EXHIBIT 10.11
AGREEMENT AND PLAN OF ORGANIZATION
dated as of the 10th day of September, 1997
by and among
HOMEUSA, INC.
WILLMAX HOMES OF COLORADO LLC
and
the Owners named herein
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TABLE OF CONTENTS
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Page
RECITALS.....................................................................1
1. THE EXCHANGE...........................................................5
1.1 The Exchange.....................................................5
1.2 Certain Information With Respect to the Company and Home.........5
2. MANNER OF EXCHANGE.....................................................5
2.1 Manner of Exhange................................................5
3. DELIVERY OF EXCHANGE CONSIDERATION.....................................6
4. CLOSING................................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE OWNERS.........................................................7
(A) Representations and Warranties of the Company and the Owners.7
5.1 Due Organization.................................................7
5.2 Authorization....................................................7
5.3 Equity Interest in theCompany....................................8
5.4 Transactions in Equity Interests; Organization Accounting........8
5.5 No Bonus.........................................................8
5.6 Subsidiaries.....................................................8
5.7 Predecessor Status; etc..........................................8
5.8 Spin-off by the Company..........................................9
5.9 Financial Statements.............................................9
5.10 Liabilities and Obligations......................................9
5.11 Accounts and Notes Receivable....................................9
5.12 Permits and Intangibles.........................................10
5.13 Environmental Matters...........................................10
5.14 Personal Property...............................................11
5.15 Significant Customers; Material Contracts and Commitments.......11
5.16 Real Property...................................................12
5.17 Insurance.......................................................12
5.18 Compensation; Employment Agreements; Organized Labor Matters....13
5.19 Employee Plans..................................................13
5.20 Compliance with ERISA...........................................14
5.21 Conformity with Law; Litigation.................................15
5.22 Taxes...........................................................15
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5.23 No Violations; No Consents Required, Etc.......................16
5.24 Government Contracts............................................16
5.25 Absence of Changes..............................................16
5.26 Deposit Accounts; Powers of Attorney............................18
5.27 Validity of Obligations.........................................18
5.28 Relations with Governments......................................18
5.29 Disclosure......................................................18
5.30 Prohibited Activities...........................................19
5.31 Dealer Agreements and Related Matters...........................19
5.32 No Retail Financing.............................................20
5.33 No Warranties or Insurance......................................20
5.34 No Interests In Other Businesses................................20
(B) Representations and Warranties of Owners............21
5.35 Authority; Ownership............................................21
5.36 Preemptive Rights...............................................21
5.37 No Intention to Dispose of Home Stock...........................21
6. REPRESENTATIONS OF HOME...............................................21
6.1 Due Organization................................................21
6.2 Authorization...................................................22
6.3 Capital Stock of Home...........................................22
6.4 Transactions in Capital Stock, Organization Accounting..........22
6.5 Subsidiaries....................................................22
6.6 Financial Statements............................................22
6.7 Liabilities and Obligations.....................................23
6.8 Conformity with Law; Litigation.................................23
6.9 No Violations...................................................23
6.10 Validity of Obligations.........................................24
6.11 Home Stock......................................................24
6.12 No Side Agreements..............................................24
6.13 Business; Real Property; Material Agreements....................24
6.14 Taxes...........................................................24
6.15 Absence of Changes..............................................25
6.16 Disclosure......................................................26
6.17 Private Offering................................................26
7. COVENANTS PRIOR TO CLOSING............................................26
7.1 Access and Cooperation; Due Diligence...........................26
7.2 Conduct of Business Pending Closing.............................27
7.3 Prohibited Activities...........................................27
7.4 No Shop.........................................................29
7.5 Notice to Bargaining Agents.....................................29
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7.6 Agreements......................................................29
7.7 Notification of Certain Matters.................................29
7.8 Amendment of Schedules..........................................30
7.9 Cooperation in Preparation of Registration Statement............31
7.10 Final Financial Statements......................................31
7.11 Further Assurances..............................................31
7.12 Authorized Capital..............................................31
7.13 Compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976 (the "▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act")..........31
7.14 Stockholders of Home...........................................32
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF OWNERS
AND COMPANY...........................................................32
8.1 Representations and Warranties; Performance of Obligations......32
8.2 Satisfaction....................................................33
8.3 No Litigation...................................................33
8.4 Opinion of Counsel..............................................33
8.5 Registration Statement..........................................33
8.6 Consents and Approvals..........................................33
8.7 Good Standing Certificates......................................33
8.8 No Material Adverse Change......................................33
8.9 Closing of IPO..................................................34
8.10 Secretary's Certificate.........................................34
8.11 Employment Agreements...........................................34
8.12 Tax Matters.....................................................34
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF HOME...........................34
9.1 Representations and Warranties; Performance of Obligations......34
9.2 No Litigation...................................................35
9.3 Secretary's Certificate.........................................35
9.4 No Material Adverse Effect......................................35
9.5 Owners' Release.................................................35
9.6 Satisfaction....................................................35
9.7 Termination of Related Party Agreements.........................35
9.8 Opinion of Counsel..............................................36
9.9 Consents and Approvals..........................................36
9.10 Good Standing Certificates......................................36
9.11 Registration Statement..........................................36
9.12 Employment Agreements...........................................36
9.13 Closing of IPO..................................................36
9.14 FIRPTA Certificate..............................................36
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10. COVENANTS OF HOME AND THE OWNERS AFTER CLOSING........................36
10.1 Release From Guarantees; Repayment of Certain Obligations.......36
10.2 Preservation of Tax and Accounting Treatment....................37
10.3 Preparation and Filing of Tax Returns...........................37
10.4 Directors.......................................................38
11. INDEMNIFICATION.......................................................38
11.1 General Indemnification by the Owners...........................38
11.2 Indemnification by Home.........................................39
11.3 Third Person Claims.............................................39
11.4 Exclusive Remedy................................................41
11.5 Limitations on Indemnification..................................41
12. TERMINATION OF AGREEMENT..............................................41
12.1 Termination.....................................................41
12.2 Liabilities in Event of Termination.............................42
13. NONCOMPETITION........................................................42
13.1 Prohibited Activities...........................................42
13.2 Damages.........................................................43
13.3 Reasonable Restraint............................................43
13.4 Severability; Reformation.......................................44
13.5 Independent Covenant............................................44
13.6 Materiality.....................................................44
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................44
14.1 Owners..........................................................44
14.2 Home............................................................45
14.3 Damages.........................................................45
14.4 Survival........................................................46
15. TRANSFER RESTRICTIONS.................................................46
15.1 Transfer Restrictions...........................................46
16. FEDERAL SECURITIES ACT REPRESENTATIONS................................46
16.1 Compliance with Law.............................................46
16.2 Economic Risk; Sophistication...................................47
17. REGISTRATION RIGHTS...................................................47
17.1 Piggyback Registration Rights...................................47
17.2 Demand Registration Rights......................................48
17.3 Registration Procedures.........................................49
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17.4 Indemnification.................................................50
17.5 Underwriting Agreement..........................................51
17.6 Rule 144 Reporting..............................................51
18. GENERAL...............................................................51
18.1 Cooperation.....................................................51
18.2 Successors and Assigns..........................................52
18.3 Entire Agreement................................................52
18.4 Counterparts....................................................52
18.5 Brokers and Agents..............................................52
18.6 Expenses........................................................52
18.7 Notices.........................................................53
18.8 Governing Law...................................................54
18.9 Survival of Representations and Warranties......................54
18.10 Exercise of Rights and Remedies.................................54
18.11 Time............................................................54
18.12 Reformation and Severability....................................54
18.13 Remedies Cumulative.............................................54
18.14 Captions........................................................54
18.15 Amendments and Waivers..........................................55
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ANNEXES
Annex I - Consideration to Be Paid to Owners
Annex II - Owners of the Company
Annex III - Certificate of Incorporation and By-Laws of Home
Annex IV - Not Applicable
Annex V - Form of Opinion of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P.
Annex VI - Form of Opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
Annex VII - Form of Key Employee Employment Agreement
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SCHEDULES
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock, Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Permits and Intangibles
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Organized Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes 5.23 No Violations, Consents, etc.
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.28 Relations with Governments
5.30 Prohibited Activities
5.31 Dealer Agreements
5.32 No Retail Financing
5.33 No Warranties or Insurance
5.34 No Interests in Other Businesses
5.35 Authority; Ownership
6.9 No Violations
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Notice to Bargaining Agents
9.12 Employment Agreements
10.1 Guaranties
13.1 Lots Excluded from Noncompete
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
the 10th day of September, 1997, by and among HomeUSA, Inc., a Delaware
corporation ("Home"), Willmax Homes of Colorado L.L.C., a Colorado limited
liability company (the "Company"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇▇ (the "Owners"). The Owners are all the equity owners of the
Company.
RECITALS
WHEREAS, the Owners desire to exchange all of the outstanding equity
interest in the Company for shares of Home Stock (as defined below) and
cash as described herein;
WHEREAS, Home is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements"), each of
which is entitled "Agreement and Plan of Organization," with each of the
Other Founding Companies (as defined herein) and their respective
stockholders in order to acquire additional retail manufactured housing
companies;
WHEREAS, this Agreement and the Other Agreements constitute the
"Home Plan of Organization;"
WHEREAS, the Owners and the Boards of Directors and the stockholders
of Home, each of the Other Founding Companies and each of the subsidiaries
of Home that are parties to the Other Agreements have approved and adopted
the Home Plan of Organization as an integrated plan pursuant to which the
Owners and the stockholders of each of the other Founding Companies will
transfer the capital stock of each of the Founding Companies to Home and
the stockholders of each of the other Founding Companies will acquire the
stock of Home (but not cash or other property) as a tax-free transfer of
property under Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Owners have approved this
Agreement (which is subject to the terms and conditions herein set forth),
as part of the Home Plan of Organization in order to transfer all of the
equity interest in the Company to Home;
WHEREAS, unless the context otherwise requires, capitalized terms
used in this Agreement or in any schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of
this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
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"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the Company, any subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean each of the Delaware companies
wholly-owned by Home prior to the Funding and Consummation Date.
"Affiliates" means, with respect to any Person, any Person or entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Balance Sheet Date" shall mean June 30, 1997.
"Board of Directors" means the managers or other persons performing the
management role most analogous to that of a board of directors of a corporation.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in Section 2.1.
"Draft Registration Statement" means the draft dated September 5, 1997 of
the Registration Statement, and any corrections thereto and supplemental
information delivered by Home to the Company for delivery to the Owners prior to
the time this Agreement is delivered to Home.
"Effective Time of the Exchange" shall mean the time as of which the
Exchange becomes effective, which shall occur on the Funding and Consummation
Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" means:
▇▇▇▇▇▇'▇ Mobile Homes, Inc., a Washington corporation, Home USA,
Inc., a Washington corporation, and Pac West Mgmt., Inc., a Washington
corporation.
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CSF&T, Inc. (dba AAA Homes), a Mississippi corporation, AAA Homes,
L.L.C., a Louisiana limited liability company, and Fordham Insurance
Agency, Inc., a Mississippi corporation.
First American Homes, Inc., an Alabama corporation, D & S, Inc., an
Alabama corporation, and Son Development Corporation, an Alabama
corporation.
Home Folks Housing Center, Inc., a Kentucky corporation.
▇▇▇▇▇▇▇▇ Homes, Inc., an Oklahoma corporation.
Mobile World, Inc., a Texas corporation, and Showcase of Homes,
Inc., a Texas corporation.
▇▇▇▇▇▇▇ Home Center, Inc., a Mississippi corporation.
Universal Housing, Inc., a Tennessee corporation, ▇▇▇▇▇▇▇ & ▇▇▇▇
Insurance Agency, Inc., a Tennessee corporation, and Universal Housing of
East TN, Inc., a Tennessee corporation.
Willmax Homes of Colorado LLC, a Colorado limited liability company.
"Funding and Consummation Date" has the meaning set forth in Section 4.
"IPO" means the initial public offering of Home Stock pursuant to the
Registration Statement described herein.
"Knowledge of the Company" means the actual knowledge of the executive
officers of the Company.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Home" has the meaning set forth in the first paragraph of this Agreement.
"Home Charter Documents" has the meaning set forth in Section 6.1.
"Home Stock" means the common stock, par value $.01 per share, of Home.
"Other Founding Companies" means all of the Founding Companies other than
the Company.
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"Person" means an individual or a corporation, limited partnership,
general partnership, limited liability company, trust, unincorporated
association, joint venture, association, or government or any agency,
instrumentality, or political subdivision thereof, or other entity.
"Pricing" means the date of determination by Home and the Underwriters of
the public offering price of the shares of Home Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement on Form
S-1 to be filed with the SEC covering the shares of Home Stock to be issued in
the IPO and all amendments thereto.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto (as the same may from time
to time be amended), which shall reference the relevant sections of this
Agreement, on which parties hereto disclose information as part of their
respective representations, warranties and covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Organization" means the State of Colorado.
"Owners" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiary" means, as to any Person, any corporation or entity, 50% or
more of the shares of voting stock (or in the case of an entity which is not a
corporation, 50% or more of the equity interests that provide the power to
manage or direct the management of such entity) of which is at the time any
determination is being made, owned, directly or indirectly, by such Person and
its wholly owned Subsidiaries.
"Surviving Corporation" shall mean the Company as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, excise, property, deed, stamp, alternative
or add on minimum, or other taxes, assessments, duties, fees, levies or other
governmental charges, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
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"Underwriters" means the prospective underwriters identified in the Draft
Registration Statement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE EXCHANGE
1.1 THE EXCHANGE. At the Closing, the parties shall execute and deliver to
one another such amendments to the governing documents of the Company and other
agreements and instruments as may be appropriate to effect the exchange of the
membership interests in the Company for the consideration to be received by the
Owners pursuant hereto.
1.2 CERTAIN INFORMATION WITH RESPECT TO THE COMPANY AND HOME. The
respective equity interests or designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock, as applicable, of
the Company and Home as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the Owners are the only
members of the Company and are the only holders of the entire equity
interest in the Company, all as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date and the Funding and
Consummation Date, except for changes permitted by Section 7.12 hereof,
the authorized capital stock of Home will consist of 50,000,000 shares of
Home Stock, of which the number of issued and outstanding shares will be
set forth in the Registration Statement, 5,000,000 shares of preferred
stock, $.01 par value, of which no shares will be issued and outstanding,
and 5,000,000 shares of Restricted Voting Common Stock, $.01 par value
(the "Restricted Common Stock"), all of which will be issued and
outstanding except as otherwise set forth in the Registration Statement.
2. MANNER OF EXCHANGE
2.1 MANNER OF EXHANGE. The manner of exchanging the outstanding equity
interest in the Company ("Company Interests") for shares of Home Stock and cash
shall be as follows. As of the Effective Time of the Exchange, the Owners shall
deliver to Home such amendments to the governing documents of the Company and
other agreements and instruments as may be appropriate to effect the exchange of
all of the membership interests in the Company for (1) the right to receive the
number of shares of Home Stock set forth on Annex I hereto (adjusted as set
forth on such Annex
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I) with respect to such Owner and (2) the right to receive the amount of cash
set forth on Annex I hereto with respect to such Owner (adjusted as set forth on
such Annex I);
All Home Stock received by the Owners pursuant to this Agreement shall,
except for restrictions on resale or transfer described in Sections 15 and 16
hereof, have the same rights as all the other shares of outstanding Home Stock
by reason of the provisions of the Certificate of Incorporation of Home or as
otherwise provided by the Delaware GCL. All Home Stock received by the Owners
shall be issued and delivered to the Owners free and clear of any liens, claims
or encumbrances of any kind or nature. All voting rights of such Home Stock
received by the Owners shall be fully exercisable by the Owners and the Owners
shall not be deprived nor restricted in exercising those rights. At the
Effective Time of the Exchange, Home shall have no class of capital stock issued
and outstanding other than the Home Stock and the Restricted Voting Common
Stock.
3. DELIVERY OF EXCHANGE CONSIDERATION
3.1 On the Funding and Consummation Date the Owners, who are the holders
of all of the outstanding equity interest in the Company, shall, upon their
execution and delivery of appropriate instruments of transfer of their
membership interests, receive the respective number of shares of Home Stock and
the amount of cash described on Annex I hereto, said cash to be payable by
certified check or wire transfer.
3.2 The Owners shall deliver to Home at the Closing an amendment of the
Company's Regulations or other governing documents effective to transfer all of
the equity interest in the Company to Home at the Closing. The Owners agree
promptly to cure any deficiencies with respect to the assignment and admission
of Home as the equity owner of the Company as contemplated hereby.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary
to prepare to (i) effect the Exchange and (ii) effect the delivery of shares
referred to in Section 3 hereof; provided, that such actions shall not include
the actual completion of the Exchange or the delivery of the shares and
certified check(s) referred to in Section 3 hereof, each of which actions shall
only be taken upon the Funding and Consummation Date as herein provided. In the
event that there is no Funding and Consummation Date and this Agreement
automatically terminates as provided in this Section 4 the Exchange shall not be
consummated. The taking of the actions described in clauses (i) and (ii) above
(the "Closing") shall take place on the closing date (the "Closing Date") at the
offices of Bracewell & ▇▇▇▇▇▇▇▇▇, L.L.P., South Tower Pennzoil Place, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. On the Funding and Consummation
Date (x) all transactions contemplated by this Agreement, including the delivery
of shares, the delivery of a certified check or checks in an amount equal to the
cash portion of the consideration which the Owners shall be entitled to receive
and (y) the closing
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with respect to the IPO shall occur and be completed. The date on which the
actions described in the preceding clauses (x) and (y) occurs shall be referred
to as the "Funding and Consummation Date." During the period from the Closing
Date to the Funding and Consummation Date, this Agreement may only be terminated
by the parties if the underwriting agreement in respect of the IPO is terminated
pursuant to the terms of such underwriting agreement. This Agreement shall also
in any event automatically terminate if the Funding and Consummation Date has
not occurred within 15 business days following the Closing Date. Time is of the
essence.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OWNERS
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OWNERS.
Each of the Company and the Owners severally (based on their relative
ownership of the Company Interests on the date hereof) represent and warrant
that all of the following representations and warranties in this Section 5(A)
are true at the date of this Agreement and, subject to Section 7.8 hereof, shall
be true at the time of Closing and the Funding and Consummation Date, and that
such representations and warranties shall survive the Funding and Consummation
Date for a period of twelve months (the last day of such period being the
"Expiration Date"), except that the warranties and representations set forth in
Section 5.22 hereof shall survive until such time as the limitations period has
run for all tax periods ended on or prior to the Funding and Consummation Date,
which shall be deemed to be the Expiration Date for Section 5.22. For purposes
of this Section 5, the term "Company" shall mean and refer to the Company and
all of its subsidiaries, if any.
5.1 DUE ORGANIZATION. The Company is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Organization, and has the requisite power and authority to carry on its business
as it is now being conducted. The Company is duly qualified to do business and
is in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification necessary,
except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so
authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the Company taken as a whole (as used herein with respect to the Company, or
with respect to any other Person, a "Material Adverse Effect"). Schedule 5.1
sets forth a list of all jurisdictions in which the Company is authorized or
qualified to do business. True, complete and correct copies of (i) the Company's
governing documents (the "Charter Documents"), and (ii) the membership records
of the Company, are all attached to Schedule 5.1. The Company has delivered
complete and correct copies of all minutes of meetings, written consents and
other evidence, if any, of deliberations of or actions taken by the Company's
Board of Directors and members during the last five years.
5.2 AUTHORIZATION. (i) The representatives of the Company executing this
Agreement have the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the
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Company has the full legal right, power and authority to enter into this
Agreement. The most recent resolutions adopted by the Board of Directors of the
Company and the most recent resolutions adopted by the Owners approve this
Agreement and the transactions contemplated hereby in all respects, and copies
of all such resolutions, certified by the Secretary or an Assistant Secretary of
the Company as being in full force and effect on the date hereof, are attached
hereto as Schedule 5.2.
5.3 EQUITY INTEREST IN THECOMPANY. The outstanding equity interest of the
Company is owned solely by the Owners as set forth on Schedule 5.3 and were
offered, issued, sold and delivered by the Company in compliance with all
applicable state and Federal laws concerning the issuance of securities.
Further, none of such interests were issued in violation of any preemptive
rights of any Person.
5.4 TRANSACTIONS IN EQUITY INTERESTS; ORGANIZATION ACCOUNTING. Except as
set forth on Schedule 5.4, the Company has not acquired any Company Interests
since January 1, 1995. Except as set forth on Schedule 5.4, (i) no option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any equity interest; (ii) the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (iii) neither the voting stock structure of
the Company nor the relative ownership of the Company has been altered or
changed in contemplation of the Exchange and/or the Home Plan of Organization.
5.5 NO BONUS. Except as set forth on Schedule 5.5, none of the Company
Interests was issued pursuant to awards, grants or bonuses in contemplation of
the Exchange or the Home Plan of Organization.
5.6 SUBSIDIARIES. Except as set forth on Schedule 5.6, the Company has no
Subsidiaries. Except as set forth in Schedule 5.6, the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is the Company,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the Company, including the names of any
entities acquired by the Company (by stock purchase, merger or otherwise) or
owned by the Company or from whom the Company previously acquired material
assets, in any case, from the earliest date upon which any Owner acquired his or
her stock in any Company. Except as disclosed on Schedule 5.7, the Company has
not been, within such period of time, a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
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5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any Affiliate since January 1, 1995.
5.9 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached hereto as Schedule 5.9:
(i) the balance sheet of the Company as of December 31, 1996 and the
related statements of operations, stockholder's equity and cash flows for
the year ended December 31, 1996, together with the related notes and
schedules (such balance sheet, the related statements of operations,
stockholder's equity and cash flows and the related notes and schedules
are referred to herein as the "Year-end Financial Statements"); and
(ii) the balance sheet (the "Interim Balance Sheet") of the Company
as of June 30, 1997 (the "Balance Sheet Date") and the related statements
of operations, stockholder's equity and cash flows for the six-month
periods ended June 30, 1997 and 1996, together with the related notes and
schedules (such balance sheets, the related statements of operations,
stockholder's equity and cash flows and the related notes and schedules
are referred to herein as the "Interim Financial Statements"). The
Year-end Financial Statements and the Interim Financial Statements are
collectively called the "Financial Statements".
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10 sets forth an accurate
list as of the Balance Sheet Date of (i) all liabilities of the Company of a
nature that they are required in accordance with GAAP to be reflected on a
balance sheet and which are not reflected on the balance sheet of the Company at
the Balance Sheet Date or otherwise reflected in the Company Financial
Statements at the Balance Sheet Date and which are not disclosed on any of the
other Schedules to this Agreement, and (ii) all loan agreements, indemnity or
guaranty agreements, bonds, mortgages, pledges and material security agreements
to which the Company is a party or by which its properties may be bound. To the
best knowledge of the Company and the Owners, except as set forth on Schedule
5.10, since the Balance Sheet Date the Company has not incurred any material
liabilities of any kind, character or description, whether accrued, absolute,
secured or unsecured, contingent or otherwise, other than liabilities incurred
in the ordinary course of business. The Company has also delivered to Home on
Schedule 5.10, in the case of those contingent liabilities related to pending or
threatened litigation, or other liabilities which are not fixed, a good faith
and reasonable estimate of the maximum amount which the Company reasonably
expects will be payable and the amount, if any, accrued or reserved for each
such potential liability on the Company's Financial Statements; in the case of
any such liability for which no estimate has been provided, the estimate for
purposes of this Agreement shall be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the Balance
Sheet Date, including any such amounts which are not reflected in the balance
sheet as of the Balance Sheet Date, and including
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receivables from and advances to employees and the Owners, which are identified
as such. Except to the extent reflected on Schedule 5.11, such accounts, notes
and other receivables are collectible in the amounts shown on Schedule 5.11, net
of reserves reflected in the balance sheet as of the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations ("Licenses") the absence of any of
which could have a Material Adverse Effect on the Company's business, and the
Company has delivered to Home an accurate list and summary description (which is
set forth on Schedule 5.12) of all such Licenses, including any trademarks,
trade names, patents, patent applications and copyrights owned or held by the
Company or any of its employees (including interests in software or other
technology systems, programs and intellectual property) (it being understood and
agreed that a list of environmental permits and other environmental approvals is
set forth on Schedule 5.13). At or prior to the Closing, all such trademarks,
trade names, patents, patent applications, copyrights and other intellectual
property will be assigned or licensed to the Company for no additional
consideration. To the best knowledge of the Company, the Licenses and other
rights listed on Schedules 5.12 and 5.13 are valid, and the Company has not
received any notice that any person intends to cancel, terminate or not renew
any such License or other right. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the Licenses and other rights listed on Schedules 5.12 and 5.13 and
is not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect on the Company. Except as
specifically provided in Schedule 5.12, the transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the Company by, any such
Licenses or other rights.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, and
except where any failure to comply, either singly or in the aggregate, has not
had and will not have any Material Adverse Effect on the Company or its
business, (i) the Company has complied with and is in compliance with all
Federal, state, local and foreign statutes (civil and criminal), laws,
ordinances, regulations, rules, notices, permits, judgments, orders and decrees
applicable to any of them or any of their respective properties, assets,
operations and businesses relating to environmental protection (collectively
"Environmental Laws") including, without limitation, Environmental Laws relating
to air, water, land and the generation, storage, use, handling, transportation,
treatment or disposal of Hazardous Wastes, Hazardous Materials and Hazardous
Substances (as such terms are defined in any applicable Environmental Law), as
well as petroleum and petroleum products (collectively "Hazardous Materials"),
(ii) the Company has obtained and adhered to all necessary permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Materials, a list of all of which permits and approvals is set forth
on Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the Company where Hazardous Materials have been treated, stored,
disposed of or otherwise handled. There have been no releases or threats of
releases (as these terms are defined in Environmental Laws) of any Hazardous
Materials at, from, in or on any property
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owned or operated by the Company except as permitted by Environmental Laws, and
to the best knowledge of the Company and the Owners, there is no on-site or
off-site location to which the Company has transported or disposed of Hazardous
Materials or arranged for the transportation of Hazardous Materials which is the
subject of any Federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the Company or Home for any
clean-up cost, remedial work, damage to natural resources, property damage or
personal injury, including, but not limited to, any claim under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Resource Conservation and Recovery Act, the Hazardous Materials
Transportation Act or comparable state or local statutes or regulations. The
Company has no contingent liability in connection with any release of any
Hazardous Materials into the environment that would have a Material Adverse
Effect.
5.14 PERSONAL PROPERTY. The Company has delivered to Home an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property material to
the operations of the Company included in "plant, property and equipment" on the
balance sheet of the Company, (y) all other personal property owned by the
Company with an individual value in excess of $25,000 (i) as of the Balance
Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all material
leases and agreements in respect of personal property, including, in the case of
each of (x), (y) and (z), (1) true, complete and correct copies of all such
leases and (2) an indication as to which assets are currently owned, or were
formerly owned, by Owners, relatives of Owners, or Affiliates of the Company.
Except as set forth on Schedule 5.14, (i) all material personal property used by
the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 5.14, (ii) all of the personal
property listed on Schedule 5.14 is in good working order and condition,
ordinary wear and tear excepted and (iii) all leases and agreements included on
Schedule 5.14 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. The
Company has delivered to Home an accurate list (which is set forth on Schedule
5.15) of all customers (persons or entities) representing 5% or more of the
Company's annual revenues for any period covered by any of the Financial
Statements. Except to the extent set forth on Schedule 5.15, none of such
customers have canceled or substantially reduced or, to the knowledge of the
Company, are currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by the Company.
The Company has listed on Schedule 5.15 all Material Contracts (as defined
below) to which the Company is a party or by which it or any of its properties
are bound, other than agreements listed on Schedules 5.10, 5.14 or 5.16, (a) in
existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to Home. For purposes of this Section 5.17, Material Contracts
includes contracts between the Company and significant customers, joint venture
or partnership agreements, contracts with any labor organization, strategic
alliances, options to purchase land and other contracts which
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are not terminable on sixty days or less notice and involve payments by the
Company in any twelve month period in excess of $25,000. The Company has also
indicated on Schedule 5.15 a summary description of all plans or projects
involving the opening of new operations, expansion of existing operations, the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the Company during any 12-month
period.
5.16 REAL PROPERTY. Schedule 5.16 includes a list of all real property
owned or leased by the Company at the date hereof and all other real property,
if any, used by the Company in the conduct of its business. Except as set forth
on Schedule 5.16, any such real property owned by the Company will be sold or
distributed by the Company on terms reasonably acceptable to Home and leased
back by the Company on terms no less favorable to the Company than those
available from an unaffiliated party and otherwise reasonably acceptable to Home
at or prior to the Closing Date. The Company has good and insurable title to any
real property owned by it that is not shown on Schedule 5.16 as property
intended to be sold or distributed prior to the Closing Date, subject to no
mortgage, pledge, lien, conditional sales agreement, encumbrance or charge,
except for:
(i) liens reflected on Schedules 5.10 or 5.16 as securing specified
liabilities (with respect to which no material default exists);
(ii) liens for current taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title which do not adversely affect the current use of the property.
True, complete and correct copies of all leases and agreements in respect
of such real property leased by the Company are attached to Schedule 5.16, and
an indication as to which such properties, if any, are currently owned, or were
formerly owned, by Owners or affiliates of the Company or Owners is included in
Schedule 5.16. Except as set forth on Schedule 5.16, all of such leases included
on Schedule 5.16 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms.
5.17 INSURANCE. The Company has delivered to Home (i) an accurate list as
of the Balance Sheet Date of all insurance policies carried by the Company, (ii)
an accurate list of all insurance loss runs or workers compensation claims
received for the past three policy years and (iii) true, complete and correct
copies of all insurance policies currently in effect. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and to the best knowledge of the Company provide adequate coverage against the
risks involved in the Company's business. All of such insurance policies are
currently in full force and effect and shall, to the best knowledge of the
Company, remain in full force and effect through the Funding and Consummation
Date. Since January 1, 1995,
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no insurance carried by the Company has been canceled by the insurer and the
Company has not been denied coverage.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
Company has delivered to Home an accurate list (which is set forth on Schedule
5.18) showing all officers, directors and key employees of the Company, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons as of (i) the
Balance Sheet Date and (ii) the date hereof. The Company has provided to Home
true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.18. Since the Balance Sheet Date, there have been no
material increases in the compensation payable or any special bonuses to any
officer, director, key employee or other employee, except ordinary salary
increases implemented and bonuses paid on a basis consistent with past
practices.
Except as set forth on Schedule 5.18, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the best knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened labor dispute involving the
Company and any group of its employees nor has the Company experienced any labor
interruptions over the past three years. The Company believes its relationship
with employees to be good.
5.19 EMPLOYEE PLANS. The Owners have delivered to Home an accurate
schedule (Schedule 5.19) (the "Benefit Plans Schedule") showing all employee
benefit plans of the Company, including all employment agreements and other
agreements or arrangements containing "golden parachute" or other similar
provisions, and deferred compensation agreements, together with true, complete
and correct copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on the Benefit Plans
Schedule, the Company does not sponsor, maintain or contribute to any plan
program, fund or arrangement that constitutes an "employee pension benefit
plan", and the Company has no obligation to contribute to or accrue or pay any
benefits under any deferred compensation or retirement funding arrangement on
behalf of any employee or employees (such as, for example, and without
limitation, any individual retirement account or annuity, any "excess benefit
plan" (within the meaning of Section 3(36) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans set forth
on the Benefit Plans Schedule, and the Company is not required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
Company's or any subsidiary's employees.
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Except as set forth on the Benefit Plans Schedule, the Company is not now,
or will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on the Benefit Plans Schedule and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company with respect to any
plan listed on the Benefit Plans Schedule have either been fulfilled in their
entirety or are fully reflected on the balance sheet of the Company as of the
Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on the Benefit Plans Schedule
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code are, and have been so qualified and have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
attached to the Benefit Plans Schedule. Except as disclosed on the Benefit Plans
Schedule, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, actuarial reports, audits or tax returns) have
been timely filed or distributed, and copies thereof are included as part of the
Benefit Plans Schedule. Neither Owners, any such plan listed in the Benefit
Plans Schedule, nor the Company has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No such Plan
listed in the Benefit Plans Schedule has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and the Company has not incurred any liability for excise tax or penalty
due to the Internal Revenue Service nor any liability to the Pension Benefit
Guaranty Corporation. The Owners further represent that except as set forth on
the Benefit Plans Schedule hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no plan listed in the Benefit Plans Schedule subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed in
the Benefit Plans Schedule;
(iv) the Company has not incurred liability under Section 4062 of
ERISA; and
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(v) no circumstances exist pursuant to which the Company could have
any direct or indirect liability whatsoever (including, but not limited
to, any liability to any multiemployer plan or the PBGC under Title IV of
ERISA or to the Internal Revenue Service for any excise tax or penalty, or
being subject to any statutory lien to secure payment of any such
liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the Company that is, or at any
time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes the Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or 5.13, and except for violations which, either singly or in the
aggregate, have not had and will not have any Material Adverse Effect, the
Company is not in violation of any law or regulation or any order of any court
or Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it; and except
to the extent set forth on Schedule 5.10 or 5.13, there are no material claims,
actions, suits or proceedings, pending or, to the knowledge of the Company,
threatened against or affecting, the Company, at law or in equity, or before or
by any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over any of them
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received by the Company, and, to the Knowledge of the
Company and the Owners, there is no basis for any such claim, action, suit or
proceeding. The Company has conducted and is now conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable Federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations, including without limitation to the extent
applicable all regulations promulgated by the Department of Housing and Urban
Development under the National Manufactured Housing Construction and Safety
Standards Act, as amended, or otherwise, and all laws and regulations affecting
the sale of manufactured housing, on credit or otherwise, including the Federal
Consumer Credit Protection Act, the Federal Fair Credit Reporting Act, the
Federal Equal Credit Opportunity Act, the Consumer Credit Protection Act, the
Fair Debt Collection Practices Act and the regulations promulgated under the
foregoing, and all state and local laws and regulations of similar effect, and
including all such orders and other governmental approvals set forth on
Schedules 5.12 and 5.13, except where any such noncompliance, individually or in
the aggregate, would not have a Material Adverse Effect.
5.22 TAXES. The Company has timely filed all requisite Federal, state and
other tax returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 5.22, there
are no examinations in progress or claims pending against any of them for
federal, state and other taxes (including penalties and interest) for any period
or periods prior to and including the Balance Sheet Date and no notice of any
claim for taxes, whether pending or threatened, has been received. All tax,
including interest and penalties (whether or not shown on any tax return) owed
by the Company or any of the Company's Subsidiaries has been paid. The amounts
shown as accruals for taxes on the Company Financial Statements are sufficient
for the payment of all taxes of the kinds indicated (including penalties and
interest) for all fiscal periods ended on or before that date. Copies of (i) any
tax examinations, (ii) extensions of statutory
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limitations and (iii) the federal and local income tax returns and franchise tax
returns of the Company for their last three (3) fiscal years, or such shorter
period of time as any of them shall have existed, are attached hereto as
Schedule 5.22 or have otherwise been delivered to Home. The Company has
disclosed to Home when its taxable year ends. The Company uses the accrual
method of accounting for income tax purposes, and the Company's methods of
accounting have not changed in the past five years. The Company is not an
investment Company as defined in Section 351(e)(1) of the Code. The Company is
not and has not during the last five years been a party to any tax sharing
agreement or agreement of similar effect. The Company is not and has not during
the last five years been a member of any consolidated group. Except as described
on Schedule 5.22, the Company has not received, been denied, or applied for any
private letter ruling during the last five years.
The Company is not taxed under the provisions of Subchapter C of the Code.
The Owners shall pay, and they hereby indemnify Home and the Company against,
all income taxes payable for all periods though and including the Closing Date.
5.23 NO VIOLATIONS; NO CONSENTS REQUIRED, ETC. The Company is not in
violation of any Charter Document. Neither the Company nor, to the best
knowledge of the Company, any other party thereto, is in default under any
lease, instrument, agreement, license, or permit set forth on Schedule 5.12,
5.13, 5.14, 5.15 or 5.16, or any other Material Contract (as defined in Section
5.15) to which it is a party or by which its properties are bound (the "Material
Documents") in any manner that could result in a Material Adverse Effect; and,
except as set forth in Schedule 5.23, (a) the rights and benefits of the Company
under the Material Documents will not be materially adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any material violation or
breach or constitute a default under, any of the terms or provisions of the
Material Documents or the Charter Documents. Except as set forth on Schedule
5.23, none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
material right or benefit. Except as set forth on Schedule 5.23, none of the
Material Documents prohibits the use or publication by the Company or Home of
the name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services to
any other customer or potential customer of the Company, Home, or any Other
Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.25 or as otherwise contemplated hereby, there has not been:
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(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the Company;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant by the Company of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company
except for distributions that would have been permitted after the date
hereof under Section 7.3(iii) hereof;
(v) any material increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by the Company
to any of its officers, directors, Owners, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of Company to any person,
including, without limitation, the Owners and their Affiliates;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of any Owners or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
-17-
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(xiii)any transaction by the Company outside the ordinary course of
its business;
(xiv) any cancellation or termination by the Company of a material
contract with a customer or client prior to the scheduled termination
date; or
(xv) any other distribution of property or assets by the Company
other than in the ordinary course of business and other than distributions
of real estate and other assets as permitted by this Agreement (including
the Schedules hereto).
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
Home an accurate schedule (which is set forth on Schedule 5.26) as of the date
of this Agreement of:
(i) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the Company and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the Company and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the Company.
5.28 RELATIONS WITH GOVERNMENTS. Except for legal contributions to
candidates for political office, neither the Company nor any Affiliate of the
Company acting on behalf of the Company has given or offered anything of value
to any governmental official, political party or candidate for government
office, nor has it or any of them otherwise taken any action which would cause
the Company to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended or any law of similar effect.
5.29 DISCLOSURE. (a) This Agreement, including the Annexes and Schedules
hereto, and the completed Director and Officer Questionnaires and the completed
S-1 Questionnaire furnished
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to Home by the Company and the Owners in connection herewith, do not contain an
untrue statement of a material fact or omit to state a material fact necessary
to make the statements herein and therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the foregoing does
not apply to statements contained in or omitted from any of such documents made
or omitted in reliance upon information furnished in writing by Home. If, prior
to the 25th day after the date of the final prospectus of Home utilized in
connection with the IPO, the Company or the Owners become aware of any fact or
circumstance which would affect the accuracy of a representation or warranty of
Company or Owners in this Agreement in any material respect, the Company and the
Owners shall immediately give notice of such fact or circumstance to Home.
Subject to the provisions of Section 7.8, such notification shall not relieve
either the Company or the Owners of their respective obligations under this
Agreement, and, subject to the provisions of Section 7.8, at the sole option of
Home, the truth and accuracy in all material respects of any and all warranties
and representations of the Company, or on behalf of the Company and of Owners at
the date of this Agreement and on the Closing Date and on the Funding and
Consummation Date, shall be a precondition to the consummation of this
transaction.
(b) The Company and the Owners acknowledge and agree (i) that there exists
no firm commitment, binding agreement, or promise or other assurance of any
kind, whether express or implied, oral or written, that a Registration Statement
will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
that neither Home or any of its officers, directors, agents or representatives
nor any Underwriter shall have any liability to the Company, the Owners or any
other person affiliated or associated with the Company for any failure of the
Registration Statement to become effective, the IPO to occur at a particular
price or to occur at all; and (iii) that the decision of Owners to enter into
this Agreement has been or will be made independent of, and without reliance
upon, any statements, opinions or other communications, or due diligence
investigations which have been or will be made or performed by any prospective
Underwriter, relative to Home or the prospective IPO. Notwithstanding the
foregoing, Home has agreed and herein acknowledges its agreement to use its
reasonable efforts to consummate the Home Plan of Organization and IPO as
contemplated hereby.
5.30 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.30, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 7.3.
5.31 DEALER AGREEMENTS AND RELATED MATTERS. Schedule 5.31 sets forth a
complete and accurate list of:
(i) all agreements of any nature (including "Dealer Agreements",
"Home Center Agreements", "Retailer Agreements", "Exclusive Retailer
Agreements", "General Conditions", "Action Plans" and other documents)
between the Company and any dealer, manufacturer, wholesaler or other
distributor (collectively, "Manufacturers") of manufactured housing units
(collectively, "Dealer Agreements"); and
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(ii) all volume incentive, rebate and other similar programs of any
Manufacturer (collectively, "Dealer Programs") in which the Company is now
or has within the last three years been a participant.
Schedule 5.31 identifies the Manufacturer that is a party to each such Dealer
Agreement or that sponsors each such Dealer Program, and also identifies the
Company's sales locations subject to or affected by each such Dealer Agreement
and each such Dealer Program. Complete and accurate copies of all Dealer
Agreements and all Dealer Programs listed on Schedule 5.31 are attached to
Schedule 5.31. Except as set forth on Schedule 5.31, the Company is now and for
the last three years has been in compliance in all material respects with all
applicable provisions of the Dealer Agreements and Dealer Programs identified on
Schedule 5.31 and any similar agreements to which the Company has been a party
during the last three years. To the extent that the Company is required by any
Dealer Agreement or Dealer Program to take or refrain from taking specified
actions in order to qualify for the benefits offered thereby (such as the
benefits of an exclusive retailer agreement), the Company is in compliance in
all material respects with all such requirements (it being understood that the
Company is not hereby representing that it qualifies for the highest level of
incentive discounts or rebates offered by such Dealer Agreements or Dealer
Programs). Except as set forth on Schedule 5.31, within the last three years, no
Manufacturer has asserted any claim or right to any refund of any incentive
payment or rebate or other payment or discount granted to the Company by any
such Manufacturer, or any right to offset any amount against any future payment
due or otherwise due to the Company, and no circumstances exist that would
entitle any Manufacturer to make any such claim against the Company. During the
last three years, the Company has accurately calculated and reported to each
Manufacturer with which the Company has done business all financial and sales
data that the Company is required to report to each such Manufacturer, whether
in connection with volume incentive or rebate plans or otherwise.
5.32 NO RETAIL FINANCING. Except as set forth on Schedule 5.32, the
Company does not finance the sale to the Company's customers of manufactured
housing units or related products or services (collectively, "Product"), and is
not liable, directly or indirectly, contingently or otherwise, to any
Manufacturer or any financing source for all or any portion of the purchase
price of any Product that has been sold by the Company or delivered by the
Company to a retail purchaser.
5.33 NO WARRANTIES OR INSURANCE. Except as set forth on Schedule 5.33, the
Company has not made any express warranties regarding any Products and the
Company does not offer or sell insurance or consumer protection plans or other
arrangements that could result in the Company being required to make any payment
to or perform any service for any person other than routine matters described as
"Retailer Responsibilities", "Retailer General Installation and Home Delivery
Guidelines" and the like in the Dealer Agreements listed on Schedule 5.31.
5.34 NO INTERESTS IN OTHER BUSINESSES. Except as set forth on Schedule
5.34, neither the Company nor any Owner, nor any affiliate of any of them, has
any ownership or similar interest in any business that offers or sells services
or products of any nature whatsoever to the Company or
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to any customers of the Company in connection with or as a direct or indirect
result of the Company's sales of Product.
(B) REPRESENTATIONS AND WARRANTIES OF OWNERS
Each Owner severally represents and warrants that the
representations and warranties set forth below as and to the extent relating to
such Owner are true as of the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Closing and on the Funding and Consummation
Date, and that the representations and warranties set forth in Sections 5.35 and
5.36 shall survive until the first anniversary of the Funding and Consummation
Date, which shall be the Expiration Date for purposes of Sections 5.35 and 5.36.
5.35 AUTHORITY; OWNERSHIP. Such Owner has the full legal right, power and
authority to enter into this Agreement. Such Owner owns beneficially and of
record all of the Company Interests identified on Annex II as being owned by
such Owner free and clear of all liens, security interests, pledges, charges,
voting agreements, voting trusts, restrictions, encumbrances and claims of every
kind.
5.36 PREEMPTIVE RIGHTS. Such Owner does not have, or hereby waives, any
preemptive or other right to acquire any additional interest in the Company.
Nothing herein, however, shall limit or restrict the rights of any Owner to
acquire Home Stock pursuant to (i) this Agreement or (ii) any option granted by
Home.
5.37 NO INTENTION TO DISPOSE OF HOME STOCK. No Owner is under any binding
commitment or contract to sell, exchange or otherwise dispose of shares of Home
Stock received as described in Section 3.1.
6. REPRESENTATIONS OF HOME
Home represents and warrants that all of the following representations and
warranties in this Section 6 are true at the date of this Agreement and, subject
to Section 7.8 hereof, shall be true at the time of Closing and the Funding and
Consummation Date, and that such representations and warranties shall survive
the Funding and Consummation Date for a period of twelve months (the last day of
such period being the "Expiration Date"), except that the warranties and
representations set forth in Section 6.14 hereof shall survive until such time
as the limitations period has run for all tax periods ended on or prior to the
Funding and Consummation Date, which shall be deemed to be the Expiration Date
for Section 6.14.
6.1 DUE ORGANIZATION. Home is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted. Home is qualified to do business and is in good
standing in each jurisdiction in which the nature of its business makes such
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qualification necessary, except where the failure to be so authorized or
qualified would not have a Material Adverse Effect. True, complete and correct
copies of the Certificate of Incorporation and By-laws of Home (the "Home
Charter Documents") are attached hereto as Annex IV.
6.2 AUTHORIZATION. (i) The respective representatives of Home executing
this Agreement have the authority to enter into and bind Home to the terms of
this Agreement and (ii) Home has the full legal right, power and authority to
enter into this Agreement and consummate the Exchange. All corporate acts and
other proceedings required to have been taken by Home to authorize the
execution, delivery and performance of this Agreement and the consummation of
the Exchange have been duly and properly taken.
6.3 CAPITAL STOCK OF HOME. The authorized capital stock of Home is as set
forth in Sections 1.4(ii). All of the issued and outstanding shares of the
capital stock of Home have been duly authorized and validly issued, are fully
paid and nonassessable, and further, such shares were offered, issued, sold and
delivered by Home in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of the preemptive rights of any past or present stockholder of
Home.
6.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except for the
Other Agreements and except as set forth in the Draft Registration Statement,
(i) no option, warrant, call, conversion right or commitment of any kind exists
which obligates Home to issue any of their respective authorized but unissued
capital stock; and (ii) Home has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. Schedule 6.4 also includes complete and accurate copies of all stock
option or stock purchase plans, including a list, accurate as of the date
hereof, of all outstanding options, warrants or other rights to acquire shares
of the stock of Home.
6.5 SUBSIDIARIES. Home has no subsidiaries except for the companies
identified as "Newco" in each of the Other Agreements. Except as set forth in
the preceding sentence, Home does not presently own, of record or beneficially,
or controls, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity, and Home is not, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. The financial statements of Home included in the
Draft Registration Statement (the "Home Financial Statements") have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated (except as noted thereon),
and the balance sheet included therein presents fairly the financial position of
Home as of its date.
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6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Draft
Registration Statement, Home has no material liabilities, contingent or
otherwise, except as set forth in or contemplated by this Agreement and the
Other Agreements and except for fees incurred in connection with the
transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in the
Draft Registration Statement,Home is not in violation of any law or regulation
or any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it which would have a Material Adverse Effect; and except to
the extent set forth in Schedule 6.8, there are no material claims, actions,
suits or proceedings, pending or, to the knowledge of Home, threatened against
or affecting, Home at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. Home has conducted and is conducting its business in substantial
compliance with the requirements, standards, criteria and conditions set forth
in applicable Federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations and is not in violation of
any of the foregoing which would have a Material Adverse Effect.
6.9 NO VIOLATIONS. Home is not in violation of any Home Charter Document.
Neither Home nor, to the knowledge of Home, any other party thereto, is in
default under any lease, instrument, agreement, license, or permit to which Home
is a party, or by which Home or any of its properties, is bound (collectively,
the "Home Documents"); and (a) the rights and benefits of Home under the Home
Documents will not be adversely affected by the transactions contemplated hereby
and (b) the execution and delivery of this Agreement by Home and the performance
of its obligations hereunder do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation or default (with or without notice or lapse of
time, or both), under or give rise to a right of termination, cancellation, or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any lien upon any of the assets of Home under, any provision
of (i) the Certificate of Incorporation or Bylaws of Home, (ii) any note, bond,
mortgage, indenture or deed of trust or any license, lease, contract,
commitment, agreement or arrangement to which Home is a party or by which any of
their respective properties or assets are bound or (iii) any judgment, order,
decree or law, ordinance, rule or regulation, applicable to Home or its
properties or assets. The execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under, any of the terms or provisions of the Home Documents or the Home
Charter Documents. Except as set forth on Schedule 6.9, none of the Home
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect and consummation of the
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
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6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by Home and the performance of the transactions contemplated herein have been
duly and validly authorized by the Board of Directors of Home and this Agreement
has been duly and validly authorized by all necessary corporate action and is a
legal, valid and binding obligation of Home.
6.11 HOME STOCK. At the time of issuance thereof and delivery to the
Owners, the Home Stock to be delivered to the Owners pursuant to this Agreement
will constitute valid and legally issued shares of Home, fully paid and
nonassessable, and with the exception of restrictions upon resale set forth in
Sections 15 and 16 hereof, will be identical in all substantive respects (which
do not include the form of certificate upon which it is printed or the presence
or absence of a CUSIP number on any such certificate) to the Home Stock issued
and outstanding as of the date hereof by reason of the provisions of the
Delaware GCL. The Home Stock issued and delivered to the Owners shall at the
time of such issuance and delivery be free and clear of any liens, claims or
encumbrances of any kind or character. The shares of Home Stock to be issued to
the Owners pursuant to this Agreement will not be registered under the 1933 Act,
except as provided in Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Home has not entered into any agreement with any
of the Founding Companies or any of the stockholders of the Founding Companies
or Home other than the Other Agreements and the agreements contemplated by each
of the Other Agreements, including the employment agreements and leases referred
to herein or entered into in connection with the transactions contemplated
hereby and thereby.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Home was formed in July
1996 and has conducted only limited operations since that time. Home has not
conducted any material business since the date of its inception, except in
connection with this Agreement, the Other Agreements and the IPO. Except as
described in the Draft Registration Statement, Home does not own any real
property or any material personal property and is not a party to any other
agreement other than the Other Agreements and the agreements contemplated
thereby and to such agreements as will be filed as Exhibits to the Registration
Statement.
6.14 TAXES.Home has timely filed all requisite federal, state and other
tax returns or extension requests for all fiscal periods ended on or before the
Balance Sheet Date; and there are no examinations in progress or claims against
Home for federal, state and other taxes (including penalties and interest) for
any period or periods prior to and including the Balance Sheet Date and no
notice of any claim for taxes, whether pending or threatened, has been received.
All taxes which Home has been required to collect or withhold have been duly and
timely collected and withheld and have been set aside in accounts for such
purposes, or have been duly and timely paid to the proper governmental
authority. All tax, including interest and penalties (whether or not shown on
any tax return) owed by Home, any member of an affiliated or consolidated group
which includes or included Home, or with respect to any payment made or deemed
made by Home herein has been paid. The amounts shown as accruals for taxes on
Home Financial Statements are sufficient for the payment of all taxes of the
kinds indicated (including penalties and interest) for all fiscal periods
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ended on or before that date. Home has not entered into any tax sharing
agreement or similar arrangement. Home is not an investment company as defined
in Section 351(e)(1) of the Code.
6.15 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
in the Draft Registration Statement delivered to the Owners, and except as
contemplated by this Agreement and the Other Agreements, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of Home;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
Home;
(iii) any change in the authorized capital of Home or any grant of
any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of Home;
(v) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of Home;
(vi) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of Home to any person;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to Home;
(viii)any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of Home or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(ix) any waiver of any material rights or claims of Home;
(x) any amendment or termination of any material contract,
agreement, license, permit or other right to which Home is a party;
(xi) any transaction by Home outside the ordinary course of its
business;
(xii) any other distribution of property or assets by Home other
than in the ordinary course of business.
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6.16 DISCLOSURE. The Draft Registration Statement delivered to the Company
and the Owners, together with this Agreement and the information furnished to
the Company and the Owners in connection herewith, does not contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon information furnished by the Company or the Owners.
6.17 PRIVATE OFFERING. (a) Neither Home, any of its Affiliates nor anyone
on its or their behalf, has issued, sold, or offered any securities of Home to
any person under circumstances that would cause the issuance and sale of the
Home Stock to the Owners pursuant to this Agreement, to be subject to the
registration requirements of the 1933 Act.
(b) The offering of shares of Home Stock pursuant to the Home Plan of
Organization has been made in compliance with applicable federal and state
securities laws.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Funding and Consummation Date, the Company will afford to the
officers and authorized representatives of Home and the Other Founding Companies
access to all of the Company's sites, properties, books and records and will
furnish Home with such additional financial and operating data and other
information as to the business and properties of the Company as Home or the
Other Founding Companies may from time to time reasonably request. The Company
will cooperate with Home and the Other Founding Companies, its representatives,
auditors and counsel in the preparation of any documents or other materials
which may be required in connection with any documents or materials required by
this Agreement. Home, the Owners and the Company will treat all information
obtained in connection with the negotiation and performance of this Agreement or
the due diligence investigations conducted with respect to the Other Founding
Companies as confidential in accordance with the provisions of Section 14
hereof. In addition, Home will cause each of the Other Founding Companies to
enter into a provision similar to this Section 7.1 requiring each such Other
Founding Company, its Owners, directors, officers, representatives, employees
and agents to keep confidential any information obtained by such Other Founding
Company.
(b) Between the date of this Agreement and the Funding and Consummation
Date, Home will afford to the officers and authorized representatives of the
Company access to all of Home's sites, properties, books and records and will
furnish the Company with such additional financial and operating data and other
information as to the business and properties of Home as the Company may from
time to time reasonably request. Home will cooperate with the Company, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. The Company will
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cause all information obtained in connection with the negotiation and
performance of this Agreement to be treated as confidential in accordance with
the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the Company will, except as set
forth on Schedule 7.2:
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management,
operation or accounting;
(ii) use its reasonable efforts to maintain its properties and
facilities, including those held under leases, in as good working order
and condition as at present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its obligations under
agreements relating to or affecting its respective assets, properties or
rights;
(iv) use its reasonable efforts to keep in full force and effect
present insurance policies or other comparable insurance coverage;
(v) use its reasonable efforts to maintain and preserve its business
organization intact, retain its respective present key employees and
maintain its relationships with suppliers, customers and others having
business relations with the Company;
(vi) use its reasonable efforts to maintain compliance with all
material permits, laws, rules and regulations, consent orders, and all
other orders of applicable courts, regulatory agencies and similar
governmental authorities;
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments without the knowledge and consent
of Home (which consent shall not be unreasonably withheld), provided that
debt and/or lease instruments may be replaced without the consent of Home
if such replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced; and
(viii)maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for ordinary and
customary bonus and salary increases for employees in accordance with past
practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Funding and Consummation Date, the Company will not,
without prior written consent of Home, which consent will not be unreasonably
withheld:
(i) make any change in its Articles of Incorporation or By-laws;
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(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed in Schedule
5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its stock
except for distributions permitted as described on Annex I hereto;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is in
the normal course of business (consistent with past practice) or involves
an amount not in excess of $25,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $25,000 necessary or desirable for the conduct of
the businesses of the Company, (2) (A) liens for taxes either not yet due
or being contested in good faith and by appropriate proceedings (and for
which contested taxes adequate reserves have been established and are
being maintained) or (B) materialmen's, mechanics', workers', repairmen's,
employees' or other like liens arising in the ordinary course of business
(the liens set forth in clause (2) being referred to herein as "Statutory
Liens"), or (3) liens set forth on Schedule 5.10 and/or 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business and other
than distributions of real estate and other assets as permitted in this
Agreement (including the Schedules hereto);
(vii) negotiate for the acquisition of any business or the start-up
of any new business;
(viii)merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the Company, provided
that the Company may negotiate and adjust bills and accounts in the course
of good faith disputes with customers in a manner consistent with past
practice, provided, further, that such adjustments shall not be deemed to
be included in Schedule 5.11 unless specifically listed thereon;
(x) amend or terminate any material agreement, permit, license or
other right of the Company; or
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(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
7.4 NO SHOP. None of the Owners, the Company, nor any agent, officer,
director, trustee or any representative of any of the foregoing will, during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Funding and Consummation Date or the termination of this Agreement
in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than Home or its
authorized agents relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the Company
or a merger, consolidation or business combination of the Company.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide Home on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The Owners and the Company shall (except as otherwise
agreed to by Home or reflected in Schedule 7.6) terminate (i) any stockholders
agreements, voting agreements, voting trusts, options, warrants and employment
agreements between the Company and any employee listed on Schedule 9.12 hereto
and (ii) any existing agreement between the Company and any Owner, on or prior
to the Funding and Consummation Date provided that nothing herein shall prohibit
or prevent the Company from paying (either prior to or on the Closing Date)
notes or other obligations from the Company to the Owners in accordance with the
terms thereof, which terms have been disclosed to Home. Such termination
agreements are listed on Schedule 7.6 and copies thereof shall be attached
thereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The Owners and the Company shall give
prompt notice to Home of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Company or the Owners contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing and (ii)
any failure of any Owner or the Company to comply with or satisfy any material
covenant, condition or agreement to be complied with or satisfied by such person
hereunder. Home shall give prompt notice to the Company of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of Home contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing and (ii)
any failure of Home to comply with or satisfy any material covenant, condition
or agreement to be
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complied with or satisfied by it hereunder. The delivery of any notice pursuant
to this Section 7.7 shall not be deemed to (i) modify the representations or
warranties hereunder of the party delivering such notice, which modification may
only be made pursuant to Section 7.8, (ii) modify the conditions set forth in
Sections 8 and 9, or (iii) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
anticipated effectiveness of the Registration Statement to supplement or amend
promptly the Schedules hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall
only have to be delivered at the Closing Date, unless such Schedule is to be
amended to reflect an event occurring other than in the ordinary course of
business. Notwithstanding the foregoing sentence, no amendment or supplement to
a Schedule prepared by the Company that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless Home and
a majority of the Founding Companies other than the Company consent to such
amendment or supplement; and provided further, that no amendment or supplement
to a Schedule prepared by Home or that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless a
majority of the Founding Companies consent to such amendment or supplement. For
all purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 7.8. In the event that one of the Other
Founding Companies seeks to amend or supplement a Schedule pursuant to Section
7.8 of one of the Other Agreements, and such amendment or supplement constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company, Home shall give the Company notice promptly after
it has knowledge thereof. If Home and a majority of the Founding Companies
consent to such amendment or supplement, which consent shall have been deemed
given by Home or any Founding Company if no response is received within 24 hours
following receipt of notice of such amendment or supplement (or sooner if
required by the circumstances under which such consent is requested), but the
Company does not give its consent, the Company may terminate this Agreement
pursuant to Section 12.1(iv) hereof. In the event that the Company seeks to
amend or supplement a Schedule pursuant to this Section 7.8, and Home and a
majority of the Other Founding Companies do not consent to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 12.1(i) hereof. In the event that Home seeks to amend or
supplement a Schedule pursuant to this Section 7.8 and a majority of the
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. No party to this Agreement shall be liable to any other party if
this Agreement shall be terminated pursuant to the provisions of this Section
7.8. No amendment of or supplement to a Schedule shall be made later than 24
hours prior to the anticipated effectiveness of the Registration Statement.
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7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Company and
Owners shall furnish or cause to be furnished to Home and the Underwriters all
of the information concerning the Company and the Owners required for inclusion
in, and will cooperate with Home and the Underwriters in the preparation of, the
Registration Statement and the prospectus included therein (including audited
and unaudited financial statements, prepared in accordance with generally
accepted accounting principles, in form suitable for inclusion in the
Registration Statement). The Company and the Owners agree promptly to advise
Home if at any time during the period in which a prospectus relating to the
offering is required to be delivered under the Securities Act, any information
contained in the prospectus concerning the Company or the Owners becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy. Insofar as the information relates solely to
the Company or the Owners, the Company represents and warrants as to such
information with respect to itself, and each Owner represents and warrants, as
to such information with respect to the Company and himself or herself, that the
Registration Statement will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
7.10 FINAL FINANCIAL STATEMENTS. The Company shall provide prior to the
Funding and Consummation Date, and Home shall have had sufficient time to review
the unaudited consolidated balance sheets of the Company as of the end of all
fiscal quarters following the Balance Sheet Date, and the unaudited consolidated
statement of income, cash flows and retained earnings of the Company for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the Company or the results of its
operations from the financial statements as of the Balance Sheet Date. Such
financial statements shall have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted therein). Except as noted in such financial
statements, all of such financial statements will present fairly the results of
operations of the Company for the periods indicated therein.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. Prior to the Funding and Consummation Date, Home
shall maintain its authorized capital stock as set forth in the Registration
Statement filed with the SEC except for such changes in authorized capital stock
as are made to respond to comments made by the SEC or requirements of any
exchange or automated trading system for which application is made to register
the Home Stock and any changes necessary or advisable in order to permit the
delivery of the opinion contemplated by Section 8.12 hereof.
7.13 COMPLIANCE WITH THE ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ANTITRUST IMPROVEMENTS ACT OF
1976 (THE "▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT"). All parties to this Agreement hereby
recognize that one or more filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act may be
required in connection with the transactions
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contemplated herein. If it is determined by the parties to this Agreement that
filings under the ▇▇▇▇- ▇▇▇▇▇-▇▇▇▇▇▇ Act are required, then: (i) each of the
parties hereto agrees to cooperate and use its best efforts to comply with the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, (ii) such compliance by the Owners and the Company shall
be deemed a condition precedent in addition to the conditions precedent set
forth in Section 9 of this Agreement, and such compliance by Home shall be
deemed a condition precedent in addition to the conditions precedent set forth
in Section 8 of this Agreement, and (iii) the parties agree to cooperate and use
their best efforts to cause all filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act
to be made. If filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act are required, the costs
and expenses thereof (including legal fees and costs and filing fees) shall be
borne by Home. The obligation of each party to consummate the transactions
contemplated by this Agreement is subject to the expiration or termination of
the waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, if applicable.
7.14 STOCKHOLDERS OF HOME. Promptly after a request by the Company, Home
will deliver to the Company a list of the stockholders of Home as of the date of
this Agreement.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF OWNERS AND COMPANY
The obligations of Owners and the Company with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions. The obligations of the
Owners and the Company with respect to actions to be taken on the Funding and
Consummation Date are subject to the satisfaction or waiver on or prior to the
Funding and Consummation Date of the conditions set forth in Sections 8.1, 8.5,
8.8, 8.9 and 8.12. As of the Closing Date or, with respect to the conditions set
forth in Sections 8.1, 8.5, 8.8, 8.9 and 8.12, as of the Funding and
Consummation Date, if any such conditions have not been satisfied, the Owners
(acting in unison) shall have the right to terminate this Agreement, or in the
alternative, waive any condition not so satisfied. Any act or action of the
Owners in consummating the Closing or delivering certificates representing
Company Interests as of the Funding and Consummation Date shall constitute a
waiver of any conditions not so satisfied. However, no such waiver shall be
deemed to affect the survival of the representations and warranties of Home
contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of Home contained in Section 6 shall be true and
correct in all material respects as of the Closing Date and the Funding and
Consummation Date as though such representations and warranties had been made as
of that time; all of the terms, covenants and conditions of this Agreement to be
complied with and performed by Home on or before the Closing Date and the
Funding and Consummation Date shall have been duly complied with and performed
in all material respects; and certificates to the foregoing effect dated the
Closing Date and the Funding and Consummation Date, respectively, and signed by
the President or any Vice President of Home shall have been delivered to the
Owners.
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8.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the Company and its counsel.
The Owners and the Company shall be satisfied that the Registration Statement
and the prospectus forming a part thereof, including any amendments thereof or
supplements thereto, shall not contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall (for purposes of this Section 8.2) be
deemed satisfied if the Company or Owners shall have failed to inform Home in
writing prior to the effectiveness of the Registration Statement of the
existence of an untrue statement of a material fact or the omission of such a
statement of a material fact.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Exchange or the IPO and no governmental agency or body shall
have taken any other action or made any request of the Company as a result of
which the management of the Company deems it inadvisable to proceed with the
transactions hereunder.
8.4 OPINION OF COUNSEL. The Company shall have received an opinion from
counsel for Home, dated the Closing Date, in the form annexed hereto as Annex V.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the underwriters named therein shall have
agreed to acquire on a firm commitment basis, subject to the conditions set
forth in the underwriting agreement, on terms such that the aggregate value of
the cash and the number of shares of Home Stock to be received by the Owners is
not less than the Minimum Value set forth on Annex I.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the Exchange and no governmental agency or body shall have taken any other
action or made any request of the Company as a result of which the Company deems
it inadvisable to proceed with the transactions hereunder.
8.7 GOOD STANDING CERTIFICATES. Home shall have delivered to the Company a
certificate, dated as of a date no later than ten days prior to the Closing
Date, duly issued by the Delaware Secretary of State and in each state in which
Home is authorized to do business, showing that Home is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for Home for all periods prior to the Closing have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to Home which would constitute a Material Adverse Effect.
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8.9 CLOSING OF IPO. The closing of the sale of the Home Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of Home, certifying the truth and correctness of attached copies of the Home's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the boards of directors and, if
required, the stockholders of Home approving Home's entering into this Agreement
and the consummation of the transactions contemplated hereby.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VII hereto.
8.12 TAX MATTERS. The Owners shall have received an opinion of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP or other tax advisor reasonably acceptable to the Owners that the
Home Plan of Organization will qualify as a tax-free transfer of property under
Section 351 of the Code and that the Owners will not recognize gain to the
extent the Owners exchange stock of the Company for Home Stock (but not cash or
other property) pursuant to the Home Plan of Organization.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF HOME
The obligations of Home with respect to actions to be taken on the Closing
Date are subject to the satisfaction or waiver on or prior to the Closing Date
of all of the following conditions. The obligations of Home with respect to
actions to be taken on the Funding and Consummation Date are subject to the
satisfaction or waiver on or prior to the Funding and Consummation Date of the
conditions set forth in Sections 9.1, 9.4 and 9.13. As of the Closing Date or,
with respect to the conditions set forth in Sections 9.1, 9.4 and 9.13, as of
the Funding and Consummation Date, if any such conditions have not been
satisfied, Home shall have the right to terminate this Agreement, or waive any
such condition, but no such waiver shall be deemed to affect the survival of the
representations and warranties contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the Owners and the Company contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date and the Funding and Consummation Date with the same effect as though such
representations and warranties had been made on and as of such date; all of the
terms, covenants and conditions of this Agreement to be complied with or
performed by the Owners and the Company on or before the Closing Date or the
Funding and Consummation Date, as the case may be, shall have been duly
performed or complied with in all material respects; and the Owners shall have
delivered to Home certificates dated the Closing Date and the Funding and
Consummation Date, respectively, and signed by them to such effect.
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9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Exchange or the IPO and no governmental agency or body shall
have taken any other action or made any request of Home as a result of which the
management of Home (acting in good faith) deems it inadvisable to proceed with
the transactions hereunder.
9.3 SECRETARY'S CERTIFICATE. Home shall have received a certificate, dated
the Closing Date and signed by the secretary of the Company, certifying the
truth and correctness of attached copies of the Company's Certificate of
Incorporation (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the board of directors and the Owners approving the
Company's entering into this Agreement and the consummation of the transactions
contemplated hereby.
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 OWNERS' RELEASE. The Owners shall have delivered to Home an instrument
dated the Closing Date which shall be effective only upon the occurrence of the
Funding and Consummation Date releasing the Company from (i) any and all claims
of the Owners against the Company and Home and (ii) obligations of the Company
and Home to the Owners, except for (x) items specifically identified on
Schedules 5.10 and 5.15 as being claims of or obligations to the Owners, (y)
continuing obligations to Owners relating to their employment by the Company and
(z) obligations arising under this Agreement or the transactions contemplated
hereby. In the event that the Funding and Consummation Date does not occur, then
the release instrument referenced herein shall be void and of no further force
or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to Home.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7 or otherwise approved by Home, all existing agreements between the
Company and the Owners (and entities controlled by the Owners) other than real
property leases shall have been canceled effective prior to or as of the Closing
Date, and all real property leases between the Company and the Owners (and any
entity controlled by the Owners) shall have been amended in a manner reasonably
satisfactory to Home.
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9.8 OPINION OF COUNSEL. Home shall have received an opinion from Counsel
to the Company and the Owners, dated the Closing Date, substantially in the form
annexed hereto as Annex VI.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 5.23 shall have been obtained;
and no action or proceeding shall have been instituted or threatened to restrain
or prohibit the Exchange and no governmental agency or body shall have taken any
other action or made any request of Home as a result of which Home deems it
inadvisable to proceed with the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to Home
a certificate, dated as of a date no earlier than ten days prior to the Closing
Date, duly issued by the appropriate governmental authority in the Company's
State of Organization and, unless waived by Home, in each state in which the
Company is authorized to do business, showing the Company is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes for the Company for all periods prior to the Closing have been
filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall enter into an employment agreement substantially in the form of Annex VII
hereto.
9.13 CLOSING OF IPO. The closing of the sale of the Home Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
9.14 FIRPTA CERTIFICATE. Each Owner shall have delivered to Home a
certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
10. COVENANTS OF HOME AND THE OWNERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. Home shall
use reasonable efforts to have the Owners released from any and all guarantees
of the Company's indebtedness identified on Schedule 10.1. In the event that
Home cannot obtain such releases from the lenders of any such guaranteed
indebtedness identified on Schedule 10.1 on or prior to 120 days subsequent to
the Funding and Consummation Date, Home shall promptly pay off or otherwise
refinance or retire such indebtedness. From and after the Funding and
Consummation Date and until such time as all of such indebtedness is paid off,
refinanced or retired, Home shall maintain unencumbered funds in amounts
sufficient to provide for such pay off, refinancing or retirement, provided that
Home may use such funds for other purposes, in its sole discretion, with the
prior
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written consent of each Owner who has not as of that time been released from his
or her guarantee as described above and whose indebtedness as described above
has not as of that time been paid off, refinanced or retired.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Funding and
Consummation Date, Home shall not and shall not permit any of its subsidiaries
to undertake any act that would jeopardize the tax-free status of the
organization, including without limitation:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the Home Stock issued in connection with the transactions contemplated
hereby; or
(b) the entering into of financial arrangements for the benefit of the
Owners.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The Company, if possible, or otherwise the Owners shall file or
cause to be filed all income Tax Returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on or
before the Funding and Consummation Date, and shall permit Home to review
all such Tax Returns prior to such filings. The Owners shall pay or cause
to be paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on
the Company Financial Statements) shown by such Returns to be due.
(ii) Home shall file or cause to be filed all separate Returns of,
or that include, any Acquired Party for all taxable periods ending after
the Funding and Consummation Date.
(iii) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any
audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each
party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party
required to file Returns pursuant to this Agreement shall bear all costs
of filing such Returns.
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(iv) Each of the Company, Home and each Owner shall comply with the
tax reporting requirements of Section 1.351-3 of the Treasury Regulations
promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b)
of the Code subject to gain, if any, recognized on the receipt of cash or
other property under Section 351(b) of the Code.
10.4 DIRECTORS. The persons named in the Draft Registration Statement
shall be appointed as directors and elected as officers of Home, as and to the
extent set forth in the Draft Registration Statement, promptly following the
Funding and Consummation Date.
11. INDEMNIFICATION
The Owners and Home each make the following covenants that are applicable
to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE OWNERS. The Owners covenant and agree
that they, severally (based on their relative ownership of the Company Interests
on the date hereof), will indemnify, defend, protect and hold harmless Home, the
Company and the Surviving Corporation at all times, from and after the date of
this Agreement until the Expiration Date (provided that for purposes of Section
11.1(iii) below, the Expiration Date shall be the date on which the applicable
statute of limitations expires), from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by Home, the Company or the Surviving
Corporation as a result of or arising from (i) any breach of the representations
and warranties of the Owners or the Company set forth herein or on the schedules
or certificates delivered in connection herewith, (ii) any breach of any
agreement on the part of the Owners or the Company under this Agreement, or
(iii) any liability under the 1933 Act, the 1934 Act or other Federal or state
law or regulation, at common law or otherwise, arising out of or based upon any
untrue statement of a material fact relating to the Company or the Owners, and
provided to Home or its counsel by the Company or the Owners (but in the case of
the Owners, only if such statement was provided in writing) contained in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company or the Owners required to be stated therein or necessary to make the
statements therein not misleading, provided, however, that such indemnity shall
not inure to the benefit of Home, the Company or the Surviving Corporation to
the extent that such untrue statement (or alleged untrue statement) was made in,
or omission (or alleged omission) occurred in, any preliminary prospectus and
the Owners provided, in writing, corrected information to Home counsel and to
Home for inclusion in the final prospectus, and such information was not so
included or properly delivered, and provided further, that no Owner shall be
liable for any indemnification obligation pursuant to this Section 11.1 to the
extent
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attributable to a breach of any representation, warranty or agreement made
herein individually by any other Owner.
Home acknowledges and agrees that other than the representations and
warranties of Company or Owners specifically contained in this Agreement, there
are no representations or warranties of Company or Owners, either express or
implied, with respect to the transactions contemplated by this Agreement, the
Company or its assets, liabilities and business.
Home further acknowledges and agrees that, should the Closing occur, its
sole and exclusive remedy with respect to any and all claims relating to this
Agreement and the transactions contemplated in this Agreement, shall be pursuant
to the indemnification provisions set forth in this Section 11. Home hereby
waives, from and after the Closing, to the fullest extent permitted under
applicable law, any and all rights, claims and causes of action it or any
indemnified person may have against the Company or any Owner relating to this
Agreement or the transactions arising under or based upon any federal, state,
local or foreign statute, law, rule, regulation or otherwise.
11.2 INDEMNIFICATION BY HOME. Home covenants and agrees that it will
indemnify, defend, protect and hold harmless the Owners at all times from and
after the date of this Agreement until the Expiration Date, from and against all
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by the Owners as a
result of or arising from (i) any breach by Home of their representations and
warranties set forth herein or on the schedules or certificates attached hereto,
(ii) any breach of any agreement on the part of Home under this Agreement, (iii)
any liabilities which the Owners may incur due to Home's 's failure to be
responsible for the liabilities and obligations of the Company as provided in
Section 1 hereof (except to the extent that Home has claims against the Owners
by reason of such liabilities); or (iv) any liability under the 1933 Act, the
1934 Act or other Federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to Home or any of the Other Founding
Companies contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to Home or any of the Other Founding
Companies required to be stated therein or necessary to make the statements
therein not misleading.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the
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right to defend and settle, at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any criminal
proceeding without the written consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing
Indemnified Party, Indemnified Party shall have the right to participate in such
matter through counsel of its own choosing and Indemnifying Party will reimburse
the Indemnified Party for the reasonable expenses of its counsel. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested by the Indemnifying Party, in which event
the Indemnified Party shall be reimbursed by the Indemnifying Party for
reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnifying Party desires to accept a final and complete settlement of any such
Third Person claim and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement by said Third Person. Upon agreement as to such settlement between
said Third Person and the Indemnifying Party, the Indemnifying Party shall, in
exchange for a complete release from the Indemnified Party, promptly pay to the
Indemnified Party the amount agreed to in such settlement and the Indemnified
Party shall, from that moment on, bear full responsibility for any additional
costs of defense which it subsequently incurs with respect to such claim and all
additional costs of settlement or judgment. If the Indemnifying Party does not
undertake to defend such matter to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall reimburse the Indemnified
Party for the amount paid in such settlement and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. All settlements hereunder
shall effect a complete release of the Indemnified Party, unless the Indemnified
Party otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
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11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that, nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement. Any
indemnity payment under this Section 11 shall be treated as an adjustment to the
exchange consideration for tax purposes unless a final determination (which
shall include the execution of a Form 870-AD or successor form) with respect to
the indemnified party or any of its affiliate causes any such payment not to be
treated as an adjustment to the exchange consideration for U.S. Federal Income
Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. Home, the Surviving Corporation and
the other persons or entities indemnified pursuant to Section 11.1 or 11.2 shall
not assert any claim for indemnification hereunder against the Owners until such
time as, and solely to the extent that, the aggregate of all claims which such
persons may have against such the Owners shall exceed the greater of (a) 1.0% of
the sum of (i) the cash paid to Owners plus (ii) the value of the Home Stock
delivered to Owners (calculated as provided in this Section 11.5) or (b) $50,000
(the "Indemnification Threshold"). Owners shall not assert any claim for
indemnification hereunder against Home until such time as, and solely to the
extent that, the aggregate of all claims which Owners may have against Home
shall exceed the Indemnification Threshold.
No person shall be entitled to indemnification under this Section 11 if
and to the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
Notwithstanding any other term of this Agreement, no Owner shall be liable
under this Section 11 for an amount which exceeds the amount of proceeds
received by such Owner in connection with the Exchange. For purposes of
calculating the value of the Home Stock received by a Owner, Home Stock shall be
valued at its initial public offering price as set forth in the Registration
Statement. It is hereby agreed that an Owner shall have the right to satisfy an
indemnification obligation through payment of a combination of stock and cash in
proportion equal to the proportion of stock and cash received by such Owner in
connection with the Exchange, valued as described immediately above, but shall
also have the right to satisfy any such obligation in cash.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION.This Agreement may be terminated at any time prior to the
Funding and Consummation Date solely:
(i) by mutual consent of the board of directors of Home and the
Owners;
(ii) by the Owners or by Home if the transactions contemplated by
this Agreement to take place at the Closing shall not have been
consummated by March 31, 1998,
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unless the failure of such transactions to be consummated is due to the
willful failure of the party seeking to terminate this Agreement to
perform any of its obligations under this Agreement to the extent required
to be performed by it prior to or on the Funding and Consummation Date;
(iii) by the Owners or by Home if a material breach or default shall
be made by the other party in the observance or in the due and timely
performance of any of the covenants or agreements contained herein, and
the curing of such default shall not have been made on or before the
Funding and Consummation Date or by the Owners or the Company, if the
conditions set forth in Section 8 hereof have not been satisfied or waived
as of the Closing Date or the Funding and Consummation Date, as
applicable, or by Home, if the conditions set forth in Section 9 hereof
have not been satisfied or waived as of the Closing Date or the Funding
and Consummation Date, as applicable;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof;
provided, however, that during the period from the Closing Date to the Funding
and Consummation Date, this Agreement may be terminated only if the underwriting
agreement relating to the IPO is terminated in accordance with its terms.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section
7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Owners will not, for a period of five (5)
years following the Funding and Consummation Date, for any reason whatsoever,
directly or indirectly, for themselves or on behalf of or in conjunction with
any other person, persons, company, partnership, corporation or business of
whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any retail (new or used, but excluding used home lots
or other activities listed on Schedule 13.1 hereto) manufactured housing
business or operation or related services business (including the
ownership or management of manufactured housing subdivisions, lots or
parks, but excluding any such subdivisions, lots or parks or other
activities listed on Schedule 13.1 hereto) in direct competition with Home
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or any of the subsidiaries thereof, within 100 miles of where the Company
or any of its subsidiaries conducted business prior to the effectiveness
of the Exchange (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of Home or any subsidiary thereof for the purpose
or with the intent of enticing such employee away from or out of the
employ of Home or any subsidiary thereof;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to the Funding and Consummation
Date, a customer of Home or any subsidiary thereof, of the Company or of
any of the Other Founding Companies within the Territory for the purpose
of soliciting or selling products or services in direct competition with
Home within the Territory;
(iv) call upon any prospective acquisition candidate, on any Owner's
own behalf or on behalf of any competitor in the retail manufactured
housing business, which candidate, to the actual knowledge of such Owner
after due inquiry, was called upon by Home or any subsidiary thereof or
for which, to the actual knowledge of such Owner after due inquiry, Home
or any subsidiary thereof made an acquisition analysis, for the purpose of
acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the Company has in
the past disclosed such information to the public for valid business
reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit (i) any Owner from acquiring as a passive investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter, or (ii) any of the
activities listed on Schedule 13.1 hereto.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
Home as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to Home for which it would
have no other adequate remedy, each Owner agrees that the foregoing covenant may
be enforced by Home in the event of breach by such Owner, by injunctions and
restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Owners in light of the activities and business of Home and the subsidiaries
thereof on the date of the execution of this Agreement and the current plans of
Home; but it is also the intent of Home and the Owners that such covenants be
construed and enforced in accordance with the changing activities; business and
locations of Home and its subsidiaries throughout the term of this covenant.
During the term of this covenant, if Home or one
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of its subsidiaries engages in new activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business it is currently conducting in the
locations currently established therefor (provided such activities or business
are related to the business or operations of the retail manufactured housing
business), then the Owners will be precluded from soliciting the customers or
employees of such new activities or business or from such new location and from
directly competing with such new activities or business within 100 miles of its
then-established operating location(s) through the term of this covenant.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Owner
against Home or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Home of such
covenants. The covenants contained in Section 13 shall not be affected by any
breach of any other provision hereof by any party hereto and shall have no
effect if the transactions contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The Company and the Owners hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 OWNERS. The Owners recognize and acknowledge that they had in the
past, currently have, and in the future may possibly have, access to certain
confidential information of the Company, the Other Founding Companies, and/or
Home, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company's, the Other Founding
Companies' and/or Home's respective businesses. The Owners agree that they will
not disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except (a) to
authorized representatives of Home, (b) following the Closing, such information
may be disclosed by the Owners as is required in the course of performing their
duties for Home or the Surviving Corporation and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 14.1, unless (i) such information
becomes known to the public generally through no fault of the Owners, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, that prior to disclosing any information pursuant to
this clause (ii), the Owners shall, if possible, give prior written notice
thereof to Home and provide Home with the opportunity to contest
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such disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any of the
Owners of the provisions of this Section 14.1, Home shall be entitled to an
injunction restraining such Owners from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting Home
from pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event the transactions contemplated by
this Agreement are not consummated, Owners shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company. Each Owner further agrees that in the
event the transactions contemplated herein are not consummated (i) neither the
Company nor any Owner can thereafter use any confidential information of the
Other Founding Companies for any purpose and (ii) upon written request of any
Other Founding Company to the Company, the Company and Owners will return all
confidential information pertaining to such Other Founding Company to such Other
Founding Company.
14.2 HOME. Home recognizes and acknowledges that it had in the past and
currently have access to certain confidential information of the Company, such
as operational policies, and pricing and cost policies that are valuable,
special and unique assets of the Company's business. Home agrees that, prior to
the Closing, or if the Transactions contemplated by this Agreement are not
consummated, it will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the Company, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.2, (c) to the Other
Founding Companies and their representatives pursuant to Section 7.1(a), unless
(i) such information becomes known to the public generally through no fault of
Home , (ii) disclosure is required by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Home shall, if possible, give prior written notice
thereof to the Company and the Owners and provide the Company and the Owners
with the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, and (d) to the public to the
extent necessary or advisable in connection with the filing of the Registration
Statement and the IPO and the securities laws applicable thereto and to the
operation of Home as a publicly held entity after the IPO. In the event of a
breach or threatened breach by Home of the provisions of this Section 14.2, the
Company and the Owners shall be entitled to an injunction restraining Home from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the Company and the Owners from pursuing any
other available remedy for such breach or threatened breach, including the
recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the
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parties hereto agree that, in the event of a breach by any of them of the
foregoing covenants, the covenant may be enforced against the other parties by
injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of five years from the
Funding and Consummation Date.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Unless otherwise agreed by Home, except for
transfers to immediate family members who agree to be bound by the restrictions
set forth in this Section 15.1 (or trusts for the benefit of the Owners or
family members, the trustees of which so agree), for a period of one year from
the Closing, except pursuant to Section 17 hereof, none of the Owners shall
sell, assign, exchange, transfer, encumber, pledge, distribute, appoint, or
otherwise dispose of any shares of Home Stock received by the Owners in the
Exchange. The certificates evidencing the Home Stock delivered to the Owners
pursuant to Section 3 of this Agreement will bear a legend substantially in the
form set forth below and containing such other information as Home may deem
necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT
OR OTHER DISPOSITION PRIOR TO [FIRST ANNIVERSARY OF CLOSING DATE]. UPON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE DATE SPECIFIED ABOVE.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. The Owners acknowledge that the shares of Home
Stock to be delivered to the Owners pursuant to this Agreement have not been and
will not be registered under the 1933 Act (except as provided in Section 17
hereof) and therefore may not be resold without compliance with the 1933 Act.
The Home Stock to be acquired by such Owners pursuant to this Agreement is being
acquired solely for their own respective accounts, for investment purposes only,
and with no present intention of distributing, selling or otherwise disposing of
it in connection with a distribution. The Owners covenant, warrant and represent
that none of the shares of Home Stock issued to such Owners will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the 1933
Act and the rules and regulations of the SEC. All the Home Stock shall bear the
following legend in addition to the legend required under Section 15 of this
Agreement:
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THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE SECURITIES LAW.
16.2 ECONOMIC RISK; SOPHISTICATION. The Owners are able to bear the
economic risk of an investment in the Home Stock to be acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in the
Home Stock. The Owners party hereto have had an adequate opportunity to ask
questions and receive answers from the officers of Home concerning any and all
matters relating to the transactions described herein including, without
limitation, the background and experience of the current and proposed officers
and directors of Home, the plans for the operations of the business of Home, the
business, operations and financial condition of the Founding Companies other
than the Company, and any plans for additional acquisitions and the like. The
Owners have asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing,
whenever Home proposes to register any Home Stock for its own or others account
under the 1933 Act for a public offering, other than (i) any shelf or other
registration of shares to be used as consideration for acquisitions of
additional businesses by Home and (ii) registrations relating to employee
benefit plans, Home shall give each of the Owners prompt written notice of its
intent to do so. Upon the written request of any of the Owners given within 30
days after receipt of such notice, Home shall cause to be included in such
registration all of the Home Stock issued to the Owners pursuant to this
Agreement (including any stock issued as (or issuable upon the conversion or
exchange of any convertible security, warrant, right or other security which is
issued by Home as) a dividend or other distribution with respect to, or in
exchange for, or in replacement of such Home Stock) which any such Owner
requests, provided that Home shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the written opinion of tax counsel to Home or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as a tax-free organization under Section 351 of the Code.
In addition, if Home is advised in writing in good faith by any managing
underwriter of an underwritten offering of the securities being offered pursuant
to any registration statement under this Section 17.1 that the number of shares
to be sold by persons other than Home is greater than the number of such shares
which can be offered without adversely affecting the offering, Home may reduce
pro rata the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter, provided, that, for each such offering made by
Home after the IPO, such reduction shall be made first by reducing the number of
shares to be sold by persons other than Home, the Owners
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and the stockholders of the Other Founding Companies (collectively, the Owners
and the stockholders of the other Founding Companies being referred to herein as
the "Founding Stockholders"), and thereafter, if a further reduction is
required, by reducing the number of shares to be sold by the Founding
Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date one year after
the Closing and prior to the date three years after the Closing, the holders of
a majority of the shares of Home Stock issued to the Founding Stockholders
pursuant to this Agreement and the Other Agreements which have not been
previously registered or sold and which are not entitled to be sold under Rule
144(k) (or any similar or successor provision) promulgated under the 1933 Act
may request in writing that Home file a registration statement under the 1933
Act covering the registration of the shares of Home Stock issued to the
Stockholders pursuant to this Agreement and the Other Agreements (including any
stock issued as (or issuable upon the conversion or exchange of any convertible
security, warrant, right or other security which is issued by Home as) a
dividend or other distribution with respect to, or in exchange for, or in
replacement of such Home Stock) then held by such Founding Stockholders (a
"Demand Registration"). Within ten (10) days of the receipt of such request,
Home shall give written notice of such request to all other Founding
Stockholders and shall, as soon as practicable but in no event later than 45
days after notice from any Stockholder, file and use its best efforts to cause
to become effective a registration statement covering all such shares. Home
shall be obligated to effect only one Demand Registration for all Founding
Stockholders and will keep such Demand Registration current and effective for
not less than 120 days (or such shorter period as is required to sell all of the
shares registered thereby).
Notwithstanding the foregoing paragraph, following any such a demand, a
majority of Home's disinterested directors (i.e. directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the registration statement for up to a 30 day period after the date on which
Home would otherwise be required to make such filing pursuant to the foregoing
paragraph.
If at the time of any request by the Founding Stockholders for a Demand
Registration Home has fixed plans to file within 60 days after such request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' Home
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless Home is no longer proceeding
diligently to effect such registration; provided that Home shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
In the event that the Founding Stockholders make a demand registration
request pursuant to this Section 17.2 and such registration is delayed by Home
as a consequence of the exercise of its rights under this Section 17.2, then the
period during which such demand registration may be requested by the Founding
Stockholders shall be extended for an equal number of days.
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17.3 REGISTRATION PROCEDURES. Whenever Home is required to register shares
of Home Stock pursuant to Sections 17.1 and 17.2, Home will, as expeditiously as
possible:
a. Prepare and file with the SEC a registration statement with respect to
such shares and use its best efforts to cause such registration statement to
become effective (provided that before filing a registration statement or
prospectus or any amendments or supplements or term sheets thereto, Home will
furnish a representative of the Owners with copies of all such documents
proposed to be filed) as promptly as practical;
b. Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 120 days;
c. Furnish to each Owner who so requests such number of copies of such
registration statement, each amendment and supplement thereto and the prospectus
included in such registration statement (including each preliminary prospectus
and any term sheet associated therewith), and such other documents as such Owner
may reasonably request in order to facilitate the disposition of the relevant
shares;
d. Use its best efforts to register or qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Owners, and to keep such
registration or qualification effective during the period such registration
statement is to be kept effective, provided that Home shall not be required to
become subject to taxation, to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions;
e. Cause all such shares of Home Stock to be listed or included on any
securities exchanges or trading systems on which similar securities issued by
Home are then listed or included;
f. Notify each Owner at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act within the period that Home is
required to keep the registration statement effective of the happening of any
event as a result of which the prospectus included in such registration
statement, together with any associated term sheet, contains an untrue statement
of a material fact or omits any fact necessary to make the statement therein not
misleading, and, at the request of such Owner, Home will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of the covered shares, such prospectus will not contain an untrue statement of
material fact or omit to state any fact necessary to make the statements therein
not misleading.
All expenses incurred in connection with the registration under this
Article 17 (including all registration, filing, qualification, legal, printer
and accounting fees, but excluding underwriting commissions and discounts),
shall be borne by Home.
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17.4 INDEMNIFICATION.
(a) In connection with any demand registration, Home shall indemnify, to
the extent permitted by law, each Owner (an "Indemnified Party") against all
losses, claims, damages, liabilities and expenses arising out of or resulting
from any untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or associated term
sheet or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading except insofar as the same are caused by or contained in or omitted
from any information furnished in writing to Home by such Indemnified Party
expressly for use therein or by any Indemnified Parties' failure to deliver a
copy of the registration statement or prospectus or any amendment or supplements
thereto after Home has furnished such Indemnified Party with a sufficient number
of copies of the same.
(b) In connection with any demand registration, each Owner shall furnish
to Home in writing such information as is reasonably requested by Home for use
in any such registration statement or prospectus and will indemnify, to the
extent permitted by law, Home, its directors and officers and each person who
controls Home (within the meaning of the ▇▇▇▇ ▇▇▇) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement or material fact or any omission or alleged omission of a material
fact required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
contained in information so furnished in writing by such Owner specifically for
use in preparing the registration statement. Notwithstanding the foregoing, the
liability of a Owner under this Section 17.5 shall be limited to an amount equal
to the net proceeds actually received by such Owner from the sale of the
relevant shares covered by the registration statement.
(c) Any person entitled to indemnification hereunder will (i) give prompt
notice to the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely effected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled or elects not,
to assume the defense of a claim, will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
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17.5 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered offering, Home and
each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of Home's size and investment stature,
including indemnification.
17.6 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of Home stock
to the public without registration, Home agrees to use its best efforts to:
(i) make and keep public information regarding Home available as
those terms are understood and defined in Rule 144 under the 1933 Act for
a period of four years beginning 90 days following the effective date of
the Registration Statement;
(ii) file with the SEC in a timely manner all reports and other
documents required of Home under the 1933 Act and the 1934 Act at any time
after it has become subject to such reporting requirements; and
(iii) so long as a Owner owns any restricted Home Common Stock,
furnish to each Owner forthwith upon written request a written statement
by Home as to its compliance with the reporting requirements of Rule 144
(at any time from and after 90 days following the effective date of the
Registration Statement, and of the 1933 Act and the 1934 Act (any time
after it has become subject to such reporting requirements), a copy of the
most recent annual or quarterly report of Home, and such other reports and
documents so filed as a Owner may reasonably request in availing itself of
any rule or regulation of the SEC allowing a Owner to sell any such shares
without registration.
18. GENERAL
18.1 COOPERATION. The Company, Owners, and Home shall each deliver or
cause to be delivered to the other on the Funding and Consummation Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
Home on and after the Funding and Consummation Date in furnishing information,
evidence, testimony and other assistance in connection with any tax return
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Funding and
Consummation Date.
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18.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
Home, and the heirs and legal representatives of the Owners.
18.3 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Owners, the Company,
and Home and supersede any prior agreement and understanding relating to the
subject matter of this Agreement. This Agreement, upon execution, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance with
its terms and may be modified or amended only by a written instrument executed
by the Owners, the Company and Home, acting through their respective officers or
trustees, duly authorized by their respective Boards of Directors. Any
disclosure made on any Schedule delivered pursuant hereto shall be deemed to
have been disclosed for purposes of any other Schedule required hereby, provided
that the Company shall make a good faith effort to cross reference disclosure,
as necessary or advisable, between related Schedules.
18.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 BROKERS AND AGENTS. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.6 EXPENSES. (a) Whether or not the transactions herein contemplated
shall be consummated, Home will pay the fees, expenses and disbursements of Home
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by Home under this Agreement, including the fees and
expenses of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P., and any other
person or entity retained by Home or by Notre Capital Ventures II, L.L.C., and
the costs of preparing the Registration Statement. Each Owner shall pay all
sales, use, transfer, real property transfer, recording, gains, stock transfer
and other similar taxes and fees ("Transfer Taxes") imposed in connection with
the Exchange, other than Transfer Taxes, if any, imposed by the State of
Delaware. Each Owner shall file all necessary documentation and Returns with
respect to such Transfer Taxes. In addition, each Owner acknowledges that he,
and not the Company or Home, will pay all taxes due upon receipt of the
consideration payable pursuant to Section 2 hereof. The Owners acknowledge that
the risks of the transactions contemplated hereby include tax risks, with
respect to which the Owners are relying solely on the opinion contemplated by
Section 8.12 hereof.
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(b) In the event that the Funding and Consummation Date occurs, then
Home will reimburse the Owners and the Stockholders of Other Founding Companies
for incremental and direct accounting costs and expenses incurred by them in
connection with the Exchange and IPO and such additional accounting and legal
expenses incurred by them in connection therewith as may be approved by Home.
18.7 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person to
an officer or agent of such party.
(a) If to Home, addressed to it at:
Home USA, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P.
South Tower Pennzoil Place
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(b) If to the Owners, addressed to them at their addresses set forth
on Annex II, with copies to:
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(c) If to the Company, addressed to it at:
Willmax Homes of Colorado LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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with copies to:
▇▇▇▇ ▇▇▇▇, PC
4700 One Norwest Center
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
18.8 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Texas.
18.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the Expiration Date.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.13 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of Home, the Company and Owners who hold or who will hold at
least 50% of the Home Stock issued or to be issued upon consummation of the
Exchange. Any amendment or waiver effected in accordance with this Section 18.15
shall be binding upon each of the parties hereto, any other person receiving
Home Stock in connection with the Exchange and each future holder of such Home
Stock.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
HOMEUSA, INC.
By: ___________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chief Executive Officer
WILLMAX HOMES OF COLORADO LLC
By: ___________________________
Name: ______________________
Title: _____________________
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Owners:
_______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
_______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________________
▇▇▇▇ ▇▇▇▇▇▇▇
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SCHEDULE 6.9
None.
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