EXHIBIT 3
AGREEMENT AND PLAN OF MERGER
Among
BEAZER HOMES USA, INC.
BEAZER HOMES INVESTMENT CORP.
and
CROSSMANN COMMUNITIES, INC.
Dated as of January 29, 2002
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ARTICLE I. THE MERGER.........................................................................2
SECTION 1.1 The Merger...............................................................2
SECTION 1.2 Closing..................................................................2
SECTION 1.3 Effective Time...........................................................2
SECTION 1.4 Certificate of Incorporation and By-Laws of the Surviving Corporation....2
SECTION 1.5 Directors................................................................3
SECTION 1.6 Officers.................................................................3
ARTICLE II. EFFECT OF MERGER ON THE CAPITAL STOCK OF PARENT, MERGER SUB AND THE COMPANY........3
SECTION 2.1 Capital Stock of Merger Sub..............................................3
SECTION 2.2 Cancellation of Treasury Stock and Parent Owned Stock....................3
SECTION 2.3 Conversion of Company Common Stock.......................................3
SECTION 2.4 Cancellation of Company Shares...........................................8
SECTION 2.5 Stock Options............................................................8
SECTION 2.6 Adjustment of Exchange Ratio.............................................9
SECTION 2.7 Exchange of Certificates.................................................9
SECTION 2.8 Distributions with Respect to Unexchanged Shares........................10
SECTION 2.9 No Further Ownership Rights.............................................10
SECTION 2.10 No Fractional Shares....................................................11
SECTION 2.11 Termination of Exchange Fund............................................11
SECTION 2.12 No Liability............................................................11
SECTION 2.13 Investment of Exchange Fund.............................................11
SECTION 2.14 Transfer Taxes..........................................................12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................12
SECTION 3.1 Organization, Existence and Good Standing of the Company................12
SECTION 3.2 Organization, Existence and Good Standing of Company Subsidiaries.......12
SECTION 3.3 Capitalization..........................................................13
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SECTION 3.4 Authority Relative to this Agreement; Recommendation....................14
SECTION 3.5 Material Contracts......................................................14
SECTION 3.6 No Conflict.............................................................15
SECTION 3.7 Required Filings and Consents...........................................15
SECTION 3.8 Compliance with Laws and Obligations....................................15
SECTION 3.9 Permits.................................................................16
SECTION 3.10 SEC Filings.............................................................16
SECTION 3.11 Financial Statements....................................................16
SECTION 3.12 Absence of Certain Changes..............................................16
SECTION 3.13 No Undisclosed Liabilities..............................................17
SECTION 3.14 Litigation..............................................................17
SECTION 3.15 Employee Benefit Plans..................................................18
SECTION 3.16 Labor Matters...........................................................19
SECTION 3.17 Restrictions on Business Activities.....................................20
SECTION 3.18 Real Property...........................................................20
SECTION 3.19 Taxes...................................................................21
SECTION 3.20 Intellectual Property...................................................25
SECTION 3.21 Environmental Matters...................................................25
SECTION 3.22 Interested Party Transactions...........................................26
SECTION 3.23 Insurance...............................................................26
SECTION 3.24 Warranties..............................................................27
SECTION 3.25 Joint Ventures..........................................................27
SECTION 3.26 Opinion of Financial Advisors...........................................27
SECTION 3.27 Brokers.................................................................27
SECTION 3.28 Tax Treatment...........................................................27
SECTION 3.29 Affiliates..............................................................27
SECTION 3.30 Vote Required...........................................................28
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...........................28
SECTION 4.1 Organization, Existence and Good Standing of Parent and Merger Sub......28
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SECTION 4.2 Organization, Existence and Good Standing of Parent Subsidiaries........28
SECTION 4.3 Capitalization..........................................................29
SECTION 4.4 Authority Relative to this Agreement; Recommendation....................30
SECTION 4.5 Material Contracts......................................................30
SECTION 4.6 No Conflict.............................................................30
SECTION 4.7 Required Filings and Consents...........................................31
SECTION 4.8 Compliance with Laws and Obligations....................................31
SECTION 4.9 Permits.................................................................31
SECTION 4.10 SEC Filings.............................................................32
SECTION 4.11 Financial Statements....................................................32
SECTION 4.12 Absence of Certain Changes..............................................32
SECTION 4.13 No Undisclosed Liabilities..............................................32
SECTION 4.14 Litigation..............................................................33
SECTION 4.15 Employee Benefit Plans..................................................33
SECTION 4.16 Labor Matters...........................................................35
SECTION 4.17 Restrictions on Business Activities.....................................35
SECTION 4.18 Real Property...........................................................35
SECTION 4.19 Taxes...................................................................36
SECTION 4.20 Intellectual Property...................................................39
SECTION 4.21 Environmental Matters...................................................40
SECTION 4.22 Interested Party Transactions...........................................40
SECTION 4.23 Insurance...............................................................40
SECTION 4.24 Opinion of Financial Advisor............................................41
SECTION 4.25 Brokers.................................................................41
SECTION 4.26 Tax Treatment...........................................................41
SECTION 4.27 Vote Required...........................................................41
SECTION 4.28 Parent Common Stock.....................................................41
SECTION 4.29 Sufficient Funds........................................................42
SECTION 4.30 Warranties..............................................................42
SECTION 4.31 Joint Ventures..........................................................42
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ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER...........................................42
SECTION 5.1 Conduct of Business of the Company......................................43
SECTION 5.2 No Solicitation.........................................................45
SECTION 5.3 Conduct of Business by Parent...........................................47
SECTION 5.4 Adverse Changes in Condition............................................48
ARTICLE VI. ADDITIONAL AGREEMENTS............................................................48
SECTION 6.1 Registration Statement/Listing Application..............................48
SECTION 6.2 Meetings of Stockholders................................................50
SECTION 6.3 Antitrust Matters.......................................................52
SECTION 6.4 Access to Information; Confidentiality..................................52
SECTION 6.5 Tax-Free Reorganization.................................................52
SECTION 6.6 Affiliate Agreements....................................................53
SECTION 6.7 Company Stock Options...................................................53
SECTION 6.8 Indemnification and Insurance...........................................53
SECTION 6.9 Further Action..........................................................54
SECTION 6.10 Public Announcements....................................................54
SECTION 6.11 Employee Benefits.......................................................55
ARTICLE VII. TERMINATION......................................................................56
SECTION 7.1 Termination.............................................................56
SECTION 7.2 Effect of Termination...................................................58
SECTION 7.3 Amendment...............................................................60
SECTION 7.4 Extension: Waiver.......................................................60
ARTICLE VIII. CONDITIONS TO THE MERGER.........................................................60
SECTION 8.1 Conditions to the Obligations of Each Party.............................60
SECTION 8.2 Conditions to the Obligations of Parent and Merger Sub..................61
SECTION 8.3 Conditions to the Obligations of the Company............................63
ARTICLE IX. GENERAL PROVISIONS...............................................................63
SECTION 9.1 Nonsurvival of Representations..........................................63
SECTION 9.2 Notices.................................................................64
SECTION 9.3 Definitions.............................................................65
SECTION 9.4 Headings................................................................66
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SECTION 9.5 Severability............................................................66
SECTION 9.6 Entire Agreement........................................................66
SECTION 9.7 Assignment..............................................................66
SECTION 9.8 Parties in Interest.....................................................67
SECTION 9.9 Failure and Indulgence not Waivers; Remedies not Exclusive..............67
SECTION 9.10 Governing Law...........................................................67
SECTION 9.11 Counterparts............................................................67
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AGREEMENT AND PLAN OF MERGER, dated as of January 29, 2002 among BEAZER
HOMES USA, INC., a Delaware corporation ("Parent"), BEAZER HOMES INVESTMENT
CORP., a Delaware corporation and a wholly owned subsidiary of Parent ("MERGER
SUB"), and CROSSMANN COMMUNITIES, INC., an Indiana corporation (the "Company").
WITNESSETH:
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WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have approved the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth in this Agreement and Plan of
Merger, including, without limitation, the exhibits attached hereto
(collectively, this "AGREEMENT");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have unanimously approved and deemed advisable the merger of the
Company with and into Merger Sub (the "MERGER") upon the terms and subject to
the conditions set forth in this Agreement, whereby each issued and outstanding
share (a "COMPANY SHARE") of common stock, no par value, of the Company
("COMPANY COMMON STOCK"), will be converted into the right to receive common
stock, par value $0.01 per share, of Parent (the "PARENT COMMON STOCK") and cash
subject to the provisions of Article II of this Agreement;
WHEREAS, for federal income tax purposes, the Merger is intended to
qualify as a tax-free reorganization within the meaning of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "CODE");
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger; and
WHEREAS, as a condition and inducement to the Parent and Merger Sub to
enter into this Agreement, contemporaneously with the execution and delivery of
this Agreement, certain stockholders of the Company are entering into a voting
agreement, in the form attached hereto as EXHIBIT A, with Parent;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL") and the Indiana Business Corporation Law (the
"IBCL"), the Company shall be merged with and into Merger Sub at the Effective
Time (as defined in Section 1.3). Following the Merger, the separate corporate
existence of the Company shall cease, and Merger 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
and the IBCL.
SECTION 1.2 CLOSING. Unless this Agreement shall have been terminated
and the transaction herein contemplated shall have been abandoned pursuant to
Section 7.1, and subject to the satisfaction or waiver (pursuant to the terms of
this Agreement) of the conditions set forth in Article VIII, the closing of the
Merger (the "CLOSING") shall take place as promptly as practicable, and in any
event within two business days, after satisfaction or waiver (pursuant to the
terms of this Agreement) of the conditions set forth in Article VIII (the
"CLOSING DATE") at the offices of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, unless another date or place is
agreed to in writing by the parties hereto.
SECTION 1.3 EFFECTIVE TIME. On the Closing Date, or as soon as
practicable thereafter, the parties shall execute and file with the Secretary of
State of the State of Delaware, a Certificate of Merger, and with the Secretary
of State of the State of Indiana, Articles of Merger, executed in accordance
with the relevant provisions of the DGCL and the IBCL, respectively. The
"EFFECTIVE TIME" shall be 11:59 p.m. Eastern Time on the Closing Date, which
date and time shall be specified in the Certificate of Merger and Articles of
Merger, or at such other time as is agreed to in writing by the parties hereto.
SECTION 1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION.
(a) The Certificate of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time shall become the Certificate of
Incorporation of the Surviving Corporation after the Effective Time, and
thereafter may be amended as provided therein and as permitted by the DGCL and
this Agreement.
(b) The By-Laws of Merger Sub as in effect immediately prior to the
Effective Time shall become the By-Laws of the Surviving Corporation after the
Effective Time, and thereafter may be amended as provided therein and as
permitted by the DGCL and this Agreement.
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SECTION 1.5 DIRECTORS. The directors of Merger 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 elected and qualified, as the case may be.
SECTION 1.6 OFFICERS. The persons listed on EXHIBIT B hereto shall
become the officers of the Surviving Corporation at the Effective Time, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II.
EFFECT OF MERGER ON THE CAPITAL STOCK
OF PARENT, MERGER SUB AND THE COMPANY
SECTION 2.1 CAPITAL STOCK OF MERGER SUB. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Merger Sub,
each share of common stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock, par value $0.01
per share, of the Surviving Corporation.
SECTION 2.2 CANCELLATION OF TREASURY STOCK AND PARENT OWNED STOCK. As
of the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any shares of Company Common Stock or any shares of
capital stock of Merger Sub, each share of Company Common Stock issued and held
immediately prior to the Effective Time and held in the Company's treasury or by
any of the Company's direct or indirect wholly owned subsidiaries and each share
of Company Common Stock that is owned by Parent, Merger Sub or any other
subsidiary of Parent shall automatically be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor.
SECTION 2.3 CONVERSION OF COMPANY COMMON STOCK.
At the Effective Time, subject to the provisions of this Agreement,
each Company Share issued and outstanding immediately prior to the Effective
Time (other than shares cancelled pursuant to Section 2.2) shall be converted
into the merger consideration (the "MERGER CONSIDERATION") which shall consist
of the right to receive:
(a) For each such Company Share other than shares of Company Common
Stock as to which a Stock Election or Cash Election has been duly made and not
revoked or lost pursuant to Section 2.3(g), the right to receive cash and Parent
Common Stock as specified herein below (the "Base Consideration"). Subject to
Section 2.3(a)(vii), the
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Base Consideration shall be $17.60 in cash plus a fraction of a share of Parent
Common Stock equal to the Base Exchange Ratio. The term "Base Exchange Ratio"
means:
(i) If the Stock Value is equal to or greater than $68.54 and
equal to or less than $80.45, the Base Exchange Ratio shall be 0.3544.
(ii) If the Stock Value is less than $68.54 and greater than
$61.46, the Base Exchange Ratio shall equal the quotient obtained by
dividing $24.29 by the Stock Value (rounded to the nearest ten
thousandth).
(iii) If the Stock Value is greater than $80.45 and less than
$93.13, the Base Exchange Ratio shall equal the quotient obtained by
dividing $28.51 by the Stock Value (rounded to the nearest ten
thousandth).
(iv) If the Stock Value is equal to or less than $61.46, the
Base Exchange Ratio shall be 0.3952.
(v) If the Stock Value is equal to or greater than $93.13, the
Base Exchange Ratio shall be 0.3061.
(vi) The term "Stock Value" means the average of the closing
prices of Parent Common Stock as reported for NYSE Composite
Transactions for the 15 consecutive trading days ending at the close of
trading on the date that is three trading days prior to the date of the
Company Stockholder Meeting (as defined in Section 6.2(a)).
(vii) If the Stock Value is less than the Floor Price and
Parent so elects, as provided in Section 7.1(f), the Base Consideration
shall be the Adjusted Cash Amount plus a fraction of a share of Parent
Common Stock equal to the Adjusted Exchange Ratio; provided that, as
set forth in Section 2.3(b)(ii), the Base Consideration Value shall
equal not less than $38.21.
(viii) The term "Adjusted Cash Amount" means $17.60, or more
if and to the extent elected by Parent as provided in Section 7.1(f).
(ix) The term "Adjusted Exchange Ratio" means 0.3952, or more
if and to the extent elected by Parent pursuant to Section 7.1(f).
(x) The term "Floor Price" means $52.15.
(xi) Company Shares as to which a Base Election has duly been
made or as to which a Stock Election or Cash Election has not been duly
made or, if made, has been revoked or lost pursuant to Section 2.4 (a
"NON-ELECTION" ) are hereinafter sometimes referred to as "Non-Election
Shares."
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(b) Subject to Section 2.3(e), for each such Company Share with respect
to which an election to receive Parent Common Stock has been duly made and not
revoked or lost pursuant to the provisions of Sections 2.3(i) through 2.3(k) (a
"STOCK ELECTION"), the right to receive a fraction of a share of Parent Common
Stock equal to the Stock Exchange Ratio.
(i) The term "Stock Exchange Ratio" means the quotient of the
Base Consideration Value divided by the Stock Value.
(ii) The term "Base Consideration Value" means (w) $17.60 plus
(x) the product of the Stock Value times the Base Exchange Ratio;
provided, that if the Stock Value is less than the Floor Price and
Parent so elects, as provided in Section 7.1(f), the Base Consideration
Value shall be the sum of (y) the Adjusted Cash Amount plus (z) the
product of the Adjusted Exchange Ratio times the Stock Value; provided,
further, that the sum of (y) and (z) shall not be less than $38.21.
(iii) Company Shares for which a Stock Election has been made
are hereinafter sometimes referred to as the "Stock Election Shares."
(c) Subject to Section 2.3(d), for each such Company Share with respect
to which an election to receive cash has been duly made and not revoked or lost
pursuant to the provisions of Sections 2.3(i) through 2.3(k) (a "CASH
ELECTION"), the right to receive in cash an amount equal to the Base
Consideration Value. Company Shares for which a Cash Election has been made are
hereinafter sometimes referred to as the "Cash Election Shares."
(d) If the Requested Cash Amount exceeds the Cash Consideration, the
Merger Consideration for each Cash Election Share shall be cash and Parent
Common Stock as set forth below:
(i) Cash equal to the quotient of (y) the Cash Consideration
minus the product of (A) the Adjusted Cash Amount times (B) the
aggregate number of Non-Election Shares, divided by (z) the aggregate
number of Cash Election Shares, but in no event less than the Adjusted
Cash Amount.
(ii) A fraction of a share of Parent Common Stock equal to the
quotient of (y) the Base Consideration Value minus the cash payable
pursuant to Section 2.3(d)(i), divided by (z) the Stock Value.
(iii) The term "Requested Cash Amount" means the aggregate
amount of cash that would be payable with respect to Non-Election
Shares and Cash Election Shares before any adjustments pursuant to
Section 2.3(e) or this Section 2.3(d).
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(iv) The term "Cash Consideration" means the product of the
Adjusted Cash Amount times the number of Company Shares outstanding
immediately prior to the Effective Time (other than shares cancelled
pursuant to Section 2.2).
(e) If the Requested Cash Amount is less than the Cash Consideration,
the Merger Consideration for each Stock Election Share shall be cash and Parent
Common Stock as set forth below:
(i) Cash equal to the quotient of (y) the Cash Consideration
minus the Requested Cash Amount, divided by (z) the number of Stock
Election Shares.
(ii) A fraction of a share of Parent Common Stock equal to the
quotient of (y) the Base Consideration Value minus the cash payable
pursuant to Section 2.3(e)(i), divided by (z) the Stock Value.
(f) Notwithstanding the foregoing, if more than 60% of the total value
of the Merger Consideration for all the outstanding Company Shares other than
shares to be canceled in accordance with Section 2.2 would be cash, the cash
which a holder of a share of Company Common Stock will receive will be reduced
on a pro rata basis with all other such holders to the amount such that 60% of
the total value of the Merger Consideration will be cash and the holders of
Company Common Stock will receive in exchange for such reduction in cash an
amount of additional shares of Parent Common Stock obtained by dividing the
amount of such reduction in cash by the Stock Value.
(g) Each person who, on or prior to the Election Date, is a record
holder of shares of Company Shares shall have the right to submit a Form of
Election specifying one of the following: (i) that such stockholder desires that
all of his or her Company Shares be converted into the Base Consideration (such
election being hereinafter sometimes referred to as a "Base Election"), (ii)
that such stockholder desires that all of his or her Company Shares be converted
into cash pursuant to the Cash Election, or (iii) that such stockholder desires
that all of his or her Company Shares be converted into Stock Election Shares
pursuant to the Stock Election. A stockholder may not make an election for less
than all of his or her Company Shares.
(h) Parent shall prepare, subject to the reasonable approval of the
Company, a form of election (the "FORM OF ELECTION") for mailing with the Proxy
Statement. The Form of Election shall be (i) mailed to the record holders of
Company Shares as of the record date for the Company Stockholder Meeting, and
(ii) used by each record holder of Company Shares to make the Base Election, the
Cash Election or the Stock Election. The Company shall also use its reasonable
best efforts to make the Form of Election and the Proxy Statement available to
all persons who become holders of Company Shares during the period between such
record date and the Election Date. Any such holder's Base Election, Cash
Election or Stock Election shall have been properly made only if the Exchange
Agent shall have received at its designated office, by 5:00 p.m., New York
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City time on the business day next preceding the date of the Company Stockholder
Meeting (the "ELECTION DATE"), a Form of Election properly completed and signed
and accompanied by certificate(s) for the Company Shares ("CERTIFICATE(S)") to
which such Form of Election relates, duly endorsed in blank or otherwise in form
acceptable for transfer on the books of the Company (or by an appropriate
guarantee for delivery of such Certificate(s) as set forth in such Form of
Election from a firm which is a member of a registered national securities
exchange or a commercial bank or trust company having an office or correspondent
in the United States, provided that such Certificate(s) are in fact delivered to
the Exchange Agent within three trading days after the date of execution of such
guarantee of delivery).
(i) Any Form of Election may be revoked by a record holder of Company
Common Stock who submitted such Form of Election to the Exchange Agent only by
written notice received by the Exchange Agent prior to 5:00 p.m., New York City
time on the Election Date. In addition, all Forms of Election shall
automatically be revoked if the Exchange Agent is notified in writing by Parent
and the Company that the Merger has been abandoned or if either the Company's or
Parent's stockholders fail to approve the Merger. If a Form of Election is
revoked because the Merger has been abandoned or if either the Company's or
Parent's stockholders fail to approve the Merger, the Certificate(s) (or
guarantee(s) of delivery, if applicable) for the share(s) of Company Common
Stock, if any, to which such Form of Election relates shall promptly be returned
to the stockholder submitting the same to the Exchange Agent.
(j) For purposes of this Agreement, a holder of Common Stock who does
not submit a Form of Election which is received by the Exchange Agent prior to
the Election Date or who submits a Form of Election that is not properly made or
who acquires Company Shares after the date hereof pursuant to either of the
Company Option Plans shall be deemed to have made a Non-Election. If Parent or
the Exchange Agent shall determine that any purported Base Election, Cash
Election or Stock Election was not properly made, such purported Base Election,
Cash Election or Stock Election shall be deemed to be of no force and effect and
the holder making such purported Base Election, Cash Election or Stock Election
shall, for purposes of this Agreement, be deemed to have made a Non-Election.
All holders of Non-Election Shares shall receive the Base Consideration.
(k) Parent shall have the sole 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. The decision of Parent (or the Exchange
Agent, if applicable) in such matters shall be conclusive and binding. Neither
Parent nor the Exchange Agent shall be under any obligation to notify any
stockholder of any defect in a Form of Election submitted to the Exchange Agent.
The Exchange Agent shall make all computations contemplated by Section 2.3(d)
and Section 2.3(e) and all such computations shall be conclusive and binding on
the holders of Company Common Stock.
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SECTION 2.4 CANCELLATION OF COMPANY SHARES. Upon conversion pursuant to
Section 2.3, all Company Shares shall be cancelled and cease to exist, and each
holder thereof shall cease to have any rights with respect thereto other than
the right to receive the Merger Consideration and any other amounts in
accordance with the terms provided herein. All shares of Parent Common Stock
issued as Merger Consideration shall be fully paid and nonassessable.
SECTION 2.5 STOCK OPTIONS. At the Effective Time, each option
outstanding (and which by its terms does not lapse on or before the Effective
Time) to purchase Company Common Stock (a "COMPANY STOCK OPTION") granted under
the Company's 1993 Employee Stock Option Plan, as amended (the "COMPANY EMPLOYEE
OPTION PLAN"), or the Company's 1993 Outside Director Stock Option Plan (the
"COMPANY DIRECTOR PLAN" and, together with the Company Employee Option Plan, the
"COMPANY OPTION PLANS"), whether or not then vested or exercisable, shall be
replaced by a comparable option to purchase Parent Common Stock (a "PARENT STOCK
OPTION"), after giving effect to the requirements of the Company Option Plans
(including without limitation any provisions with respect to a change of control
of the Company) pursuant to which it was granted and any stock option agreement
by which it is evidenced. Notwithstanding the foregoing, in the event that, as
of the Effective Time, Parent shall not have reserved a sufficient number of
shares for issuance upon exercise of each of the Parent Stock Options
contemplated by this Section 2.5, then, to the extent of such deficiency and on
a pro rata basis, each holder of a Company Stock Option (whether or not then
vested or exercisable) shall be entitled to receive, immediately prior to the
Effective Time, cash in an amount equal to the difference between (A) the Base
Consideration Value minus (B) the per-share exercise price of the applicable
Company Stock Option. It is intended that the foregoing provisions shall be
undertaken in a manner that will not constitute a "modification" as defined in
Section 424 of the Code as to any stock option which is an "incentive stock
option." Each Parent Stock Option shall be exercisable for that number of shares
of Parent Common Stock equal to the number of the Company Shares subject to the
corresponding Company Stock Option multiplied by the Stock Exchange Ratio, and
shall have an exercise price per share equal to its exercise price per Company
Share divided by the Stock Exchange Ratio (the "Adjusted Strike Price"). Any
resulting fractional share of Parent Common Stock shall be rounded down to the
nearest whole share and Parent shall pay an amount in cash to the holder of such
Company Stock Option at the Effective Time equal to the product of such
fractional share of Parent Common Stock multiplied by an amount equal to the
Stock Value minus the Adjusted Strike Price. Parent and the Company shall use
commercially reasonable efforts to take all such steps as may be required to
cause the transactions contemplated by this Section 2.5 and any other
dispositions of equity securities of the Company or dispositions of Parent
equity securities in connection with this Agreement by each individual who (i)
is a director or officer of the Company or (ii) at the Effective Time, will
become a director or officer of Parent, to be exempt under Rule 16b-3 of the
Exchange Act.
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SECTION 2.6 ADJUSTMENT OF EXCHANGE RATIO. If after the date hereof and
prior to the Effective Time there shall have been a change in the Parent Common
Stock, by reason of a stock split (including a reverse split) of the Parent
Common Stock or a dividend payable in the Parent Common Stock, or any other
distribution of securities to holders of the Parent Common Stock with respect to
their Parent Common Stock (including without limitation such a distribution made
in connection with a recapitalization, reclassification, merger, consolidation,
reorganization or similar transaction) or otherwise, then the Exchange Ratio and
the dollar amounts set forth in Section 2.3(a) shall be appropriately adjusted;
provided, however, that the aggregate amount of Merger Consideration shall not
be adjusted below the amount provided for in this Article II.
SECTION 2.7 EXCHANGE OF CERTIFICATES.
(a) Prior to the mailing of the Proxy Statement, Parent shall enter
into an agreement with a bank or trust company designated by Parent (the
"EXCHANGE AGENT"), providing that Parent shall deposit with the Exchange Agent
as of the Effective Time, for the benefit of the holders of the Company Shares,
for exchange in accordance with Sections 2.3 and 2.4 and this Section 2.7
through the Exchange Agent, (i) cash in an amount equal to the aggregate amount
payable pursuant to Sections 2.3 and 2.5, (ii) certificates representing the
shares of Parent Common Stock issuable pursuant to Sections 2.3 and 2.5 and
(iii) cash in an amount equal to the aggregate amount required to be paid in
lieu of fractional interests of Parent Common Stock pursuant to Section 2.10
(such cash and shares of Parent Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective Time
and the cash referred to in clause (iii) of this Section 2.7 being hereinafter
referred to as the "EXCHANGE FUND"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the cash and the Parent Common Stock
contemplated to be issued pursuant to this Article II from the Exchange Fund in
accordance with this Agreement. Until they are distributed, the shares of Parent
Common Stock held by the Exchange Agent shall be deemed to be outstanding, but
the Exchange Agent shall not vote such shares or exercise any rights of a
stockholder with regard thereto.
(b) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate representing shares of
Company Common Stock (a "CERTIFICATE") whose shares were converted into the
right to receive the Merger Consideration, (i) a letter of transmittal and (ii)
instructions for use in effecting the surrender of the Certificate(s) in
exchange for the Merger Consideration. Upon surrender of such Certificate(s) for
cancellation to the Exchange Agent, 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(s) shall be entitled to receive
in exchange therefor a certificate representing that number of whole shares of
Parent Common Stock and cash which such holder has the right to receive pursuant
to the
9
provisions of Sections 2.3 and 2.10, and the Certificate(s) so surrendered shall
forthwith be canceled.
(c) If any cash or any certificate representing Parent Shares is to be
paid to or issued in a name other than that in which a Certificate surrendered
in exchange therefor is registered, a certificate representing the proper number
of shares of Parent Common Stock may be issued to a person 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 to the Exchange Agent any transfer or
other Taxes required by reason of the payment of cash or 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 the Exchange Agent that such Tax
has been paid or is not applicable. Until surrendered as contemplated by this
Section 2.7, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the cash, the
certificate representing shares of Parent Common Stock or cash in lieu of any
fractional shares of Parent Common Stock, as applicable. No interest will be
paid or will accrue on any cash so payable.
(d) If any holder of converted Company Shares shall be unable to
surrender such holder's Certificates because such Certificates shall have been
lost or destroyed, such holder may deliver in lieu thereof an affidavit and
indemnity bond in form and substance and with surety reasonably satisfactory to
Parent.
SECTION 2.8 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made with respect to Parent Common
Stock with a record date after the Effective Time shall be paid to the holder of
any unsurrendered Certificate with respect to the Parent Common Stock
represented thereby by reason of the conversion of shares of Company Common
Stock pursuant to Section 2.3 and no cash shall be paid to any such holder until
such Certificate is surrendered or deemed surrendered in accordance with this
Article II. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid, without interest, to the person in whose
name the shares of Parent Common Stock representing such shares are registered
(i) at the time of such surrender, the amount of any cash payable to which such
holder is entitled pursuant to this Section 2.8 and (ii) at the appropriate
payment date or as promptly as practicable thereafter, the proportionate amount
of dividends or other distributions, with (x) a record date with respect thereto
after the Effective Time, but prior to such surrender, and (y) a payment date
subsequent to such surrender, payable with respect to such shares of Parent
Common Stock.
SECTION 2.9 NO FURTHER OWNERSHIP RIGHTS. All cash and shares of Parent
Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid pursuant
to Section 2.10) shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to the
10
Company Shares theretofore represented by such Certificates. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Article II, except as otherwise provided by law.
SECTION 2.10 NO FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a stockholder of
Parent. Notwithstanding any other provision of this Agreement, each holder of
Company Shares 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) 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 Stock Value. The parties
acknowledge that payment of the cash consideration in lieu of issuing fractional
shares was not separately bargained for consideration but merely represents a
mechanical rounding off for purposes of simplifying the corporate and accounting
complexities which would otherwise be caused by the issuance of fractional
shares.
SECTION 2.11 TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of cash and Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock, and
any dividends or distributions with respect to Parent Common Stock, all without
interest.
SECTION 2.12 NO LIABILITY. To the fullest extent permitted by
applicable law, none of Parent, Merger Sub, the Company or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock
(or dividends or distributions with respect thereto) or cash from the Exchange
Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall not have been
surrendered prior to the end of the applicable period after the Effective Time
under escheat laws (or immediately prior to such earlier date on which any
Merger Consideration or any dividends or distributions with respect to Parent
Common Stock in respect of such Certificates would otherwise escheat to or
become the property of any governmental entity), any such shares, cash,
dividends or distributions in respect of such Certificates shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
SECTION 2.13 INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall
invest any cash included in the Exchange Fund on a daily basis as directed by
Parent. Any interest and other income resulting from such investments shall be
paid to Parent.
11
SECTION 2.14 TRANSFER TAXES. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, applications or other
documents regarding any real property transfer, stamp, recording, documentary or
other taxes and any other fees and similar taxes which become payable in
connection with the Merger other than transfer or stamp taxes payable in respect
of transfers pursuant to Section 2.7(c) (collectively, "TRANSFER TAXES"). From
and after the Effective Time, Parent shall pay or cause to be paid, without
deduction or withholding from any amounts payable to the holders of Company
Shares, all Transfer Taxes.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a separate disclosure schedule which has been
delivered by the Company to the Parent prior to the date of this Agreement (the
"COMPANY DISCLOSURE SCHEDULE") (which Company Disclosure Schedule shall contain
appropriate references to identify the representations and warranties herein to
which the information in such Company Disclosure Schedule relates), the Company
hereby represents and warrants to Parent and Merger Sub as follows:
SECTION 3.1 ORGANIZATION, EXISTENCE AND GOOD STANDING OF THE COMPANY.
The Company is a corporation duly organized and validly existing under the laws
of the State of Indiana. The Company has all necessary corporate power and
authority to own its properties and assets and to carry on its business as
presently conducted. The Company is qualified to do business and is in good
standing in each jurisdiction where the nature or character of the property
owned, leased or operated by it or the nature of the business transacted by it
makes such qualification necessary, except where the failure to be so qualified
or be in good standing is not reasonably likely to have a Company Material
Adverse Effect. The Company has delivered to Parent a complete and correct copy
of its Amended and Restated Articles of Incorporation (the "ARTICLES OF
INCORPORATION") and Bylaws as amended to the date hereof.
SECTION 3.2 ORGANIZATION, EXISTENCE AND GOOD STANDING OF COMPANY
SUBSIDIARIES. Section 3.2 of the Company Disclosure Schedule sets forth a list
of each subsidiary of the Company (each a "COMPANY SUBSIDIARY" and, collectively
the "COMPANY SUBSIDIARIES"), the jurisdiction of incorporation or organization,
as applicable, of each Company Subsidiary, the type of entity of each Company
Subsidiary, the percentage of the ownership of the outstanding capital stock or
interest in each Company Subsidiary by the Company or by any other Company
Subsidiary and the authorized and outstanding capital stock of each corporate
Company Subsidiary. Each Company Subsidiary is a corporation, business trust,
general or limited partnership or limited liability company (as so specified)
duly organized, validly existing and (to the extent applicable) in good standing
under the laws of the jurisdiction of its incorporation or organization, as
applicable. Each Company Subsidiary has all necessary entity power and
12
authority to own its properties and assets and to carry on its business as
presently conducted. Each Company Subsidiary is qualified to do business and is
in good standing in each jurisdiction where the nature or character of the
property owned, leased or operated by it or the nature of the business
transacted by it makes such qualification necessary, except where the failure to
be so qualified or be in good standing is not reasonably likely to have a
Company Material Adverse Effect. Except for the Company Subsidiaries and except
as set forth in Section 3.2 of the Company Disclosure Schedule, the Company does
not, directly or indirectly, own any equity interest in any other corporation,
association, partnership, joint venture, business organization or limited
liability company or other entity, with respect to which interest the Company or
any Company Subsidiary has invested or is required to invest $100,000 or more,
excluding securities in any publicly traded company held for investment and
comprising less than one percent (1%) of the outstanding voting securities of
such company, nor has the Company entered into any agreement, arrangement or
understanding to make any such investment.
SECTION 3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists solely of
30,000,000 shares of Company Common Stock, and 10,000,000 shares of preferred
stock, no par value ("COMPANY PREFERRED STOCK"). As of the date hereof: (i)
10,671,503 shares of Company Common Stock are issued and outstanding, no shares
of Company Common Stock are held in treasury, and no shares of Company Preferred
Stock are issued and outstanding; and (ii) 248,600 shares of Company Common
Stock are reserved for purchase pursuant to the Company Option Plans. All of the
outstanding shares of Company Common Stock are, and all shares of Company Common
Stock which may be issued prior to the Effective Time upon exercise of any
option or other right will be, validly issued, fully paid and nonassessable and
free of preemptive rights. Except as set forth above, as of the date hereof
there are outstanding no shares of capital stock or other voting securities of
the Company and no equity equivalent interests in the ownership or earnings of
the Company or the Company Subsidiaries. All of the outstanding shares of
capital stock, or other ownership interest, of each Company Subsidiary are
validly issued, fully paid and nonassessable, and are owned by the Company or
another Company Subsidiary free and clear of all security interests, liens,
claims, pledges, charges or other encumbrances of any nature whatsoever.
(b) Section 3.3 of the Company Disclosure Schedule sets forth a true
and complete list of all outstanding rights, including options, to purchase
Company Common Stock, the name of each holder thereof, the number of shares
purchasable thereunder, the date of vesting of such right, any rights of holders
of such rights that will be triggered by the consummation of the Merger and the
per share exercise or purchase price of each right. There are no securities of
the Company or any Company Subsidiary convertible or exchangeable for shares of
capital stock or voting securities of the Company or any Company Subsidiary;
and, except as set forth in Section 3.3 of the Company Disclosure
13
Schedule, there are no options, warrants or other similar rights, agreements,
arrangements or commitments of any character obligating the Company or any
Company Subsidiary to issue or sell any shares of capital stock of, or other
equity interests in, the Company or any Company Subsidiary. There are no
obligations, contingent or otherwise, of the Company or any Company Subsidiary
to repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock or other equity interest of any Company Subsidiary or to make
any investment (in the form of a loan, capital contribution or otherwise) in any
Company Subsidiary.
SECTION 3.4 AUTHORITY RELATIVE TO THIS AGREEMENT; RECOMMENDATION. The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the approval of this Agreement by the holders of a
majority of the outstanding shares of the Company Common Stock in accordance
with the IBCL and the Company's Articles of Incorporation). This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Parent and Merger Sub, constitutes
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms. The Board of Directors of the Company (the
"COMPANY BOARD") has, at a meeting duly called and held at which all directors
of the Company were present, duly and unanimously adopted resolutions (i)
approving and declaring the advisability of this Agreement and the Merger in
accordance with the IBCL and the Company's Articles of Incorporation and Bylaws,
(ii) determining that this Agreement and the Merger are fair to and in the best
interests of the stockholders of the Company, (iii) determining that the
consideration to be paid in the Merger is fair to and in the best interests of
the stockholders of the Company and (iv) recommending that the stockholders of
the Company approve this Agreement; which resolutions have not been subsequently
rescinded, modified or withdrawn in any way.
SECTION 3.5 MATERIAL CONTRACTS. Except as set forth in Section 3.5 of
the Company Disclosure Schedule, the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000 and Quarterly Reports on Form 10-Q for
the periods ended March 31, 2001, June 30, 2001 and September 30, 2001 set forth
a list of all agreements to which the Company or any Company Subsidiary is a
party or by which any of them is bound which, as of the date hereof: (i) are
required to be filed as "material contracts" with the Securities and Exchange
Commission (the "SEC") pursuant to the requirements of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"); (ii) under which the consequences
of a default, nonrenewal or termination is reasonably likely to have a Company
Material Adverse Effect; or (iii) pursuant to which payments might be required
or acceleration of benefits may be required upon a "change of control"
14
of the Company, or upon execution of this Agreement by the Company or the
performance by the Company of its obligations hereunder (collectively, the
"COMPANY MATERIAL CONTRACTS").
SECTION 3.6 NO CONFLICT. Except as set forth in Section 3.6 of the
Company Disclosure Schedule, neither the execution and delivery of this
Agreement by the Company nor the consummation by the Company of the transactions
contemplated hereby nor the compliance by the Company with any of the provisions
hereof will, (i) conflict with or violate the Articles of Incorporation or
Bylaws of the Company, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Company or any Company Subsidiary or
by which its or any of their respective assets or properties are bound or
affected (such laws, rules, regulations, orders, judgments or decrees applicable
with respect to a party or such party's assets or properties, the "APPLICABLE
LAWS"), or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair the rights of the Company or any Company Subsidiary, or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration, purchase or cancellation, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or any of their
respective assets or properties are bound or affected, except in any such case
for any such conflicts, violations, breaches, defaults or other occurrences that
are not reasonably likely to have a Company Material Adverse Effect.
SECTION 3.7 REQUIRED FILINGS AND CONSENTS. Neither the execution and
delivery of this Agreement by the Company nor the consummation by the Company of
the transactions contemplated hereby nor the compliance by the Company with any
of the provisions hereof will require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic or foreign, federal, state or local ("GOVERNMENTAL ENTITY"),
except (i) for applicable requirements, if any, of the Securities Act of 1933,
as amended (the "SECURITIES ACT"), the Exchange Act, state securities laws
("BLUE SKY LAWS"), any pre-merger notification requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended ("HSR ACT"),
and the filing and recordation of appropriate merger or other documents as
required by the DGCL and the IBCL, and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger, or
otherwise prevent or delay the Company from performing its obligations under
this Agreement, or is not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 3.8 COMPLIANCE WITH LAWS AND OBLIGATIONS. Neither the Company
nor any Company Subsidiary is in conflict with, or in default or violation of,
(i) any
15
Applicable Law or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation, except for
any such conflicts, defaults or violations which is not reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect.
SECTION 3.9 PERMITS. Except as set forth in Section 3.9 of the Company
Disclosure Schedule, the Company and each Company Subsidiary hold all permits,
licenses, easements, variances, exemptions, consents, certificates, orders and
approvals from Governmental Entities necessary for the operation of the business
of the Company and the Company Subsidiaries as it is now being conducted
(collectively, the "COMPANY PERMITS"), except where the failure to hold such
Company Permits is not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect. The Company and the Company
Subsidiaries are in compliance with the terms of the Company Permits, except
where the failure to so comply is not reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect.
SECTION 3.10 SEC FILINGS. The Company has filed all forms, reports and
documents required to be filed by it with the SEC (collectively, the "COMPANY
SEC REPORTS") on a timely basis. The Company SEC Reports filed prior to the date
hereof and all similar documents filed prior to the Closing Date (i) were, or
will be, as the case may be, prepared in all material respects in accordance
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and (ii) did not, or will not, as the case may be, at the time they were or
are filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of the Company
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
SECTION 3.11 FINANCIAL STATEMENTS. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto), and each fairly
presents in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as at the respective dates thereof and
the consolidated statements of income and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments.
SECTION 3.12 ABSENCE OF CERTAIN CHANGES. Except as set forth in the
Company SEC Reports, since December 31, 2001, there has not occurred: (i) any
Company Material Adverse Effect or any event, change or effect which is
reasonably likely to have, individually or in the aggregate with other events,
changes or effects, a Company Material Adverse Effect; (ii) any amendments or
changes in the Articles of
16
Incorporation or Bylaws of the Company; (iii) any damage to, destruction or loss
of any asset of the Company or any Company Subsidiary (whether or not covered by
insurance) that is reasonably likely to individually or in the aggregate have a
Company Material Adverse Effect; (iv) any material change by the Company in its
accounting methods, principles or practices; (v) any material revaluation by the
Company of any of its assets, including, without limitation, writing off or
writing down notes or accounts receivable or inventory, other than in the
ordinary course of business consistent with past practices; or (vi) any action
or event that would have required the consent of Parent pursuant to Section 5.1
had such action or event occurred after the date of this Agreement.
SECTION 3.13 NO UNDISCLOSED LIABILITIES. Neither the Company nor any
Company Subsidiary has any liabilities (absolute, accrued, contingent or
otherwise), except liabilities (a) for which in the aggregate there are adequate
reserves in the Company's audited balance sheet (including any related notes
thereto) as of December 31, 2001 (the "2001 COMPANY BALANCE SHEET"), (b)
incurred in the ordinary course of business before the date of the 2001 Company
Balance Sheet and not required under generally accepted accounting principles to
be reflected on the 2001 Company Balance Sheet, or (c) incurred since December
31, 2001 in the ordinary course of business consistent with past practice or in
connection with this Agreement, that are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect.
SECTION 3.14 LITIGATION. Except as set forth in the Company SEC Reports
or in Section 3.14 of the Company Disclosure Schedule, there are no claims,
actions, suits, proceedings or investigations pending or, to the knowledge of
the Company, threatened against the Company or any Company Subsidiary or any
properties or rights of the Company or any Company Subsidiary before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign, that would be required to be disclosed in an Annual Report
on Form 10-K or that could reasonably be expected to prevent or delay
consummation of the Merger, or otherwise prevent or delay the Company from
performing its obligations under this Agreement. None of the claims, actions,
suits, proceedings and investigations so set forth are reasonably likely to have
a Company Material Adverse Effect.
17
SECTION 3.15 EMPLOYEE BENEFIT PLANS.
(a) Section 3.15 of the Company Disclosure Schedule lists all employee
pension plans (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), all employee welfare plans (as
defined in Section 3(1) of ERISA) and all other bonus, stock option, stock
purchase, performance share, stock appreciation or other equity based
compensation, incentive, deferred compensation, supplemental retirement,
severance and other similar fringe or employee benefit plans, programs or
arrangements, and any employment, executive compensation, consulting or
severance agreements, performance pay, loan or loan guarantee, change of control
or other non-ERISA plans, written or otherwise, for the benefit of, or relating
to, any current or former employee or director of or consultant to the Company,
any trade or business (whether or not incorporated) which is or was a member of
a controlled group including the Company or which is under common control with
the Company (a "COMPANY ERISA AFFILIATE") within the meaning of Section 414 of
the Code, or any Company Subsidiary, that the Company, any Company Subsidiary or
any Company ERISA Affiliate maintains or pursuant to which has any obligation,
as well as each employee pension plan with respect to which the Company, any
Company Subsidiary or a Company ERISA Affiliate maintained or otherwise incurred
any liability within the consecutive five-year period ending on the Closing Date
(collectively the "COMPANY EMPLOYEE PLANS"). The Company has provided Parent
copies of (i) each such written Company Employee Plan and all documents pursuant
to which the Company Employee Plans are maintained, funded and administered,
including summary plan descriptions, (ii) the three most recent annual reports
on Form 5500 series, with accompanying schedules and attachments, filed with
respect to each Company Employee Plan required to make such a filing, and (iii)
all governmental filings for the last three years, including, without
limitation, excise tax returns and reportable events filings, and (iv) all
governmental rulings, determinations, and opinions (and pending requests for
governmental communications, rulings, determinations, and opinions) during the
past three years.
(b) (i) None of the Company Employee Plans provides retiree medical or
other retiree welfare benefits to any person (other than as required under
COBRA), none of the Company Employee Plans is a "multiemployer plan" as such
term is defined in Section 3(37) of ERISA and no Company Employee Plan is
subject to the funding requirements of Section 412 of the Code or Section 302 of
ERISA or is otherwise subject to Title IV of ERISA; (ii) there has been no
non-exempt "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code or a breach of fiduciary duty within the
meaning of Section 404 of ERISA, with respect to any Company Employee Plan,
which, individually or in the aggregate, is reasonably likely to have a Company
Material Adverse Effect; (iii) all Company Employee Plans are in compliance with
the requirements prescribed by any and all statutes (including ERISA and the
Code), orders, or governmental rules and regulations currently in effect with
respect thereto (including all applicable requirements for notification to
participants or the Department of Labor, the Pension Benefit Guaranty
Corporation (the "PBGC"), Internal Revenue
18
Service (the "IRS") or Secretary of the Treasury) except as is not reasonably
likely to have individually or in the aggregate a Company Material Adverse
Effect, and the Company and each Company Subsidiary have performed all
obligations required to be performed by them under, and are not in default under
or violation of any of the Company Employee Plans except as is not reasonably
likely to have individually or in the aggregate a Company Material Adverse
Effect; (iv) except as set forth in Section 3.15 of the Company Disclosure
Schedule, each Company Employee Plan intended to qualify under Section 401(a) of
the Code and each trust intended to qualify under Section 501(a) of the Code is
so qualified and is the subject of a favorable determination letter from the
IRS, such determination letter has not been revoked or threatened to be revoked
by the IRS, to the knowledge of the Company, nothing has occurred since the date
of such determination letter that could adversely affect the tax exempt status
of such Company Employee Plan or the tax exempt status of any related trust, and
each such Company Employee Plan which is not an IRS-approved master or prototype
plan has been amended to comply with the tax laws referred to as "GUST" and
submitted to the IRS for a determination letter that the Company Employee Plan,
as amended, satisfies the qualification requirements of Section 401(a) the Code;
(v) except as provided by Sections 204(h), 4041(a)(2) or 104(b)(1) of ERISA,
each Company Employee Plan can be amended or terminated at any time without
approval from any person, without advance notice, and without any liability
other than for benefits accrued prior to such amendment or termination; (vi)
except as set forth in Section 3.15 of the Company Disclosure Schedule, all
benefits due under each Employee Plan have been timely paid and there is no
material lawsuit or claim, other than routine uncontested claims for benefits,
pending, or to the knowledge of the Company, any Company ERISA Affiliate or
Company Subsidiary, threatened, against any Company Employee Plan or the
fiduciaries of any such plan or otherwise involving or pertaining to any such
plan, and no basis exists for any such lawsuit or claim; (vii) except as set
forth in Section 3.15 of the Company Disclosure Schedule, no Company Employee
Plan provides for any severance pay, accelerated payments, deemed satisfaction
of goals or conditions, new or increased benefits, forgiveness or modification
of loans, or vesting conditioned in whole or in part upon a "change in control"
of the Company, as such term is defined in the Company Employee Plan or in
Section 280G of the Code (and regulations promulgated thereunder), any Company
ERISA Affiliate or Company Subsidiary, or any plant closing; (viii) no
agreement, commitment, or obligation exists to increase any benefits under any
Company Employee Plan or to adopt any new Company Employee Plan; and (ix) no
Company Employee Plan has any unfunded accrued benefits that are not fully
reflected in the Company's financial statements.
SECTION 3.16 LABOR MATTERS. (i) There are no controversies pending or,
to the knowledge of the Company, threatened, between the Company or any Company
Subsidiary and any of their respective employees, which controversies are
reasonably likely to have individually or in the aggregate a Company Material
Adverse Effect; (ii) neither the Company nor any Company Subsidiary is a party
to any material collective bargaining agreement or other labor union contract
applicable to persons employed by the
19
Company or any Company Subsidiary, nor does the Company know of any activities
or proceedings of any labor union to organize any such employees; and (iii) the
Company has no knowledge of any strikes, slowdowns, work stoppages, lockouts, or
threats thereof, by or with respect to any employees of the Company or any
Company Subsidiary which are reasonably likely to have a Company Material
Adverse Effect. To the knowledge of the Company, as of the date hereof, no
executive or management employee of the Company or any of the Company
Subsidiaries intends to terminate his employment in connection with the Merger.
SECTION 3.17 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, there is no agreement with any person, judgment, injunction, order,
decree, statute, ordinance, rule, regulation, moratorium or other action by a
Governmental Entity, or to the knowledge of the Company, pending before or being
considered by a Governmental Entity, binding upon the Company or any Company
Subsidiary, which has or would have the effect of prohibiting or restricting the
conduct of business by the Company or any Company Subsidiary as currently
conducted or intended to be conducted, except for any prohibitions or
restrictions as are not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 3.18 REAL PROPERTY. The Company and the Company Subsidiaries
have good and marketable (or indefeasible, in jurisdictions where the term
"marketable" is not customarily used in such a context) title in fee simple to
the real property purported to be owned by them, and, upon the exercise of any
options to acquire real property optioned by the Company or any Company
Subsidiary, the Company or such Company Subsidiary will have good and marketable
(or indefeasible, in jurisdictions where the term "marketable" is not
customarily used in such a context) title in fee simple to such optioned
property, in each case free and clear of all liens, charges and encumbrances,
except liens for Taxes not yet due and payable and such liens or other
encumbrances as do not or will not materially interfere with the present use or
intended use by the Company and the Company Subsidiaries or materially affect
the value of or the ability to market to customers the property affected thereby
and that are not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect. Except as set forth in Section 3.18 of the
Company Disclosure Schedule, the Company and the Company Subsidiaries hold valid
policies of title insurance issued by reputable title insurance companies on
each parcel of real property owned by them in amounts equal to the purchase
price paid by the Company or such Company Subsidiary at the time of its
acquisition thereof. Neither the Company nor any Company Subsidiary has given,
nor have they received, any notice or information indicating that the facts set
forth in any surveys or title insurance policies are untrue or incorrect in any
material respect nor has the Company or any Company Subsidiary received any
notice that a breach or an event of default exists, and no condition or event
has occurred that with the giving of notice, the lapse of time, or both would
constitute a breach or event of default, by the Company or any Company
Subsidiary, or to the knowledge of the Company, any other person with respect to
any material contracts, covenants, conditions and restrictions, deeds, deeds of
20
trust, rights-of-way, easements, mortgages and other documents granting to the
Company or any Company Subsidiary title to or an interest in or otherwise
affecting the real property which is material to the operation of the business
of the Company and the Company Subsidiaries, as presently conducted or intended
to be conducted, except for such breach or event of default that is not
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect. To the knowledge of the Company, no condemnation, eminent
domain, or similar proceeding exists, is pending or threatened with respect to,
or that could affect, any real property owned or leased by the Company or any
Company Subsidiary that is reasonably likely to have a Company Material Adverse
Effect. No developer-related charges or assessments for off-site improvements
payable to any public authority or any other person for public improvements are
unpaid (other than those reflected on the Company Balance Sheet or incurred
since the date of the Company Balance Sheet in the ordinary course of the
Company's business consistent with past practices), except for charges or
assessments as are not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect. To the knowledge of the Company,
there is no material impediment to obtaining any permits or governmental
approvals required to develop lots or construct homes on undeveloped real
property held by the Company or a Company Subsidiary for such purpose (the
"COMPANY DEVELOPMENT PROPERTIES"), except for such as is not reasonably likely
to have a Company Material Adverse Effect. The Company Development Properties
have access to public streets, and are serviced (or will be serviced in
accordance with "will serve letters" issued by the appropriate utility
provider), in all material respects, by water, gas and electricity and other
services that may be necessary to construct homes on such properties, and to the
knowledge of the Company such utilities and other services are or will be
adequate for the current and intended use of such property. All material leases
pursuant to which the Company or any Company Subsidiary leases from others real
or personal property are valid and in full force and effect and no default or
event of default by the Company or the Company Subsidiaries has occurred
thereunder, except where the lack of such validity and effectiveness or the
existence of such defaults or event of defaults is not reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect.
SECTION 3.19 TAXES.
(a) For purposes of this Agreement, "TAX" or "TAXES" shall mean taxes,
fees, levies, duties, tariffs, imposts, and governmental impositions or charges
of any kind, in the nature of taxes, payable to any federal, state, local or
foreign taxing authority, including, without limitation, (i) income, franchise,
profits, gross receipts, ad valorem, net worth, value added, sales, use,
service, real or personal property, special assessments, capital stock, license,
payroll, withholding, employment, social security, workers' compensation,
unemployment compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes, including
interest, penalties, additional taxes and additions to tax imposed with respect
thereto, (ii) any liability for payment of amounts described in clause (i)
whether as a result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary
21
group for any period, or otherwise through operation of law, and (iii) any
liability for the payment of amounts described in clauses (i) or (ii) as a
result of any tax sharing, tax indemnity or tax allocation agreement or any
other express or implied agreement to indemnify any other person. For purposes
of this Agreement, "TAX RETURNS" shall mean returns, reports, and information
statements with respect to Taxes required to be filed with the IRS or any other
taxing authority, domestic or foreign, including, without limitation,
consolidated, combined and unitary tax returns.
(b) Except as provided in Section 3.19 of the Company Disclosure
Schedule:
(i) The Company and the Company Subsidiaries have duly and
timely (with due regard to valid extensions properly secured) filed all
Tax Returns related to Federal income Taxes and all other material Tax
Returns required to be filed by them prior to the date of this
Agreement. All such Tax Returns are true, correct and complete in all
material respects as filed (or as validly amended thereafter). Each of
the Company and the Company Subsidiaries has timely (with due regard to
valid extensions properly secured) paid in full all Taxes shown as due
on the face of such Tax Returns, except to the extent of items which
have been adequately reserved against in accordance with generally
accepted accounting principles in the 2001 Company Balance Sheet. The
liabilities and reserves for Taxes reflected in the 2001 Company
Balance Sheet cover all Taxes for all periods ended at or prior to the
date of such balance sheet and have been determined in accordance with
generally accepted accounting principles and all Taxes of the Company
accrued following the date of the 2001 Company Balance Sheet have been
accrued in the ordinary course of business of the Company and do not
materially exceed comparable amounts incurred in similar periods in
prior years (taking into account any changes in the Company's operating
results).
(ii) The Company and the Company Subsidiaries have at all
times complied in all respects with applicable laws pertaining to
Taxes, including, without limitation, all applicable laws relating to
record retention, except as any such noncompliance is not reasonably
likely to have a Company Material Adverse Effect.
(iii) No Federal income Tax Return, or material state, local
or foreign Tax Return, of the Company or any Company Subsidiary is the
subject of a pending audit or other administrative proceeding or court
proceeding. Neither the Company nor any of the Company Subsidiaries is
aware of any claim by any taxing authority that the Company or any
Company Subsidiary has been required to file a Tax Return, but has
failed to do so. Neither the Company nor any of the Company
Subsidiaries has requested an extension of time to file any Tax Return
not yet filed, nor has been granted any waiver of any statute of
limitations with respect to, or any extension of a period for the
assessment of, any Tax not yet paid. Neither the Company nor any
Company Subsidiary has granted a power of
22
attorney that will be outstanding on the Closing Date with respect to
any material matter related to Taxes. In the past two years neither the
Company nor any Company Subsidiary has entered into any closing
agreement with respect to any Federal income Taxes or any other
material Taxes that has the effect of materially increasing the
liability for Taxes for any taxable year of the Company for which Tax
Returns have not been filed.
(iv) Except as is not reasonably likely to have a Company
Material Adverse Effect, all Tax deficiencies that have been claimed,
proposed, asserted or assessed in writing against the Company or any of
the Company Subsidiaries have been fully paid or finally settled and
there is no claim, audit, action, suit, proceeding, investigation or
assessment pending against the Company or any of the Company
Subsidiaries in respect of any Tax.
(v) No issues have been raised in any examination by any
taxing authority which, by application of similar principles,
reasonably could be expected to result in a material proposed
deficiency for any other period not so examined.
(vi) All Taxes that were required to be collected or withheld
by the Company or any of the Company Subsidiaries have been duly
collected or withheld, and all such Taxes that the Company or any of
the Company Subsidiaries were required to remit to any taxing authority
have been duly remitted, except where a failure to collect, withhold or
remit Taxes is not reasonably likely to have a Company Material Adverse
Effect.
(vii) Neither the Company nor any of the Company Subsidiaries
is aware of any claim by any taxing authority that the Company or any
Company Subsidiary is required to include in income any adjustment
pursuant to Section 481 of the Code (or similar provisions of other law
or regulation) by reason of a change in accounting method, nor has the
Company or any of the Company Subsidiaries received notice that the IRS
(or other taxing authority) has proposed, or is considering, any such
change in accounting method. The Company has not taken any action that
is not in accordance with past practice that could defer a liability
for Taxes of the Company from any taxable period ending on or before
the Closing Date to any taxable period ending after such date.
(viii) To the knowledge of the Company after review of
appropriate documents filed with the SEC, the Company has no foreign
stockholders for whom shares of Company Common Stock are United States
real property interests as defined in Section 897 of the Code.
(ix) The Company and the Company Subsidiaries have disclosed
on their respective federal income Tax Returns all positions taken
therein that could
23
give rise to a substantial understatement of federal income Tax within
the meaning of Section 6662 of the Code.
(x) There are no requests for rulings or determinations in
respect of any Tax pending between, or in respect of, the Company or
any Company Subsidiary and any taxing authority.
(xi) Neither the Company nor any of the Company Subsidiaries
has filed, or has had filed on its behalf, a consent under Section
341(f) of the Code concerning collapsible corporations.
(xii) Neither the Company nor any of the Company Subsidiaries
has made any payments, is obligated to make any payments or has entered
into any agreements under which payment would, separately or in the
aggregate in connection with this Agreement or any change in control or
any other circumstances, result in a nondeductible expense to the
Company or any of the Company Subsidiaries pursuant to Section 162(m)
or 280G of the Code or an excise tax to the recipient of such payment
pursuant to Section 4999 of the Code.
(xiii) There are no liens for Taxes (other than for current
Taxes not yet due and payable or for other immaterial Taxes that are
being contested in good faith) upon the assets of the Company or any
Company Subsidiary.
(xiv) Neither the Company nor any Company Subsidiary is a
party to or bound by any tax indemnity, tax sharing or tax allocation
agreement (other than agreements solely between the Company and its
direct or indirect wholly-owned subsidiaries or among direct or
indirect wholly-owned subsidiaries of the Company). Neither the Company
nor any Company Subsidiary has any liability for Taxes of any person
(other than the Company and the Company Subsidiaries) under Treasury
Regulations Section 1.1502-6 (or any corresponding provision of state,
local or foreign income Tax law), as transferee or successor, by
contract or otherwise.
(xv) Neither the Company nor any Company Subsidiary has been a
"distributing corporation" or a "controlled corporation" in connection
with a distribution described in Section 355 of the Code within the
past two years.
(xvi) Neither the Company nor any Company Subsidiary has
participated in or cooperated with an international boycott as that
term is used in Section 999 of the Code.
(xvii) The Company does not own directly any interests in any
entities that are classified as partnerships for federal and state
income Tax purposes.
24
(c) All persons who have at any time been classified as consultants,
independent contractors or service providers other than employees to the Company
or any Company Subsidiary (collectively, the "COMPANY CONSULTANTS") have been
properly so classified and excluded from the classification as an employee in
accordance with all Applicable Laws, including without limitation, ERISA and the
Code and in accordance with the terms of each Company Employee Plan. The Company
and all Company Subsidiaries have complied with all Applicable Laws with respect
to employment, Taxes, and tax reporting associated with the Company Consultants
except as is not reasonably likely to have a Company Material Adverse Effect.
SECTION 3.20 INTELLECTUAL PROPERTY. The Company and the Company
Subsidiaries own, or are licensed or otherwise possess legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights,
and any applications therefor, technology, know-how, computer software programs
or applications, and tangible or intangible proprietary information or material
that are used in the business of the Company and the Company Subsidiaries as
currently conducted, except as is not reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect.
SECTION 3.21 ENVIRONMENTAL MATTERS. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Company
Material Adverse Effect: (a) the Company and the Company Subsidiaries have all
environmental permits which are necessary to enable them to conduct their
businesses as they are currently being conducted without violating any
Environmental Law, and the Company and the Company Subsidiaries have complied
with all their environmental permits and with all applicable Environmental Laws;
(b) the properties currently owned or operated by the Company or any Company
Subsidiary (including soils, groundwater, surface water, buildings or other
structures) do not contain and, to the Company's knowledge, have not previously
contained any Hazardous Substances; (c) the properties formerly owned or
operated by the Company or any Company Subsidiary did not contain any Hazardous
Substances at any time during the period of ownership or operation by the
Company or the Company Subsidiary; (d) neither the Company nor any Company
Subsidiary has disposed of any Hazardous Substance on any third party property
which could reasonably be expected to result in any liability under
Environmental Law; (e) neither the Company nor any Company Subsidiary has
released any Hazardous Substance from any property owned or operated by any of
them which could reasonably be expected to result in any liability under
Environmental Law; (f) neither the Company nor any Company Subsidiary has
received any written notice, demand, letter, claim or request for information
alleging that the Company or any Company Subsidiary may be in violation of or
liable under any Environmental Law; (g) neither the Company nor any Company
Subsidiary is a party to any orders, decrees, injunctions or agreements with any
Governmental Entity or is a party to any indemnity or other agreement with any
third party which is expected to result in liability on the Company or any
Company Subsidiary under any Environmental Law; (h) there are no circumstances,
conditions or activities
25
involving the Company or any Company Subsidiary that could reasonably be
expected to result in any liability or costs to the Company or any Company
Subsidiary or any restrictions on the ownership, use or transfer of any property
now owned by the Company or a Company Subsidiary pursuant to any Environmental
Law; and (i) to the knowledge of the Company, none of the properties now owned
or operated by the Company or any Company Subsidiary contains any underground
storage tanks. As used in this Agreement, "Environmental Law" means any federal,
state, local or foreign law, regulation, rule, treaty, order, decree, permit,
authorization, or the common law or any requirement of any governmental
authority relating to: (A) the protection, investigation or restoration of the
environment, or natural resources; (B) the handling, use, presence, disposal,
release or threatened release of any Hazardous Substance; or (C) noise, odor,
wetlands, pollution, contamination or injury or threat of injury to persons or
property; and "Hazardous Substance" means any substance that is listed in or
regulated by any Environmental Law, including any petroleum product or
by-product, asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon.
SECTION 3.22 INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 3.22 of the Company Disclosure Schedule or in the Company SEC Reports,
since December 31, 2000, no event has occurred that would be required to be
reported as a Certain Relationship or Related Transaction, pursuant to Item 404
of Regulation S-K promulgated by the SEC.
SECTION 3.23 INSURANCE.
(a) The Company maintains insurance, including, without limitation,
general liability insurance, with financially responsible insurance companies in
amounts customary in its industry to insure it against risks and losses
associated with the operation of the business and properties of the Company and
the Company Subsidiaries. No event has occurred with respect to the Company or
any Company Subsidiary (except for events affecting the home construction
industry generally) that is reasonably likely to cause the Company to be unable
to maintain its current coverage or obtain replacement coverage on substantially
identical terms to the policies currently in force other than with respect to
premium amounts which will not exceed then current market rates.
(b) For the ten-year period ending as of the date of this Agreement,
the Company has maintained in full force and effect general liability policies
in respect of such period which named the Company and the Company Subsidiaries,
so long as they were Company Subsidiaries, as named insureds for the period of
ownership by the Company and which provided coverage for, among other
occurrences, product liability and damages and liabilities arising therefrom in
the minimum insured amount of $10,000,000 and the maximum deductible of $50,000.
26
SECTION 3.24 WARRANTIES.
(a) Except as set forth in Section 3.24 of the Company Disclosure
Schedule, the Company and the Company Subsidiaries have for the ten-year period
ending as of the date of this Agreement, and each Company Subsidiary has prior
to becoming a subsidiary of the Company for the longer of (1) the period between
the date of formation of such Company Subsidiary and the date such Company
Subsidiary became a subsidiary of the Company or (2) the applicable statute of
limitations, provided to each home purchaser from either the Company or any
Company Subsidiary a homeowners warranty from either Residential Warranty
Corporation, Homeowners' Warranty Company, or Meridian Structural Insurance,
Risk Retention Group, Inc., a Hawaii corporation ("MERIDIAN").
(b) Meridian is in compliance with all Applicable Laws and requirements
of all trade and industry groups so as to provide structural warranties as to
houses and other properties conveyed by the Company or the Company Subsidiaries
to third parties in all markets where the Company and the Company Subsidiaries
sell houses and other improved property. There are no claims pending against
Meridian or under homeowner warranty bonds issued by Meridian that are
reasonably likely to have, individually or in the aggregate, if paid by
Meridian, a Company Material Adverse Effect.
SECTION 3.25 JOINT VENTURES. Neither the Company nor any Company
Subsidiary has any direct liability or liability as a guarantor with respect to
any indebtedness incurred in connection with any joint venture or similar
arrangement to which the Company or any Company Subsidiary is a party.
SECTION 3.26 OPINION OF FINANCIAL ADVISORS. The Company Board has
received the opinion of the Company's financial advisor, McDonald Investments
Inc. ("MCDONALD"), to the effect that, as of the date of this Agreement, the
Merger Consideration is fair from a financial point of view to the stockholders
of the Company, and the Company will deliver a copy of such written opinion to
Parent promptly after the date hereof.
SECTION 3.27 BROKERS. No broker, finder or investment banker (other
than McDonald) is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
SECTION 3.28 TAX TREATMENT. Neither the Company nor, to the knowledge
of the Company, any of its affiliates has taken or agreed to take any action,
nor to the knowledge of the Company is there any fact or circumstance relating
to the Company, that would prevent the Merger from constituting a reorganization
within the meaning of Section 368(a) of the Code.
SECTION 3.29 AFFILIATES. Except for the directors and executive
officers of the Company, each of whom is listed in Section 3.29 of the Company
Disclosure
27
Schedule and any other person or entity listed in Section 3.29 of the Company
Disclosure Schedule, there are no persons or entities that may be deemed to be
affiliates of the Company under Rule 145 of the Securities Act ("Company
Affiliates").
SECTION 3.30 VOTE REQUIRED. At the Company Stockholder Meeting or any
adjournment or postponement thereof, the affirmative vote of the holders of a
majority of the outstanding shares of the Company Common Stock are the only
votes of the holders of any class or series of capital stock of the Company
necessary to approve this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in a separate disclosure schedule which has been
delivered by the Parent and Merger Sub to the Company prior to the date of this
Agreement (the "PARENT DISCLOSURE SCHEDULE") (which Parent Disclosure Schedule
shall contain appropriate references to identify the representations and
warranties herein to which the information in such Parent Disclosure Schedule
relates), Parent and Merger Sub hereby represent and warrant to the Company as
follows:
SECTION 4.1 ORGANIZATION, EXISTENCE AND GOOD STANDING OF PARENT AND
MERGER SUB. Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Parent has all necessary corporate power and authority to own its properties and
assets and to carry on its business as presently conducted. Parent is qualified
to do business and is in good standing in each jurisdiction where the nature or
character of the property owned, leased or operated by it or the nature of the
business transacted by it makes such qualification necessary, except where the
failure to be so qualified or be in good standing is not reasonably likely to
have a Parent Material Adverse Effect. Merger Sub does not presently conduct any
business and was formed solely for the purpose of effecting the Merger. Each of
Parent and Merger Sub has delivered to the Company a complete and correct copy
of its Certificate of Incorporation and Bylaws as amended to the date hereof.
SECTION 4.2 ORGANIZATION, EXISTENCE AND GOOD STANDING OF PARENT
SUBSIDIARIES. Section 4.2 of the Parent Disclosure Schedule sets forth a list of
each subsidiary of Parent (each a "Parent Subsidiary" and, collectively the
"PARENT SUBSIDIARIES"), the jurisdiction of incorporation or organization, as
applicable, of each Parent Subsidiary, the type of entity of each Parent
Subsidiary, the percentage of the ownership of the outstanding capital stock or
interest in each Parent Subsidiary by Parent or by any other Parent Subsidiary,
and the authorized and outstanding capital stock of each corporate Parent
Subsidiary. Each Parent Subsidiary is a corporation, business trust, general or
limited partnership or limited liability company (as so specified) duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as applicable. Each Parent
Subsidiary has all necessary
28
entity power and authority to own its properties and assets and to carry on its
business as presently conducted. Each Parent Subsidiary is qualified to do
business and is in good standing in each jurisdiction where the nature or
character of the property owned, leased or operated by it or the nature of the
business transacted by it makes such qualification necessary, except where the
failure to be so qualified or be in good standing is not reasonably likely to
have a Parent Material Adverse Effect. Except for the Parent Subsidiaries,
Parent does not, directly or indirectly, own any equity interest in any other
corporation, association, partnership, joint venture, business organization or
limited liability company or other entity, with respect to which interest Parent
or any Parent Subsidiary has invested or is required to invest $100,000 or more,
excluding securities in any publicly traded company held for investment and
comprising less than one percent (1%) of the outstanding voting securities of
such company, nor has Parent entered into any agreement, arrangement or
understanding to make any such investment.
SECTION 4.3 CAPITALIZATION.
(a) The authorized capital stock of Parent consists solely of
30,000,000 shares of Parent Common Stock, and 5,000,000 shares of preferred
stock, par value $0.01 per share ("PARENT PREFERRED STOCK"). As of the date
hereof: (i) 8,606,859 shares of Parent Common Stock are issued and outstanding,
3,830,076 shares of Parent Common Stock are held in treasury, and no shares of
Parent Preferred Stock are issued and outstanding; and (ii) 1,687,046 shares of
Parent Common Stock are reserved for purchase pursuant to Parent's Non-Employee
Director Stock Option Plan, Parent's Amended 1994 Stock Incentive Plan and
Parent's 1999 Stock Incentive Plan (collectively the "PARENT OPTION PLANS"). All
of the outstanding shares of Parent Common Stock are, and all shares of Parent
Common Stock which may be issued prior to the Effective Time upon exercise of
any option or other right will be, validly issued, fully paid and nonassessable
and free of preemptive rights. Except as set forth above, as of the date hereof
there are outstanding no shares of capital stock or other voting securities of
Parent and no equity equivalent interests in the ownership or earnings of Parent
or the Parent Subsidiaries. All of the outstanding shares of capital stock, or
other ownership interest, of each Parent Subsidiary (including Merger Sub) are
validly issued, fully paid and nonassessable, and are owned by Parent or another
Parent Subsidiary free and clear of all security interests, liens, claims,
pledges, charges or other encumbrances of any nature whatsoever.
(b) Section 4.3 of the Parent Disclosure Schedule sets forth a true and
complete list of all outstanding rights, including options, to purchase Parent
Common Stock, the name of each holder thereof, the number of shares purchasable
thereunder, the date of vesting of such right, any rights of holders of such
rights that will be triggered by the consummation of the Merger and the per
share exercise or purchase price of each right. There are no securities of
Parent or any Parent Subsidiary convertible or exchangeable for shares of
capital stock or voting securities of Parent or any Parent Subsidiary; and,
except as set forth in Section 4.3 of the Parent Disclosure Schedule, there are
no options, warrants or other similar rights, agreements, arrangements or
commitments of any
29
character obligating Parent or any Parent Subsidiary to issue or sell any shares
of capital stock of, or other equity interests in, Parent or any Parent
Subsidiary. There are no obligations, contingent or otherwise, of Parent or any
Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of
Parent Common Stock or the capital stock or other equity interest of any Parent
Subsidiary or to make any investment (in the form of a loan, capital
contribution or otherwise) in any Parent Subsidiary.
SECTION 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT; RECOMMENDATION.
Parent and Merger Sub each have all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate the transactions so contemplated (other than the adoption and
approval of this Agreement by the holders of a majority of the outstanding
shares of Parent Common Stock and Merger Sub Common Stock in accordance with the
requirements of the NYSE). This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of Parent and Merger Sub enforceable against Parent and Merger Sub in
accordance with its terms. The members of the Board of Directors of Parent (the
"PARENT BOARD"), present at a meeting of the Parent Board at which a quorum was
present, duly and unanimously adopted resolutions (i) approving and declaring
the advisability of this Agreement and the Merger in accordance with the DGCL
and Parent's Amended and Restated Certificate of Incorporation (the "CERTIFICATE
OF INCORPORATION") and By-laws, (ii) determining that this Agreement and the
Merger are fair to and in the best interests of the stockholders of Parent,
(iii) determining that the consideration to be paid in the Merger is fair to and
in the best interests of the stockholders of Parent and (iv) recommending that
the stockholders of Parent adopt and approve this Agreement; which resolutions
have not been subsequently rescinded, modified or withdrawn in any way.
SECTION 4.5 MATERIAL CONTRACTS. The Parent's Annual Report on Form 10-K
for the fiscal year ended September 30, 2001 sets forth a list of all agreements
to which Parent or any Parent Subsidiary is a party or by which any of them is
bound which, as of the date hereof: (i) are required to be filed as "material
contracts" with the SEC pursuant to the requirements of the Exchange Act; (ii)
under which the consequences of a default, nonrenewal or termination is
reasonably likely to have a Parent Material Adverse Effect; or (iii) pursuant to
which payments might be required or acceleration of benefits may be required
upon execution of this Agreement by Parent or the performance by Parent of its
obligations hereunder (collectively, the "PARENT MATERIAL CONTRACTS").
SECTION 4.6 NO CONFLICT. Neither the execution and delivery of this
Agreement by Parent or Merger Sub nor the consummation by Parent or Merger Sub
of
30
the transactions contemplated hereby nor the compliance by Parent or Merger Sub
with any of the provisions hereof will, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of Parent or Merger Sub, (ii) conflict
with or violate any Applicable Law, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the rights of Parent or any Parent
Subsidiary, or alter the rights or obligations of any third party under, or give
to others any rights of termination, amendment, acceleration, purchase or
cancellation, or result in the creation of a lien or encumbrance on any of the
properties or assets of Parent or any Parent Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any Parent
Subsidiary is a party or by which Parent or any Parent Subsidiary or any of
their respective assets or properties are bound or affected, except in any such
case for any such conflicts, violations, breaches, defaults or other occurrences
that are not reasonably likely to have a Parent Material Adverse Effect.
SECTION 4.7 REQUIRED FILINGS AND CONSENTS. Neither the execution and
delivery of this Agreement by Parent or Merger Sub nor the consummation by
Parent or Merger Sub of the transactions contemplated hereby nor the compliance
by Parent or Merger Sub with any of the provisions hereof will require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for applicable requirements, if any, of
the Securities Act, the Exchange Act, Blue Sky Laws, any pre-merger notification
requirements of the HSR Act, and the filing and recordation of appropriate
merger or other documents as required by the DGCL and the IBCL, and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay consummation of
the Merger, or otherwise prevent or delay Parent or Merger Sub from performing
its obligations under this Agreement, or is not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 4.8 COMPLIANCE WITH LAWS AND OBLIGATIONS. Neither Parent nor
any Parent Subsidiary is in conflict with, or in default or violation of, (i)
any Applicable Law or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except for any such conflicts, defaults or violations which is not reasonably
likely to have, individually or in the aggregate, a Parent Material Adverse
Effect.
SECTION 4.9 PERMITS. Parent and each Parent Subsidiary hold all
permits, licenses, easements, variances, exemptions, consents, certificates,
orders and approvals from Governmental Entities necessary for the operation of
the business of Parent and Parent Subsidiaries as it is now being conducted
(collectively, the "PARENT PERMITS"), except where the failure to hold such
Parent Permits is not reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect. Parent and Parent Subsidiaries are
in compliance with the terms of the Parent Permits, except where the
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failure to so comply is not reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect.
SECTION 4.10 SEC FILINGS. Parent has filed all forms, reports and
documents required to be filed by it with the SEC (collectively, the "PARENT SEC
REPORTS") on a timely basis. The Parent SEC Reports filed prior to the date
hereof and all similar documents filed prior to the Closing Date (i) were, or
will be, as the case may be, prepared in all material respects in accordance
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and (ii) did not, or will not, as the case may be, at the time they were or
are filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of the Parent
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
SECTION 4.11 FINANCIAL STATEMENTS. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Parent SEC Reports was prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto), and each fairly presents in all
material respects the consolidated financial position of Parent and its
consolidated subsidiaries as at the respective dates thereof and the
consolidated statements of income and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments.
SECTION 4.12 ABSENCE OF CERTAIN CHANGES. Except as set forth in the
Parent SEC Reports, since September 30, 2001, there has not occurred: (i) any
Parent Material Adverse Effect or any event, change or effect which is
reasonably likely to have, individually or in the aggregate with other events,
changes or effects, a Parent Material Adverse Effect; (ii) any amendments or
changes in the Certificate of Incorporation or Bylaws of Parent; (iii) any
damage to, destruction or loss of any asset of Parent or any Parent Subsidiary
(whether or not covered by insurance) that is reasonably likely to individually
or in the aggregate have a Parent Material Adverse Effect; (iv) any material
change by Parent in its accounting methods, principles or practices; (v) any
material revaluation by Parent of any of its assets, including, without
limitation, writing off or writing down notes or accounts receivable or
inventory other than in the ordinary course of business consistent with past
practice; or (vi) any action or event that would have required the consent of
the Company pursuant to Section 5.1 had such action or event occurred after the
date of this Agreement.
SECTION 4.13 NO UNDISCLOSED LIABILITIES. Neither Parent nor any Parent
Subsidiary has any liabilities (absolute, accrued, contingent or otherwise),
except liabilities (a) for which in the aggregate there are adequate reserves in
Parent's audited
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balance sheet (including any related notes thereto) as of September 30, 2001
(the "2001 PARENT BALANCE SHEET"), (b) incurred in the ordinary course of
business before the date of the 2001 Parent Balance Sheet and not required under
generally accepted accounting principles to be reflected on the 2001 Parent
Balance Sheet, or (c) incurred since September 30, 2001 in the ordinary course
of business consistent with past practice or in connection with this Agreement,
that is not reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect.
SECTION 4.14 LITIGATION. Except as set forth in the Parent SEC Reports,
there are no claims, actions, suits, proceedings or investigations pending or,
to the knowledge of Parent, threatened against Parent or any Parent Subsidiary
or any properties or rights of Parent or any Parent Subsidiary before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign, that would be required to be disclosed in an Annual Report
on Form 10-K or that could reasonably be expected to prevent or delay
consummation of the Merger, or otherwise prevent or delay Parent from performing
its obligations under this Agreement. None of the claims, actions, suits,
proceedings and investigations so set forth is reasonably likely to have a
Parent Material Adverse Effect.
SECTION 4.15 EMPLOYEE BENEFIT PLANS.
(a) Section 4.15 of the Parent Disclosure Schedule lists all employee
pension plans (as defined in Section 3(2) of ERISA, all employee welfare plans
(as defined in Section 3(1) of ERISA) and all other bonus, stock option, stock
purchase, performance share, stock appreciation or other equity based
compensation, incentive, deferred compensation, supplemental retirement,
severance and other similar fringe or employee benefit plans, programs or
arrangements, and any employment, executive compensation, consulting or
severance agreements, performance pay, loan or loan guarantee, change of control
or other non-ERISA plans, written or otherwise, for the benefit of, or relating
to, any current or former employee or director of or consultant to Parent, any
trade or business (whether or not incorporated) which is or was a member of a
controlled group including Parent or which is under common control with Parent
(a "PARENT ERISA AFFILIATE") within the meaning of Section 414 of the Code, or
any Parent Subsidiary, that Parent, any Parent Subsidiary or any Parent ERISA
Affiliate maintains or pursuant to which has any obligation, as well as each
employee benefit plan with respect to which Parent, any Parent Subsidiary or a
Parent ERISA Affiliate maintained or otherwise incurred any liability to within
the consecutive five-year period ending on the Closing Date (collectively the
"PARENT EMPLOYEE Plans"). Parent has provided the Company copies of (i) each
such written Parent Employee Plan and all documents pursuant to which the Parent
Employee Plans are maintained, funded and administered, including summary plan
descriptions, (ii) the three most recent annual report on Form 5500 series, with
accompanying schedules and attachments, filed with respect to each Parent
Employee Plan required to make such a filing, and (iii) all governmental filings
for the last three years, including, without limitation, excise tax returns and
reportable events
33
filings, and (iv) all governmental rulings, determinations, and opinions (and
pending requests for governmental communications, rulings, determinations, and
opinions) during the past three years.
(b) (i) None of the Parent Employee Plans provides retiree medical or
other retiree welfare benefits to any person (other than as required under
COBRA), none of the Parent Employee Plans is a "multiemployer plan" as such term
is defined in Section 3(37) of ERISA and no Parent Employee Plan is subject to
the funding requirements of Section 412 of the Code or Section 302 of ERISA or
is otherwise subject to Title IV of ERISA; (ii) there has been no non-exempt
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, or a breach of fiduciary duty within the meaning of
Section 404 of ERISA, with respect to any Parent Employee Plan, which,
individually or in the aggregate, is reasonably likely to have a Parent Material
Adverse Effect; (iii) all Parent Employee Plans are in compliance with the
requirements prescribed by any and all statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to participants
or the Department of Labor, the PBGC, IRS or Secretary of the Treasury) except
as is not reasonably likely to have individually or in the aggregate a Parent
Material Adverse Effect, and Parent and each Parent Subsidiary have performed
all obligations required to be performed by them under, and are not in default
under or violation of any of the Parent Employee Plans except as is not
reasonably likely to have individually or in the aggregate a Parent Material
Adverse Effect; (iv) each Parent Employee Plan intended to qualify under Section
401(a) of the Code and each trust intended to qualify under Section 501(a) of
the Code is so qualified and is the subject of a favorable determination letter
from the IRS, such determination letter has not been revoked or threatened to be
revoked by the IRS, to the knowledge of Parent, nothing has occurred since the
date of such determination letter that could adversely affect the tax exempt
status of such Parent Employee Plan or the tax exempt status of any related
trust, and each such Parent Employee Plan which is not an IRS-approved master or
prototype plan has been amended to comply with GUST and submitted to the IRS for
a determination letter that the Parent Employee Plan, as amended, satisfies the
qualification requirements of Section 401(a) the Code; (v) except as provided by
Sections 204(h), 4041(a)(2) or 104(b)(1) of ERISA, each Parent Employee Plan can
be amended or terminated at any time without approval from any person, without
advance notice, and without any liability other than for benefits accrued prior
to such amendment or termination; (vi) except as set forth in Section 4.15 of
the Parent Disclosure Schedule, all benefits due under each Employee Plan have
been timely paid and there is no material lawsuit or claim, other than routine
uncontested claims for benefits, pending, or to the knowledge of Parent, any
Parent ERISA Affiliate or Parent Subsidiary, threatened, against any Parent
Employee Plan or the fiduciaries of any such plan or otherwise involving or
pertaining to any such plan, and no basis exists for any such lawsuit or claim;
(vii) except as set forth in Section 4.15 of the Parent Disclosure Schedule, no
Parent Employee Plan provides for any severance pay, accelerated payments,
deemed satisfaction of goals or conditions, new or increased benefits,
34
forgiveness or modification of loans, or vesting conditioned in whole or in part
upon a "change in control" of Parent, as such term is defined in the Parent
Employee Plan or in Section 280G of the Code (and regulations promulgated
thereunder), any Parent ERISA Affiliate or Parent Subsidiary, or any plant
closing; (viii) no agreement, commitment, or obligation exists to increase any
benefits under any Parent Employee Plan or to adopt any new Parent Employee
Plan; and (ix) no Parent Employee Plan has any unfunded accrued benefits that
are not fully reflected in Parent's financial statements.
SECTION 4.16 LABOR MATTERS. (i) There are no controversies pending or,
to the knowledge of Parent, threatened, between Parent or any Parent Subsidiary
and any of their respective employees, which controversies are reasonably be
likely to have individually or in the aggregate a Parent Material Adverse
Effect; (ii) neither Parent nor any Parent Subsidiary is a party to any material
collective bargaining agreement or other labor union contract applicable to
persons employed by Parent or any Parent Subsidiary, nor does Parent know of any
activities or proceedings of any labor union to organize any such employees; and
(iii) Parent has no knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of Parent or
any Parent Subsidiary which are reasonably likely to have a Parent Material
Adverse Effect. To the knowledge of Parent, as of the date hereof, no executive
or management employee of Parent or any of the Parent Subsidiaries intends to
terminate his employment in connection with the Merger.
SECTION 4.17 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, there is no agreement with any person, judgment, injunction, order,
decree, statute, ordinance, rule, regulation, moratorium or other action by a
Governmental Entity, or to the knowledge of Parent, pending before or being
considered by a Governmental Entity, binding upon Parent or any Parent
Subsidiary, which has or would have the effect of prohibiting or restricting the
conduct of business by Parent or any Parent Subsidiary as currently conducted,
or intended to be conducted, except for any prohibitions or restrictions which
are not reasonably likely to have, individually or in the aggregate, have a
Parent Material Adverse Effect.
SECTION 4.18 REAL PROPERTY. The Parent and the Parent Subsidiaries have
good and marketable (or indefeasible, in jurisdictions where the term
"marketable" is not customarily used in such a context) title in fee simple to
the real property purported to be owned by them, and, upon the exercise of any
options to acquire real property optioned by Parent or any Parent Subsidiary,
Parent or such Parent Subsidiary will have good and marketable (or indefeasible,
in jurisdictions where the term "marketable" is not customarily used in such a
context) title in fee simple to such optioned property, in each case free and
clear of all liens, charges and encumbrances, except liens for Taxes not yet due
and payable and such liens or other encumbrances as do not or will not
materially interfere with the present use or intended use by Parent and the
Parent Subsidiaries or materially affect the value of or the ability to market
to customers the property affected thereby and which are not reasonably likely
to have, individually or in the aggregate, a
35
Parent Material Adverse Effect. Parent and the Parent Subsidiaries hold valid
policies of title insurance issued by reputable title insurance companies on
each parcel of real property owned by them in amounts equal to the purchase
price paid by Parent or such Parent Subsidiary at the time of its acquisition
thereof. Neither Parent nor any Parent Subsidiary has given, nor have they
received, any notice or information indicating that the facts set forth in any
surveys or title insurance policies are untrue or incorrect in any material
respect nor has Parent or any Parent Subsidiary received any notice that a
breach or an event of default exists, and no condition or event has occurred
that with the giving of notice, the lapse of time, or both would constitute a
breach or event of default, by Parent or any Parent Subsidiary, or to the
knowledge of Parent, any other person with respect to any material contracts,
covenants, conditions and restrictions, deeds, deeds of trust, rights-of-way,
easements, mortgages and other documents granting to Parent or any Parent
Subsidiary title to or an interest in or otherwise affecting the real property
which is material to the operation of the business of Parent and the Parent
Subsidiaries, as presently conducted or intended to be conducted, except for
such breach or event of default that is not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect. To the
knowledge of Parent, no condemnation, eminent domain, or similar proceeding
exists, is pending or threatened with respect to, or that could affect, any real
property owned or leased by Parent or any Parent Subsidiary that is reasonably
likely to have a Parent Material Adverse Effect. No developer-related charges or
assessments for off-site improvements payable to any public authority or any
other person for public improvements are unpaid (other than those reflected on
the Parent Balance Sheet or incurred since the date of the Parent Balance Sheet
in the ordinary course of Parent's business consistent with past practices),
except for charges or assessments that are reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect. To the
knowledge of Parent, there is no material impediment to obtaining any permits or
governmental approvals required to develop lots or construct homes on
undeveloped real property held by Parent or a Parent Subsidiary for such purpose
(the "PARENT DEVELOPMENT PROPERTIES"), except for such as is not reasonably
likely to have a Parent Material Adverse Effect. The Parent Development
Properties have access to public streets, and are serviced (or will be serviced
in accordance with "will serve letters" issued by the appropriate utility
provider), in all material respects, by water, gas and electricity and other
services that may be necessary to construct homes on such properties, and to the
knowledge of Parent such utilities and other services are or will be adequate
for the current and intended use of such property. All material leases pursuant
to which Parent or any Parent Subsidiary leases from others real or personal
property are valid and in full force and effect and no default or event of
default by Parent or the Parent Subsidiaries has occurred thereunder, except
where the lack of such validity and effectiveness or the existence of such
defaults or event of defaults is not reasonably likely to have, individually or
in the aggregate, a Parent Material Adverse Effect.
SECTION 4.19 TAXES.
(a) Except as provided in Section 4.19 of the Parent Disclosure
Schedule:
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(i) Parent and the Parent Subsidiaries have duly and timely
(with due regard to valid extensions properly secured) filed all Tax
Returns related to Federal income Taxes and all other material Tax
Returns required to be filed by them prior to the date of this
Agreement. All such Tax Returns are true, correct and complete in all
material respects as filed (or as validly amended thereafter). Each of
Parent and the Parent Subsidiaries has timely (with due regard to valid
extensions properly secured) paid in full all Taxes shown as due on the
face of such Tax Returns, except to the extent of items which have been
adequately reserved against in accordance with generally accepted
accounting principles in the 2001 Parent Balance Sheet. The liabilities
and reserves for Taxes reflected in the 2001 Parent Balance Sheet cover
all Taxes for all periods ended at or prior to the date of such balance
sheet and have been determined in accordance with generally accepted
accounting principles and all Taxes of Parent accrued following the end
of the most recent period covered by the financial statements included
in Parent's September 30, 2001 Form 10-K have been accrued in the
ordinary course of business of Parent and do not materially exceed
comparable amounts incurred in similar periods in prior years (taking
into account any changes in Parent's operating results).
(ii) Parent and the Parent Subsidiaries have at all times
complied in all respects with applicable laws pertaining to Taxes,
including, without limitation, all applicable laws relating to record
retention, except as is not reasonably likely to have a Parent Material
Adverse Effect.
(iii) No Federal income Tax Return, or material state, local
or foreign Tax Return of Parent or any Parent Subsidiary is the subject
of a pending audit or other administrative proceeding or court
proceeding. Neither Parent nor any of the Parent Subsidiaries is aware
of any claim by any taxing authority that Parent or any Parent
Subsidiary has been required to file a Tax Return, but has failed to do
so. Neither Parent nor any of the Parent Subsidiaries has requested an
extension of time to file any Tax Return not yet filed, nor has been
granted any waiver of any statute of limitations with respect to, or
any extension of a period for the assessment of, any Tax not yet paid.
Neither Parent nor any Parent Subsidiary has granted a power of
attorney that will be outstanding on the Closing Date with respect to
any material matter related to Taxes. In the past two years neither
Parent nor any Parent Subsidiary has entered into any closing agreement
with respect to any Federal income Taxes or any other material Taxes
that has the effect of materially increasing the liability for Taxes
for any taxable year of Parent for which Tax Returns have not been
filed.
(iv) Except as is not reasonably likely to have a Parent
Material Adverse Effect, all Tax deficiencies that have been claimed,
proposed, asserted or assessed in writing against Parent or any of the
Parent Subsidiaries have been fully paid or finally settled and there
is no claim, audit, action, suit, proceeding,
37
investigation or assessment pending against Parent or any of the Parent
Subsidiaries in respect of any Tax.
(v) No issues have been raised in any examination by any
taxing authority which, by application of similar principles,
reasonably could be expected to result in a material proposed
deficiency for any other period not so examined.
(vi) All Taxes that were required to be collected or withheld
by Parent or any of the Parent Subsidiaries have been duly collected or
withheld, and all such Taxes that Parent or any of the Parent
Subsidiaries were required to remit to any taxing authority have been
duly remitted, except where a failure to collect, withhold or remit
Taxes is not reasonably likely to have a Parent Material Adverse
Effect.
(vii) Neither Parent nor any of the Parent Subsidiaries is
aware of any claim by any taxing authority that Parent or any Parent
Subsidiary is required to include in income any adjustment pursuant to
Section 481 of the Code (or similar provisions of other law or
regulation) by reason of a change in accounting method, nor has Parent
or any of the Parent Subsidiaries received notice that the IRS (or
other taxing authority) has proposed, or is considering, any such
change in accounting method. Parent has not taken any action that is
not in accordance with past practice that could defer a liability for
Taxes of Parent from any taxable period ending on or before the Closing
Date to any taxable period ending after such date.
(viii) To the knowledge of Parent, after review of appropriate
documents filed with SEC, Parent has no foreign stockholders for whom
shares of Parent Common Stock are United States real property interests
as defined in Section 897 of the Code.
(ix) Parent and the Parent Subsidiaries have disclosed on
their respective federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income
Tax within the meaning of Section 6662 of the Code.
(x) There are no requests for rulings or determinations in
respect of any Tax pending between, or in respect of, Parent or any
Parent Subsidiary and any taxing authority.
(xi) Neither Parent nor any of the Parent Subsidiaries has
filed, or has had filed on its behalf, a consent under Section 341(f)
of the Code concerning collapsible corporations.
38
(xii) Neither Parent nor any of the Parent Subsidiaries has
made any payments, is obligated to make any payments or has entered
into any agreements under which payment would, separately or in the
aggregate in connection with this Agreement or any change in control or
any other circumstances, result in a nondeductible expense to Parent or
any of the Parent Subsidiaries pursuant to Section 162(m) or 280G of
the Code or an excise tax to the recipient of such payment pursuant to
Section 4999 of the Code.
(xiii) There are no liens for Taxes (other than for current
Taxes not yet due and payable or for other immaterial Taxes that are
being contested in good faith) upon the assets of Parent or any Parent
Subsidiary.
(xiv) Neither Parent nor any Parent Subsidiary is a party to
or bound by any tax indemnity, tax sharing or tax allocation agreement
(other than agreements solely between Parent and its direct or indirect
wholly-owned subsidiaries or among direct or indirect wholly-owned
subsidiaries of Parent). Neither Parent nor any Parent Subsidiary has
any liability for Taxes of any person (other than Parent and the Parent
Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any
corresponding provision of state, local or foreign income Tax law), as
transferee or successor, by contract or otherwise.
(xv) Neither Parent nor any Parent Subsidiary has been a
"distributing corporation" or a "controlled corporation" in connection
with a distribution described in Section 355 of the Code within the
past two years.
(xvi) Neither Parent nor any Parent Subsidiary has
participated in or cooperated with an international boycott as that
term is used in Section 999 of the Code.
(xvii) Parent does not own directly any interests in any
entities that are classified as partnerships for federal and state
income Tax purposes.
(b) All persons who have at any time been classified as consultants,
independent contractors or service providers other than employees to Parent or
any Parent Subsidiary (collectively, the "PARENT CONSULTANTS") have been
properly so classified and excluded from the classification as an employee in
accordance with all Applicable Laws, including without limitation, ERISA and the
Code and in accordance with the terms of each Parent Employee Plan. Parent and
all Parent Subsidiaries have complied with all Applicable Laws with respect to
employment, Taxes, and tax reporting associated with the Parent Consultants,
except as is not reasonably likely to have a Parent Material Adverse Effect.
SECTION 4.20 INTELLECTUAL PROPERTY. Parent and the Parent Subsidiaries
own, or are licensed or otherwise possess legally enforceable rights to use, all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how, computer software programs or
applications, and tangible or
39
intangible proprietary information or material that are used in the business of
Parent and the Parent Subsidiaries as currently conducted, except as is not
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect.
SECTION 4.21 ENVIRONMENTAL MATTERS. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Parent
Material Adverse Effect: (a) Parent and the Parent Subsidiaries have all
environmental permits which are necessary to enable them to conduct their
businesses as they are currently being conducted without violating any
Environmental Law, and Parent and the Parent Subsidiaries have complied with all
their environmental permits and with all applicable Environmental Laws; (b) the
properties currently owned or operated by Parent or any Parent Subsidiary
(including soils, groundwater, surface water, buildings or other structures) do
not contain and, to Parent's knowledge, have not previously contained any
Hazardous Substances; (c) the properties formerly owned or operated by Parent or
any Parent Subsidiary did not contain any Hazardous Substances at any time
during the period of ownership or operation by Parent or the Parent Subsidiary;
(d) neither Parent nor any Parent Subsidiary has disposed of any Hazardous
Substance on any third party property which could reasonably be expected to
result in any liability under Environmental Law; (e) neither Parent nor any
Parent Subsidiary has released any Hazardous Substance from any property owned
or operated by any of them which could reasonably be expected to result in any
liability under Environmental Law; (f) neither Parent nor any Parent Subsidiary
has received any written notice, demand, letter, claim or request for
information alleging that Parent or any Parent Subsidiary may be in violation of
or liable under any Environmental Law; (g) neither Parent nor any Parent
Subsidiary is a party to any orders, decrees, injunctions or agreements with any
Governmental Entity or is a party to any indemnity or other agreement with any
third party which is expected to result in liability on Parent or any Parent
Subsidiary under any Environmental Law; (h) there are no circumstances,
conditions or activities involving Parent or any Parent Subsidiary that could
reasonably be expected to result in any liability or costs to Parent or any
Parent Subsidiary or any restrictions on the ownership, use or transfer of any
property now owned by Parent or a Parent Subsidiary pursuant to any
Environmental Law; and (i) to the knowledge of Parent, none of the properties
now owned or operated by Parent or any Parent Subsidiary contains any
underground storage tanks.
SECTION 4.22 INTERESTED PARTY TRANSACTIONS. Except as set forth in the
Parent SEC Reports, since September 30, 2001, no event has occurred that would
be required to be reported as a Certain Relationship or Related Transaction,
pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 4.23 INSURANCE.
(a) Parent maintains insurance, including, without limitation, general
liability insurance, with financially responsible insurance companies in amounts
customary in its industry to insure it against risks and losses associated with
the operation of the business
40
and properties of Parent and the Parent Subsidiaries. No event has occurred with
respect to Parent or any Parent Subsidiary (except for events affecting the home
construction industry generally) that is reasonably likely to cause Parent to be
unable to maintain insurance coverage providing protection to Parent at a level
substantially equivalent to its current coverage.
(b) For the period beginning on the date of the initial public offering
of Parent Common Stock and ending as of the date of this Agreement, Parent has
maintained in full force and effect general liability policies in respect of
such period which named Parent and the Parent Subsidiaries, so long as they were
Parent Subsidiaries, as named insureds for the period of ownership by Parent and
which provided coverage for, among other occurrences, product liability and
damages and liabilities arising therefrom in the minimum insured amount of
$10,000,000 and the maximum deductible of $50,000, except as set forth in
Section 4.23 of the Parent Disclosure Schedule.
SECTION 4.24 OPINION OF FINANCIAL ADVISOR. The Parent Board has
received the opinion of Parent's financial advisor, UBS Warburg LLC ("UBS
WARBURG"), to the effect that, as of the date of this Agreement, the Merger
Consideration is fair from a financial point of view to Parent.
SECTION 4.25 BROKERS. No broker, finder, investment banker (other than
UBS Warburg) is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
SECTION 4.26 TAX TREATMENT. Neither Parent nor, to the knowledge of
Parent, any of its affiliates has taken or agreed to take any action, nor to the
knowledge of Parent is there any fact or circumstance relating to Parent, that
would prevent the Merger from constituting a reorganization within the meaning
of Section 368(a) of the Code.
SECTION 4.27 VOTE REQUIRED. At the Parent Stockholder Meeting or any
adjournment or postponement thereof, the affirmative vote of the holders of a
majority of the outstanding shares of the Parent Common Stock are the only votes
of the holders of any class or series of capital stock of Parent necessary to
adopt this Agreement.
SECTION 4.28 PARENT COMMON STOCK. On the Closing Date, Parent will have
a sufficient number of authorized but unissued or treasury shares of the Parent
Common Stock available (i) for issuance as the stock component of the Merger
Consideration set forth in Section 2.3 and (ii) for issuance to the holders of
the Parent Stock Options issued pursuant to this Agreement and participants in
the Parent Stock Purchase Plan in accordance with the provisions of this
Agreement. The Parent Common Stock to be issued pursuant to this Agreement will,
when so delivered, be (i) duly and validly issued, fully paid and nonassessable,
and (ii) listed on the NYSE, upon official notice of issuance.
41
SECTION 4.29 SUFFICIENT FUNDS. Parent has received the financing
commitments attached on Section 4.29 of the Parent Disclosure Schedules (the
"COMMITMENTS"). The Commitments are complete and correct copies of all financing
commitments received by Parent in connection with the transactions contemplated
by this Agreement. To the knowledge of Parent, no event has occurred and no
circumstances currently exist that would be likely to cause the conditions
precedent to obtaining the financing referenced in the Commitments to fail to
occur or be fulfilled. If the closing of the transactions contemplated by the
Commitment occurs, Parent will have available to it at the Effective Time
sufficient funds to (i) pay the cash component of the Merger Consideration set
forth in Section 2.3(i) and (ii) repay all of the outstanding principal,
interest and premium (if any) and discharge all other obligations of the Company
and each of the Company Subsidiaries pursuant to (x) the Credit Agreement, dated
as of April 1, 1999, as amended, by and among the Company, Bank One, Indiana,
NA, as agent, and the financial institutions named therein, (y) the 7.75% Senior
Notes due June 11, 2008 of the Company and (z) the 7.625% Senior Notes due
December 19, 1994 of the Company.
SECTION 4.30 WARRANTIES.
(a) Except as provided in Section 4.20 of the Parent Disclosure
Schedule, Parent and the Parent Subsidiaries have for the period equal to the
applicable statute of limitations, and each Parent Subsidiary has prior to
becoming a subsidiary of Parent for the longer of (1) the period between the
date of formation of such Parent Subsidiary and the date such Parent Subsidiary
became a subsidiary of Parent or (2) the applicable statute of limitations,
provided to each home purchaser from either Parent or any Parent Subsidiary a
homeowners warranty from Residential Warranty Corporation, Homeowners' Warranty
Company, Two-Ten Warranty Company or United Home Insurance Company, a Risk
Retention Company ("UHIC"), a Vermont corporation.
(b) UHIC is in compliance with all Applicable Laws and requirements of
all trade and industry groups so as to provide structural warranties as to
houses and other properties conveyed by Parent or the Parent Subsidiaries to
third parties in all markets where UHIC operates. There are no claims pending
against UHIC or under homeowner warranty bonds issued by UHIC that are
reasonably likely to have, either individually or in the aggregate, if paid by
UHIC, a Parent Material Adverse Effect.
SECTION 4.31 JOINT VENTURES. Neither Parent nor any Parent Subsidiary
has any direct liability or liability as a guarantor with respect to any
indebtedness incurred in connection with any joint venture or similar
arrangement to which Parent or any Parent Subsidiary is a party.
ARTICLE V.
CONDUCT OF BUSINESS PENDING THE MERGER
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SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY. The Company covenants
and agrees that, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, unless Parent shall otherwise agree in writing, which agreement
shall not be unreasonably withheld or delayed, the Company shall conduct its
business and shall cause the businesses of the Company Subsidiaries to be
conducted only in, and the Company and the Company Subsidiaries shall not take
any action except in, the ordinary course of business in a manner consistent
with past practice except as expressly contemplated by this Agreement. The
Company shall use reasonable best efforts to preserve substantially intact the
business organization and material assets and maintain the material rights of
the Company and the Company Subsidiaries, keep available the services of the
present officers, employees and consultants of the Company and the Company
Subsidiaries and preserve the present relationships of the Company and the
Company Subsidiaries with customers, suppliers and other persons with which the
Company or any Company Subsidiary has business relations. Without limiting the
foregoing, except as contemplated by this Agreement, neither the Company nor any
Company Subsidiary shall, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, directly or indirectly do any of the following without the prior
written consent of Parent:
(a) amend or otherwise change the Articles of Incorporation or Bylaws
of the Company or the organizational documents of any Company Subsidiary;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in the
Company (except for the issuance of shares of Company Common Stock pursuant to
any option previously granted under the Company Option Plans);
(c) sell, pledge, dispose of or encumber any assets of the Company or
any Company Subsidiary, except for (i) sales of assets in the ordinary course of
business in a manner consistent with past practice, (ii) sales of lots and/or
homes in a manner consistent with past practice, (iii) disposition of obsolete
or worthless assets, (iv) sales of immaterial assets not in excess of $250,000
individually, and (v) liens on assets to secure purchase money and construction
financings in the ordinary course of business consistent with past practice and
other non-monetary encumbrances entered into in the ordinary course of business
consistent with past practice;
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except that a wholly owned Company
Subsidiary may declare and pay a dividend or make advances to its parent or the
Company, (ii) split, combine or reclassify any of its
43
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) amend the terms or change the period of exercisability
of, purchase, repurchase, redeem or otherwise acquire, or permit any Company
Subsidiary to purchase, repurchase, redeem or otherwise acquire, any of its
securities, including, without limitation, shares of Company Common Stock or any
option, warrant or right, directly or indirectly, to acquire shares of Company
Common Stock, or propose to do any of the foregoing;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) purchase any securities or make any material investment (other
than investments in existing joint ventures for the purpose of land acquisition
complying with the dollar limits set forth in clause (vi) of this Section
5.1(e)), either by purchase of securities, contributions to capital, asset
transfers, or purchase of any assets, in any person other than a wholly owned
Company Subsidiary or otherwise acquire direct or indirect control over any
person; (iii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person, except under existing
lines of credit in the ordinary course of business consistent with past
practice, or make any loans or advances (other than loans or advances to or from
direct or indirect wholly owned Company Subsidiaries or pursuant to existing
contracts or contracts for the acquisition or development of land entered into
in the ordinary course of business consistent with past practice), (iv) enter
into or amend any contract or agreement, other than in the ordinary course of
business consistent with past practice, that is or would be a Company Material
Contract or is otherwise material to the Company and the Company Subsidiaries,
taken as a whole; (v) authorize any capital expenditures or purchase of fixed
assets which are, in excess of $250,000 individually or $1,500,000 in the
aggregate; (vi) authorize any expenditures for the purchase of real estate which
are in excess of $15,000,000 in any single transaction or series of related
transactions or in excess of $30,000,000 in the aggregate in any 30-day period
(it being understood and agreed that this clause (vi) shall not prohibit the
performance of any obligation pursuant to any agreement entered into prior to
the date of this Agreement (including any obligation to purchase land in order
to fulfill obligations pursuant to agreements with home purchasers executed
prior to the date hereof) in Section 5.1(e)(vi) of the Company Disclosure
Schedule); or (vii) fail to use their commercially reasonable efforts to cause
to be memorialized in writing all agreements pertaining to the obligations of
the Company or any of the Company Subsidiaries to purchase land in connection
with the joint ventures as set forth on Schedule 5.1(e)(vii), except where the
failure to so memorialize an agreement is not reasonably likely to individually
or in the aggregate have a Company Material Adverse Effect.
(f) except as may be required by law, increase the compensation payable
or to become payable to its officers or employees, grant or pay any severance or
termination pay to, or enter into any employment or severance agreement with any
director, officer or other employee of the Company or any Company Subsidiary, or
establish, adopt, enter
44
into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any current or former
directors, officers or employees, except increases in annual compensation for
employees in the ordinary course consistent with past practice to the extent
such compensation increases do not result in a material increase in compensation
expense to the Company;
(g) enter into or amend any employment agreement between the Company or
any Company Subsidiary (unless required by law) and any person that the Company
or the Company Subsidiary does not have the unconditional right to terminate
without liability at any time on or after the Effective Time;
(h) change accounting policies or procedures (including, without
limitation, procedures with respect to revenue recognition, payments of accounts
payable and collection of accounts receivable);
(i) make any material Tax election inconsistent with past practice or
settle or compromise any material federal, state, local or foreign Tax liability
or agree to an extension of a statute of limitations with respect to any
material amount of Tax, except to the extent the amount of any such settlement
or compromise has been reserved for in the financial statements contained in the
Company SEC Reports filed prior to the date hereof;
(j) except as set forth in Section 5.1(j) of the Company Disclosure
Schedule, commence any litigation other than in accordance with past practice,
or settle any litigation involving any liability of the Company or any Company
Subsidiary for material money damages or restrictions upon the operations of any
of the Company or the Company Subsidiaries, or enter into any agreement to
waive, release, compromise or assign any material rights or claims held by the
Company or Company Subsidiary or settle any claim described in Section 3.14 of
the Company Disclosure Schedule for a payment exceeding $3,000 per claim or in
such other maximum amount as may be set forth in Section 3.14 of the Company
Disclosure Schedule;
(k) fail to renew the Company's existing insurance policies, including
general liability insurance policies, or fail to replace such policies with new
policies with terms substantially identical to those currently in force other
than with respect to premium amounts which will not exceed then market rates; or
(l) take, or agree to take, any of the actions described in Sections
5.1(a) through (k) above, or any action which would make any of the
representations or warranties of the Company contained in this Agreement untrue
or incorrect in any material respect as contemplated hereby or prevent the
Company from performing or cause the Company not to perform in any material
respect its covenants hereunder.
SECTION 5.2 NO SOLICITATION.
45
(a) The Company shall, and shall cause the Company Subsidiaries and its
and their respective officers, directors, employees, investment bankers,
attorneys and other representatives and agents to, immediately cease any
discussions or negotiations with any parties with respect to any Third Party
Acquisition. The Company shall not, nor shall the Company authorize or permit
any Company Subsidiary or any of its or their respective officers, directors,
employees, investment bankers, attorneys and other representatives or agents to,
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with or provide any information to any person or
group (other than Parent or any designees of Parent) concerning, or take any
other action designed to facilitate any inquiries or the making of any proposal
concerning, any Third Party Acquisition; provided, however, that (i) nothing
herein shall prevent the Company Board from complying with Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer or exchange
offer; and (ii) the Company may make inquiry of and participate in discussions
with any person or group who has submitted after the date hereof an unsolicited
and unencouraged Superior Proposal if, and to the extent, the Company Board
determines in its good faith judgment, that it is necessary to do so in order to
comply with its fiduciary duties, after consultation with and advice from
outside legal counsel to such effect and, before making such inquiry or
participating in such discussions, it receives from such person or group an
executed confidentiality agreement with terms no less favorable to the Company
than those contained in the Confidentiality Letters (as defined herein), which
agreement does not provide for any payments by the Company. The Company shall
promptly (but no later than 24 hours after receipt) notify Parent in the event
it receives any proposal or inquiry concerning a Third Party Acquisition,
including the terms and conditions thereof and the identity of the party
submitting such proposal or inquiry (all in reasonable detail), and shall advise
Parent promptly of any developments concerning the same and the status thereof.
(b) Except as set forth in this Section 5.2(b), the Company Board shall
not withdraw or, in any manner adverse to Parent, modify its recommendation of
the transactions contemplated hereby or approve or recommend, or cause the
Company to enter into any agreement with respect to, any Third Party
Acquisition. Notwithstanding the foregoing, if the Company Board determines in
its good faith judgment, after consultation with and advice from outside legal
counsel to such effect, that it is necessary to do so in order to comply with
its fiduciary duties, the Company Board may withdraw or modify its
recommendation of the transactions contemplated hereby or approve or recommend a
Superior Proposal, but in each case only (i) after providing reasonable written
notice to Parent (a "NOTICE OF SUPERIOR PROPOSAL") advising Parent that the
Company Board has received a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal and identifying the person making such
Superior Proposal (all in reasonable detail) and (ii) if Parent does not, within
five business days of Parent's receipt of the Notice of Superior Proposal, make
an offer which the Company Board determines in its good faith judgment (after
consultation with a financial adviser of nationally recognized reputation) to
provide as great a value and to be as favorable to the Company's stockholders as
such Superior Proposal; provided, however, that the
46
Company shall not be entitled to enter into any agreement with respect to a
Superior Proposal until this Agreement is terminated in accordance with Section
7.1. Any disclosure that the Company Board may be compelled to make with respect
to the receipt of a proposal for a Third Party Acquisition in order to comply
with Rule 14d-9 or 14e-2 of the Exchange Act will not constitute a violation of
this Section 5.2(b); provided that such disclosure states that no action will be
taken by the Company Board with respect to the withdrawal or modification of its
recommendation of the transactions contemplated hereby or the approval or
recommendation of any Third Party Acquisition except in accordance with this
Section 5.2(b).
(c) For the purposes of this Agreement, "Third Party Acquisition" means
the occurrence of any of the following events: (i) the acquisition of the
Company by merger or otherwise by any person (which, for purposes of this
Section 5.2(c), includes a "person" as such term is defined in Section 13(d)(3)
of the Exchange Act) other than Parent or any affiliate thereof (a "THIRD
PARTY"); (ii) the acquisition by a Third Party of all or a substantial portion
of the assets of the Company and the Company Subsidiaries taken as a whole;
(iii) the acquisition by a Third Party of an equity interest in the Company of
more than 20% of the outstanding Company Common Stock or the acquisition by a
Third Party of securities convertible into more than 20% of the outstanding
Company Common Stock or more than 25% of the outstanding capital stock or
securities convertible into more than 25% of the outstanding capital stock of
any Company Subsidiary (whether from the Company or any Company Subsidiary, by
tender offer, exchange offer or otherwise); (iv) the adoption by the Company of
a plan of liquidation or the declaration or payment of an extraordinary
dividend; (v) the repurchase by the Company or any Company Subsidiary of a
significant equity interest in the Company or any Company Subsidiary; or (vi)
any other business combination, acquisition, recapitalization, restructuring or
other similar transaction involving the Company or any Company Subsidiary. For
purposes of this Agreement, a "Superior Proposal" means any bona fide written
proposal to acquire directly or indirectly for consideration consisting of cash
or securities more than 66-2/3% of the voting power of Company Shares then
outstanding or all or substantially all the assets of the Company and otherwise
on terms which the Company Board determines in its good faith judgment (after
consulting with a financial adviser of nationally recognized reputation) (1) to
be from a Third Party that is financially capable of completing the transaction
subject to the proposal and (2) to provide (if completed) greater value and to
be more favorable to the Company's stockholders than the Merger.
SECTION 5.3 CONDUCT OF BUSINESS BY PARENT. Parent covenants and agrees
that, during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, unless the
Company shall otherwise agree in writing, which agreement shall not be
unreasonably withheld or delayed, Parent shall conduct its business and shall
cause the businesses of the Parent Subsidiaries to be conducted in the ordinary
course of business except as expressly contemplated by this Agreement. Except as
contemplated by this Agreement, Parent
47
shall not, during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Time,
directly or indirectly do any of the following without the prior written consent
of the Company, which consent shall not be unreasonably withheld or delayed:
(a) amend or otherwise change the Certificate of Incorporation or
Bylaws of Parent other than incident to a stock split or combination;
(b) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except for quarterly cash dividends and
stock dividends and any Parent Subsidiary may declare and pay a dividend to its
parent or Parent or (ii) reclassify the Parent Common Stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of Parent Common Stock;
(c) issue any shares of Parent Common Stock (except restricted stock or
common stock issued pursuant to stock options issued under the Parent Stock
Option Plans or in any stock dividend) in one transaction or series of related
transactions if the shares so issued constitute more than 15% of the outstanding
shares of Parent Common Stock (after giving effect to such issuance);
(d) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof if the consideration therefor would exceed $150,000,000; and
(e) take, or agree to take, any of the actions described in Sections
5.3(a) through (c) above, or any action which would make any of the
representations or warranties of Parent contained in this Agreement untrue or
incorrect in any material respect as contemplated hereby or prevent Parent from
performing or cause Parent not to perform in any material respect its covenants
hereunder.
SECTION 5.4 ADVERSE CHANGES IN CONDITION. Both the Company and Parent
agree to give written notice promptly to the other upon becoming aware of the
occurrence or impending occurrence of any event or circumstance which (i) is
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect, with respect to a Company notice to Parent, or a Parent Material
Adverse Effect, with respect to a Parent notice to the Company or (ii) would
constitute a material breach of any of the disclosing party's representations,
warranties or covenants contained herein.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1 REGISTRATION STATEMENT/LISTING APPLICATION.
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(a) Parent shall prepare and file with the SEC and any other applicable
regulatory bodies, as soon as reasonably practicable, a Registration Statement
on Form S-4 with respect to the shares of the Parent Common Stock to be issued
in the Merger (together with any amendments or supplements thereto, the
"REGISTRATION STATEMENT"), and will otherwise proceed promptly to satisfy the
requirements of the Securities Act, including Rule 145 thereunder. Such
Registration Statement shall contain a joint proxy statement of Parent and of
the Company prepared by Parent and the Company containing the information
required by the Exchange Act (together with any amendments or supplements
thereto, the "PROXY STATEMENT"). Parent shall use its reasonable best efforts to
cause the Registration Statement to be declared effective and to maintain such
effectiveness as long as is necessary to consummate the Merger. Parent shall
promptly amend or supplement the Registration Statement to the extent necessary
in order to make the statements therein not misleading or to correct any
statements which have become false or misleading. Parent will use reasonable
best efforts to take any action required to be taken under state securities or
blue sky laws in connection with the issuance of the Parent Common Stock in
connection with the Merger. The Company shall furnish Parent will all
information concerning the Company and the holders of Company Common Stock and
shall take such other action as Parent may reasonably request in connection with
the preparation and filing of the Registration Statement, the Proxy Statement
and all amendments thereto.
(b) The Company and Parent shall use their reasonable best efforts to
have the Proxy Statement approved by the SEC under the provisions of the
Exchange Act. The Company and its counsel shall be given a reasonable
opportunity to review and comment on the filings made pursuant to this Section
6.1 prior to their filing with the SEC and shall be provided with any comments
Parent and its counsel may receive from the SEC or its staff with respect to
such filings promptly after receipt of such comments.
(c) The information specifically designated as being supplied by the
Company for inclusion or incorporation by reference in the Registration
Statement shall not, at the time the Registration Statement is declared
effective or at the time the Proxy Statement is first mailed to holders of the
Company Common Stock, 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 not misleading. The information specifically
designated as being supplied by the Company for inclusion or incorporation by
reference in the Proxy Statement shall not, at the date the Proxy Statement is
first mailed to holders of the Company Common Stock and the Parent Common Stock,
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 the light of the circumstances under which they are made, not
misleading. If, at any time prior to the Effective Time, any event or
circumstance relating to the Company, or its officers or directors, should be
discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, the Company shall
promptly inform Parent. All documents, if any, that the Company is responsible
for
49
filing with the SEC in connection with the transactions contemplated hereby will
comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.
(d) The information specifically designated as being supplied by Parent
for inclusion or incorporation by reference in the Registration Statement shall
not, at the time the Registration Statement is declared effective or at the time
the Proxy Statement is first mailed to holders of the Company Common Stock and
the Parent Common Stock, 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 not misleading. The information specifically
designated as being supplied by Parent for inclusion or incorporation by
reference in the Proxy Statement shall not, at the date the Proxy Statement is
first mailed to holders of the Company Common Stock and the Parent Common Stock,
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 circumstance under which they are made, not misleading.
If at any time prior to the Effective Time any event or circumstance relating to
Parent or its officers or directors should be discovered by Parent which should
be set forth in an amendment to the Registration Statement or a supplement to
the Proxy Statement, Parent shall promptly inform the Company and shall promptly
file such amendment to the Registration Statement. All documents that Parent is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder.
(e) Prior to the Effective Time, Parent shall use its reasonable best
efforts to cause the shares of the Parent Common Stock to be issued pursuant to
the Merger to be registered or qualified under all applicable Blue Sky Laws, and
to take any other actions which may be necessary to enable the Parent Common
Stock to be issued pursuant to the Merger to be distributed in each such
jurisdiction.
(f) Prior to the Effective Time, Parent shall file a subsequent listing
application with the NYSE relating to the shares of the Parent Common Stock to
be issued in connection with the Merger, and shall use reasonable best efforts
to cause such shares of the Parent Common Stock to be listed, upon official
notice of issuance, prior to the Effective Time.
SECTION 6.2 MEETINGS OF STOCKHOLDERS.
(a) The Company will take all steps necessary in accordance with its
Articles of Incorporation and Bylaws and the IBCL to call, give notice of,
convene and hold a meeting of its stockholders (the "COMPANY STOCKHOLDER
MEETING") as soon as practicable (and in any event within 45 days) after the
effectiveness of the Registration Statement,
50
for the purpose of approving this Agreement and the transactions contemplated
hereby and for such other purposes as may be necessary. Unless this Agreement is
terminated in accordance with its terms, the Company Board (subject to the
provisions of Section 5.2) will (i) recommend to its stockholders the approval
of this Agreement, the transactions contemplated hereby and any other matters to
be submitted to the stockholders in connection therewith, to the extent that
such approval is required by applicable law in order to consummate the Merger,
and (ii) use its reasonable good faith efforts to obtain the approval by its
stockholders of this Agreement and the transactions contemplated hereby.
(b) If at any time after the date hereof, the Company Board shall
withdraw or modify its recommendation of this Agreement or the Merger pursuant
to Section 5.2 hereof, the Company acknowledges that, notwithstanding the
provisions of paragraph 7 of the Confidentiality Letter dated November 27, 2001,
Parent may take such action as Parent may choose in its own discretion which
would not require the approval of the Company Board, including, without
limitation a tender offer conducted pursuant to the Exchange Act, to obtain any
or all of the capital stock of the Company or any or all of the assets of the
Company and the Company Subsidiaries. Parent and the Company hereby acknowledge
and agree that, if the Company Board withdraws or modifies its recommendation of
this Agreement or the Merger pursuant to Section 5.2 hereof, the provisions of
paragraph 7 of the Confidentiality Letter dated November 27, 2001 shall
terminate and be of no further force or effect; provided, however, that all of
the other provisions of such letter shall remain in full force and effect.
(c) Parent will take all steps necessary in accordance with its
Certificate of Incorporation and By-Laws and the DGCL to call, give notice of,
convene and hold a meeting of its stockholders (the "PARENT STOCKHOLDER
MEETING") as soon as practicable (and in any event within 45 days) after the
effectiveness of the Registration Statement, for the purpose of approving and
adopting this Agreement and the transactions contemplated hereby, approving the
issuance of the Parent Shares upon consummation of the Merger and for such other
purposes as may be necessary. Unless this Agreement shall have been validly
terminated as provided herein, Board of Directors will (i) recommend to its
stockholders the approval and adoption of this Agreement, and (ii) use its
reasonable good faith efforts to obtain the approval by its stockholders of this
Agreement and the transactions contemplated hereby.
(d) The Company and Parent shall cause the definitive Proxy Statement
to be mailed to their respective stockholders as promptly as practicable after
the Registration Statement is declared effective by the SEC. At the
stockholders' meetings, each of the Company and Parent shall vote or cause to be
voted in favor of approval and/or adoption of this Agreement all capital stock
entitled to vote at such meetings as to which they hold proxies at such time.
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SECTION 6.3 ANTITRUST MATTERS. As promptly as practicable after the
date of this Agreement, the Company and Parent shall file any notifications that
may be required under the HSR Act in connection with the Merger and the
transactions contemplated hereby and thereafter use reasonable efforts to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") for additional information or documentation
and to respond as promptly as practicable to all inquiries and requests received
from any State Attorney General or other governmental authority in connection
with antitrust matters.
SECTION 6.4 ACCESS TO INFORMATION; CONFIDENTIALITY
(a) Upon reasonable notice and subject to restrictions contained in
confidentiality agreements to which such party is subject (from which such party
shall use reasonable efforts to be released), the Company shall (and shall cause
each Company Subsidiary to) afford to the officers, employees, accountants,
counsel and other representatives of Parent reasonable access, during the period
from the date hereof through the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, the Company shall
(and shall cause each Company Subsidiary to) furnish promptly to Parent all
information concerning its business, properties and personnel as Parent may
reasonably request.
(b) Upon reasonable notice and subject to restrictions contained in
confidentiality agreements to which such party is subject (from which such party
shall use reasonable efforts to be released), Parent shall (and shall cause each
Parent Subsidiary to) afford to the officers, employees, accountants, counsel
and other representatives of the Company reasonable access, during the period
from the date hereof through the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, Parent shall (and
shall cause each Parent Subsidiary to) furnish promptly to the Company all
information concerning its business, properties and personnel as such the
Company may reasonably request.
(c) Each of Parent and the Company shall make available to the other
the appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and personnel
as either Parent or the Company may reasonably request. Each party shall keep
all information obtained under this Section 6.4 confidential in accordance with
the terms of the confidentiality letters, dated November 27, 2001 and December
13, 2001 (the "CONFIDENTIALITY LETTERS"), between Parent and the Company.
SECTION 6.5 TAX-FREE REORGANIZATION. Neither Parent, Merger Sub nor the
Company shall take or cause to be taken any action on or before the Effective
Time which would prevent the Merger from qualifying as a "reorganization" under
Section 368(a) of the Code. Parent shall not, and shall cause the Surviving
Corporation not to, take or cause to be taken any action after the Effective
Time that would prevent the
52
Merger from qualifying as a reorganization under Section 368(a) of the Code
except as required by applicable law.
SECTION 6.6 AFFILIATE AGREEMENTS. The Company will use its best efforts
to cause each of its directors and executive officers and each of its
"affiliates" (within the meaning of Rule 145 under the Securities Act) to
execute and deliver to Parent as soon as practicable an agreement in the form
attached hereto as EXHIBIT C, with respect to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, and EXHIBIT D, with respect to all other affiliates, relating to the
disposition of shares of Parent Common Stock issuable pursuant to this
Agreement.
SECTION 6.7 COMPANY STOCK OPTIONS.
(a) As soon as reasonably practicable after the Effective Time, and
after giving effect to the requirements of the Company Option Plans, Parent
shall deliver to the holders of the Company Stock Options, appropriate notices
setting forth such holders' rights pursuant to a Parent stock incentive plan,
and any stock option agreement evidencing such Parent Stock Options replacing
such holders' Company Stock Options as provided by Section 2.5 and this Section
6.7. Parent shall use its reasonable efforts to ensure, to the extent required
by, and subject to the provisions of, such plan or agreements, that the options
to purchase Parent Common Stock (the "PARENT STOCK OPTIONS") replacing any
Company Stock Options which qualified as incentive stock options prior to the
Effective Time shall also qualify as incentive stock options after the Effective
Time.
(b) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of the Parent Common Stock for delivery
upon exercise of the Parent Stock Options replacing the Company Stock Options in
accordance with Section 2.5. Parent shall use its reasonable efforts to maintain
the effectiveness of a registration statement or registration statements
covering such options (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Parent Stock Options remain
outstanding. Except to the extent otherwise agreed to by the parties, all
restrictions or limitations on transfer and vesting with respect to the Company
Stock Options, to the extent that such restrictions or limitations shall not
have already lapsed, shall remain in full force and effect with respect to the
Parent Stock Options replacing the Company Stock Options as set forth above.
SECTION 6.8 INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, the Surviving Corporation shall,
to the fullest extent permitted under applicable law and the Surviving
Corporation's Certificate of Incorporation and Bylaws, indemnify and hold
harmless, each present director or officer of the Company, determined as of the
Effective Time (collectively, the "INDEMNIFIED PARTIES"), against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages and liabilities incurred in connection
53
with, and amounts paid in settlement of, any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative and
wherever asserted, brought or filed, arising out of or pertaining to any acts or
omissions or alleged acts or omissions by them in their capacities as such;
provided that, as to claims existing as of the Effective Time, in no event shall
the Surviving Corporation be obligated to provide indemnification under this
Section 6.8(a) in excess of the indemnification that the Company is required to
provide to its directors and officers under its Articles of Incorporation or
Bylaws as in effect as of the date hereof.
(b) For a period of six (6) years after the Effective Time, the
Surviving Corporation shall maintain (through the continuation or endorsement of
the Company's existing policy or the purchase of a "tail-end" rider permitted by
such policy) in effect, if available, the directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on the terms (including the
amounts of coverage and the amounts of deductibles, if any) now applicable to
them; provided that in no event shall the Surviving Corporation be required to
spend in excess of 200% of the annual premium currently paid by the Company for
such coverage, and provided further that, if the premium for such coverage
exceeds such amount, the Surviving Corporation shall maintain the greatest
coverage available for an annual amount equal to 200% of the annual premium
currently paid by the Company for such coverage.
(c) This Section 6.8 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of the Surviving Corporation and shall be enforceable by the Indemnified
Parties. In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates or merges into any other person or entity and shall not
be the continuing or surviving corporation or entity in such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person or entity, then and in such case, proper provisions shall be made
so that the successors and assigns of the Surviving Corporation (as the case may
be) assume the obligations of the Surviving Corporation set forth in this
Section 6.8.
SECTION 6.9 FURTHER ACTION. Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use all reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all material waivers, consents and approvals and to
effect all necessary registrations and filings, and otherwise to satisfy or
cause to be satisfied in all material respects all conditions precedent to its
obligations under this Agreement.
SECTION 6.10 PUBLIC ANNOUNCEMENTS. Parent, Merger Sub and the Company
shall consult with each other before issuing any press release with respect to
the Merger
54
or this Agreement and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which shall not
be unreasonably withheld or delayed; provided, however, that a party may,
without the prior consent of the other party, issue such press release or make
such public statement as may upon the advice of counsel be required by law or
the rules and regulations of the NYSE, in the case of Parent and the Nasdaq
Stock Market in the case of the Company if it has used all reasonable efforts to
consult with the other party.
SECTION 6.11 EMPLOYEE BENEFITS.
(a) At the written request of Parent, which request shall be delivered
to the Company not less than 10 days before the Closing Date, the Company shall
cause any defined contribution plan (within the meaning of Section 3(34) of
ERISA) maintained by it or any Company Subsidiary to be terminated ("Terminated
Plan") no later than the day immediately preceding the Closing Date and cause
all participants under such Terminated Plan to become fully vested, with the
assets of such Terminated Plan being distributed at the direction of Parent or
its designee as soon as practicable after receipt of a determination in which
the Internal Revenue Service confirms that the plan is tax-qualified upon its
termination. Until such time as the assets of such Terminated Plan are
distributed to participants, Parent shall permit participants in the Terminated
Plan to continue making loan repayments for plan loans outstanding as of the
Closing Date to the extent consistent with the terms of the Plan as of the
Closing Date.
(b) Each employee of the Company or a Company Subsidiary at the
Effective Time who becomes an employee immediately following the Effective Time
of Parent or a subsidiary of Parent ("Employer Entity") (with such employee
being considered "Transferred Employee") shall be eligible to participate in
Parent's 401(k) plan (subject to complying with eligibility requirements and to
Parent's right to terminate such plan). Notwithstanding the preceding sentence,
each Transferred Employee who was a participant in any defined contribution plan
(within the meaning of Section 3(34) of ERISA) maintained by Company or any
Company Subsidiary immediately preceding the Closing Date shall become a
participant in the Parent's 401(k) plan as of the Effective Time. For purposes
of administering Parent's 401(k) plan, service with the Company and the Company
Subsidiaries shall be deemed to be service with Parent or the Parent's
subsidiaries for participation, vesting, and for purposes of benefit accrual.
The Parent's 401(k) plan shall accept eligible rollover distributions within the
meaning of Section 402(c) of the Code from any defined contribution plan (within
the meaning of Section 3(34) of ERISA) maintained by the Company or any Company
Subsidiary.
(b) (c) With respect to any medical, dental, life, disability and other
welfare benefit plans and programs available to employees of the Company or a
Company Subsidiary at the Effective Time who are Transferred Employees that the
Employer Entity determines, in good faith, provides benefits of the same type or
class as a
55
corresponding plan or program maintained by the Employer Entity, the Employer
Entity shall continue such Company plan or program in effect for the benefit
of the Transferred Employees until such date as the Employer Entity
determines in its sole discretion, but in no event effective as of a date
later than the January 1 immediately following the Closing Date, that they
shall become eligible to participate in the corresponding plan or program
maintained by the Employer Entity (and, with respect to any such plan or
program, subject to complying with eligibility requirements and subject to
the right of the Employer Entity to terminate such plan or program). For
purposes of administering each such plan or program, service with the Company
and the Company Subsidiaries shall be deemed to be service with the Employer
Entity for the purpose of determining eligibility to participate, vesting (if
applicable), and benefit accrual in such welfare plans and programs. With
respect to any Parent Employee Plan that is a "group health plan" within the
meaning of Section 5000(b)(1) of the Code and that is offered to Transferred
Employees at any time prior to the January 1 immediately following the
Closing Date, such Parent Employee Plan shall grant such Transferred
Employees credit for all deductible amounts, co-payment amounts and other
out-of-pocket expenses credited to or paid by such Transferred Employee under
the terms of any Company Employee Plan that was a "group health plan" within
the meaning of Section 5000(b)(1) of the Code as of the Closing Date
(including periods of time during which such plan was maintained following
the Closing Date).
ARTICLE VII.
TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be terminated, and the
Merger may be abandoned, at any time prior to the Effective Time, whether before
or after the adoption of this Agreement by the holders of the Company Common
Stock or the Parent Common Stock, in each case by written notice of the
terminating party to the other(s):
(a) by mutual written consent of Parent, Merger Sub and the Company;
(b) by either Parent and Merger Sub or by the Company:
(i) if, upon a vote at a duly held meeting of stockholders or
any adjournment thereof, any required approval of the holders of the
Company Common Stock (including any required approval of any class of
the Company Common Stock) shall not have been obtained;
(ii) if the Merger shall not have been consummated on or
before July 31, 2002, unless the failure to consummate the Merger is
the result of a willful and material breach of this Agreement by the
party seeking to terminate this Agreement;
56
(iii) if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued a
nonappealable final order, decree or ruling or taken any other action
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger (provided that the right to terminate this
Agreement under this Section 7.1(b)(iii) shall not be available to any
party who has not complied with its obligations under Section 6.9 and
such noncompliance materially contributed to the issuance of any such
order, decree or ruling or the taking of such action);
(iv) in the event of a material breach by the other party of
any representation, warranty, covenant or other agreement contained in
this Agreement (a "TERMINATING BREACH") (provided that the terminating
party is not then in material breach of any representation, warranty,
covenant or other agreement contained in this Agreement); provided
that, in the case of a covenant or agreement, if such Terminating
Breach is curable by the Company or Parent, as the case may be, through
the exercise of its reasonable efforts and for so long as the Company
or Parent, as the case may be, continues to exercise such reasonable
efforts, neither Parent nor the Company, respectively, may terminate
this Agreement under this Section 7.1(b)(iv) unless such Terminating
Breach is not cured within 15 days after the giving of written notice
to the Company or Parent, as applicable; or
(v) if, upon a vote at a duly held meeting of stockholders or
any adjournment thereof, any required approval of the holders of the
Parent Common Stock shall not have been obtained;
(c) notwithstanding the other provisions of this Section 7.1, as
provided in Section 7.2(d);
(d) by Parent if the Company Board shall have recommended to the
Company's stockholders a Superior Proposal; or the Company Board shall have
withdrawn or, in a manner adverse to Parent, modified its recommendation of this
Agreement or the Merger; provided that any disclosure that the Company Board is
compelled to make of the receipt of a proposal for a Third Party Acquisition in
order to comply with Rule 14d-9 or 14e-2 shall not in and of itself constitute
the withdrawal or modification of the Company Board's recommendation, provided
that such disclosure states that no action will be taken by the Company Board
with respect to the withdrawal or modification of its recommendation of the
transactions contemplated hereby or the approval or recommendation of any Third
Party Acquisition except in accordance with Section 5.2(b);
(e) by the Company if the Company Board has received a Superior
Proposal, the Company Board determines in its good faith judgment, after
consultation with and advice from outside legal counsel, that it is necessary to
do so in order to comply with its fiduciary duties, withdraws or, in a manner
adverse to Parent, modifies its
57
recommendation of the transactions contemplated by this Agreement or approves or
recommends such Superior Proposal, and the Company Board has complied with all
other provisions of Section 5.2(b) and Section 7.2(a); and
(f) by the Company if the Stock Value is less than the Floor Price,
unless within three (3) business days after the giving of notice to Parent by
the Company of the Company's election to terminate this Agreement pursuant to
this Section 7.1(f) Parent elects, by notice to the Company to establish the
Adjusted Cash Amount or the Adjusted Exchange Ratio, or a combination thereof,
so that the amount of cash and Parent Common Stock (valued at the Stock Value)
constituting the Merger Consideration shall equal not less than $38.21.
SECTION 7.2 EFFECT OF TERMINATION. Except as set forth in this Section
7.2, in the event of termination of this Agreement as provided in Section 7.1,
this Agreement shall immediately become void and of no force or effect, without
any liability or obligation on the part of any party, unless such termination
results from the willful and material breach by a party of any of its
representations and warranties, covenants or other agreements set forth in this
Agreement, in which case the terminating party shall retain its rights and
remedies against such other party in respect of such other party's breach.
Except as otherwise provided in this Section 7.2, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expense, whether or not the
Merger is consummated.
(a) In the event that this Agreement shall be terminated:
(i) pursuant to Section 7.1(d) or 7.1(e);
(ii) by Parent pursuant to Section 7.1(b)(iv) and within 12
months thereafter the Company enters into an agreement with respect to
a Third Party Acquisition or a Third Party Acquisition occurs;
(iii) pursuant to Section 7.1(b)(i) and within 12 months
thereafter the Company enters into an agreement with respect to a Third
Party Acquisition or a Third Party Acquisition occurs; or
(iv) pursuant to Section 7.1(b)(i) at a meeting in respect of
which the Company Board shall have either (A) recommended to the
Company's stockholders a Superior Proposal or (B) withdrawn or, in a
manner adverse to Parent, modified its recommendation of this Agreement
or the merger.
the Company shall pay to Parent the amount of $21,000,000 immediately upon the
occurrence of the event described in this Section 7.2(a) and promptly thereafter
reimburse Parent for all documented out-of-pocket expenses and fees (including,
without limitation, fees payable to all banks, investment banking firms and
other financial institutions, and their respective agents and counsel, and all
fees of counsel, accountants, financial
58
printers, experts and consultants to Parent), whether incurred prior to, on or
after the date hereof, in connection with the Merger and the consummation of all
transactions contemplated by this Agreement up to an aggregate amount of
$3,000,000 less any amount theretofore paid pursuant to Section 7.2(b).
(b) In the event this Agreement shall be terminated by Parent or the
Company pursuant to Section 7.1(b)(i), and at the time of termination Parent is
not in breach of its material obligations hereunder, the Company shall, promptly
after the termination of this Agreement, reimburse Parent for all documented
out-of-pocket expenses and fees (including, without limitation, fees payable to
all banks, investment banking firms and other financial institutions, and their
respective agents and counsel, and all fees of counsel, accountants, financial
printers, experts and consultants to Parent), whether incurred prior to, on or
after the date hereof, in connection with the Merger or the consummation of any
transactions contemplated by this Agreement; provided that in no event shall the
Company be required to pay in excess of an aggregate of $3,000,000 pursuant to
this Section 7.2(b).
(c) In the event this Agreement shall be terminated by Parent or the
Company pursuant to Section 7.1(b)(v), and at the time of termination the
Company is not in breach of its material obligations hereunder, Parent shall,
promptly after the termination of this Agreement, reimburse the Company for all
documented out-of-pocket expenses and fees (including, without limitation, fees
payable to all banks, investment banking firms and other financial institutions,
and their respective agents and counsel, and all fees of counsel, accountants,
financial printers, experts and consultants to the Company), whether incurred
prior to, on or after the date hereof, in connection with the Merger or the
consummation of any transactions contemplated by this Agreement; provided that
in no event shall Parent be required to pay in excess of an aggregate of
$2,000,000 pursuant to this Section 7.2(c).
(d) In the event that the transactions contemplated by this Agreement
have not been consummated by the date set forth in Section 7.1(b)(ii) because of
the failure of the condition set forth in Section 8.2(h), the Parent shall pay
to the Company the amount of $10,000,000 immediately upon the occurrence of such
termination and promptly thereafter reimburse the Company for all documented
out-of-pocket expenses and fees (including, without limitation, fees payable to
all banks, investment banking firms and other financial institutions, and their
respective agents and counsel, and all fees of counsel, accountants, financial
printers, experts and consultants to the Company), whether incurred prior to, on
or after the date hereof, in connection with the Merger or the consummation of
any of the transactions contemplated by this Agreement up to an aggregate amount
of $2,000,000 less any amount theretofore paid pursuant to Section 7.2(c). Upon
payment of such amounts as set forth in this Section 7.2(d), this Agreement
shall automatically terminate.
59
SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties at
any time before or after any required approval of this Agreement by the
stockholders of the Company; PROVIDED, HOWEVER, that after any such approval,
there shall not be made any amendment that by law requires further approval by
such stockholders without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.
SECTION 7.4 EXTENSION: WAIVER. At any time prior to the Effective Time,
the parties 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 contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) waive compliance with any
of the agreements or conditions contained in this Agreement to the extent such
compliance is waivable in accordance with law. Any agreement on the part of a
party to any such extension or waiver shall be valid only if set forth in any
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 those rights.
ARTICLE VIII.
CONDITIONS TO THE MERGER
SECTION 8.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and applicable Blue Sky laws and no
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceeding for that purpose shall have been
initiated by the SEC.
(b) COMPANY SHAREHOLDER APPROVAL. This Agreement shall have been
approved by the requisite affirmative vote of the shareholders of the Company in
accordance with the Company's Articles of Incorporation, By-Laws and the IBCL.
(c) PARENT STOCKHOLDER APPROVAL. The holders of shares of the Parent
Common Stock shall have approved the adoption of this Agreement and any other
matters submitted to them for the purpose of approving the transactions
contemplated hereby to the extent required by the rules and regulations of the
NYSE.
(d) NO INJUNCTION OR RESTRAINT. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; and there shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
applicable to the Merger which makes the consummation of
60
the Merger illegal. There shall not have been instituted or pending any action
or proceeding by any governmental authority or administrative agency, before any
governmental authority, administrative agency or court of competent
jurisdiction, nor shall there be in effect any judgment, decree or order of any
governmental authority, administrative agency or court of competent
jurisdiction, in either case, seeking to prohibit or limit Parent from
exercising all material rights and privileges pertaining to its ownership of the
assets of the Company (including the Company Subsidiaries) taken as a whole or
the ownership or operation by Parent or any Parent Subsidiary of all or a
material portion of the business or assets of the Surviving Corporation and its
subsidiaries taken as a whole, or seeking to compel Parent or any Parent
Subsidiary to dispose of or hold separate all or any material portion of the
business or assets of the Surviving Corporation and its subsidiaries taken as a
whole, as a result of the Merger or the transactions contemplated by this
Agreement.
(e) HSR ACT. Any waiting period (and any extension thereof) applicable
to the consummation of the Merger under the HSR Act shall have expired or been
terminated.
(f) CONSENTS AND APPROVALS. All consents, authorizations, orders and
approvals of (or filings or registrations with) any governmental commission,
board or other regulatory body, the absence of which is reasonably likely to
have a Material Adverse Effect on the Surviving Corporation, Parent, any Parent
Subsidiary or any Company Subsidiary, shall have been obtained or made, except
for filings in connection with the Merger and any other documents required to be
filed after the Effective Time.
(g) LISTING OF SHARES. The shares of the Parent Common Stock to be
issued in connection with the Merger shall have been listed on the NYSE, upon
official notice of issuance.
SECTION 8.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver by Parent on or prior to the Closing Date of the
following further conditions:
(a) The representations and warranties of the Company contained herein
shall be true at and as of the Closing Date with the same effect as if made at
and as of the Closing Date (except to the extent such representation or warranty
specifically related to an earlier date, in which case such representation or
warranty shall be true as of such earlier date), except for such untruths or
inaccuracies that, individually or in the aggregate, are not reasonably likely
to have a Company Material Adverse Effect, and the Company shall have performed
and complied in all material respects with all agreements and covenants set
forth in this Agreement to be performed or complied with by it on or prior to
the Closing Date.
61
(b) Parent shall have been furnished with a certificate, executed by a
duly authorized officer of the Company, dated the Closing Date, certifying as to
the fulfillment of the conditions in paragraph (a).
(c) Parent shall have received an opinion of Ice ▇▇▇▇▇▇ in the form
attached hereto as EXHIBIT E.
(d) Parent shall have received an opinion from Paul, Hastings, ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇ LLP to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, and that Parent and the
Company will each be a party to a reorganization within the meaning of Section
368(b) of the Code, which opinion may be based upon reasonable representations
of fact provided by officers of Parent and the Company.
(e) Each "affiliate" of the Company, as such term is defined for
purposes of Rule 145 under the Securities Act, shall have executed an affiliate
agreement substantially in the form attached hereto as EXHIBIT C or EXHIBIT D as
the case may be.
(f) ATTORNEY GENERAL DEMAND. The Company shall be in compliance with
the terms and conditions of the Settlement Agreement with the Attorney General
of the State of Indiana, except for such non-compliance as is not reasonably
likely to have a Company Material Adverse Effect, and all of the consumer
complaints with respect to homes built by the Company and described in written
complaints filed with the Office of the Indiana Attorney General on or before
the date hereof (i) relate to claims regarding construction or quality of the
home and which are either not covered by an applicable homeowners' warranty or
were raised after the expiration of the applicable warranty period; (ii) have
been resolved to the satisfaction of the consumer (as memorialized in a
settlement agreement or an Attorney General Complaint Satisfaction Form); (iii)
are disclosed in Section 3.14 of the Company Disclosure Schedule and no material
adverse changes have occurred with respect to the resolution of such complaint;
or (iv) have not been resolved, but the aggregate costs to repair the
deficiencies noted in all the complaints described by this subsection (iv) do
not exceed $25,000.
(g) INSURANCE. The Company shall have provided to Parent evidence that
the Company and the Company Subsidiaries (i) have been named insureds on general
liability insurance policies maintained by the Company for the ten (10) year
period prior to the Closing Date (ii) are currently insured under substantially
identical general liability insurance policies, except that the premium amounts
will not exceed then current market rates and (iii) such prior and current
policies provide coverage for, among other occurrences, product liability and
damages and liabilities arising therefrom, in the minimum insured amount of
$10,000,000 with a maximum deductible of $50,000.
(h) FINANCING. All of the conditions precedent to the issuance of the
proceeds of the financing described in the Commitments shall have occurred or
otherwise be fulfilled
62
or waived according to the terms of the Commitments and the financing described
in the Commitments shall have closed on or before the Closing Date.
SECTION 8.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver by the Company on or prior to the Closing Date of the
following further conditions:
(a) The representations and warranties of Parent contained herein shall
be true at and as of the Closing Date with the same effect as if made at and as
of the Closing Date (except to the extent such representation or warranty
specifically relates to an earlier date, in which case such representation or
warranty shall be true as of such earlier date), except for such untruths or
inaccuracies that, individually or in the aggregate, are not reasonably likely
to have a Parent Material Adverse Effect, and Parent shall have performed and
complied in all material respects with all agreements and covenants set forth in
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
(b) The Company shall have been furnished with a certificate, executed
by duly authorized officer of Parent, dated the Closing Date, certifying as to
the fulfillment of the conditions in paragraph (a).
(c) The Company shall have received an opinion of Paul, Hastings,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP substantially identical to the form of opinion to be
provided by Ice ▇▇▇▇▇▇ attached hereto as EXHIBIT E.
(d) The Company shall have received an opinion from Ice ▇▇▇▇▇▇ to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and that Parent and the Company will each be a party
to a reorganization within the meaning of Section 368(b) of the Code, which
opinion may be based upon reasonable representations of fact provided by
officers of Parent and the Company.
(e) Parent shall have deposited with the Exchange Agent, for the
benefit of the holders of the Company Shares, for exchange in accordance with
Sections 2.3 and 2.7, (i) cash in an amount equal to the aggregate amount
payable pursuant to Article II, (ii) certificates representing the shares of
Parent Common Stock issuable pursuant to Section 2.3 and (iii) cash in an amount
equal to the aggregate amount required to be paid in lieu of fractional shares
of Parent Common Stock pursuant to Section 2.11.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1 NONSURVIVAL OF REPRESENTATIONS. Except as otherwise
provided in this Section 9.1, the representations, warranties, covenants and
agreements of each party hereto shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any other party
hereto, any person controlling any
63
such party or any of their officers or directors, whether prior to or after the
execution of this Agreement. The representations, warranties, covenants and
agreements in this Agreement shall terminate at the Effective Time, except that
the agreements set forth in Article II and in Section 6.1 and Section 6.6 shall
survive the Effective Time indefinitely, and (ii) the agreements in Section 6.8
and Section 6.11 shall survive in accordance with their respective terms. The
Confidentiality Letters shall survive termination of this Agreement as provided
therein.
SECTION 9.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
Beazer Homes USA, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇ ▇▇▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company:
Crossmann Communities, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇
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Ice ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.3 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) "Company Material Adverse Effect" means a Material Adverse Effect
with respect to the Company, its subsidiaries and its affiliated entities, taken
as a whole;
(c) "CONTROL" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise;
(d) "KNOWLEDGE" or "KNOWN" means, with respect to the matter in
question the actual knowledge of such matter of: (i) in the case of Parent or
Merger Sub the persons listed on EXHIBIT F hereto; and (ii) in the case of the
Company, the persons listed on EXHIBIT G hereto.
(e) "lien" means any encumbrance, hypothecation, infringement, lien,
mortgage, pledge, restriction, security interest, title retention or other
security arrangement, or any adverse right or interest, charge or claim of any
nature whatsoever of, on, or with respect to any asset, property or property
interest; PROVIDED, HOWEVER, that the term "lien" shall not include (i) liens
for water and sewer charges and current taxes not yet due and payable without
penalty or being contested in good faith, (ii) mechanics', carriers', workers',
repairers', materialmen's, warehousemen's and other similar liens arising or
incurred in the ordinary course of business or (iii) all liens approved in
writing by the other party hereto;
(f) "MATERIAL ADVERSE EFFECT" means, when used in connection with an
entity, any change, event, violation, inaccuracy, circumstance or effect that is
or would reasonably be expected to be materially adverse to the business, assets
(including intangible assets), capitalization, financial condition, results of
operations or prospects of such entity, its parent (if applicable), subsidiaries
and affiliated entities taken as a whole. For purposes of clarity, it is agreed
that (i) information expressly set forth in the Company Disclosure Schedule or
the Parent Disclosure Schedule or (ii) events or circumstances affecting the
home construction industry generally, unless such events or circumstances
65
disproportionately affect such entity or such entity's market as compared to
other participants in such industry, shall not form the basis of a Material
Adverse Effect. However, changes in the trading price of Parent Common Stock as
reported by the NYSE shall not alone constitute a Material Adverse Effect,
whether occurring at any time or from time to time.
(g) "Parent Material Adverse Effect" means a Material Adverse Effect
with respect to Parent; its subsidiaries and its affiliated entities, taken as a
whole;
(h) "PERSON" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, other entity
or group (as defined in Section 13(d)(3) of the Exchange Act); (i) a
"SUBSIDIARY" of any person means another person, an amount of the voting
securities, 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 interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person;
and
(j) "TRADING DAY" means any day on which the NYSE is open for the
trading of securities.
SECTION 9.4 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.5 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.6 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letter), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof.
SECTION 9.7 ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise.
66
SECTION 9.8 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than Section 6.8 (which is intended to be for the benefit of the Indemnified
Parties and may be enforced by such Indemnified Parties).
SECTION 9.9 FAILURE AND INDULGENCE NOT WAIVERS; REMEDIES NOT EXCLUSIVE.
No failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available, except as otherwise provided herein.
SECTION 9.10 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware.
SECTION 9.11 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
67
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
BEAZER HOMES USA, INC.
By: /s/▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
BEAZER HOMES INVESTMENT CORP.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
CROSSMANN COMMUNITIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER