EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 17, 1998
AMONG
FLEETWOOD ENTERPRISES, INC.,
HUSA ACQUISITION COMPANY,
AND
HOMEUSA, INC.
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of February 17,
1998, among Fleetwood Enterprises, Inc., a Delaware corporation ("Parent"), HUSA
Acquisition Company, a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and HomeUSA, Inc., a Delaware corporation (the "Company").
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company,
and Parent acting as the sole stockholder of Sub, have approved the merger of
the Company with and into Sub (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, pursuant to which each issued and
outstanding share of the Company's Stock, par value $.01 per share and each
issued and outstanding share of the Company's Restricted Voting Common Stock,
par value $.01 per share (collectively, the "Company Common Stock"), other than
shares owned directly or indirectly by Parent or the Company, will be converted
into the right to receive the Merger Consideration (as defined in Section
2.01(a)); and
WHEREAS, Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), the Company shall be merged with and into Sub at the Effective Time
(as defined in Section .03). Following the Effective Time, the separate
corporate existence of the Company shall cease and Sub shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of the Company in accordance with the
DGCL.
(b) At the election of Parent, any direct wholly owned subsidiary of
Parent may be substituted for Sub as a constituent corporation in the
Merger. In such event, the parties agree to execute an appropriate amendment
to this Agreement in order to reflect such substitution.
SECTION 1.02. CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on Friday May 29, 1998 or (subject to the prior satisfaction
or waiver of the conditions set forth in Sections 6.01, 6.02 and 6.03)
thereafter no later than the second business day after the day on which the
conditions set forth in Section 6.01 have been satisfied or waived, at the
offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
unless another time, date or place is agreed to in writing by the parties
hereto. The date on which the Closing occurs is hereinafter referred to as the
"Closing Date."
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the
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DGCL and shall make all other filings or recordings required under the DGCL to
effectuate fully the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Delaware Secretary of State, or
at such other time as Sub and the Company shall agree should be specified in the
Certificate of Merger (the time the Merger becomes effective being hereinafter
referred to as the "Effective Time").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The certificate of incorporation of Sub as in effect at the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law; PROVIDED that Article One of the certificate of
incorporation of the Surviving Corporation shall be amended in its entirety
to read as follows: "The name of the corporation is HomeUSA, Inc."
(b) The by-laws of Sub as in effect at the Effective Time shall be the
by-laws of the Surviving Corporation, until thereafter changed or amended as
provided therein or by applicable law.
SECTION 1.06. DIRECTORS. The directors of Sub, immediately prior to the
Effective Time shall become the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly appointed or elected, as the case may be, in accordance with the
certificate of incorporation of the Surviving Corporation and applicable law.
SECTION 1.07. OFFICERS. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly appointed or elected and qualified, as the case may be, in accordance with
the certificate of incorporation of the Surviving Corporation and applicable
law.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Sub, the Company or the
holders of any of the following securities:
(a) Subject to the election and allocation provisions set forth below,
each share of Company Common Stock issued and outstanding immediately prior
to the Effective Time (excluding any treasury shares and shares held
directly or indirectly by Parent) shall be converted into:
(i) the right to receive a number of shares of Parent's Common
Stock, $1.00 par value, including associated Parent Rights (as defined in
Section 3.02(c)) ("Parent Common Stock"), equal to the quotient
(calculated to the nearest 0.0001) of $10.25 (the "Per Share Cash
Amount") divided by the Valuation Period Stock Price (the "Exchange
Ratio"); or
(ii) the right to receive in cash, without interest, the Per Share
Cash Amount;
PROVIDED, HOWEVER, that, in any event, if between the date of this
Agreement and the Effective Time the outstanding shares of Parent Common
Stock or Company Common Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Exchange Ratio and the Per Share Cash Amount shall
be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares. The "Valuation Period Stock Price" means the average of the NYSE (as
defined in Section 6.01) closing sale prices for the Parent Common Stock (as
reported in THE WALL STREET JOURNAL or, in the absence
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thereof, by another authoritative source) for the ten consecutive
trading-day period ending on the tenth day immediately prior to the
anticipated Closing Date.
Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (excluding any treasury shares and shares held
directly or indirectly by Parent) shall at the Effective Time no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each certificate previously evidencing any such shares
("Certificates") shall thereafter represent the right to receive only the
Merger Consideration. The holders of Certificates shall cease to have any
rights with respect to the shares of Company Common Stock previously
represented thereby, except as otherwise provided herein or by law. Such
certificates previously evidencing such shares of Company Common Stock shall
be exchanged for (A) certificates evidencing whole shares of Parent Common
Stock issued in consideration therefor or (B) the Per Share Cash Amount
multiplied by the number of shares previously evidenced by the canceled
Certificate or (C) a combination of such certificates and cash, in each case
in accordance with the allocation procedures of this Section 2.01 and upon
the surrender of such Certificates in accordance with the provisions of
Section 2.02, without interest. No fractional shares of Parent Common Stock
shall be issued and, in lieu thereof, a cash payment shall be made pursuant
to Section 2.02(e).
The consideration provided for in this Section 2.01(a) in exchange for
each share of Company Common Stock is referred to herein as the "Merger
Consideration" and the aggregate of such consideration provided in exchange
for all shares of Company Common Stock is referred to herein as the
"Aggregate Merger Consideration."
(b) Election forms in such form as Parent and the Company shall mutually
agree (each a "Form of Election") and a Letter of Transmittal (as defined in
Section 2.02(b)) shall be mailed 30 days prior to the anticipated Effective
Time, or such other date as Parent and the Company shall agree (the "Mailing
Date"), to each holder of record of Company Common Stock as of five business
days prior to the Mailing Date (the "Election Form Record Date"). Each
Election Form shall permit the holder (or the beneficial owner through
appropriate and customary documentation and instructions) to choose to
receive (subject to the allocation and proration procedures set forth below)
one of the following in exchange for such holder's shares of Company Common
Stock: (i) only cash (a "Cash Election"), (ii) only Parent Common Stock (a
"Stock Election") or (iii) the Mixed Consideration (a "Mixed Election").
Alternatively, each Election Form will permit the holder to indicate that
such holder has no preference as to the receipt of cash or Parent Common
Stock for such holder's shares of Company Common Stock (a "Non-Election").
No Company director or former principal stockholder of the Founding
Companies (as defined in the Company S-1) shall be entitled to elect to
receive more than 25% of his Merger Consideration in cash. Holders of record
of shares of Company Common Stock who hold such shares as nominees, trustees
or in other representative capacities (a "Representative") may submit
multiple Forms of Election, provided that such Representative certifies that
each such Form of Election covers all the shares of Company Common Stock
held by each Representative for a particular beneficial owner.
Any Company Common Stock (excluding any treasury shares and shares held
directly or indirectly by Parent) with respect to which the holder (or the
beneficial owner, as the case may be) shall not have submitted to the
Exchange Agent an effective, properly completed Election Form on or before
5:00 p.m. (New York City time) on the 25th day following the Mailing Date
(or such other time and date as Parent and the Company may mutually agree)
(the "Election Deadline") shall be deemed to be shares of Company Common
Stock with respect to which a Non-Election has been made.
Parent shall make available (or shall cause the Exchange Agent to make
available) one or more separate Election Forms to all persons who become
holders (or beneficial owners) of Company Common Stock between the Election
Form Record Date and the close of business on the business day prior to the
Election Deadline upon such holder's request to the Exchange Agent, and the
Company
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shall provide to the Exchange Agent all information reasonably necessary for
it to perform as specified herein.
Any such election shall have been properly made only if the Exchange
Agent shall have actually received a properly completed Election Form by the
Election Deadline. An Election Form shall be deemed properly completed only
if accompanied by one or more Certificates (or affidavits and
indemnification regarding the loss or destruction of such Certificates
reasonably acceptable to Parent or the guaranteed delivery of such
Certificates) representing all shares of Company Common Stock covered by
such Election Form, together with a duly executed Letter of Transmittal. Any
Election Form may be revoked or changed by the person submitting such
Election Form at or prior to the Election Deadline. In the event an Election
Form is revoked prior to the Election Deadline, the shares of Company Common
Stock represented by such Election Form shall be deemed to be shares covered
by a Non-Election (unless thereafter covered by a duly completed Election
Form) and Parent shall cause the Certificates to be promptly returned
without charge to the person submitting the Election Form upon written
request to that effect from such person.
Parent will have the discretion, which it may delegate in whole or in
part to the Exchange Agent, to determine whether Forms of Election have been
properly completed, signed and submitted or revoked and to disregard
immaterial defects in Forms of Election. If Parent (or the Exchange Agent)
shall determine that any purported Cash Election or Stock Election was not
properly made, such purported Cash Election or Stock Election shall have no
force and effect and the holder making such purported Cash Election or Stock
Election shall for purposes hereof be deemed to have made a Non-Election.
The decision of Parent (or the Exchange Agent) in all such matters shall be
conclusive and binding. Neither Parent nor the Exchange Agent will be under
any obligation to notify any person of any defect in a Form of Election
submitted to the Exchange Agent. The Exchange Agent shall also make all
computations contemplated by this Section 2.01 and all such computations
shall be conclusive and binding on the holders of Company Common Stock.
(c) If the sum of the aggregate number of shares covered by Cash
Elections (the "Cash Election Shares") and the aggregate number of such
shares covered by Mixed Elections to be acquired for cash (the "Mixed
Election Cash Shares") times the Per Share Cash Amount exceeds 49% (or such
lesser percentage as may be permissible to permit the reorganization tax
treatment provided for herein) of the Aggregate Merger Consideration (the
"Maximum Cash Merger Consideration"), then:
(i) all shares of Company Common Stock covered by Stock Elections
(the "Stock Election Shares") and all shares of Company Common Stock
covered by Non-Elections (the "Non-Election Shares") shall be converted
into the right to receive Parent Common Stock; and
(ii) each Cash Election Share and each Mixed Election Cash Share
shall be converted into the right to receive (A) a pro-rated cash portion
of the Per Share Cash Amount such that the aggregate cash payments do not
exceed the Maximum Cash Merger Consideration and (B) the balance of the
Per Share Cash Amount in Parent Common Stock at the Exchange Ratio;
(d) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Parent or any direct
or indirect wholly owned subsidiary of Parent or of the Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(e) Each issued and outstanding share of capital stock of Sub shall
continue as a validly issued, fully paid and nonassessable share of common
stock, par value of $.01 per share, of the Surviving Corporation Each
certificate representing any such shares of Sub shall continue to represent
the same number of shares of common stock of the Surviving Corporation.
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SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit
with such bank or trust company as may be designated by Parent (the
"Exchange Agent"), for the benefit of the holders of shares of Company
Common Stock, for exchange in accordance with this Article II, through the
Exchange Agent, (i) certificates representing the shares of Parent Common
Stock issuable pursuant to Section 2.01 in exchange for outstanding shares
of Company Common Stock and (ii) cash in the amount sufficient to pay the
cash portion of the Aggregate Merger Consideration (such shares and cash
consideration, together with any dividends or distributions with respect
thereto with a record date on or after the day on which the Effective Time
occurs and any cash payable in lieu of any fractional shares of Parent
Common Stock being hereinafter referred to as the "Exchange Fund").
(b) EXCHANGE PROCEDURES. No later than the business day after the
Effective Time, the Exchange Agent shall mail or, if requested, deliver to
each holder of record of a Certificate or Certificates immediately prior to
the Effective Time, whose shares were converted into the right to receive
the Merger Consideration pursuant to Section 2 01, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the
Merger Consideration (collectively, the "Letter of Transmittal"), unless
such record holder shall have submitted a Letter of transmittal together
with the Form of Election pursuant to Section 2.01(c). Upon the later of the
Effective Time and the surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor
(x) a certificate representing that number of whole shares of Parent Common
Stock and (y) a certified or bank cashier's check in the amount equal to the
cash, which such holder has the right to receive pursuant to the provisions
of this Article II (in each case, less the amount of any withholding taxes
required under applicable law), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the Company,
a certificate representing the proper number of shares of Parent Common
Stock may be issued to a person (as defined in Section 8.03) other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or
other taxes required by reason of the issuance of shares of Parent Common
Stock to a person other than the registered holder of such Certificate or
establish to the satisfaction of Parent that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.02(b),
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration and any cash in lieu of a fractional share of Parent Common
Stock which the holder thereof has the right to receive in respect of such
Certificate pursuant to this Article II. No interest will be paid or will
accrue on any cash payable to holders of Certificates pursuant to this
Article II.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. Notwithstanding
any other provisions of this Agreement, no dividends or other distributions
with respect to shares of Parent Common Stock with a record date on or after
the day on which the Effective Time occurs shall be paid to the holder of
any unsurrendered Certificate with respect to the shares of Parent Common
Stock represented thereby, and no cash in lieu of a fractional share of
Parent Common Stock shall be paid to any such holder pursuant to this
Article II, and all such dividends, other distributions and cash in lieu of
any fractional share of Parent Common Stock shall be paid by Parent to the
Exchange Agent (less the amount of any required withholding taxes) and shall
be included in the Exchange Fund, in each case until the surrender of such
Certificate in accordance with this Article II. Following surrender of any
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such Certificate, there shall be issued or paid, as applicable, to the
holder thereof (i) at the time of such surrender, (x) a certificate
representing whole shares of Parent Common Stock issued in exchange
therefor, (y) the cash portion of the Merger Consideration and any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to this Article II and (z) the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock
(in each case, without interest and less the amount of any required
withholding taxes); and (ii)) at the appropriate payment date, the amount of
any dividends or other distributions with a record date after the Effective
Time but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued and cash paid upon the surrender for exchange of
Certificates in accordance with this Article II shall be deemed to have been
issued (and paid) in full satisfaction of all rights pertaining to the
shares of Company Common Stock theretofore represented by such Certificates,
SUBJECT, HOWEVER, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid at
the Effective Time, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
Company Common Stock which were outstanding immediately prior to the
Effective Time. Subject to applicable law, Certificates presented after the
Effective Time to the Surviving Corporation or the Exchange Agent for any
reason shall be canceled and exchanged as provided in this Article II.
(e) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution of Parent shall relate to such
fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Parent
(ii) Notwithstanding any other provision of this Agreement, each
holder of record of shares of Company Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction
of a share of Parent Common Stock (after taking into account all
Certificates delivered by such holder of record) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional
part of a share of Parent Common Stock multiplied by the closing sales
price of one share of Parent Common Stock on the NYSE Composite
Transactions List (as reported by THE WALL STREET JOURNAL or, if not
reported thereby, any other authoritative source) on the trading day
immediately preceding the Closing Date.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Certificates who have not theretofore complied with this Article
II shall thereafter look only to Parent for payment of their claim for the
Merger Consideration and any cash in lieu of fractional shares or other
dividends or distributions payable to such holders pursuant to this Article
II, in each case without interest thereon.
(g) NO LIABILITY. None of Parent, Sub, the Company and the Exchange
Agent shall be liable to any person in respect of any shares of Parent
Common Stock (or any dividends or distributions with respect thereto or with
respect to any shares of Company Common Stock theretofore represented by any
Certificate) or any cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law. If any Certificate shall not have been surrendered prior to the date on
which any Merger Consideration or any cash in lieu of a fractional share of
Parent Common Stock or other dividends or distributions payable to the
holder of such
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Certificate pursuant to this Article II would otherwise escheat to or become
the property of any Governmental Entity (as defined in Section 3.01(e)), any
such Merger Consideration or cash or other dividends or distributions shall,
to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interests of any
person previously entitled thereto.
(h) LOST, STOLEN AND DESTROYED CERTIFICATES. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or destroyed
and, if required by Parent, the posting by such person of a bond in such
reasonable amount as Parent may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration, cash in lieu of a fractional share of Parent Common
Stock, and unpaid dividends and distributions on shares of Parent Common
Stock as provided in this Article II, deliverable in respect thereof
pursuant to this Agreement
(i) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund in U. S. government securities, as
directed by Parent, on a daily basis. Any interest and other income
resulting from such investments shall be paid to Parent.
SECTION 2.03. NO APPRAISAL RIGHTS. The holders of Company Common Stock
shall not be entitled to appraisal rights in connection with the Merger.
SECTION 2.04. STOCK OPTIONS. At the Effective Time and subject to Section
5.12, each option granted by the Company to purchase shares of the Company's
stock (each, a "Company Option") which is outstanding immediately prior thereto
shall cease to represent a right to acquire shares of Company Common Stock and
shall be converted automatically ally into an option (the "Exchanged Option") to
purchase shares of Parent Common Stock exercisable until the current termination
of the Company Option in an amount and at an exercise price determined as
provided below (and subject to the terms of the Company's 997 Long-Term
Incentive Plan and 1997 Non-Employee Directors' Stock Plan (the "Company Stock
Plans") and the agreements evidencing such grants, in the case of the directors
and executive officers of the Company other than accelerated vesting of any such
options which otherwise would occur by virtue of the consummation of the Merger
under such plans and agreements):
(a) The number of shares of Parent Common Stock to be subject to the
converted options shall be equal to the product of the number of shares of
Company Common Stock subject to the original options and the Exchange Ratio,
provided that any fractional shares of Parent Common Stock resulting from
such multiplication shall be rounded down to the nearest share; and
(b) The exercise price per share of Parent Common Stock under the
converted option shall be equal to the exercise price per share of Company
Common Stock under the original option divided by the Exchange Ratio,
provided that such exercise price shall be rounded out to the nearest cent.
(c) Parent shall (i) reserve for issuance the number of shares of Parent
Common Stock that will become issuable upon the exercise of the Exchanged
Options and (ii) promptly after the Effective Time, issue to each holder of
an Exchanged Option a document evidencing Parent's assumption of the
Company's obligations under the Company Options. The Exchanged Options shall
have the same terms and conditions as the Company Options.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth on the Disclosure Schedule delivered by the Company to Parent at or prior
to the execution and delivery of this Agreement (the "Company Disclosure
Schedule") or as disclosed in the Company SEC Documents (as
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defined in Section 3.01(f)) filed and publicly available prior to the date of
this Agreement (the "Filed Company SEC Documents"), the Company represents and
warrants to Parent and Sub as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Company
and its Significant Subsidiaries (as defined in Section 8.03) is a
corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated and has the
requisite corporate power and authority to carry on its business as now
being conducted. Each of the Company and its Significant Subsidiaries is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing
of its properties makes such qualification or licensing necessary, except
jurisdictions where the failure to be so qualified or licensed or to be in
good standing individually or in the aggregate would not have a material
adverse effect (as defined in Section 8.03) on the Company. The Company has
delivered to Parent prior to the execution and delivery of this Agreement
complete and correct copies of its certificate of incorporation and by-laws.
(b) SUBSIDIARIES. Paragraph (b) of the Company Disclosure Schedule
sets forth a true and complete list of each equity investment made by the
Company or any of its subsidiaries in any other person other than the
Company's Significant Subsidiaries ("Other Interests"). All the outstanding
shares of capital stock of each subsidiary of the Company have been validly
issued and are fully paid and nonassessable and are owned by the Company, by
another subsidiary of the Company or by the Company and another such
subsidiary, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"). Any Other Interests are owned by the Company, by
one or more of the Company's subsidiaries or by the Company and one or more
of its subsidiaries, in each case free and clear of all Liens, except for
Liens created by any partnership agreements for Other Interests.
(c) CAPITAL STRUCTURE.
(i) The authorized capital stock of the Company consists of
5,000,000 shares of Company preferred stock, $0.01 par value (the
"Company Preferred Stock"), 100,000,000 shares of Company Common Stock
and 5,000,000 shares of restricted common stock, $0.01 par value (the
"Restricted Company Common Stock"). At the close of business on February
13,1998, (i) no shares of Company Preferred Stock were issued and
outstanding, (ii) 13,723,064 shares of Company Common Stock were issued
and outstanding, (iii) 1,718,823 shares of Restricted Company Common
Stock were issued and outstanding, (iv) no shares of Company Preferred
Stock, Company Common Stock or Restricted Company Common Stock were held
by the Company in its treasury or by subsidiaries of the Company, and (v)
1,642,483 shares of Company Common Stock were reserved for issuance
pursuant to the Company Stock plans (as defined in Section 2.04). Except
as set forth above, at the close of business on February 13, 1998, no
shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. From February 13, 1998 to
the date of this Agreement, no shares of capital stock or other voting
securities of the Company have been issued except shares of Company
Common Stock pursuant to the Company Stock Plans. There are no
outstanding stock appreciation rights or rights (other than the Company
Options (as defined in Section 2.04)) to receive shares of Company Common
Stock on a deferred basis granted under the Company Stock Plans or
otherwise. The aggregate number of shares of Company Common Stock subject
to issuance upon exercise of all Company Options does not exceed the
aggregate number of shares specified for issuance upon exercise of all
Company Options in paragraph 3.01(c) of the Company Disclosure Schedule.
Except as set forth herein, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind, to which the Company is a party or by which it
is bound, obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other
voting securities
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of the Company, or obligating the Company to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking.
(ii) All outstanding shares of capital stock of the Company are, and
all shares which may be issued pursuant to the Company Stock Plans will
be when issued, duly authorized, validly issued, frilly paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the Company may
vote. Paragraph 3.01(c) of the Company Disclosure Schedule sets forth a
complete and correct list, as of the date hereof, of all holders of
Company Options and the exercise prices thereof.
(iii) There are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any
kind, to which any Significant Subsidiary of the Company is bound,
obligating such Significant Subsidiary to issue, deliver, sell, or cause
to be issued delivered or sold, additional shares of capital stock or
other voting securities of such Significant Subsidiary, or obligating
such Significant Subsidiary to issue, grant, extend or enter into any
such security, option, warrant, call, right commitment, agreement,
arrangement or undertaking.
(iv) There are no outstanding contractual obligations of the Company
or any of its Significant Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its
Significant Subsidiaries. There are no outstanding contractual
obligations of the Company to vote or to dispose of any shares of the
capital stock of any of its Significant Subsidiaries.
(d) CORPORATE AUTHORITY RECOMMENDATION NONCONTRAVENTION. The Company
has all requisite corporate power and authority to enter into this Agreement
and, subject to the Company Stockholder Approval (as defined in Section
3.01(k)) with respect to the Merger, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company subject, in the case of the
Merger, to the Company Stockholder Approval. The Board of Directors of the
Company has resolved to recommend that the stockholders of the Company
approve and adopt this Agreement and the Merger. This Agreement has been
duly executed and delivered by the .Company and, assuming the due
authorization, execution and delivery thereof by Parent and Sub, constitutes
a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by general principles of equity or principles applicable to
creditors' rights generally. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not, conflict
with, or result in any violation of, or default (after notice or lapse of
time or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
result in the creation of any Lien upon any of the properties or assets of
the Company or any of its subsidiaries under, (i) the certificate of
incorporation or by-laws of the Company or the comparable charter or
organizational documents of any of its Significant Subsidiaries, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable
to the Company or any of its subsidiaries or any of their respective
properties or assets or (iii) subject to the governmental filings and other
consents and matters referred to in Section 3.01(e), any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its subsidiaries or any of their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, defaults, rights, losses or Liens that, individually
or in the aggregate, would not (x) have a
10
material adverse effect on the Company or (y) prevent the consummation of
any of the transactions contemplated by this Agreement.
(e) GOVERNMENTAL AUTHORIZATION. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state or local government or any court, administrative or regulatory agency
or commission or other governmental authority or agency (each a
"Governmental Entity") is required by or with respect to the Company or any
of its subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation of the transactions
contemplated by this Agreement, except for (i) the filing of a premerger
notification and report form by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act"); (ii) the filing with the
Securities and Exchange Commission (the "SEC") of (x) a proxy statement
(such proxy statement, as amended or supplemented from time to time, the
"Proxy Statement") relating to the Company Stockholders Meeting (as defined
in Section 5.01(b)) which shall also constitute a prospectus of Parent
relating to the shares of Parent Common Stock to be issued in the Merger,
and (y) such reports under Section 13(a) and Section 16 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), as may be required in connection with this
Agreement and the transactions contemplated by this Agreement; (iii) the
filing of the Certificate of Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business; (iv) such filings with Governmental
Entities as may be required to satisfy the applicable requirements of state
securities or "blue sky" laws in connection with the transactions
contemplated by this Agreement; and (v) such other consents, approvals,
orders, authorizations, regulations, declarations or filings, the failure of
which to obtain or make would not have a material adverse effect on the
Company.
(f) SEC DOCUMENTS: UNDISCLOSED LIABILITIES. The Company has filed with
the SEC the Company's registration statement on Form S-1 (the "Company
S-1"), which became effective on November 20, 1997 (the "S-1 Effective
Date"), and all required reports, schedules, forms, statements and other
documents since the S-1 Effective Date (together with such Form S-1
registration statement, the "Company SEC Documents"). None of the Company's
subsidiaries is required to file with the SEC any report, form or other
document. As of their respective dates, the Company SEC Documents complied
as to form in all material respects with the requirements of the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"), or the Exchange Act, as the case may be,
and none of the Company SEC Documents when filed 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. The
financial statements of the Company included in the Company SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by the
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and
fairly present, in all material respects, the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the Filed Company
SEC Documents, and except for liabilities and obligations incurred since the
Balance Sheet Date in the ordinary course of business consistent with past
practice, as of the date of this Agreement, neither the Company nor any of
its subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally accepted
accounting principles to be recognized or disclosed on a consolidated
balance sheet of the Company and its consolidated subsidiaries or in the
notes thereto and which, individually or in the aggregate, would have a
material adverse effect on the Company.
11
(g) INFORMATION SUPPLIED. None of the information to be supplied by
the Company specifically for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger
(the "Form S-4") will, at the time the Form S-4 is filed with the SEC, at
any time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or (ii) the Proxy Statement
will, at the date it is first mailed to the Company's stockholders or at the
time of the Company Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Sub specifically for inclusion or incorporation by reference in
the Proxy Statement.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated by
this Agreement, since September 30, 1997 (the "Balance Sheet Date"), the
Company has conducted its business only in the ordinary course, and there
has not been (i) any material adverse change (as defined in Section 8.03) in
the Company, other than changes relating to or arising from legislative or
regulatory changes or developments generally affecting the retailing of
manufactured housing or general economic conditions, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of the Company's capital stock,
(iii) any split, combination or reclassification of any of its capital stock
or any issuance or the authorization of any issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock, (iv) (x) any granting by the Company or any of its subsidiaries to
any executive officer or other key employee of the Company or any of its
Significant Subsidiaries of any increase in compensation (except for normal
increases in the ordinary course of business consistent with past practice
or as required under any employment agreement in effect as of December 31,
1997) or (y) any granting by the Company or any of its subsidiaries to any
such executive officer or key employee of any increase in severance or
termination pay (except as was required under any employment, severance or
termination agreement in effect as of December 31, 1997), (v) any damage,
destruction or loss, whether or not covered by insurance, that has had or
would have a material adverse effect on the Company, or (vi) except as
required by a change in generally accepted accounting principles, any change
in accounting methods, principles or practices by the Company materially
affecting the basis of presenting or method of determining its results of
operations, assets, liabilities or businesses.
(i) LITIGATION. There is no suit, action or proceeding pending, and
the Company has not received written notification threatening any suit,
action or proceeding, against or affecting the Company or any of its
subsidiaries that individually or in the aggregate would (i) have a material
adverse effect on the Company or (ii) prevent the consummation of any of the
transactions contemplated by this Agreement, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its subsidiaries having any effect
referred to in clause (i) or (ii) of this sentence.
(j) ERISA AND OTHER COMPENSATION MATTERS.
(i) Except as will not have a material adverse effect on the
Company, all employee benefit plans ("Plans") covering employees or
former employees of the Company or any of its subsidiaries ("Company
Employees") have been administered according to their terms and, to the
extent subject to the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder ("ERISA"),
are in compliance with ERISA. Except as will not have a material adverse
effect on the Company, each Plan which is an "employee pension
12
benefit plan" within the meaning of Section 3(2) of ERISA ("Company
Pension Plan") and which is intended to be qualified under Section 401(a)
of the Code, has received a favorable determination letter from the
Internal Revenue Service (the "Service"), and the Company is not aware of
any circumstances likely to result in revocation of any such favorable
determination letter. Neither the Company nor any of its subsidiaries or
Company ERISA Affiliates (as defined below) has engaged in a transaction
with respect to any Company Plan that, assuming the taxable period of
such transaction expired as of the date hereof, could subject the Company
or any of its subsidiaries or Company ERISA Affiliates to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of
ERISA which would have a material adverse effect on the Company. Neither
the Company nor any of its subsidiaries or any Company ERISA Affiliates
has contributed or been required to contribute to any multi-employer
plan.
(ii) No liability under Subtitles C or D of Title IV of ERISA has
been or is expected to be incurred by the Company or any of its
subsidiaries or Company ERISA Affiliates with respect to any ongoing,
frozen or terminated Plan, currently or formerly maintained by any of
them, or the Plan of any person which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (a
"Company ERISA Affiliate") which would have a material adverse effect on
the Company.
(iii) All contributions required to be made and all contributions
accrued as of the Balance Sheet Date under the terms of any Plan for
which the Company or any of its subsidiaries or ERISA Affiliates may have
liability have been timely made or have been reflected on the most recent
audited balance sheet included in the Filed Company SEC Documents.
Neither any Company Pension Plan nor any single-employer plan of the
Company or any of its subsidiaries or Company ERISA Affiliates has
incurred an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA
which would have a material adverse effect on the Company. Neither the
Company nor any of its subsidiaries has provided, or is required to
provide, security to any Company Pension Plan or to any Plan of a Company
ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(iv) Neither the Company nor any of its subsidiaries has any
obligations for retiree health and life benefits under any Plan, except
as set forth in the Company Disclosure Schedule, which would have a
material adverse effect on the Company.
(v) The execution and delivery of this Agreement do not, and the
performance of the transactions contemplated by this Agreement will not
(either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any of the Company's Compensation and
Benefit Plans that will or may result in any payment (whether of
severance or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee of the Company or any of its
subsidiaries or Company ERISA Affiliates which would have a material
adverse effect on the Company.
(vi) There is no contract, agreement, plan or arrangement covering
any employee or former employee of the Company or any of its subsidiaries
or Company ERISA Affiliates that, individually or collectively, could
give rise as a result of the transactions contemplated by this Agreement
to the payment of any amount that would not be deductible pursuant to the
terms of Section 162(a)(l) or 280G of the Code.
(vii) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its
subsidiaries or Company ERISA Affiliates relating to, or change in
employee participation or coverage under, any of the Company's
Compensation and Benefit Plans which would increase materially above the
level of the expense incurred in respect thereof for the fiscal year
ended on the Balance Sheet Date.
13
(k) VOTING REQUIREMENTS. The affirmative vote at the Company
Stockholders Meeting of the holders of a majority of the votes represented
by the outstanding Company Common Stock (the "Company Stockholder Approval")
is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve and adopt this Agreement and the
transactions contemplated by this Agreement.
(l) STATE TAKEOVER STATUTES. The Board of Directors of the Company has
approved the terms of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement, and such approval is
sufficient to render inapplicable to the Merger and the other transactions
contemplated by this Agreement and the Company Stockholder Agreement the
provisions of Section 203 of the DGCL. To the knowledge of the Company, no
other state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement, the Company Stockholder
Agreement or any of the transactions contemplated by this Agreement and no
provision of the certificate of incorporation, by-laws or other governing
documents of the Company or any of its Significant Subsidiaries would,
directly or indirectly, restrict or impair the ability of Parent or any of
its Significant Subsidiaries to vote, or otherwise to exercise the rights of
a stockholder with respect to, shares of the Company Common Stock and the
shares of capital stock of its Significant Subsidiaries that may be acquired
or controlled directly or indirectly by Parent.
(m) BROKERS. No broker, investment banker, financial advisor or other
person, other than BT Alex. ▇▇▇▇▇, the fees and expenses of which will be
paid by the Company, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company or any of its subsidiaries. The Company has
furnished to Parent true and complete copies of all agreements with BT Alex.
▇▇▇▇▇ under which any such fees or expenses may be payable, including all
indemnification agreements.
(n) OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of BT Alex. ▇▇▇▇▇, dated the date of this Agreement, to the effect that, as
of such date, the Aggregate Merger Consideration is fair to the Company's
stockholders from a financial point of view, a signed copy of which opinion
has been delivered to Parent.
(o) COMPLIANCE WITH APPLICABLE LAWS. Each of the Company and its
subsidiaries is in compliance with all applicable statutes, laws,
ordinances, rules, regulations, judgments, decrees and orders of any
Governmental Entity applicable to its business and operations, except for
possible noncompliance that would not, individually or in the aggregate,
have a material adverse effect on the Company.
(p) TAXES. Each of the Company and its subsidiaries has timely filed
(or has had timely filed on its behalf) or will file or cause to be timely
filed, all material Tax Returns (as defined in Section 8.03) required by
applicable law to be filed by it prior to or as of the Effective Time. All
such Tax Returns are, or will be at the time of filing, true, complete and
correct in all material respects. Each of the Company and its subsidiaries
has paid (or has had paid on its behalf), or where payment is not yet due,
has established (or has had established on its behalf and for its sole
benefit and recourse), or will establish or cause to be established on or
before the Effective Time, an adequate accrual for the payment of, all Taxes
(as defined in Section 8.03) due with respect to any period ending prior to
or as of the Effective Time, except for Taxes which would not, individually
or in the aggregate, have a material adverse effect on the Company.
(q) LABOR. Since the Balance Sheet Date, as of the date of this
Agreement, there has not been any amendment in any material respect by the
Company or any of its subsidiaries of any collective bargaining agreement or
contract with a labor union or labor organization (each a "Collective
Bargaining Agreement") to which it is a party or otherwise bound. There is
no labor strike, labor dispute, work slowdown, labor stoppage or lockout
actually pending, and the Company has received no written notice of any
threatened labor strike, labor dispute, work slowdown, labor stoppage or
14
lockout, against the Company or any of its subsidiaries, nor are there, to
the knowledge of the Company, any organizational efforts presently being
made involving any of the unorganized employees of the Company or any of its
subsidiaries which in any such case or all such cases together would have a
material adverse effect on the Company.
(r) ENVIRONMENTAL MATTERS.
(i) Except as disclosed in the Company Disclosure Schedule and
except for such matters that, alone or in the aggregate, would not have a
material adverse effect on the Company:
(1) the Company and its subsidiaries have complied with all
applicable Environmental Laws; (2) the properties currently owned or
operated by the Company and its subsidiaries (including soils,
groundwater, surface water, buildings or other structures) are not
contaminated with any Hazardous Substances; (3) the properties
formerly owned or operated by the Company or its subsidiaries were
not contaminated with Hazardous Substances during the period of
ownership or operation by the Company or any of its subsidiaries; (4)
neither the Company nor any of its subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on
any third party property; (5) neither the Company nor any of its
subsidiaries has been associated with any release or threat of
release of any Hazardous Substance; (6) neither the Company nor any
of its subsidiaries has received any notice, demand, letter, claim or
request for information alleging that the Company or any of its
subsidiaries may be in violation of or liable under any Environmental
Law; (7) neither the Company nor any of its subsidiaries is subject
to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or is subject to any orders, decrees, injunctions
or other arrangements with any Governmental Entity or is subject to
any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous
Substances; (8) there are no circumstances or conditions involving
the Company or any of its subsidiaries that could reasonably be
expected to result in any claims, liability, investigations, costs or
restrictions on the ownership, use or transfer of any property of the
Company or its subsidiaries pursuant to any Environmental Law; (9)
none of the properties of the Company or its subsidiaries contains
any underground storage tanks, asbestos-containing material,
lead-based products, or polychlorinated biphenyls; and (10) neither
the Company nor any of its subsidiaries has engaged in any activities
involving the generation, use, handling or disposal of any Hazardous
Substances.
(ii) As used herein:
(1) "Environmental Law" means any federal, state, local or
foreign law, regulation, treaty, order, decree, permit,
authorization, policy, opinion, common law or agency requirement
relating to: (A) the protection, investigation or restoration of the
environment, health and safety, or natural resources; (B) the
handling, use, presence, disposal, release or threatened release of
any chemical substance or waste; or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons
or property.
(2) "Hazardous Substance" means any substance that is: (A)
listed, classified or regulated in any concentration pursuant to any
Environmental Law; (B) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (C) any
other substance which may be the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law.
(s) LICENSES. Each of the Company and its subsidiaries has all
permits, licenses, waivers and authorizations which are necessary for it to
conduct its business in the manner in which it is presently being conducted
(collectively, "Company Licenses"), other than any Company Licenses the
failure of
15
which to have would not, individually or in the aggregate, have a material
adverse effect on the Company. Each of the Company and its subsidiaries is
in compliance with the terms of all Company Licenses, except for such
failures so to comply which would not have a material adverse effect on the
Company. The Company and its subsidiaries have duly performed their
respective obligations under such Company Licenses, except for such
non-performance as would not have a material adverse effect on the Company.
There is no pending or, to the knowledge of the Company, threatened
application, petition, objection or other pleading with any Governmental
Entity which challenges or questions the validity of, or any rights of the
holder under, any Company License, except for such applications, petitions,
objections or other pleadings, that would not, individually or in the
aggregate, have a material adverse effect on the Company.
(t) INTELLECTUAL PROPERTY. The Company and its subsidiaries own or
have rights to use (i) all material computer software utilized in the
conduct of their respective businesses and (ii) all names and service marks
used by the Company or any such subsidiary and, to the knowledge of the
Company, such use does not conflict with any rights of others with respect
thereto, except for such failures to own or have rights to use and such
conflicts that have not had and would not have a material adverse effect on
the Company.
(u) MATERIAL AGREEMENTS. Neither the Company nor any of its
subsidiaries is in breach of any material agreement, except for breaches
which would not, individually or in the aggregate, have a material adverse
effect on the Company and the Company has no material agreements other than
those specified in the Company SEC Documents. All employment agreements of
the Company are listed on the Company Disclosure Schedule and are filed with
the Company SEC Documents.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Except as
set forth on the Disclosure Schedule delivered by Parent to the Company at or
prior to the execution and delivery of this Agreement (the "Parent Disclosure
Schedule") or as disclosed in the Parent SEC Documents (as defined in Section
3.02(f)) filed and publicly available prior to the date of this Agreement (the
"Filed Parent SEC Documents") or the Parent's Offering Memorandum dated February
4, 1998 (collectively with the Filed Parent SEC Documents the "Parent Disclosure
Documents"), Parent and Sub represent and warrant to the Company as follows:
(a) ORGANIZATION STANDING AND CORPORATE POWER. Each of Parent and Sub
and each of Parent's Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate
power and authority to carry on its business as now being conducted. Each of
Parent and its Significant Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, except jurisdictions where the failure
to be so qualified or licensed or to be in good standing individually or in
the aggregate would not have a material adverse effect on Parent. Parent has
delivered to the Company prior to the execution and delivery of this
Agreement complete and correct copies of its certificate of incorporation
and by-laws.
(b) SUBSIDIARIES. All the outstanding shares of capital stock of each
subsidiary of Parent have been validly issued and are frilly paid and
nonassessable and are owned by Parent, free and clear of all Liens, and
excluding the outstanding shares of Expression Homes Corporation which is
49% owned by the Company.
(c) CAPITAL STRUCTURE.
(i) As of the date of this Agreement, the authorized capital stock
of Parent consists of 75,000,000 shares of Common Stock, par value $1.00
per share (the "Parent Common Stock"), and 10,000,000 shares of Preferred
Stock, par value $1.00 per share ("Parent Preferred Stock") of which
50,000 shares are designated as Series A Junior Participating Preferred
Stock. At the close
16
of business on February 10, 1998, (i) 30,858,719 shares of Parent Common
Stock were issued and outstanding, (ii) no shares of Parent Preferred
Stock were issued and outstanding, (iii) no shares of Parent Common Stock
were held by Parent in its treasury, (iv) 2,167,224 shares of Parent
Common Stock were reserved for issuance upon exercise of outstanding
options under Parent's stock option plans (the "Parent Stock Plans"), (v)
5,131,363 shares of Parent Common Stock have been reserved for issuance
upon conversion of the Trust Preferred Securities issued by a subsidiary,
and (vi) 24,070,402 shares of Parent's Series A Junior Participating
Preferred Stock were reserved for issuance pursuant to that certain
Rights Agreement, dated as of November 10, 1988 (the "Parent Rights
Agreement"), between Parent and The First National Bank of Boston, as
Rights Agent (the "Parent Rights Agent"). Except as set forth above, at
the close of business on February 10, 1998, no shares of capital stock or
other voting securities of Parent were issued, reserved for issuance or
outstanding. Except as set forth above or as otherwise contemplated by
this Agreement, as of the date of this Agreement, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind, to which Parent is
a party or by which it is bound, obligating Parent to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of Parent, or obligating Parent
to issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking.
(ii) All outstanding shares of capital stock of Parent are, and all
shares which may be issued pursuant to this Agreement will be when
issued, duly authorized, validly issued, frilly paid and nonassessable
and not subject to preemptive rights. As of the date of this Agreement,
except for the Parent's 6% Convertible Subordinated Debentures due
February 15, 2028, there are no bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on
which stockholders of Parent may vote.
(iii) There are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any
kind, to which any Significant Subsidiary of Parent is bound, obligating
such Significant Subsidiary to issue, deliver, sell, or cause to be
issued delivered or sold, additional shares of capital stock or other
voting securities of such Significant Subsidiary, or obligating such
Significant Subsidiary to issue, grant, extend or enter into any such
security, option, warrant, call, right commitment, agreement, arrangement
or undertaking.
(iv) As of the date of this Agreement, there are no outstanding
contractual obligations of Parent or any of its Significant Subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of
Parent or any of its Significant Subsidiaries. As of the date of this
Agreement, the authorized capital stock of Sub consists of 1,000 shares
of common stock, par value $.01 per share, 100 of which have been validly
issued, are frilly paid and nonassessable and are owned by Parent free
and clear of any Lien.
(d) CORPORATE AUTHORITY, NONCONTRAVENTION. Parent and Sub have all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and, assuming the due
authorization, execution and delivery thereof by the Company, constitutes a
valid and binding obligation of each such party, enforceable against such
party in accordance with its terms, except as such enforceability may be
limited by general principles of equity or principles applicable to
creditors' rights generally. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not, conflict
with, or result in any violation of, or default (after notice or lapse of
time or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or
17
to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of Parent, Sub or any of Parent's other
subsidiaries under, (i) the certificate of incorporation or by-laws of
Parent or Sub or the comparable charter or organizational documents of any
of Parent's Significant Subsidiaries, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to Parent, Sub or such
other subsidiary or any of their respective properties or assets or (iii)
subject to the governmental filings and other consents and matters referred
to in Section 3.02(e), any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent, Sub or such other subsidiary or any
of their respective properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults, rights, losses or
Liens that, individually or in the aggregate, would not (x) have a material
adverse effect on Parent or (y) prevent the consummation of any of the
transactions contemplated by this Agreement.
(e) GOVERNMENTAL AUTHORIZATION. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement or the
consummation by Parent or Sub, as the case may be, of any of the
transactions contemplated by this Agreement, except for (i) the filing of a
premerger notification and report form by Parent under the HSR Act; (ii) the
filing with the SEC of (x) the Form S-4 and (y) the filing or furnishing
with or to the SEC of such reports under Section 13(a) of the Exchange Act
as may be required in connection with this Agreement, and the transactions
contemplated by this Agreement; (iii) the filing of the Certificate of
Merger with the Delaware Secretary of State and appropriate documents with
the relevant authorities of other states in which the Company is qualified
to do business; (iv) such filings with Governmental Entities as may be
required to satisfy the applicable requirements of state securities or "blue
sky" laws in connection with the transactions contemplated by this
Agreement; (v) such other consents, approvals, orders, authorizations,
regulations, declarations or filings, the failure of which to obtain or make
not have a material adverse effect on Parent; and (vi) such filings with and
approvals of the NYSE to permit the shares of Parent Common Stock that are
to be issued in the Merger to be listed on the NYSE.
(f) SEC DOCUMENTS, UNDISCLOSED LIABILITIES. Parent has filed with the
SEC all reports, schedules, forms, statements and other documents required
to be filed since the Balance Sheet Date (the "Parent SEC Documents"). None
of Parent's subsidiaries is required to file with the SEC any report, form
or other document. As of their respective dates, the Parent SEC Documents
complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents, and none of the Parent SEC Documents when filed 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. The financial statements of Parent included in the Parent SEC
Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements,
as permitted by the rules and regulations of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present, in all material respects, the
consolidated financial position of Parent and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as disclosed in
the Parent Disclosure Documents, and except for liabilities and obligations
incurred since October 26, 1997 (the "Parent Balance Sheet Date") in the
ordinary course of business consistent with past practice, as of the date of
this Agreement, neither Parent nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting
principles to be recognized or disclosed on a consolidated balance sheet of
Parent and its
18
consolidated subsidiaries or in the notes thereto and which, individually or
in the aggregate, would have a material adverse effect on Parent.
(g) INFORMATION SUPPLIED. None of the information to be supplied by
Parent or Sub specifically for inclusion or incorporation by reference in
(i) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at
any time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or (ii) the Proxy Statement
will, at the date the Proxy Statement is first mailed to Company
stockholders or at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein in light of the circumstances under which they are not misleading.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated by
this Agreement or as disclosed in the Parent Disclosure Documents, since the
Parent Balance Sheet Date, Parent has conducted its business only in the
ordinary course, and there has not been (i) any material adverse change in
Parent, other than changes relating to or arising from legislative or
regulatory changes or developments generally affecting broadcasting or
publishing operations or general economic conditions, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of Parent's capital stock,
except for regular quarterly dividends on the Parent Common Stock, (iii) any
split, combination or reclassification of any of its capital stock or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(iv) any damage, destruction or loss, whether or not covered by insurance,
that has had or would have a material adverse effect on Parent, (v) (x) any
granting by Parent or any of its subsidiaries to any executive officer or
other key employee of Parent or any of its Significant Subsidiaries of any
increase in compensation (except for normal increases in the ordinary course
of business consistent with past practice or as required under any
employment agreement in effect as of the Parent Balance Sheet Date) or (y)
any granting by Parent or any of its Significant Subsidiaries to any such
executive officer or key employee of any increase in severance or
termination pay (except as was required under any employment, severance or
termination agreement in effect as of the Parent Balance Sheet Date), (vi)
any damage, destruction or loss, whether or not covered by insurance, that
has had or would have a material adverse effect on Parent, or (vii) except
as required by a change in generally accepted accounting principles, any
change in accounting methods, principles or practices by Parent materially
affecting the basis of presenting or method of determining its results of
operations, assets, liabilities or businesses.
(i) LITIGATION. There is no suit, action or proceeding pending, and
Parent has not received written notification threatening any suit, action or
proceeding, against or affecting Parent or any of its subsidiaries that
individually or in the aggregate could (i) have a material adverse effect on
Parent or (ii) prevent the consummation of any of the transactions
contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Parent or any of its subsidiaries having, or which,
insofar as reasonably can be foreseen, in the future would have, any effect
referred to in clause (i)or (ii) of this sentence.
(j) ERISA AND OTHER COMPENSATION MATTERS.
(i) Except as will not have a material adverse effect on Parent, all
Plans covering employees or former employees of Parent or any of its
subsidiaries ("Parent Employees") have been administered according to
their terms and, to the extent subject to ERISA, are in compliance with
ERISA. Each Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Parent Pension Plan") and which is
intended to be qualified under Section 401(a) of the Code, has received a
favorable determination letter from the Service, and Parent is not aware
of any circumstances likely to result in revocation of any such favorable
19
determination letter. Neither Parent nor any of its subsidiaries or
Parent ERISA Affiliates (as defined below) has engaged in a transaction
with respect to any Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject Parent or any of
its subsidiaries or Parent ERISA Affiliates to a tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA which would
have a material adverse effect on Parent. Neither Parent nor any of its
subsidiaries or Parent ERISA Affiliates has contributed or been required
to contribute to any multi-employer plan.
(ii) No liability under Subtitles C or D of Title IV of ERISA has
been or is expected to be incurred by Parent or any of its subsidiaries
or Parent ERISA Affiliates with respect to any ongoing, frozen or
terminated Plan, currently or formerly maintained by any of them, or the
Plan of any person which is considered one employer with Parent under
Section 4001 of ERISA or Section 414 of the Code (a "Parent ERISA
Affiliate") which would have a material adverse effect on Parent.
(iii) All contributions required to be made and all contributions
accrued as of the Balance Sheet Date under the terms of any Plan for
which Parent or any of its subsidiaries or Parent ERISA Affiliates may
have liability have been timely made or have been reflected on the most
recent audited balance sheet included in the Filed Parent SEC Documents.
Neither any Parent Pension Plan nor any single-employer plan of Parent or
any of its subsidiaries or Parent ERISA Affiliates has incurred an
"accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA which would
have a material adverse effect on Parent. Neither Parent nor any of its
subsidiaries has provided, or is required to provide, security to any
Parent Pension Plan or to any Plan of a Parent ERISA Affiliate pursuant
to Section 401(a)(29) of the Code.
(iv) Neither Parent nor any of its subsidiaries has any obligations
for retiree health and life benefits under any Plan, except as set forth
in the Parent Disclosure Schedule, which would have a material adverse
effect on Parent.
(v) The execution and delivery of this Agreement do not, and the
performance of the transactions contemplated by this Agreement will not
(either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any of the Parent's Compensation and
Benefit Plans that will or may result in any payment (whether of
severance or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee of Parent or any of its
subsidiaries or Parent ERISA Affiliates which would have a material
adverse effect on Parent.
(vi) There is no contract, agreement, plan or arrangement covering
any employee or former employee of Parent or any of its subsidiaries or
Parent ERISA Affiliates that, individually or collectively, could give
rise as a result of the transactions contemplated by this Agreement to
the payment of any amount that would not be deductible pursuant to the
terms of Section 1 62(a)( I) or 280G of the Code.
(vii) There has been no amendment to, written interpretation or
announcement (whether or not written) by Parent or any of its
subsidiaries or Parent ERISA Affiliates relating to, or change in
employee participation or coverage under, any of the Parent's
Compensation and Benefit Plans which would increase materially above the
level of the expense incurred in respect thereof for the fiscal year
ended on the Balance Sheet Date.
(k) BROKERS. No broker, investment banker, financial advisor or other
person, other than PaineWebber Incorporated, the fees and expenses of which
will be paid by Parent, is entitled to any broker's, finders, financial
advisor's or other similar fee or commission in connection with the
20
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Sub
(l) INTERIM OPERATIONS OF SUB. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby and has engaged in no
other business other than incident to its creation and this Agreement and
the transactions contemplated hereby.
(m) TAXES. Each of Parent and its subsidiaries has timely filed (or
has had timely filed on its behalf), or will file or cause to be timely
filed, all material Tax Returns required by applicable law to be filed by it
prior to or as of the Effective Time. All such Tax Returns are, or will be
at the time of filing, true, complete and correct in all material respects.
Each of Parent and its subsidiaries has paid (or has had paid on its
behalf), or where payment is not yet due, has established (or has had
established on its behalf and for its sole benefit and recourse), or will
establish or cause to be established on or before the Effective Time, an
adequate accrual for the payment of, all Taxes due with respect to any
period ending prior to or as of the Effective Time, except for Taxes which
would not, individually or in the aggregate, have a material adverse effect
on Parent.
(n) COMPLIANCE WITH APPLICABLE LAWS. Each of Parent and its
subsidiaries is in compliance with all applicable statutes, laws,
ordinances, rules, regulations, judgments, decrees and orders of any
Governmental Entity applicable to its business and operations, except for
possible noncompliance that would not, individually or in the aggregate,
have a material adverse effect on Parent.
(o) LABOR. Since the Parent Balance Sheet Date, as of the date of this
Agreement, there has not been any amendment in any material respect by
Parent or any of its subsidiaries of any Collective Bargaining Agreement to
which it is a party or otherwise bound. There is no labor strike, labor
dispute, work slowdown, labor stoppage or lockout actually pending, and
Parent has received no written notice of any threatened labor strike, labor
dispute, work slowdown, labor stoppage or lockout, against Parent or any of
its subsidiaries, nor are there, to the knowledge of Parent, any
organizational efforts presently being made involving any of the unorganized
employees of Parent or any of its subsidiaries which in any such case or all
such cases together would have a material adverse effect on Parent.
(p) ENVIRONMENTAL MATTERS. Except for such matters that, alone or in
the aggregate, would not have a material adverse effect on Parent:
(1) Parent and its subsidiaries have complied with all applicable
Environmental Laws; (2) the properties currently owned or operated by
Parent and its subsidiaries (including soils, groundwater, surface water,
buildings or other structures) are not contaminated with any Hazardous
Substances; (3) the properties formerly owned or operated by Parent or
its subsidiaries were not contaminated with Hazardous Substances during
the period of ownership or operation by Parent or any of its
subsidiaries; (4) neither Parent nor any of its subsidiaries is subject
to liability for any Hazardous Substance disposal or contamination on any
third party property; (5) neither Parent nor any of its subsidiaries has
been associated with any release or threat of release of any Hazardous
Substance; (6) neither Parent nor any of its subsidiaries has received
any notice, demand, letter, claim or request for information alleging
that Parent or any of its subsidiaries may be in violation of or liable
under any Environmental Law; (7) neither Parent nor any of its
subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity
or is subject to any indemnity or other agreement with any third party
relating to liability under any Environmental Law or relating to
Hazardous Substances; (8) there are no circumstances or conditions
involving Parent or any of its subsidiaries that could reasonably be
expected to result in any claims, liability, investigations, costs or
restrictions on the ownership, use or transfer of any property of Parent
or its subsidiaries pursuant to any Environmental Law; (9) none of the
properties of Parent or its subsidiaries
21
contains any underground storage tanks, asbestos-containing material,
lead-based products, or polychlorinated biphenyls; and (10) neither
Parent nor any of its subsidiaries has engaged in any activities
involving the generation, use, handling or disposal of any Hazardous
Substances.
(q) LICENSES. Each of Parent and its subsidiaries has all permits,
licenses, waivers and authorizations which are necessary for it to conduct
its business in the manner in which they are presently being conducted
(collectively, the "Parent Licenses") other than any Parent Licenses the
failure of which to have would not, individually or in the aggregate, have a
material adverse effect on Parent. Each of Parent and its subsidiaries is in
compliance with the terms of all Parent Licenses, except for such failures
such to comply which would not have a material adverse effect on Parent.
Parent and its subsidiaries have duly performed their respective obligations
under such Parent Licenses, except for such non-performance as would not
have a material adverse effect on Parent. There is no pending or, to the
knowledge of Parent, threatened application, petition, objection or other
pleading with any Governmental Entity which challenges or questions the
validity of, or any rights of the holder under, any Parent License, except
for such applications, petitions, objections or other pleadings, that would
not, individually or in the aggregate, have a material adverse effect on
Parent.
(r) INTELLECTUAL PROPERTY. Parent and its subsidiaries own or have
rights to use (i) all material computer software utilized in the conduct of
their respective businesses and (ii) all names and service marks used by
Parent or any such subsidiary and, to the knowledge of Parent, such use does
not conflict with any rights of others with respect thereto, except for such
failures to own or have rights to use and such conflicts that have not had
and would not have a material adverse effect on Parent.
(s) MATERIAL AGREEMENTS. Neither Parent nor any of its subsidiaries is
in breach of any material agreement, except for breaches which would not,
individually or in the aggregate, have a material adverse effect on Parent.
(t) FINANCING. At the Effective Time, Parent and Sub will have
available all of the funds necessary (i) to satisfy their respective
obligations under this Agreement, and (ii) to pay all the related fees and
expenses in connection with the foregoing.
(u) NO OWNERSHIP OF COMPANY COMMON STOCK. Neither Parent nor any of
its subsidiaries owns any shares of Company Common Stock.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. CONDUCT OF BUSINESS.
(a) CONDUCT OF BUSINESS BY THE COMPANY. Prior to the Effective Time,
except as contemplated by this Agreement, the Company shall, and shall cause
each of its subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and in compliance in all material respects with all
applicable laws and regulations and, to the extent consistent therewith, use
all reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers,
licensors, licensees and others having business dealings with them to the
end that their goodwill and ongoing businesses shall not be impaired at the
Effective Time. Without limiting the generality of the foregoing, prior to
the Effective Time, except as contemplated by this Agreement or as set forth
on the Company Disclosure Schedule, without the prior, express written
consent of Parent (which may not be unreasonably delayed or withheld), the
Company shall not, and shall not permit any of its subsidiaries to.
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than
dividends and distributions by a direct or indirect wholly
22
owned subsidiary of the Company to its parent, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (z) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its subsidiaries or
any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the
issuance of Company Common Stock upon the exercise of Company Employee
Stock Options outstanding on the date of this Agreement in accordance
with their present terms);
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, limited liability company,
partnership, joint venture, association or other business organization or
division thereof, or (y) any assets that, individually or in the
aggregate, are material to the Company and its subsidiaries taken as a
whole;
(v) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets,
except, in any such case, in the ordinary course of business consistent
with past practice, and except transactions between a wholly owned
subsidiary of the Company and the Company or another wholly owned
subsidiary of the Company;
(vi) (x) incur any indebtedness, except for floor plan financing and
borrowings (net of cash, cash equivalents and marketable securities held
by the Company or any of its subsidiaries) not in excess of $500,000 at
any one time outstanding incurred in the ordinary course of business
consistent with past practice, or (y) except in the ordinary course of
business consistent with past practice, make any loans, advances or
capital contributions to, or investments in, any other person, other than
to the Company or any direct or indirect wholly owned subsidiary of the
Company;
(vii) make or agree to make any new capital expenditure or capital
expenditures, except in the ordinary course of business consistent with
past practice;
(viii) make any material Tax election or settle or compromise any
material Tax liability;
(ix) except in the ordinary course of business or except as would
not have a material adverse effect on the Company, modify, amend or
terminate any material contract or agreement to which the Company or any
subsidiary is a party or waive, release or assign any material rights or
claims thereunder;
(x) make any material change to its accounting methods, principles
or practices, except as may be required by generally accepted accounting
principles;
(xi) except as required to comply with applicable law and except as
necessary to comply with Section 5.13, (w) adopt, enter into, terminate
or amend any of the Company's Compensation and Benefit Plans or other
arrangement for the benefit or welfare of any current or former director,
officer or employee, (x) increase in any manner the compensation or
fringe benefits of, or pay any bonus to, any director, officer or
employee (except for normal increases, promotions or bonuses in the
ordinary course of business consistent with past practice), (y) pay any
benefit not provided for under any of the Companyts Compensation and
Benefit Plans, or (z) except as permitted in clause (x), grant any awards
under any bonus, incentive, performance or other compensation plan or
arrangement or of the Company's Compensation and Benefit Plans (including
the grant of
23
stock options, stock appreciation rights, stock based or stock related
awards, performance units or restricted stock, or the removal of existing
restrictions in any of the Company's Compensation and Benefit Plans or
agreement or awards made thereunder); or
(xii) authorize, or commit or agree to take, any of the foregoing
actions.
(b) CONDUCT OF BUSINESS BY PARENT. Prior to the Effective Time,
without the prior, express written consent of the Company (which may be
given or withheld in its sole discretion), Parent shall not, and shall not
permit any of its subsidiaries to:
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of; the Parent capital stock, other than
quarterly dividends paid in accordance with past practice;
(ii) split, combine or reclassify the Parent capital stock or issue
or authorize the issuance of any other securities in respect of; in lieu
of or in substitution for the Parent Common Stock, or
(iii) authorize, or commit or agree to take, any of the foregoing
actions.
(c) ADVISEMENT OF CHANGES. The Company and Parent shall promptly
advise the other party orally and in writing upon its becoming aware of (i)
any representation or warranty made by it in this Agreement becoming untrue
or inaccurate in any material respect, (ii) the failure by it to comply with
or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement or (iii) any change
or event which would have a material adverse effect on such party or on the
ability of the conditions set forth in Article VI to be satisfied; PROVIDED,
HOWEVER, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
SECTION 4.02. NO SOLICITATION.
(a) The Company shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any officer, director or employee of or
any investment banker, attorney or other advisor or representative of; the
Company or any of its subsidiaries to, directly or indirectly, (i) solicit,
initiate or knowingly encourage the submission of any takeover proposal (as
defined in Section 8.03), (ii) enter into any agreement providing for any
takeover proposal or (iii) participate in any negotiations regarding, or
furnish to any person any non-public information with respect to, or take
any other action knowingly to facilitate the making of; any takeover
proposal; PROVIDED, HOWEVER, that if; at any time prior to the receipt of
the Company Stockholder Approval, the Board of Directors of the Company
determines in good faith that it is necessary to do so in order to comply
with its fiduciary duties to the Company's stockholders under applicable
law, as advised by outside counsel, the Company may, with respect to an
actual or potential unsolicited takeover proposal and subject to compliance
with Section 4.02(c), (x) furnish non-public information with respect to the
Company to such person making such actual or potential unsolicited takeover
proposal and (y) participate in negotiations regarding such proposal.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or Sub, the approval or recommendation by such
Board of Directors or any such committee of this Agreement or the Merger,
(ii) approve or recommend or propose to approve or recommend, any takeover
proposal or (iii) enter into any agreement with respect to any takeover
proposal. Notwithstanding the foregoing, the Board of Directors of the
Company may approve or recommend (and, in connection therewith, withdraw or
modify its approval or recommendation of this Agreement or the Merger) a
superior proposal (as defined in Section 8.03) if the Board of Directors of
the Company shall have determined in good faith that it is necessary, in
order to comply with its fiduciary duties to the Company's stockholders
under applicable law, as advised by outside counsel, to approve or recommend
such superior proposal, and have given notice to Parent advising Parent that
the Company has
24
received such superior proposal from a third party, specifying the material
terms and conditions (including the identity of the third party), and
specifically stating that the Company intends to approve or recommend such
superior proposal in accordance with this Section 4.02(b) and if Parent does
not, within seven business days of Parent's receipt of such notice, make an
offer which the Company Board by a majority vote determines in its good
faith judgment (based on the written advice of a financial adviser of
nationally recognized reputation) to be as favorable to the Company's
stockholders as such superior proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.02, the Company shall promptly
advise Parent orally and in writing of any request for information or of any
takeover proposal or any inquiry with respect to or which could reasonably
be expected to lead to any takeover proposal which, in any such case, is
either (i) in writing or (ii) made to any executive officer or director of
the Company (and brought to the attention of the chief executive officer of
the Company), the identity of the person making any such request (to the
extent practicable), takeover proposal or inquiry and all the material terms
and conditions thereof The Company will keep Parent fully informed of the
status and details (including amendments or proposed amendments) of any such
request, takeover proposal or inquiry.
Nothing contained in this Section 4.02 shall prohibit the Company or its
Board of Directors from (i) taking and disclosing to its stockholders a position
contemplated by Rule I 4e-2 of the Exchange Act or (ii) making any disclosure to
its stockholders that in the judgment of its Board of Directors, as advised by
its outside legal counsel, is required under applicable law.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PREPARATION OF THE FORM S-4 AND THE PROXY STATEMENT
STOCKHOLDERS MEETING.
(a) As soon as practicable after execution and delivery of this
Agreement, the Company and Parent shall prepare and the Company shall file
with the SEC the Proxy Statement and Parent shall prepare and file with the
SEC the Form S-4, in which the Proxy Statement will be included as a
prospectus. The Company and Parent shall each use all reasonable efforts to
have the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company will provide financial and other
information required by Parent in connection with Parent's filings under the
Securities Act of 1933 and the Securities Exchange Act of 1934. The Company
will use all reasonable efforts to cause the Proxy Statement to be mailed to
the Company's stockholders and Parent will use all reasonable efforts to
cause an appropriate proxy statement to be mailed to Parent's stockholders,
in each case as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. Parent shall also take any action (other
than qualifying to do business in any jurisdiction in which it is not now so
qualified or filing a general consent to service of process) required to be
taken under any applicable state securities or "blue sky" laws in connection
with the issuance of shares of Parent Common Stock in the Merger and the
Company shall furnish all information concerning the Company and the holders
of Company Common Stock and rights to acquire Company Common Stock pursuant
to the Company Stock Plans as may be reasonably requested in connection with
any such action.
(b) The Company will, as soon as reasonably practicable following the
date of this Agreement, duly call, give notice of; convene and hold a
meeting of its stockholders (the "Company Stockholders Meeting") for the
purpose of obtaining the Company Stockholder Approval. Without limiting the
generality of the foregoing but subject to Section 4.02(b), the Company
agrees that its obligations pursuant to the first sentence of this Section
5.01(b) shall not be affected by the commencement, public proposal, public
disclosure or communication to the Company of any takeover proposal. The
25
Company will, through its Board of Directors, recommend to its stockholders
the approval and adoption of this Agreement and the transactions
contemplated hereby, subject to Section 4.02(b).
SECTION 5.02. LETTERS OF THE COMPANY'S ACCOUNTANTS. The Company shall use
all reasonable efforts to cause to be delivered to Parent a letter of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, the Company's independent public accountants, dated a date within
two business days before the date on which the Form S-4 shall become effective,
addressed to Parent, in form reasonably satisfactory to Parent and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.03. LETTERS OF PARENT'S ACCOUNTANTS. Parent shall use all
reasonable efforts to cause to be delivered to the Company a letter of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, Parent's independent public accountants for the relevant periods
prior to the date hereof; dated a date within two business days before the date
on which the Form S-4 shall become effective, addressed to the Company, in form
reasonably satisfactory to the Company and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
SECTION 5.04. ACCESS TO INFORMATION, CONFIDENTIALITY. Subject to the
Confidentiality Agreement (as defined below), Parent and the Company shall, and
shall cause each of its subsidiaries to, afford to the other party and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of the other party, reasonable access during normal business
hours during the period prior to the Effective Time to all their properties,
books, contracts, commitments, personnel and records and, during such period
(subject to existing confidentiality and similar non-disclosure obligations and
the preservation of applicable privileges), Parent and the Company shall, and
shall cause each of its subsidiaries to, furnish promptly to the other party (a)
a copy of each material report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of Federal
or state securities laws and (b) all other information concerning its business,
properties and personnel as the other party may reasonably request. Each party
will hold, and will cause its officers, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
nonpublic information in accordance with the terms of the Confidentiality
Agreement, dated as of February 9, 1998, between Parent and the Company (the
"Confidentiality Agreement").
SECTION 5.05. REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (i) the obtaining of all necessary
actions, waivers, consents, licenses and approvals from Governmental
Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities) and the taking of all
reasonable steps as may be necessary to obtain an approval, waiver or
license from, or to avoid an action or proceeding by, any Governmental
Entity, (ii) the obtaining of all necessary consents, approvals or waivers
from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement
or the Stockholder Agreements, or the consummation of the transactions
contemplated by this Agreement, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental
Entity vacated or reversed and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated
by, and to carry out fully the purposes of; this Agreement. Without limiting
the foregoing, the Company and Parent shall use all reasonable efforts and
cooperate in promptly preparing and filing as soon as practicable, and in
any event within 15 business days after executing this Agreement,
notifications under the HSR Act and related filings in connection with the
Merger and the other transactions contemplated hereby, and to respond as
26
promptly as practicable to any injuries or requests received from the
Federal Trade Commission (the "FTC"), the Antitrust Division of the United
States Department of Justice (the "Antitrust Division") and any other
Governmental Entities for additional information or documentation.
Notwithstanding anything to the contrary contained in this Section 5.05, no
party shall be obligated to take any action pursuant to this Section 5.05 if
the taking of such action or the obtaining of any waiver, consent, approval
or exemption would have a material adverse effect on the Company or Parent.
(b) In connection with, but without limiting, the foregoing, the Company
and its Board of Directors shall (i) use all reasonable efforts to ensure
that no state takeover statute or similar statute or regulation is or
becomes applicable to this Agreement, the Stockholder Agreements, the Merger
or any of the other transactions contemplated by this Agreement and (ii) if
any state takeover statute or similar statute or regulation becomes
applicable to this Agreement, the Stockholder Agreements, the Merger or any
of the transactions contemplated by this Agreement, use all reasonable
efforts to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Merger and the other transactions contemplated
by this Agreement.
(c) Each of Parent and the Company shall promptly provide the other with
a copy of any inquiry or request for information (including notice of any
oral request for information), pleading, order or other document either
party receives from any Governmental Entities with respect to the matters
referred to in this Section 5.05.
SECTION 5.06. INDEMNIFICATION AND INSURANCE.
(a) Parent and Sub agree that all rights to indemnification for acts or
omissions occurring at or prior to the Effective Time now existing in favor
of the current or former directors, officers, employees or agents of the
Company and its subsidiaries (the "Indemnified Parties") as provided in
their respective certificates of incorporation or bylaws (or comparable
charter or organizational documents) or otherwise (including pursuant to
indemnification agreements) shall survive the Merger and shall continue in
hill force and effect in accordance with their terms for a period of not
less than six years from the Effective Time. From and after the Effective
Time, Parent shall guarantee the performance by the Surviving Corporation of
its obligations referred to in the immediately preceding sentence, provided
that, in the event any claim or claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim
or claims, and Parent's guarantee with respect thereto, shall continue until
final disposition of any and all such claim From and after the Effective
Time, Parent also agrees to indemnify all Indemnified Parties to the fullest
extent permitted by applicable law with respect to all acts and omissions
arising out of such individuals' services as officers, directors, employees
or agents of the Company or any of its subsidiaries or as trustees or
fiduciaries of any plan for the benefit of employees or directors of; or
otherwise on behalf of; the Company or any of its subsidiaries, occurring at
or prior to the Effective Time, including the transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, from and
after the Effective Time, in the event any such Indemnified Party is or
becomes involved in any capacity in any action, proceeding or investigation
in connection with any matter, including the transactions contemplated by
this Agreement, occurring prior to or at the Effective Time, Parent shall
pay as incurred such Indemnified Party's reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in
connection therewith. From and after the Effective Time, Parent shall pay
all reasonable expenses, including reasonable attorneys' fees, that may be
incurred by any Indemnified Party in enforcing the indemnity and other
obligations provided for in this Section 5.06.
(b) Parent will cause to be maintained, for a period of not less than
six years from the Effective Time, the Company's current directors' and
officers insurance and indemnification policy to the extent
27
that it provides coverage for events occurring prior to or at the Effective
Time ("D&O Insurance"), provided that Parent shall not be obligated to pay
annual premiums for such D&O Insurance in excess of 200% of the last annual
premium paid prior to the date of this Agreement (the amount equal to such
percentage of such last annual premium, the "Maximum Premium"); PROVIDED,
HOWEVER, that Parent may, in lieu of maintaining such existing D&O Insurance
as provided above, cause coverage to be provided under any policy maintained
for the benefit of Parent or any of its subsidiaries, so long as the terms
thereof are no less advantageous to the intended beneficiaries thereof than
the existing D&O Insurance. If the existing D&O Insurance expires, is
terminated or canceled or is not available during such six-year period,
Parent will use all reasonable efforts to cause to be obtained as much D&O
Insurance as can be obtained for the remainder of such period for an
annualized premium not in excess of the Maximum Premium, on terms and
conditions not materially less advantageous to the covered persons than the
existing D&O Insurance. The Company represents to Parent that the Maximum
Premium is $400,000.
SECTION 5.07. FEES AND EXPENSES.
(a) All fees and expenses incurred in connection with the Merger, this
Agreement, the Stockholder Agreement and the transactions contemplated by
this Agreement and the Stockholder Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated,
except that each of Parent and the Company shall bear and pay one-half of
the costs and expenses incurred in connection with the filing, printing and
mailing of the Form S-4 and the Proxy Statement referred to in Section
5.01(a). Notwithstanding the above, in the event that Parent terminates this
Agreement pursuant to Section 7.01(b)(i) or Section 7.03(c) (other than a
termination that requires the Company to pay a Termination Fee as
contemplated by Section 5.07(b) below) the Company shall reimburse Parent
and Sub (not later than 10 days after submission of statements therefor) for
all actual documented out-of-pocket fees and expenses, not to exceed
$1,000,000, incurred by either of them or on their behalf in connection with
the Merger and the transactions contemplated by this Agreement (including
without limitation fees payable to investment bankers, counsel to any of the
foregoing, and accountants).
(b) The Company shall pay, or cause to be paid, in same day funds to
Parent $6 million (the "Termination Fee") upon demand if (i) the Company or
Parent terminates this Agreement pursuant to Section 7.01(c) or (ii) if the
Company or Parent terminates this Agreement pursuant to Section 7.01 (b)(i);
PROVIDED, HOWEVER, that, with respect to clause (ii) of this paragraph (b)
only, the Termination Fee shall not be payable unless and until (x) any
Person (other than Parent) (an "Acquiring Party") has acquired, by purchase,
merger, consolidation, sale, assignment, lease, transfer or otherwise, in
one transaction or any related series of transactions within 12 months after
such termination, a majority of the voting power of the outstanding
securities of the Company or all or substantially all of the assets of the
Company or (y) there has been consummated within 12 months after such
termination a consolidation, merger or similar business combination between
the Company and an Acquiring Party in which stockholders of the Company
immediately prior to such consolidation, merger or similar transaction do
not own securities representing at least 50% of the outstanding voting power
of the surviving entity (or, if applicable, any entity in control of such
Acquiring Party) of such consolidation, merger or similar transaction
immediately following the consummation thereof; in either of cases (x) or
(y) involving a consideration for Company Common Stock (including the value
of any stub equity) in excess of the Aggregate Merger Consideration; and
PROVIDED FURTHER, that, with respect to clause (ii) of this paragraph (b)
only, no such Termination Fee shall be payable unless there shall have been
made public prior to the Company Stockholders Meeting a takeover proposal
involving consideration for Company Common Stock (including the value of any
stub equity) in excess of the Aggregate Merger Consideration. The Company
acknowledges that the agreements contained in this Section 5.07(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent and Sub would not enter into this
Agreement; accordingly, if the Company
28
fails promptly to pay the amount due pursuant to this Section 5.07(b) and,
in order to obtain such payment, Parent or Sub commences a suit which
results in a judgment against the Company for the Termination Fee, the
Company shall pay to Parent or Sub its costs and expenses (including
attorneys' fees) in connection with such suit, together with interest on the
amount of the Termination Fee at the prime rate of Citibank, N.A. in effect
on the date such payment was required to be made.
(c) TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES. Parent and Sub
agree that the Surviving Corporation will pay all real property transfer,
gains and other similar taxes and all documentary stamps, filing fees,
recording fees and sales and use .taxes, if any, and any penalties or
interest with respect thereto, payable in connection with consummation of
the Merger without any offset, deduction, counterclaim or deferment of the
payment of the Aggregate Merger Consideration.
SECTION 5.08. PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, Parent and
Sub, on the one hand, and the Company, on the other hand, will use all
reasonable efforts to consult with each other before issuing, and provide each
other the opportunity to review and comment upon, any press release or other
public statements with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, court order or by obligations pursuant to any
listing agreement with any national securities exchange. The parties agree that
the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by the
parties.
SECTION 5.09. AFFILIATES. At least thirty days prior to the Closing Date,
the Company shall deliver to Parent a letter identifying all persons who are, at
the time the Merger is submitted for approval to the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145(c) under the
Securities Act. The Company shall use all reasonable efforts to cause each such
person to deliver to Parent, on or prior to the Closing Date, a written
agreement substantially in the form attached hereto as Exhibit A (each an
"Affiliate Agreement") and shall deliver to Parent on or prior to the Closing
Date the agreement of each Company director and former principal stockholder of
the Founding Companies that the one year sale restrictions in connection with
the Company's initial public offering shall continue to apply until November 21,
1998 with respect to 50% of the number of shares of Parent Common Stock to which
such director or stockholder would be entitled if he elects solely to receive
Parent Common Stock in the Merger.
SECTION 5.10. NYSE LISTING. Parent shall use all reasonable efforts to
cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Closing Date.
SECTION 5.11. STOCKHOLDER LITIGATION. The Company shall advise Parent of
all material developments in any stockholder litigation against the Company and
its directors relating to the transactions contemplated by this Agreement and
the Company shall not agree to any settlement of such litigation without
Parent's consent, which consent shall not be unreasonably withheld.
SECTION 5.12. STOCK OPTIONS. The Parent will cause a Form S-8 ("Form S-8")
to be filed with the SEC as soon as practicable following the Effective Time,
but in no event more than thirty (30) days after the Effective Time, which
registration statement shall register the shares of the Parent Common Stock
underlying the Parent Options granted in replacement of Company Options, or will
cause such shares underlying such Parent Options to be subject to an existing
Form 5-8, and the Parent shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such Parent Options remain outstanding. At or before the
Effective Time, the Company shall cause to be effected any necessary amendments
to the Plan to give effect to the foregoing provisions of this Section 5.12.
29
SECTION 5.13. BENEFIT PLANS. Promptly after the Effective Time, Parent
shall cause the Surviving Corporation and its subsidiaries to provide Company
employees who are employees thereof or any of its subsidiaries with compensation
and employee benefit plans that are in the aggregate similar to the compensation
and Plans provided to similarly situated employees of Parent or its subsidiaries
who are not employees of the Company; provided, however, that employees of the
Company shall not be required to satisfy any additional copayment or other
deductible requirements in connection therewith; provided further, that this
sentence shall not apply to any employees of the Company or any of its
subsidiaries covered by a Collective Bargaining Agreement to which the Company
or any of its subsidiaries is a party or otherwise bound. For the purpose of
determining eligibility to participate in Plans, eligibility for benefit forms
and subsidies and the vesting of benefits under such Plans (including any
pension, severance, 401(k), vacation and sick pay), and for purposes of accrual
of benefits under any severance, sick leave, vacation and other similar employee
benefit plans (other than defined benefit pension plans), Parent shall give
effect to years of service (and for purposes of qualified and nonqualified
pension plans, prior earnings) with the Company or its subsidiaries, as the case
may be, as if they were with Parent or one of its subsidiaries. Parent also
shall cause the Surviving Corporation to assume and agree to perform the
Company's obligations under all employment, severance, consulting and other
compensation contracts between the Company or any of its subsidiaries and any
current or former director, officer or employee thereof. Nothing in this Section
5.13 shall be construed or applied to restrict the ability of the Surviving
Corporation to establish such types and levels of compensation and benefits as
it determines to be appropriate or to modify or terminate compensation or
benefit programs adopted pursuant to the first sentence of this Section 5.13.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of each of the
following conditions:
(a) STOCKHOLDER APPROVAL. The Company Stockholder Approval shall have
been obtained.
(b) HSR ACT. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) OTHER GOVERNMENTAL APPROVALS. All other consents, authorizations,
orders and approvals of (or filings or registrations with) any Governmental
Entity (other than under the HSR Act) required in connection with the
execution, delivery and performance of this Agreement shall have been
obtained or made, except for filing the Certificate of Merger and any other
documents required to be filed after the Effective Time and except where the
failure to have obtained or made any such consent, authorization, order,
approval, filing or registration would not have a material adverse effect on
Parent and the Company after the Effective Time.
(d) NO INJUNCTIONS OR RESTRAINTS. There shall not be in effect any (i)
decree, temporary restraining order, preliminary or permanent injunction or
other order entered, issued or enforced by any court of competent
jurisdiction or (ii) federal statute, rule or regulation enacted or
promulgated, in each case (i) or (ii) that prohibits the consummation of the
Merger. There shall not be in effect any state or local statute, rule or
regulation enacted or promulgated that prohibits the consummation of the
Merger and which would have a material adverse effect on Parent after the
Effective Time.
(e) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
30
(f) NYSE LISTING. The shares of Parent Common Stock, issuable to the
Company's stockholders pursuant to this Agreement shall have been approved
for listing on the New York Stock Exchange, Inc. ("NYSE"), subject to
official notice of issuance.
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations
of Parent and Sub to effect the Merger are further subject to satisfaction or
waiver of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company set forth in this Agreement shall be true and correct, in
each case as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except (i) for representations
and warranties that are made as of a specific date (in which case such
representations and warranties shall be true and correct on and as of such
date, subject to the following clause (ii)) and (ii) for inaccuracies in
such representations and warranties that individually or in the aggregate do
not have a material adverse effect on the Company. Parent shall have
received a certificate dated the Closing Date and signed on behalf of the
Company by the chief financial officer of the Company to foregoing effects.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company 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, and Parent shall
have received a certificate dated the Closing Date signed on behalf of the
Company by the chief financial officer of the Company to such effect.
(c) TAX OPINIONS. Parent shall have received from ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, counsel to Parent, on the date of the Proxy Statement and on
the Closing Date, opinions, in each case dated as of such respective dates
and stating that the Merger will be treated for Federal income tax purposes
as a reorganization within the meaning of Section 368 of the Code and that
Parent, Sub and the Company will each be a party to that reorganization
within the meaning of Section 368 of the Code. In rendering such opinions,
counsel for Parent shall be entitled to rely upon representations of
officers of Parent, Sub and the Company and representations of stockholders
of the Company, in each case reasonably satisfactory in form and substance
to such counsel.
(d) LEGAL OPINION. Parent shall have received an opinion from
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P., special counsel to the Company, effective as
of the Closing Date, with respect to matters customary in public company
merger transactions.
(e) WAIVERS. Each executive officer and director of the Company and
former principal stockholder of the Founding Companies shall have waived all
applicable change of control provisions with respect to the Merger in any
employment agreement, stock option agreement or other contract and all such
agreements and contracts shall remain in full force and effect as of the
Effective Time.
SECTION 6.03. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver of
each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Sub set forth in this Agreement shall be true and correct, in
each case as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except (i) for representations
and warranties that are made as of a specific date (in which case such
representations and warranties shall be true and correct on and as of such
date, subject to the following clause (ii)) and (ii) for inaccuracies in
such representations and warranties that individually or in the aggregate do
not have a material adverse effect on Parent. Parent shall have received a
certificate dated the Closing Date and signed on behalf of Parent by the
chief financial officer of Parent to the foregoing effects.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and Sub 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, and
the Company shall have received a certificate signed on behalf of Parent by
the chief financial officer of Parent to such effect.
31
(c) TAX OPINIONS. The Company shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, on the date of the Proxy Statement and on the Closing Date, opinions,
in each case dated as of such respective dates and stating that the Merger
will be treated for Federal income tax purposes as a reorganization within
the meaning of Section 368 of the Code and that Parent, Sub and the Company
will each be a party to that reorganization within the meaning of Section
368 of the Code. In rendering such opinions, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP for the
Company shall be entitled to rely upon representations of officers of
Parent, Sub and the Company and representations of stockholders of the
Company, in each case reasonably satisfactory in form and substance to such
entity.
(d) LEGAL OPINION. The Company shall have received an opinion or
opinions from ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, special counsel to Parent and
Sub, dated the Closing Date, reasonably satisfactory to the Company, with
respect to matters customary in public company merger transactions.
ARTICLE VII
TERMINATION AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval:
(a) by mutual written consent of Parent, Sub and the Company; or
(b) by either Parent or the Company as follows:
(i) if the Company Stockholders Meeting (including as it may be
adjourned from time to time) shall have concluded without the Company
Stockholder Approval having been obtained;
(ii) if the Merger shall not have been consummated on or before
August 30, 1998 (the "Termination Date"), provided that the party seeking
to terminate this Agreement is not otherwise in material breach of this
Agreement;
(iii) if any Governmental Entity shall have issued an order,
injunction, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such
order, injunction, decree, ruling or other action shall have become final
and nonappealable; or
(iv) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Agreement which (x) would give rise to the failure of a condition set
forth in Section 6.02(a) or (b) or Section 6.03(a) or (b), as applicable,
and (y) cannot be cured by the Termination Date (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement); or
(c) by Parent if the Board of Directors of the Company approves or
recommends a superior proposal, or by the Company if the Board of Directors
of the Company approves or recommends a superior proposal pursuant to
Section 4.02(b).
SECTION 7.02. EFFECT OF TERMINATION. If this Agreement is terminated by
either the Company or Parent pursuant to Section 7.01, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Parent, Sub or the Company, (a) other than liabilities and
obligations under Section 3.01(m), the last sentence of Section 5.04, Section
5.07, this Section 7.02 and Article VIII and (b) except that no such termination
shall relieve any party of any liability for damages resulting from any material
breach by such party of this Agreement.
SECTION 7.03. AMENDMENT. This Agreement may be amended by the parties at
any time before or after the Company Stockholder Approval; provided, however,
that after any such approval, there shall
32
not be made any amendment that by law requires further approval by the
stockholders of the Company without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.
SECTION 7.04. EXTENSION; WAIVER. At any time prior to the Effective Time,
a party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso to the first sentence of Section 7.03, waive compliance by the other
parties with any of the agreements or conditions contained in this Agreement.
Any agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
SECTION 7.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver pursuant to Section
7.04 shall, in order to be effective, require in the case of Parent, Sub or the
Company, action by Board of Directors or the duly authorized designee of its
Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Agreement or in any document or
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
SECTION 8.02. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses and telecopier numbers (or at such other address or telecopier number
for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Vice President-General Counsel and Secretary
Fleetwood Enterprises, Inc.
3 ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
33
(b) if to the Company, to
HomeUSA, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer
with a copy to:
Bracewell & ▇▇▇▇▇▇▇▇▇, L.L.P
South Tower Pemizoil Place
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
SECTION 8.03. DEFINITIONS. For purposes of this Agreement
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person.
(b) "Compensation and Benefit Plans" means all bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock and other
stock plans, all employment or severance contracts, all other employee
benefit plans and any applicable "change of control" or similar provisions
in any plan, contract or arrangement which cover employees or former
employees of a person or any of its ERISA Affiliates and all other benefit
plans, contracts or arrangements (regardless of whether they are funded or
unfunded or foreign or domestic) covering employees or former employees of a
person or any of its ERISA Affiliates, including "employee benefit plans"
within the meaning of Section 3(3) of ERISA.
(c) "indebtedness" means, with respect to any person, without
duplication, (i) all obligations of such person for borrowed money, (ii) all
obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (iii) all obligations of such person under conditional sale or
other title retention agreements relating to property purchased by such
person, and (iv) all guarantees of such person of any indebtedness of any
other person.
(d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(e) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, any change or effect that is
or would be materially adverse to the business, operations, management or
condition (financial or otherwise) of such party and its subsidiaries taken
as a whole.
(f) "Significant Subsidiary" means (i) with respect to the Company, the
subsidiaries listed on the Company Disclosure Schedule and (ii) with respect
to Parent, those subsidiaries listed on the Parent Disclosure Schedule.
(g) a "subsidiary" of any person means another person, an amount of the
voting securities or other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting
securities or interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person.
34
(h) "superior proposal" means (i) a bona fide takeover proposal to
acquire, directly or indirectly, all or a substantial portion of the shares
of Company Common Stock then outstanding or all or substantially all the
assets of the Company and (ii) otherwise on terms which the Board of
Directors of the Company determines in its good faith judgment to be more
favorable to the Company's stockholders than the Merger after receipt of the
written advice of the Company's independent financial advisor.
(i) "takeover proposal" means any proposal for a merger, consolidation
or other business combination involving the Company or any of its
Significant Subsidiaries or any proposal or offer to acquire in any manner,
directly or indirectly, an equity interest in, any voting securities of, or
a substantial portion of the assets of, the Company or any of its
Significant Subsidiaries, other than the transactions contemplated by this
Agreement.
(j) "Taxes" means all Federal, state, local and foreign taxes, and other
assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties
applicable thereto.
(k) "Tax Returns" means all Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended tax return relating to Taxes.
SECTION 8.04. INTERPRETATION. When a reference is made in this Agreement
to an Article, Section, subsection, Exhibit or Schedule, such reference shall be
to an Article or Section, subsection of; or an Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" and "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof',
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. Headings of the Articles and Sections of this Agreement are for
the convenience of reference only, and shall be given no substantive or
interpretive effect whatsoever. All terms defined in this Agreement shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted successors and assigns
and, in the case of an individual, to his or her heirs and estate, as
applicable.
SECTION 8.05. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.06. ENTIRE AGREEMENT NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Article II and Section 5.06, are not intended to confer upon any
person other than the parties any rights or remedies. The Company Disclosure
Schedule and the Parent Disclosure Schedule and all Exhibits attached hereto are
hereby incorporated herein and made a part hereof for all purposes, as if fully
set forth herein.
35
SECTION 8.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct wholly owned subsidiary of Parent, but no
such assignment shall relieve Sub of any of its obligations under this
Agreement. Any attempted assignment in violation of the preceding sentence shall
be void. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns.
SECTION 8.09. ENFORCEMENT. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any Federal court located in the State of Delaware or any Delaware state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal court sitting in the State of
Delaware or a Delaware state court.
SECTION 8.10. SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
36
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
FLEETWOOD ENTERPRISES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
HUSA ACQUISITION COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
HOMEUSA, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
37
EXHIBIT A
TO AGREEMENT
AND PLAN OF MERGER
FORM OF AFFILIATE LETTER
Fleetwood Enterprises, Inc.
3 ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an affiliate" of HomeUSA, Inc., a Delaware corporation (the "Company"), as the
term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145
of the rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). I understand that subject to and pursuant to the terms of
the Agreement and Plan of Merger, dated as of February 17, 1998 (the
"Agreement"), among Fleetwood Enterprises, Inc., a Delaware corporation
("Parent"), HUSA Acquisition Company, a Delaware corporation ("Sub"), and the
Company, pursuant to which the Company will be merged with and into Sub (the
"Merger").
As a result of the Merger, I may receive shares of Stock, par value $1.00
per share, of Parent (the "Parent Stock") in exchange for shares owned by me of
Common Stock, par value $0.01 per share, of the Company ("Company Stock").
I hereby represent, warrant and covenant to Parent that in the event I
receive any Parent Stock in the Merger:
A. I will not sell, transfer or otherwise dispose of any shares of
Parent Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Parent Stock to the
extent I felt necessary, with counsel
C. I have been advised that the issuance of Parent Stock to me pursuant
to the Merger has been registered with the Commission under the Act on a
Registration Statement on Form S-4. However, I have also been advised that
at the time the Merger is submitted for a vote of the stockholders of the
Company, I may be considered an affiliate of the Company and that the
distribution by me of the Parent Stock has not been registered under the
Act. Therefore, I will not sell, transfer or otherwise dispose of any shares
of Parent Stock issued to me in the Merger unless (i) such sale, transfer or
other disposition has been registered under the Act, (ii) such sale,
transfer or other disposition is made in conformity with Rule 145
promulgated by the Commission under the Act ("Rule 145"), or (iii) in the
opinion of counsel reasonably acceptable to Parent, or pursuant to a "no
action" letter obtained by the undersigned from the staff of the Commission,
such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
D. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of shares of Parent Stock by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
38
E. I also understand that stop transfer instructions will be given to
Parent's transfer agents with respect to the Parent Stock and that there
will be placed on the certificates for the shares of Parent Stock issued to
me, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT, DATED 1998, BETWEEN THE REGISTERED
HOLDER HEREOF AND FLEETWOOD ENTERPRISES, INC., A COPY OF WHICH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICES OF FLEETWOOD ENTERPRISES, INC."
F. I also understand that unless the transfer by me of any shares of my
Parent Stock has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, Parent reserves the right to put
the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH
SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A
VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and the stop orders referred to
above will be removed if (i) one year shall have elapsed from the date the
undersigned acquired the Parent Stock received in the Merger and the provisions
of Rule 145(d)(2) are then available to the undersigned, (ii) two years shall
have elapsed from the date the undersigned acquired the Parent Stock received in
the Merger and the provisions of Rule 145(d)(3) are then available to the
undersigned, or (iii) Parent has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Parent, or a "no action"
letter obtained by the undersigned from the staff of the Commission, to the
effect that the restrictions imposed by Rule 145 no longer apply to the
undersigned.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
This letter constitutes the complete understanding between Parent and me
concerning the subject matter hereof. The Surviving Corporation (as defined in
the Agreement) is expressly intended to be a beneficiary of this letter
agreement. Any notice required to be sent to any party hereunder shall be sent
by registered or certified mail, return receipt requested, using the addresses
set forth herein or such other address as shall be furnished in writing by
Parent and the undersigned. This letter shall be governed by, and
39
construed and interpreted in accordance with, the laws of the State of Delaware
applicable to contracts made and to be performed within such state.
Very truly yours,
[Name]
Address: _____________________________
______________________________________
______________________________________
Accepted this day of
, 199 by
FLEETWOOD ENTERPRISES, INC.
By: __________________________________
Name:
Title:
40