with any covenant or
obligation, will not preclude any right of Sellers to indemnification, payment
of Damages, or other remedy based on such representation, warranty, covenant,
and obligation.
7.3 Time Limitations. Neither the Buyer and Standard
Pacific, nor the Sellers will have any liability (for indemnification or
otherwise) with respect to any representation or warranty contained in this
Agreement, other than those in Sections 3.1, 3.4, 4.2, 4.3, 4.8, 4.9, 4.11, and
4.12, unless on or before two years following the Closing Date, the party
seeking indemnification notifies the party or parties from which it is seeking
indemnification in writing of a claim for Damages specifying the factual basis
of that claim in reasonable detail to the extent then known by such party. A
claim with respect to Section 3.1, 3.4, 4.2, 4.3, 4.8, 4.9, 4.11 or 4.12 may be
made at any time prior to 90 days after the expiration of the applicable statute
of limitations period.
7.4 Other Limitations.
(a) The Sellers will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
7.2(a)(i) (except for matters arising under Section 3.4 or Section 4.9 to which
the threshold described in this Section 7.4(a) shall be inapplicable) until the
total of all Damages with respect to such matters exceeds $100,000 (it being
agreed and acknowledged by the parties that for purposes of determining whether
the foregoing $100,000 threshold has been exceeded in the aggregate, the
representations and warranties of the Sellers contained herein shall not be
deemed qualified by any references herein to materiality generally or to whether
any such breach results or may result in a Material Adverse Effect on the
Company), and then only for the amount by which such Damages exceed $100,000.
(b) Buyer and Standard Pacific will have no liability
(for indemnification or otherwise) with respect to the matters described in
Section 7.2(b)(i) (except for matters arising under Section 5.4 to which the
threshold described in this Section 7.4(b) shall be inapplicable) until the
total of all Damages with respect to such matters exceeds $100,000 (it being
agreed and acknowledged by the parties that for purposes of determining whether
the foregoing $100,000 threshold has been exceeded in the aggregate, the
representations and warranties of Buyer and Standard Pacific contained herein
shall not be deemed qualified by any references herein to materiality generally
or to whether any such breach results or may result in a Material Adverse Effect
on Buyer or Standard Pacific), and then only for the amount by which such
Damages exceed $100,000.
7.5 Set-Off. In addition to any rights of set-off,
off-set or other rights that Buyer or Standard Pacific may have at common law,
by statute or otherwise, Buyer and Standard Pacific shall have the right to
set-off any amount that Buyer or Standard Pacific would otherwise be required to
pay to either Seller against any amounts owing from the Sellers to Buyer
pursuant to this Section 7; provided, however, that notwithstanding Buyer or
Standard Pacific's exercise of the right to set-off described in this Section
7.5, Buyer, Standard Pacific and the Sellers shall remain obligated to comply
with their respective obligations described in Section 7.6. Standard Pacific
shall cause the Buyer to provide written notice to the Sellers of the nature and
reason for any set-off that occurs pursuant to this Section 7.5.
7.6 Procedures Relating to Indemnification Involving
Third Party Claims.
(a) In order for a party to be entitled to any
indemnification provided for under this Agreement in respect of, arising out of
or involving a claim or demand made by any Person against the indemnified party
(a "Third Party Claim"), such indemnified party must notify the indemnifying
party in writing, and in reasonable detail, of the Third Party Claim within 10
Business Days after receipt by such indemnified party of written notice of the
Third Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure (except that the indemnifying party shall not be liable for any expenses
incurred during the period in which the indemnified party failed to give such
notice). Thereafter, the indemnified party shall deliver to the indemnifying
party, within five Business Days after the indemnified party's receipt thereof,
copies of all notices and documents (including court papers) received by the
indemnified party relating to the Third Party Claim. In the event the provisions
of Section 8.4 are inconsistent with any provision of this Article VII, the
provisions of Section 8.4 shall control with respect to the contest of tax
matters.
(b) If a Third Party Claim is made against an indemnified
party, the indemnifying party shall be entitled to participate in the defense
thereof and, if it promptly so chooses and acknowledges its obligation to
indemnify the indemnified party therefore, to assume the defense thereof with
counsel selected by the indemnifying party; provided that such counsel is not
reasonably object to by the indemnified party. Should the indemnifying party so
elect to assume the defense of a Third Party Claim, the indemnifying party shall
not be liable to the indemnified party for legal expenses subsequently incurred
by the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the indemnified party shall have the
right to participate in the defense thereof and to employ counsel
(not reasonably objected to by the indemnifying party), at its own expense,
separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense.
(c) The indemnifying party shall be liable for the fees
and expenses of counsel employed by the indemnified party in connection with a
Third Party Claim for any period during which the indemnifying party has failed
to assume the defense thereof (other than during the period prior to the time
the indemnified party shall have given notice of the Third Party Claim as
provided above). In connection with any Third Party Claim, the indemnified
parties and the indemnifying party shall cooperate with in the defense or
prosecution thereof. Such cooperation shall include the retention and (upon the
indemnified or indemnifying party's request) the provision to such party of
records and information which are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
(d) If the indemnifying party shall have assumed the
defense of a Third Party Claim, the indemnified party shall agree to any
settlement, compromise or discharge of a Third Party Claim which the
indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim and which would not otherwise adversely
affect the indemnified party. If the indemnifying party shall not have assumed
the defense of a Third Party Claim, the indemnified party may settle, compromise
or discharge, such Third Party Claim in good faith without the indemnifying
party's prior consent.
(e) Notwithstanding the foregoing, the indemnifying party
shall not be entitled to assume the defense of any Third Party Claim (and shall
be liable for the reasonable fees and expenses of counsel incurred by the
indemnified party in defending such Third Party Claim) if the Third Party Claim
seeks an order, injunction or other equitable relief or relief for other than
money damages against the indemnified party which the indemnified party
reasonably determines, after conferring with its outside counsel, cannot be
separated from any related claim for money damages. If such equitable relief or
other relief portion of the Third Party Claim can be so separated from that for
money damages, the indemnifying party shall be entitled to assume the defense of
the portion relating to money damages. All claims under Section 7.2 (a) other
than Third Party Claims shall be governed by Section 7.7.
7.7 Other Claims. In the event any indemnified party
should have a claim for Damages against any indemnifying party under Section
7.2(a) that does not involve a Third Party Claim being asserted against or
sought to be collected from such indemnified party, the indemnified party shall
deliver notice of such claim with reasonable promptness to the indemnifying
party. The failure by any indemnified party so to notify the indemnifying party
shall not relieve the indemnifying party from any liability which it may have to
such indemnified party under Section 7.2(a), except to the extent that the
indemnifying party demonstrates that it has been materially prejudiced by such
failure. If the indemnifying party does not notify the indemnified party within
10 calendar days following its receipt of such notice that the indemnifying
party disputes its Liability to the indemnified party under Section 7.2(a), such
claim specified by the indemnified party in such notice shall be conclusively
deemed a liability
of the indemnifying party under Section 7.2(a) and the indemnifying party shall
pay the amount of such liability to the indemnified party on demand or, in the
case of any notice in which the amount of the claim (or any portion thereof) is
estimated, on such later date when the amount of such claim (or such portion
thereof) becomes finally determined. If the indemnifying party has timely
disputed its liability with respect to such claim, as provided above, the
indemnifying party and the indemnified party shall proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction.
7.8 Sole and Exclusive Remedy. Should the Closing occur, (i) Buyer and
Standard Pacific's sole and exclusive remedies for any breach of the
representations, warranties or covenants of the Sellers under this Agreement and
any certificate delivered pursuant to this Agreement (other than claims of or
causes of action arising from fraud), shall be the remedies provided in this
Article VII and Article VIII, and Buyer and Standard Pacific hereby waive, from
and after the Closing, any and all other remedies (other than claims of or
causes of actions arising from fraud) which may be available at law or equity
for any breach or alleged breach of representations and warranties of the
Sellers hereunder, and (ii) the Sellers' sole and exclusive remedies for any
breach of the representations, warranties or covenants of Buyer and Standard
Pacific under this Agreement and any certificate delivered pursuant to this
Agreement (other than claims of or causes of action arising from fraud), shall
be the remedies provided in this Article VII and Article VIII, and each of the
Sellers hereby waive, from and after the Closing, any and all other remedies
(other than claims of or causes of actions arising from fraud) which may be
available at law or equity for any breach or alleged breach of representations
and warranties of Buyer and Standard Pacific hereunder.
ARTICLE VIII
TAX MATTERS
8.1 Section 338(h)(10) Elections.
(a) The parties intend that the acquisition by Buyer of the stock of
the Company qualify as a "qualified stock purchase" under Section 338 of the
Code. At Buyer's request, the Sellers shall join Buyer in making a timely
election under Section 338(h)(10) of the Code and any comparable election under
state or local law with respect to the acquisition of the Shares acquired
pursuant to this Agreement (the "Section 338(h)(10) Election"). Buyer and
Sellers shall be jointly responsible for the preparation and filing of all forms
that are necessary to effect the Section 338(h)(10) Election, including without
limitation an IRS Form 8023. Buyer and Sellers shall execute and timely file IRS
Forms 8023 and all other forms, returns, elections, schedules and documents
required to effect and preserve timely the Section 338(h)(10) Elections. After
the Closing Date, each party shall cooperate with the other and shall take all
actions reasonably requested by the other to assure timely and accurate filing
of the Section 338(h)(10) Elections.
(b) In connection with the Section 338(h)(10) Election, Buyer shall
reasonably determine, and the Sellers shall accept if reasonable, the fair
market values of the assets and liabilities deemed purchased for purposes of the
computation of the Aggregate Deemed Sale Price (as defined under applicable
Treasury Regulations) of the assets of the
Company with respect to which a Section 338(h)(10) Election is made and the
allocation of such Aggregate Deemed Sale Price among such assets (the
"Allocation Agreement") in accordance with Section 338 of the Code (the
"Valuations"). Buyer and the Sellers agree to act, and to cause their respective
Affiliates to act, in accordance with the allocations contained in the
Allocation Agreement in any relevant Tax Returns or similar filings.
(c) The Sellers and Buyer agree that, except as required by a final
determination with any tax authority, they will report, and will cause their
respective Affiliates to report, the transfers under this Agreement consistent
with the Section 338(h)(10) Election and will not take, or cause to be taken,
any action in connection with the filing of any Tax Return on behalf of the
Sellers, Buyer, or their Affiliates or otherwise that would be inconsistent with
or prejudice the Section 338(h)(10) Election or the Allocation Agreement, and
they will take all steps necessary to obtain comparable treatment, where
applicable, for state income Tax purposes.
(d) In the event a Section 338(h)(10) election is made, Buyer agrees to
pay to the Sellers an amount in cash such that the after-tax amount received by
the Sellers from this transaction as a result of the Section 338(h)(10) Election
equals the after-tax amount that the Sellers would have received as a result of
this transaction if the 338(h)(10) Election had not made (the "Gross-Up
Amount"). The Gross-Up Amount shall be computed assuming each Seller is taxable
at the maximum marginal federal tax rate applicable in 2002. Buyer shall provide
to the Sellers the initial computation of the Gross-Up Amount within a
reasonable time following the Closing Date. The Sellers shall have the right to
review and comment on such computations and, in the event the parties are unable
to resolve any differences, they shall appoint an Unrelated Accounting Firm to
finally resolve such differences and the Gross-Up Amount as so resolved shall be
paid to the Sellers five (5) days prior to the due date of Taxes (including
payments of estimated Taxes) resulting from the making of the 338(h)(10)
Election. The parties agree that any amounts paid by Buyer to the Sellers
hereunder shall be deemed to be an adjustment to the Purchase Price. The parties
further agree that all Tax Returns of the Company and the Sellers shall be
prepared in a manner consistent with the computations that form the basis for
the calculation of the Gross-Up Amount, and further agree not to take any
position inconsistent with such calculations.
(e) In the event the allocation set forth in the Allocation Agreement
changes as a result of a tax determination, accounting determination or
otherwise, or if any other item changes that affects the Gross-Up Amount, the
parties shall recalculate the Gross-Up Amount (the "Redetermined Gross-Up
Amount"). If the Redetermined Gross-Up Amount exceeds the Gross-Up Amount, Buyer
shall pay such excess to the Sellers and if the Redetermined Gross-Up Amount is
less than the Gross-Up Amount, the Sellers shall pay such excess to Buyer. Any
payments made pursuant to this Section 8.1(e) shall be treated by the parties as
adjustments to the Purchase Price.
8.2 Indemnification Obligations With Respect to Taxes.
(a) The Sellers shall be responsible for, and shall indemnify, defend
and hold harmless Buyer from and against:
(i) all Taxes of the Company that are due with respect to
periods customers or key ending on or prior to the Closing Date
including, without limitation, any Taxes resulting from the Corporate
Dividend;
(ii) all Taxes of the Company that are due with respect to
periods ("Straddle Periods") that include but do not end on the
Closing Date to the extent attributable to the portion of the Straddle
Period ending at the close of business on the Closing Date;
(iii) all losses resulting from any inaccuracy in or breach
of the representations and warranties with respect to tax matters that
are contained in Section 4.8 or in this Article 8 and any covenants
contained in this Agreement with respect to tax matters (without
giving effect to any supplement to the Company Disclosure Schedule
delivered after the date hereof), or contained in any certificate
delivered pursuant hereto ; and
(iv) all losses imposed on or sustained by the Buyer or its
Affiliates (including Company after the Closing Date), directly or
indirectly, by reason of or in connection with the foregoing amounts.
(b) The Buyer shall be responsible for, and shall indemnify,
defend and hold harmless the Sellers from and against:
(i) all Taxes of the Company that are due with respect to
periods commencing after the Closing Date;
(ii) all Taxes of the Company that are due with respect to
Straddle Periods to the extent attributable to the portion of the
Straddle Period commencing with the Closing Date;
(iii) all losses resulting from any breach of any covenants
of Buyer contained in this Agreement with respect to tax matters or
contained in any certificate delivered by Buyer pursuant hereto; and
(iv) all losses imposed on or sustained by the Sellers or
their Affiliates, directly or indirectly, by reason or in connection
with the foregoing amounts.
(c) For purposes of this Article VIII, whenever it is necessary
to determine the liability for Taxes of the Company for a Straddle Period, the
determination of the Taxes for the portion of the Straddle Period ending on and
including, and the portion of the Straddle Period beginning after, the Closing
Date shall be determined by assuming that the Straddle Period consisted of two
taxable years or periods, one which ended at the close of the Closing Date and
the other which began at the beginning of the day following the Closing Date,
and items of income, gain, deduction, loss or credit, and state and local
apportionment factors of the Company and its Subsidiaries for the Straddle
Period shall be allocated between such two taxable years or periods on a
"closing of the books basis" by assuming that the books of the Company and its
Subsidiaries were closed at the close of the Closing Date. However, (i)
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation and;
(ii) periodic taxes such real and personal property taxes shall be apportioned
ratably between such periods on a daily basis.
(d) Notwithstanding anything to the contrary in this Agreement
(including provisions set forth in Section 7.4 of this Agreement), the
obligations of the Sellers and Buyer under this Article VIII shall be
unconditional and absolute, shall not be limited, shall not be subject to a
deductible, threshold, cap, or similar concept, and shall remain in effect until
ninety (90) days after the expiration of all applicable statutes of limitation
as to time.
8.3 Tax Returns and Payment Responsibility.
(a) The Sellers will be responsible for and will cause to be prepared
and duly filed (i) all Tax Returns of the Company that are due before the
Closing Date and (ii) all Tax Returns of the Company that are income Tax Returns
for all taxable periods ending on or before the Closing Date. The Sellers shall
pay any Taxes due in respect of the Tax Returns described in the preceding
sentence. Buyer shall file or cause to be filed when due all Tax Returns with
respect to the Company, other than those that are the responsibility of the
Sellers pursuant to this paragraph. Without affecting the indemnification
obligations of the Sellers under this Agreement, in the event that the Sellers
fail to prepare and file or cause to be prepared and filed any Tax Return that
it is required to file to pursuant to this Paragraph, Buyer shall have the
right, but not the obligation, to prepare and file all such Tax Returns at their
expense. The Sellers shall pay by wire transfer to Buyer the Taxes for which
they are liable pursuant to this Article VIII (including Taxes set forth in
Section 8.2(a)(i) and (ii)), but which are payable with Tax Returns to be filed
by Buyer pursuant to this section at least three days prior to the due date for
the payment of such Taxes.
(b) All Tax Returns that are to be prepared and filed by Buyer pursuant
to the preceding paragraph and that relate to Taxes for which the Sellers are
liable under this Article VIII (including Straddle Period Tax Returns) shall be
submitted to the Sellers not later than fifteen (15) days prior to the due date
for filing of such Tax Returns (or if such due date is within 45 days following
the Closing Date, as promptly as practicable following the Closing Date). The
Sellers shall have the right to review such Tax Returns and to review all work
papers and procedures used to prepare any such Tax Return. If the Sellers,
within ten (10) Business Days after delivery of any such Tax Return, notifies
Buyer in writing that it objects to any of the items in such Tax Return, the
parties shall attempt in good faith to resolve the dispute and, if they are
unable to do so, the disputed items shall be resolved (within a reasonable time,
taking into account the deadline for filing such Tax Return) by an
internationally recognized independent accounting firm chosen by both the Buyer
and the Sellers. Upon resolution of all such items, the relevant Tax Return
shall be filed on that basis. The costs, fees and expenses of such accounting
firm shall be borne equally by the Buyer and the Sellers.
(c) Buyer shall not (and shall not cause or permit Company to) amend,
refile or otherwise modify (or grant an extension of any statute of limitation
with respect to) any Tax Return relating in whole or in part to Company with
respect to any taxable year or period ending on or before the Closing Date or
with respect to any Straddle Period without the prior written consent of the
Sellers, which consent may not be unreasonably withheld or delayed. The Sellers
shall not amend, refile, or otherwise modify any such Tax Return if such action
could have an
adverse affect on the liability of Company any Taxes for the post-closing
portion of a Straddle Period or for any Taxes for a taxable year or period
beginning after the Closing Date, without the prior written consent of the
Buyer, which consent may not be unreasonably withheld or delayed.
(d) All sales, use, transfer and other similar Taxes, including any
stock or asset transfer stamp Taxes shall be borne jointly and severally by the
Sellers.
8.4 Contest Provisions.
(a) In the event (i) either Seller or their Affiliates or (ii) Buyer or
its Affiliates receive notice of any pending or threatened Tax audits or
assessments or other disputes concerning Taxes with respect to which the other
party may incur liability under this Article VIII, the party in receipt of such
notice shall promptly notify the other party of such matter in writing, provided
that failure to comply with this provision shall not affect a party's right to
indemnification hereunder unless such failure materially adversely affects the
party's ability to challenge such Tax audits or assessments.
(b) The Sellers shall have the sole right to represent the interests of
the Company in any Tax audit or administrative or court proceeding relating to
any Tax for any taxable period ending on or before the Closing Date, and to
employ counsel of their choice at their expense. Notwithstanding the foregoing,
the Sellers shall not be entitled to settle, either administratively or after
the commencement of litigation, any claim for Taxes with respect to any Separate
Return which would adversely affect the liability for Taxes of Buyer or the
Company for any period after the Closing Date to any extent (including, but not
limited to, the imposition of income Tax deficiencies, the reduction of asset
basis or cost adjustments, the lengthening of any amortization or depreciation
periods, the denial of amortization or depreciation deductions, or the reduction
of the loss or credit carry forwards) without the prior written consent of
Buyer, which consent shall not be unreasonably withheld, and such consent shall
not be necessary to the extent that the Sellers have indemnified Buyer against
the effect of any such settlement.
(c) Buyer shall have the sole right to represent the interests of the
Company in any Tax audit or administrative or court proceeding relating to Taxes
with respect to taxable periods including (but not ending on) or beginning after
the Closing Date and to employ counsel of its choice at its expense, provided
that Buyer shall not be entitled to settle, either administratively or after the
commencement of litigation, any claim regarding Taxes that would adversely
affect the liability of Sellers for any Taxes for any period ending on or before
the Closing Date or for any Straddle Period, which consent shall not be
unreasonably withheld and shall not be required to the extent that Buyer has
indemnified Sellers against the effects of such settlement. Where consent to a
settlement is withheld by the Sellers pursuant to this section, the Sellers may
continue or initiate any further proceedings at its own expense, provided that
the liability of the Buyer, after giving effect to this Agreement, shall not
exceed the liability that would have resulted from the settlement or amended
return.
8.5 Assistance and Cooperation. After the Closing Date, Sellers, on the one
hand, and Buyer, on the other hand, shall (and shall cause their respective
Affiliates to): (a) assist the other party in preparing and filing any Tax
Returns or reports which such other party is responsible for preparing and
filing in accordance with this Article; (b) cooperate fully in
preparing for any audits of, or disputes with taxing authorities regarding, any
Tax Returns of the Company; (c) make available to the other and to any taxing
authority as reasonably requested all information, records, and documents
relating to Taxes of the Company; (d) provide timely notice to the other in
writing of any pending or threatened Tax audits or assessments of the Company
for taxable periods for which the other may have a liability under this Article;
and (e) furnish the other with copies of all correspondence received from any
taxing authority in connection with any Tax audit or information request with
respect to any such taxable period.
8.6 Retention of Records. After the Closing Date, the Sellers and Buyer
(including the Company) will preserve all information, records or documents
relating to liabilities for Taxes the Company until six months after the
expiration of any applicable statute of limitations (including extensions
thereof) with respect to the assessment of such Taxes, provided that neither
party shall dispose of any of the foregoing items without first offering such
items to the other party.
8.7 Other Provisions. The provisions of this Article VIII (and not Section
7.2) shall govern all indemnity claims with respect to Tax matters of the
Company and the purchase of the Shares pursuant to this Agreement. All indemnity
payments under this Agreement and any adjustment to any Earnout Payment as
described in Section 2.3 shall be treated as an adjustment to the Purchase Price
paid for the Shares for tax purposes.
ARTICLE IX
CONDITIONS
9.1 Conditions to Each Party's Obligation to Effect the Stock Purchase.
The respective obligations of each party to effect the Stock Purchase and the
other transactions contemplated hereby are subject to the satisfaction or waiver
at or prior to the Closing Date of each of the following conditions:
(a) All filings with any Governmental Entity required to be made
prior to the Closing Date by the Sellers, Buyer, Standard Pacific or any of
their respective Affiliates, and all consents of any Governmental Entity
required to be obtained prior to the Closing Date by the Sellers, Buyer Standard
Pacific or any of their respective Affiliates in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein by the Sellers, Buyer and Standard Pacific shall have been
made or obtained (as the case may be), except where the failure to so make or
obtain will not result in a Material Adverse Effect upon Buyer, Standard
Pacific, the Sellers or the Company.
(b) No court or other Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) (collectively, an "Order") that is in effect and
restrains, enjoins or otherwise prohibits consummation of the transactions
contemplated in this Agreement. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (or by any other person any
suit, action or proceeding which has a reasonable likelihood of success),
challenging or seeking to restrain or prohibit the purchase and sale of the
Shares or any of the other transactions contemplated by this Agreement.
9.2 Conditions to Obligations of Buyer. The obligations of Buyer and
Standard Pacific to effect the Stock Purchase are also subject to the
satisfaction or waiver by Buyer and Standard Pacific at or prior to the Closing
Date of the following conditions:
(a) the representations and warranties of the Sellers set forth in
this Agreement qualified as to materiality shall be true and correct, and those
not so qualified shall be true and correct in all material respects, as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except to the extent such representations and warranties speak
as of an earlier date, in which case such representation or warranty shall be
true and correct as of such earlier date);
(b) the Sellers shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date;
(c) Buyer shall have been furnished with a certificate, executed by
each of the Sellers, dated the Closing Date, certifying as to the fulfillment of
the conditions in Sections 9.2(a) and (b);
(d) any consents required to be obtained from any Governmental
Entities or other Persons shall have been obtained and delivered to Buyer
(including, without limitation, any qualifications or other consents necessary
from the State of Florida with respect to the creation and registration of
Colony Communities or any qualification to do business of any general or limited
partner of Colony Communities);
(e) Buyer shall have received an opinion dated the Closing Date of
counsel to Sellers, substantially in the form of Exhibit E;
(f) there shall not be pending or threatened by any Governmental
Entity any suit, action or proceeding (or by any other Person any suit, action
or proceeding which has a reasonable likelihood of success), (A) seeking to
obtain from Buyer in connection with the purchase and sale of the Shares or the
other transactions contemplated hereby any money damages that are material in
relation to Buyer taken as a whole; (B) seeking to prohibit or limit the
ownership or operation by Buyer, or any of the Company, of any material portion
of the business or assets of Buyer or the Company taken as a whole, or to compel
Buyer, or any of the Company to dispose of or hold separate any material portion
of the business or assets of Buyer or the Company taken as a whole, in each case
as a result of the purchase and sale of the Shares or any of the other
transactions contemplated by this Agreement; (C) seeking to impose limitations
on the ability of Buyer to acquire or hold, or exercise full rights of ownership
of, any of the real property that is the subject of the Transaction Documents,
the Shares, including the right to vote the Shares on all matters properly
presented to the stockholders of the Company; or (D) seeking to prohibit Buyer
from effectively controlling in any material respect the business or operations
of the Company;
(g) since the date of this Agreement, there shall have been no event,
change, occurrence or circumstance having, or which could have, individually or
in the aggregate a Material Adverse Effect on the Company or any of the real
property that is the subject of the Transaction Documents;
(h) Buyer shall have received the resignations of the director and
officers of the Company pursuant to Section 6.9;
(i) Buyer shall have received a duly executed and delivered copy of:
(A) the HBG Assignment Agreement;
(B) the Florida Pines Purchase Agreement and the closing
documents evidencing consummation of the transactions contemplated by the
Florida Pines Purchase Agreement (including, without limitation, executed
original mortgage reconveyances, lien releases, deeds and title insurance in the
name of Colony Communities);
(C) the High Grove Purchase Agreement and the closing documents
evidencing consummation of the transactions contemplated by the High Grove
Purchase Agreement (including, without limitation, executed original mortgage
reconveyances, lien releases, deeds and title insurance in the name of Colony
Communities); and
(D) a completed United States Internal Revenue Service Form 8023
from each of the Sellers and Melissa Meloon;
(E) a release of all guaranties, indemnities and similar
agreements made by the Company in such form as is acceptable to the Buyer in its
sole discretion;
(j) all assets of the Company and all of the real property that is
the subject of the Transaction Documents shall be free and clear of all Liens
and Buyer shall have received original UCC Termination Statements and mortgage
reconveyances suitable for filing with the appropriate authorities to evidence
the release of such Liens;
(k) the agreements listed on Schedule 3.1(b) shall have been
terminated; and
(l) all bonus or other compensation plans or arrangements between the
Company and either of the Sellers that are not applicable to employees of the
Company generally shall have been terminated, except for those that are
specifically approved in writing by the Buyer.
9.3 Conditions to Obligations of the Sellers. The obligations of the
Sellers to effect the Stock Purchase are also subject to the satisfaction or
waiver by the Sellers prior to the Closing Date of the following conditions:
(a) the representations and warranties of Buyer and Standard Pacific
set forth in this Agreement qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all material
respects, as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent such representations
and warranties speak as of an earlier date, in which case such representation or
warranty shall be true and correct as of such earlier date);
(b) Buyer shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date;
(c) the Sellers shall have been furnished with a certificate,
executed by a duly authorized officer of Buyer, dated the Closing Date,
certifying as to the fulfillment of conditions in Sections 9.3(a) and (b);
(d) Buyer shall have delivered the Closing Payment to each of the
Sellers;
(e) the Sellers shall have received an opinion dated the Closing
Date of Gibson, Dunn & Crutcher LLP, counsel to Buyer, substantially in the form
of Exhibit F;
(f) any consents required to be obtained from any Governmental
entities or other Person shall have been obtained and delivered to Sellers; and
(g) the Buyer shall have either obtained a release from, or
indemnified Larry Godwin with respect to, each Guaranty as contemplated by
Section 6.14.
ARTICLE X
TERMINATION
10.1 Termination by Mutual Consent. This Agreement may be terminated and
the Stock Purchase may be abandoned at any time prior to the Closing Date, by
mutual written consent of the Sellers, Buyer and Standard Pacific.
10.2 Termination by Either Buyer or Sellers. This Agreement may be
terminated and the Stock Purchase may be abandoned at any time prior to the
Closing Date by either Standard Pacific and Buyer or the Sellers if any Order
permanently restraining, enjoining or otherwise prohibiting the Stock Purchase
or the acquisition by Colony Communities of any of the real property that is the
subject of the Transaction Documents shall be entered and such Order is or shall
have become nonappealable, provided that (i) the party seeking to terminate this
Agreement shall have complied with its obligations under Section 6. 2 with
respect to the removal or lifting of such Order and (ii) the noncompliance with
this Agreement by the party seeking to terminate this Agreement shall not have
been the proximate cause of the issuance of the Order.
10.3 Termination by Sellers. This Agreement may be terminated and the
Stock Purchase may be abandoned at any time prior to the Closing Date, by the
Sellers if:
(a) (i) the Stock Purchase shall not have been consummated on or
before May 17, 2002, or
(ii) any of the conditions set forth in Section 9.1 or 9.3 shall
have become incapable of fulfillment;
provided, however, that the right to terminate this Agreement pursuant to
this subsection (a) shall not be available to the Sellers if either of them has
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the failure referenced in this
subsection (a); or
(b) there has been a material breach by Buyer or Standard Pacific of
any representation, warranty, covenant or agreement contained in this Agreement
that is not curable
or, if curable, is not cured prior to the earlier of (i) 30 days after written
notice of such breach is given by the Sellers to Buyer and Standard Pacific and
(ii) the date referred to in subsection (a).
10.4 Termination by Buyer. This Agreement may be terminated and the Stock
Purchase may be abandoned at any time prior to the Closing Date by Buyer and
Standard Pacific if:
(a) (i) the Stock Purchase shall not have been consummated on or
before May 17, 2002, or
(ii) any of the conditions set forth in Section 9.1 or
Section 9.2 shall have become incapable of fulfillment;
provided, however, that the right to terminate this Agreement pursuant to this
subsection (a) shall not be available to Buyer or Standard Pacific if they have
breached in any material respect their obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
referred to in this subsection (a); or
(b) there has been a material breach by either Seller of any
representation, warranty, covenant or agreement contained in this Agreement that
is not curable or, if curable, is not cured prior to the earlier of (i) 30 days
after written notice of such breach is given by Buyer or Standard Pacific to
such party and (ii) the date referred to in subsection (a).
10.5 Effect of Termination. Each party's right of termination under this
Article X is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated, all further obligations of the
parties under this Agreement will terminate, except that the confidentiality
obligations described in Section 12 of the Letter of Intent between the Company,
the Sellers and Standard Pacific, dated April 3, 2002 (the "Confidentiality
Agreement") will survive; provided, however, that if this Agreement is
terminated by a party because of the breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
ARTICLE XI
MISCELLANEOUS
11.1 Entire Agreement; Assignment.
(a) This Agreement (including the documents, schedules, exhibits and
the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, and
all contemporaneous oral agreements and understandings among the parties with
respect to the subject matter hereof, except for the provisions of the
Confidentiality Agreement not inconsistent herewith. Except for express
representations, warranties and covenants of Standard Pacific, Buyer, and the
Sellers contained herein, in the Transaction Documents, or made by the executive
officers or other authorized officers of such Persons in writing after the date
hereof, there are no representations or
warranties whatsoever by or on behalf of the Sellers, their Affiliates or agents
relating to the Company, on the one hand and Standard Pacific, Buyer, their
Affiliates or agents relating to Standard Pacific or Buyer, on the other hand.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of each other
party hereto; provided, however, that Buyer may assign all or a portion of its
rights and obligations under this Agreement to any Subsidiary of Standard
Pacific without the consent of the Sellers (which such assignment shall not
relieve the Buyer of any obligation or liability under this Agreement); provided
that such assignee shall have:
(i) assumed all obligations of Buyer set forth in this
Agreement,
(ii) made the representations and warranties contained in
Article V hereof,
(iii) provided to the Sellers appropriate evidence of the
representation set forth in Section 5.6, and
(iv) provided a Buyer's Disclosure Schedule covering matters in
Article V which is reasonably acceptable to the Sellers.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
11.2 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, each of which shall remain in full force and effect and in
lieu of such invalid or unenforceable provision there shall be automatically
added as part of this Agreement a valid and enforceable provision as similar in
terms to the invalid or unenforceable provision as possible, provided that this
Agreement as amended, (i) reflects the intent of the parties hereto, and (ii)
does not change the bargained for consideration or benefits to be received by
each party hereto.
11.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or telecopier to the
respective parties as follows:
If to Standard Pacific or Buyer:
Standard Pacific Corp.
15326 Alton Parkway
Irvine, CA 92618
Attn: Clay A. Halvorsen
Facsimile Number: (949) 789-1609
with a copy to
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071-3197
Facsimile Number: (213) 229-7520
Attn: Gregory L. Surman
If to either Seller:
Robert Godwin
2613 Park Place Drive
Orlando, Florida 32803
Facsimile Number:407-647-3435
with a copy to
Smith Mackinnon, PA
255 South Orange Avenue, Suite 800
Orlando, Florida 32801
Attention: Jack Greeley
Facsimile Number: (407) 843-2448
or to such other address as the Person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
11.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the laws
or rules that might otherwise govern under applicable principles of conflicts of
laws thereof. In the event of the bringing of any action or suit by a party
hereto against another party hereunder by reason of any breach of any of the
covenants or agreements or any inaccuracies in any of the representations and
warranties on the part of another party arising out of this Agreement, or any
other dispute between the parties concerning this Agreement, then in that event,
the prevailing party in such action or dispute, whether by final judgment, or
out of court settlement shall be entitled to have and recover of and from the
other party all costs and expenses of suit, including actual attorneys' fees.
Any judgment or order entered in any final judgment shall contain a specific
provision providing for the recovery of all costs and expenses of suit,
including actual attorneys' fees
(collectively "Costs") incurred in enforcing, perfecting and executing such
judgment. For the purposes of this paragraph, Costs shall include, without
limitation, attorneys' fees, costs and expenses incurred in (a) post-judgment
motions, (b) contempt proceeding, (c) garnishment, levy, and debtor and third
party examination, (d) discovery, and (e) bankruptcy litigation. This paragraph
shall survive any termination of this Agreement and the Closing.
11.5 Construction. The headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement. Unless the context clearly requires otherwise
"or" is not exclusive.
11.6 Counterparts. This Agreement may be executed in counterparts,
including facsimile counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement. Delivery
of an executed counterpart of a signature page to this Agreement by facsimile
transmission shall be effective delivery of a manually executed counterpart to
this Agreement.
11.7 Parties In Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement,
including any employee or former employee of the Company (or any beneficiary or
dependent thereof).
11.8 Waiver. The waiver by any party of any right under this Agreement or
to a remedy for the breach of any of the provisions herein shall not operate nor
be construed by the breaching party as a waiver of the non-breaching party's
remedies with respect to any other or continuing or subsequent breach. No waiver
of any breach of the provisions of this Agreement will be deemed to have been
made by any party, unless such waiver is expressed in writing and signed by the
party against which it is to be enforced. The failure of any party to insist
upon strict performance of any such provisions will not be construed as a waiver
for any continuing breach.
11.9 Amendments. No amendment, modification or waiver in respect of this
Agreement shall be effective unless it shall be in writing and signed by the
parties hereto.
11.10 Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as any other
party hereto may reasonably request for the purpose of carrying out the
transactions contemplated by this Agreement.
11.11 Cumulative Remedies. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any other rights, remedies,
powers and privileges provided by law.
[Signature page follows]
[SIGNATURE PAGE - STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
"SELLERS"
By: /s/ Larry Goodwin By: /s/ Robert Goodwin
----------------- ------------------
Name: Larry Godwin Name: Robert Godwin
"STANDARD PACIFIC"
Standard Pacific Corp.,
a Delaware corporation
By: /s/ Stephen J. Scarborough By: /s/ Michael C. Cortney
-------------------------- ----------------------
Name: Stephen J. Scarborough Name: Michael C. Cortney
Title Chairman of the Board & CEO Title President
"BUYER"
Colony Communities, Inc.
a Delaware corporation
By: /s/ Stephen J. Scarborough By: /s/ Clay A. Halvorsen
-------------------------- ----------------------
Name: Stephen J. Scarborough Name: Clay A. Halvorsen
Title President Title Vice President & Secretary