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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
DATED AS OF OCTOBER 7, 1999
BY AND AMONG
▇▇▇▇▇▇▇ ▇▇▇▇ HOMES, INC., A CALIFORNIA CORPORATION,
▇▇▇▇▇▇▇ ▇▇▇▇, AN INDIVIDUAL,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, AN INDIVIDUAL,
▇▇▇▇▇▇▇ HOMES, A CALIFORNIA CORPORATION,
AND
THE ▇▇▇▇▇▇▇ COMPANIES, A DELAWARE CORPORATION
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TABLE OF CONTENTS
PAGE
1. Purchase and Sale...................................................................2
1.1 Seller's Assets..............................................................2
1.2 Partnership Assets...........................................................4
2. Assets Excluded from Purchase.......................................................5
3. Purchase Price, Adjustments and Allocation..........................................6
3.1 Purchase Price...............................................................6
3.2 Adjustment to Purchase Price.................................................6
3.3 Allocation of Purchase Price; Tax Filings...................................10
4. Assumption of Liabilities..........................................................10
4.1 Contracts...................................................................10
4.2 Accounts Payable and Accrued Liabilities....................................11
4.3 Employee Obligations........................................................11
5. Liabilities Not Assumed............................................................11
6. Opening of Escrow..................................................................12
7. Close of Escrow....................................................................12
8. Title Report.......................................................................13
9. The Series A Offer.................................................................13
9.1 Commencement and Conditions.................................................13
9.2 Satisfaction of Conditions..................................................14
9.3 Lyon SEC Filings............................................................14
9.4 ▇▇▇▇▇▇▇-Del.'s Actions With Respect to the Series A Offer...................15
9.5 Over- or Under-Subscription of Offer........................................16
9.6 Successors in Interest to ▇▇▇▇▇.............................................17
10. ▇▇▇▇▇▇▇-Del./New ▇▇▇▇▇▇▇ Merger and Other Matters..................................17
11. Representations and Warranties of Seller...........................................18
11.1 Good Standing...............................................................18
11.2 Power.......................................................................19
11.3 Requisite Action............................................................19
11.4 Authority...................................................................19
11.5 Binding Agreements..........................................................19
11.6 Partnership and Membership Interests in Real Property.......................19
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TABLE OF CONTENTS
(continued)
Page
11.7 Income Tax Information......................................................19
11.8 Condition of Personal Property Assets.......................................19
11.9 Financial Statements; Contingencies; Conduct of Business Since
December 31, 1998...........................................................20
11.10 Contracts...................................................................20
11.11 Zoning......................................................................20
11.12 Governmental Notices........................................................21
11.13 Undisclosed Defects.........................................................21
11.14 No Unrecorded Interests.....................................................21
11.15 Real Property in Compliance.................................................21
11.16 Public Improvements.........................................................21
11.17 No Other Agreements.........................................................21
11.18 Litigation..................................................................22
11.19 Environmental Matters.......................................................22
11.20 Endangered or Threatened Species............................................23
11.21 Accounts Receivable.........................................................23
11.22 Employment Contracts and Benefits...........................................24
11.23 Insurance Policies..........................................................25
11.24 Authority and Consents......................................................25
11.25 Plant Closing...............................................................26
11.26 No Brokers or Finders.......................................................26
11.27 Knowledge Convention........................................................26
12. Representations and Warranties of Buyer and ▇▇▇▇▇▇▇-Del............................26
12.1 Power.......................................................................26
12.2 Requisite Action............................................................26
12.3 Authority...................................................................26
12.4 No Conflicts................................................................26
12.5 No Brokers or Finders.......................................................26
12.6 Legal Proceedings...........................................................27
12.7 Plant Closing...............................................................27
13. Survival of Representations and Warranties; Indemnity..............................27
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TABLE OF CONTENTS
(continued)
Page
13.1 Survival of Representations and Warranties..................................27
13.2 Seller's Indemnity Obligation...............................................27
13.3 Buyer's and ▇▇▇▇▇▇▇-Del.'s Indemnity Obligation.............................28
13.4 Notice......................................................................28
14. Seller's Obligations Before Closing................................................28
14.1 Buyer's Access to Premises and Information..................................28
14.2 Conduct of Business in Normal Course........................................29
14.3 Preservation of Real Property and Operations................................29
14.4 Maintenance of Insurance....................................................29
14.5 Maintenance of Intangibles..................................................29
14.6 Employees and Compensation..................................................29
14.7 Other Transactions..........................................................29
14.8 Notification of Certain Matters.............................................29
14.9 Permits and Approvals; Third Party Consents.................................30
14.10 Supplements to Schedules....................................................30
14.11 Financing...................................................................30
15. ▇▇▇▇▇▇▇-Del.'s and Buyer's Obligations Before Closing..............................30
15.1 Cooperation in Securing Consents of Third Parties...........................30
15.2 Resale Certificate..........................................................30
15.3 Conduct of Business in Normal Course........................................30
15.4 Financing...................................................................30
15.5 Notification of Certain Matters.............................................31
16. Conditions Precedent to ▇▇▇▇▇▇▇-Del.'s and Buyer's Performance.....................31
16.1 Accuracy of Seller's Representations and Warranties; Satisfaction of
Covenants...................................................................31
16.2 Regulatory Approvals and Other Consents.....................................31
16.3 No Material Adverse Change..................................................31
16.4 Opinion of Seller's Counsel.................................................32
16.5 Absence of Litigation.......................................................33
16.6 Title Policy................................................................33
16.7 Assignment of Real Property Documents.......................................33
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16.8 Solvency Opinion............................................................33
16.9 Financing...................................................................34
16.10 No "Ownership Change".......................................................34
16.11 Series A Offer..............................................................34
16.12 ▇▇▇▇▇▇▇-Del. Stockholder Approval...........................................34
16.13 Series B Purchase Agreements................................................34
16.14 Cancellation of Lyon Stock Options..........................................34
17. Conditions Precedent to Seller's Performance.......................................34
17.1 Accuracy of Buyer's and ▇▇▇▇▇▇▇-Del.'s Warranties...........................34
17.2 Regulatory Approvals and Other Consents.....................................35
17.3 Opinion of Buyer's and ▇▇▇▇▇▇▇-Del.'s Counsel...............................35
17.4 Absence of Litigation.......................................................36
17.5 Series A Offer..............................................................36
17.6 ▇▇▇▇▇▇▇-Del. Stockholder Approval...........................................36
17.7 Release of Seller From Certain Assumed Liabilities..........................36
17.8 Series B Purchase Agreements................................................36
17.9 No "Ownership Change".......................................................36
18. The Parties' Obligations after Closing.............................................37
18.1 Employee Matters............................................................37
18.2 WARN Act....................................................................37
18.3 Maintenance of Seller's Corporate Existence; Tangible Net Worth.............37
18.4 Corporate Governance........................................................37
18.5 Further Agreements..........................................................38
18.6 Post Closing Obligations....................................................39
18.7 Management of Certain Excluded Projects Following the Closing...............39
19. Escrow Closing Obligations.........................................................39
19.1 Deliveries by Seller to Escrow Holder.......................................39
19.2 Deliveries by Buyer to Escrow Holders.......................................41
19.3 Disbursements and Other Actions by Escrow Holder............................41
20. Escrow Cancellation................................................................42
20.1 Charges.....................................................................42
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TABLE OF CONTENTS
(continued)
Page
21. Escrow Costs; Taxes and Assessments................................................42
21.1 Escrow and Other Costs......................................................42
21.2 Real Property Taxes and Assessments.........................................43
21.3 Supplemental Real Property Taxes............................................43
21.4 Other Taxes.................................................................43
22. Condemnation and Destruction.......................................................43
22.1 Condemnation................................................................43
22.2 Fire or Other Casualty During Escrow........................................44
23. Waiver and Consent.................................................................44
24. Miscellaneous......................................................................44
24.1 Successors and Assigns......................................................44
24.2 Expenses....................................................................44
24.3 Attorney's Fees.............................................................45
24.4 Notices.....................................................................45
24.5 Gender and Name.............................................................46
24.6 Entire Agreement............................................................46
24.7 Captions....................................................................47
24.8 Time of Essence.............................................................47
24.9 Governing Law...............................................................47
24.10 Invalidity of Provision.....................................................47
24.11 Amendments..................................................................47
24.12 Counterparts................................................................47
24.13 Schedules and Exhibits......................................................47
24.14 Time References.............................................................47
24.15 Construction of Agreement...................................................47
24.16 No Recording Without Consent................................................47
24.17 Parties in Interest.........................................................48
24.18 Specific Performance and Waiver of Rescission Rights........................48
25. Termination Events.................................................................48
26. Effect of Termination..............................................................49
27. No Solicitation....................................................................49
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LIST OF SCHEDULES*
Schedule 1.1(a) - Seller's Real Property
Schedule 1.1(c)(iii) - Seller's Intangible Property
Schedule 1.1(c)(vi) - Other Assets
Schedule 1.2 - The Partnerships
Schedule 1.2(a) - Partnership Real Property
Schedule 1.2(c)(iii) - Partnership Intangible Property
Schedule 1.2(c)(vi) - Other Partnership Assets
Schedule 2.6 - Excluded Assets
Schedule 4.1 - Specified Contracts
Schedule 5.9 - Excluded Liabilities
Schedule 11.10 - Conflicts with Contracts
Schedule 11.24 - Consents, Waivers and Releases
Schedule 12.4 - ▇▇▇▇▇▇▇ Conflicts
Schedule 17.7 - Releases from Third Parties
Schedule 19.1(b) - Properties Under Option or Contract
EXHIBITS*
Exhibit A - Escrow Holder's General Provisions
Exhibit B - Conditions to Series A Offer
Exhibit C - Form of Certificates of Ownership and Merger
Exhibit D - Form of Seller's Affidavit
Exhibit E - Form of Cancellation of Lyon Stock Options
Exhibit F - Form of Seller Grant Deeds
Exhibit G - Form of Assignment of Plans and Warranties
Exhibit H - Form of ▇▇▇▇ of Sale
Exhibit I - Form of Assignment of Other Assets
Exhibit J - Form of Assignment and Assumption of Leaseholds
Exhibit K - Form of Assignment and Assumption Agreement
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* Except for Exhibit B to the Purchase Agreement and Escrow Instructions, the
Schedules and Exhibits are not filed herewith. The Filer hereby agrees to
furnish supplementally a copy of any omitted Schedule or Exhibit upon the
request of the Commission.
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
To: First American Title Insurance Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Escrow Officer: ▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ Escrow No.: N991215G
THIS PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS ("Agreement") is made
and entered into as of October 7, 1999, and constitutes an agreement by and
among ▇▇▇▇▇▇▇ ▇▇▇▇ HOMES, INC., a California corporation ("Seller"), ▇▇▇▇▇▇▇
▇▇▇▇, an individual, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, an individual (▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇ are collectively referred to herein as the "▇▇▇▇▇"), ▇▇▇▇▇▇▇ HOMES, a
California corporation ("Buyer"), and THE ▇▇▇▇▇▇▇ COMPANIES, a Delaware
corporation ("▇▇▇▇▇▇▇-Del."). This Agreement also constitutes escrow
instructions of Buyer, Seller and ▇▇▇▇▇▇▇-Del. to First American Title Insurance
Company, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Escrow Holder")
for its Escrow No. N991215G. Seller, the ▇▇▇▇▇, Buyer and ▇▇▇▇▇▇▇-Del. are
hereinafter collectively referred to as the "Parties," and each individually as
a "Party."
RECITALS:
WHEREAS, Seller is engaged in the business of residential development in
the State of California; and
WHEREAS, Buyer desires to purchase, and Seller desires to sell,
substantially all of Seller's real estate assets and certain other assets of
Seller related thereto for a cash purchase price of $48 million (subject to
adjustment as provided herein) and the assumption by Buyer of substantially all
of the liabilities of Seller relating to such assets, all as provided for herein
(such purchase and assumption being referred to herein as the "Acquisition");
and
WHEREAS, Seller has entered into separate Stock Purchase and Sale
Agreements dated as of July 6, 1999 (collectively, the "Series B Purchase
Agreements") with each of GS Credit Partners, L.P., ING (U.S.) Capital, L.L.C.,
and The Chase Manhattan Bank, as Trustee for First Plaza Group Trust
(collectively, the "Series B Shareholders"), which provide for the purchase by
Seller from the Series B Shareholders of an aggregate of 9,434,813 shares
(subject to adjustment as provided therein) of Series B Common Stock of
▇▇▇▇▇▇▇-Del. for a cash price of $0.655 per share (such transactions being
referred to herein collectively as the "Series B Purchases"); and
WHEREAS, the ▇▇▇▇▇ propose to purchase a number of the issued and
outstanding shares of ▇▇▇▇▇▇▇-Del. Series A Common Stock, par value $.01 per
share (the "Series A Common Stock"), such that, after such purchase (and after
giving effect to the Series B Purchases and to the disposition by the ▇▇▇▇▇ on
August 13, 1999 of an aggregate of 3,000,000 shares of Series A Common Stock of
▇▇▇▇▇▇▇-Del.), the ▇▇▇▇▇ and their affiliates would own approximately 49% (but
not more than 49.9%) of the outstanding Common Stock of ▇▇▇▇▇▇▇-Del; and
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WHEREAS, in furtherance thereof, the ▇▇▇▇▇ propose to make a cash tender
offer (the "Series A Offer") to acquire, for a purchase price of $0.655 per
share, 10,678,792 shares (subject to adjustment as provided herein) of Series A
Common Stock.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the Parties hereby
agree, and Escrow Holder is instructed, as follows.
1. Purchase and Sale.
1.1 Seller's Assets. Subject to the terms and conditions set forth in
this Agreement, on the Closing Date (as hereinafter defined), Seller will sell,
convey, transfer, assign, and deliver to Buyer or to Buyer's Permitted Assigns
(as hereinafter defined), as applicable, and Buyer or Buyer's Permitted Assigns,
as applicable, will purchase and accept delivery from Seller of the following
assets of Seller:
(a) Real Property. All of Seller's rights, title and interest in
and to all of that certain real property located in the State of
California and more particularly described on Schedule 1.1(a) attached
hereto (collectively, "Seller's Real Property"), inclusive of (i) any
and all buildings, structures, fixtures and improvements located on or
in Seller's Real Property, and (ii) all of Seller's rights, privileges
and easements appurtenant to or used in connection with any of Seller's
Real Property and/or any of the improvements, buildings, structures or
fixtures located therein or thereon, including, without limitation, all
minerals, oil, gas and other hydrocarbon substances, all development
rights, all entitlement rights, air rights, water, water rights and
water stock relating to any of Seller's Real Property, all strips and
gores, all of Seller's rights, title and interest in and to any streets,
alleys, easements, rights-of-way, public ways, and all other rights of
Seller appurtenant, adjacent or connected to any of Seller's Real
Property, but exclusive of any parcels and improvements included in
Seller's Real Property which are sold by Seller prior to the Closing in
the ordinary course of Seller's business.
(b) Personal Property. All supplies, materials, work in process,
equipment, machinery, furniture, fixtures, motor vehicles, claims and
rights under leases (as lessor or lessee), contracts, notes, evidences
of indebtedness, purchase and sales orders, copyrights, service marks,
trademarks, trade names, trade secrets, licenses and permits (to the
extent transferable) and deposits (collectively, "Personal Property
Assets") that are owned, leased or licensed by Seller and used in
connection with or relate to the development, marketing or sale of
Seller's Real Property ("Seller's Personal Property").
(c) Other Seller Assets.
(i) All receivables, escrow and other proceeds, purchase
deposits, cash, real estate assets (including improvements) and other
assets
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(inclusive of any interest or other amounts earned thereon) of
Seller existing as of the Closing Date and which were earned, acquired
or generated by Seller in the conduct of its real estate development
business, including without limitation those arising out of or relating
to any of the following:
(A) sales, transfers, assignments or other dispositions of
real property and related assets, improvements and other rights
by Seller between January 1, 1999 and the Closing Date, including
without limitation, sales, transfers, assignments or other
dispositions of any portion of Seller's Real Property, Seller's
Personal Property or Seller's interests in the Partnerships (as
defined in Section 1.2 hereof) in the ordinary course of business
after the date hereof and prior to the Closing Date;
(B) purchases or other investments in real estate
development and related assets after the date hereof and prior to
the Closing Date; and
(C) Seller's right to receive capital, profits, assets,
allocations, returns (whether preferred or not), distributions,
fees or other payments from any of the Partnerships (as defined
in Section 1.2 hereof) between January 1, 1999 and the Closing
Date.
(ii) All accruals and cash reserves of Seller in respect of or
relating to any of the Assumed Liabilities (as defined in Section 5
below).
(iii) All of Seller's right, title and interest in and to the
intangible property identified on Schedule 1.1(c)(iii).
(iv) All sales data, customer lists, mailing lists, supplier and
contractor lists, and marketing and advertising materials relating to
the marketing and sale of Seller's Real Property.
(v) All of Seller's rights under the Contracts (as defined in
Section 4.1 hereof).
(vi) All other assets of Seller identified on Schedule
1.1(c)(vi).
(vii) All of Seller's books and records relating to any of
Seller's Real Property, Seller's Personal Property or any of the other
assets to be transferred pursuant to this Section 1.1(c).
All of the foregoing assets of Seller to be sold, assigned and
transferred at Closing by Seller to Buyer (other than Seller's Excluded Assets
as defined in Section 2 below) are hereinafter collectively referred to as
"Seller's Assets."
1.2 Partnership Assets. Subject to the terms and conditions set forth
in this Agreement, on the Closing Date (as hereinafter defined), Seller shall
cause each of the partnerships and limited liability companies identified on
Schedule 1.2 attached hereto
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(collectively, the "Partnerships") to sell, convey, transfer, assign, and
deliver to Buyer or to Buyer's Permitted Assigns (as hereinafter defined), as
applicable, and Buyer or Buyer's Permitted Assigns, as applicable, will purchase
and accept delivery of, the following assets of each Partnership:
(a) Partnership Real Property. All of each Partnership's rights,
title and interest in and to all of that certain real property located
in the State of California as more particularly described on Schedule
1.2(a) attached hereto (collectively, the "Partnership Real Property,"
and together with Seller's Real Property, the "Real Property"),
inclusive of (i) any and all buildings, structures, fixtures and
improvements located on or in the Partnership Real Property, and (ii)
each of the Partnership's rights, privileges and easements appurtenant
to or used in connection with any of the Partnership Real Property
and/or any of the improvements, buildings, structures or fixtures
located therein or thereon, including, without limitation, all minerals,
oil, gas and other hydrocarbon substances, all development rights, all
entitlement rights, air rights, water, water rights and water stock
relating to any of the Partnership Real Property, all strips and gores,
all of each Partnership's rights, title and interest in and to any
streets, alleys, easements, rights-of-way, public ways, and all other
rights of each of the Partnerships appurtenant, adjacent or connected to
any of the Partnership Real Property, but exclusive of any parcels and
improvements included in the Partnership Real Property which are sold by
any of the Partnerships prior to the Closing and in the ordinary course
of business.
(b) Partnership Personal Property. All Personal Property Assets
(as defined in Section 1.1(b) hereof) that are owned, leased or licensed
by any of the Partnerships and used in connection with or relate to the
development, marketing or sale of the Partnership Real Property
(collectively, the "Partnership Personal Property," and together with
Seller's Personal Property, the "Personal Property").
(c) Other Partnership Assets.
(i) All receivables, escrow and other proceeds, purchase
deposits, cash, real estate assets (including improvements) and other
assets (inclusive of any interest or other amounts earned thereon) of
any of the Partnerships existing as of the Closing Date and which were
earned, acquired or generated by any of the Partnerships in the conduct
of their respective real estate development businesses, including
without limitation those arising out of or relating to any of the
following:
(A) sales, transfers, assignments or other dispositions
of real property and related assets, improvements and other
rights by any of the Partnerships between January 1, 1999 and the
Closing Date, including without limitation sales, transfers,
assignments or other dispositions of any portion of the
Partnership Real Property or the Partnership Personal Property
after the date hereof and prior to the Closing Date; and
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(B) purchases or other investments in real estate
development and related assets after the date hereof and prior to
the Closing Date.
(ii) All accruals and cash reserves of the Partnerships in
respect of or relating to any of the Assumed Liabilities (as defined in
Section 5 below) of the Partnerships.
(iii) All of each Partnership's right, title and interest in
and to the intangible property identified on Schedule 1.2(c)(iii).
(iv) All sales data, customer lists, mailing lists, supplier
and contractor lists, and marketing and advertising materials relating
to the marketing and sale of the Partnership Real Property.
(v) All of each Partnership's obligations and liabilities
under any of the Contracts (as defined in Section 4.1 hereof).
(vi) All other assets of the Partnerships identified on
Schedule 1.2(c)(vi).
(vii) All of the Partnerships' books and records relating to
any of the Partnership Real Property, the Partnership Personal Property
or any of the other assets to be transferred pursuant to this Section
1.2.
All of the foregoing assets of the Partnerships to be sold,
assigned and transferred at Closing by such Partnerships to Buyer or Buyer's
Permitted Assigns (other than the Excluded Assets as defined in Section 2 below)
are hereinafter collectively referred to as the "Partnership Assets," and
together with Seller's Assets, as the "Assets."
2. Assets Excluded from Purchase. Notwithstanding Section 1
hereof, the following assets of Seller and/or the Partnerships shall not be
transferred and sold to Buyer (or Buyer's Permitted Assigns) pursuant to Section
1, but shall be retained by Seller and/or the Partnerships, as applicable (the
"Excluded Assets"):
2.1 Seller's and the Partnerships' rights and claims to tax refunds
and adjustments of any kind (other than those relating to property taxes paid or
payable with respect to property owned by Seller or any of the Partnerships as
of December 31, 1998 or acquired by Seller or any of the Partnerships after such
date);
2.2 The consideration delivered to Seller pursuant to this Agreement;
2.3 Seller's and the Partnerships' articles of incorporation,
corporate seals, minute books, stock books, books of account, partnership
agreements, organizational documents and other corporate, partnership or limited
liability company records and all income tax records and nontransferable
licenses and permits; provided however, that copies of such corporate,
partnership, limited liability company, tax and accounting records and
nontransferable permits shall be delivered to Buyer at the Closing;
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2.4 Any assets acquired by Seller or any of the Partnerships after the
Closing Date (other than with proceeds which constitute any part of the Assets
to be transferred pursuant to Sections 1.1(c) or 1.2(c));
2.5 All cash reserves of Seller or any of the Partnerships in an
amount equal to the amount of any and all recorded accounts payable or accrued
liabilities in respect of or relating to any of the Excluded Liabilities under
Section 5 hereof;
2.6 Such other Excluded Assets as are identified on Schedule 2.6.
3. Purchase Price, Adjustments and Allocation.
3.1 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be (i) the assumption of the Assumed Liabilities (as defined
herein), plus (ii), subject to Section 3.2 below, Forty-Eight Million Dollars
($48,000,000), which shall be payable, together with Buyer's share of any escrow
closing costs, through the Escrow created pursuant to Section 6 hereof and as
provided for herein. The cash portion of the Purchase Price, together with
Buyer's share of any escrow closing costs, shall be deposited in Escrow by Buyer
in cash or other immediately available funds on or prior to the Close of Escrow.
3.2 Adjustment to Purchase Price. The Purchase Price for the Assets
was determined based on the value of the real property and related assets,
rights and improvements owned directly or indirectly by Seller and the
Partnerships as of December 31, 1998 and held for development and/or resale or
otherwise used in their respective real estate development businesses
(collectively referred to as the "1998 Real Estate Development Assets"). Buyer
and Seller intend that the 1998 Real Estate Development Assets, together with
all income, receivables, escrow and other proceeds, purchase deposits, cash and
other assets earned or received by Seller or any of the Partnerships from the
sale of any of the 1998 Real Estate Development Assets (including any assets
purchased or acquired with the sale proceeds thereof) or otherwise earned or
acquired by Seller or any of the Partnerships in the ordinary course of business
since January 1, 1999 and through the Closing Date (the "Operating Period"),
shall inure to the benefit of Buyer (or Buyer's Permitted Assigns), net of any
such assets or amounts which have been or will be used by Seller or any of the
Partnerships prior to the Closing Date to pay or satisfy land acquisition or
development costs, capital expenditures, principal of or interest on
indebtedness, accounts payable, accrued liabilities, employee wages and
benefits, taxes and other liabilities and operating expenses existing at
December 31, 1998 or incurred by Seller or any of the Partnerships in the
ordinary course of business during the Operating Period.
In furtherance of the foregoing, Buyer and Seller agree that the
$48,000,000 cash portion of the Purchase Price shall be:
(a) reduced by the aggregate amount (if any) of:
(i) except to the extent recorded or otherwise provided
for on the books of Seller as of December 31, 1998, any dividends,
redemption payments or other similar distributions (whether of cash or
property) made by Seller during the Operating Period to any of its
stockholders in respect of their stock;
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(ii) except to the extent recorded or otherwise
provided for on the books of Seller or the applicable Partnership
as of December 31, 1998, the unpaid balance (outstanding as of
the Closing Date, and inclusive of any interest) of any loans or
other advances, and the unreimbursed portion of any other
payments, made during the Operating Period by Seller to or for
the personal benefit of any of its shareholders or affiliates, or
by any of the Partnerships to or for the personal benefit of any
partner (or affiliate of such partner) other than Seller, but
excluding (A) any loans or advances, the right to receive
repayment of which is included among the Assets to be transferred
to Buyer pursuant to either Section 1.1(c) or Section 1.2(c)
hereof, (B) any advances or other payments made in the form of
salary or other compensation for services rendered to Seller or
any of the Partnerships in the ordinary course of business, and
(C) any payments made or amounts incurred in respect of legal,
financial and tax accounting, appraisal or financial advisory
fees and expenses incurred in connection with the transactions
contemplated by this Agreement (it being the intent of the
Parties that any adjustments for such fees and expenses be
governed by clause (viii) of this Section 3.2(a));
(iii) the amount of any payments made or liabilities
accrued by Seller during the Operating Period in respect of any
of the following items, but only to the extent that the payment
or other liability had not been accrued and reflected or
otherwise provided for on Seller's or the applicable
Partnership's books and records as of December 31, 1998:
(A) bonuses and other compensation to directors,
officers and employees of Seller or any of the Partnerships
for services rendered prior to December 31, 1998;
(B) warranty expenses related to real estate
assets sold and closed prior to December 31, 1998;
(C) payments (and related legal fees) made in
settlement of legal claims, other than claims relating to
any of the Assets or Assumed Liabilities; and
(D) any significant and unusual charitable
contributions made by Seller or any of the Partnerships
during the Operating Period;
(iv) the value of any real estate assets identified as
"Excluded Assets" on Schedule 2.6, such value to be (A) with
respect to any such asset acquired after December 31, 1998, the
net book value of such asset as of the Closing Date (as reflected
on Seller's or the applicable Partnership's books and records and
determined in accordance with generally accepted accounting
principles), and (B) with respect to any such asset owned by
Seller or any of the Partnerships as of December 31, 1998, the
fair value of such asset as of January 1, 1999 as adjusted for
any increases or decreases in the carrying value of the
particular asset(s) as of the Closing Date;
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(v) the amount of any operating expenses incurred or
accrued by Seller or any of the Partnerships during the Operating
Period in respect of or relating directly to any of the Excluded
Assets;
(vi) the amount of any non-cash adjustments made on the
books and records of Seller or any of the Partnerships during the
Operating Period for write-offs or abandonment of assets which
were recorded on the books at December 31, 1998 (other than with
respect to any Excluded Assets), but only to the extent such
amount exceeds $500,000 in the aggregate;
(vii) the amount of any cash reserves to be retained by
Seller or any of the Partnerships pursuant to Section 2.4 hereof
in respect of Excluded Liabilities; and
(viii) any amounts (A) paid by Seller or any of the
Partnerships during the Operating Period (except to the extent
that the corresponding liability was recorded on the books and
records of Seller or the applicable Partnership as of December
31, 1998), or (B) incurred by Seller or any of the Partnerships
during the Operating Period and accrued on the books and records
of Seller or the applicable Partnership as of the Closing Date,
in the case of (A) and (B), to the extent such amounts were paid
or incurred in respect of legal, financial or tax accounting,
appraisal or financial advisory fees or expenses incurred in
connection with the transactions contemplated by this Agreement,
but only to the extent such amounts exceed $1,250,000 in
the aggregate;
and
(b) increased by the aggregate amount (if any) of:
(i) any capital contribution to or other equity
investment made in Seller by any of its shareholders during the
Operating Period, provided that if such contribution or
investment is made after the date hereof, such contribution or
investment has been approved by Buyer in writing;
(ii) any accounts payable, accrued liabilities and/or
indebtedness secured by or relating to any of the Excluded
Assets;
(iii) warranty reserves reflected on the books and
records of Seller or any of the Partnerships as of the Closing
Date, but only to the extent that such reserves are retained by
Seller; and
(iv) tax refunds, insurance recoveries, utility
deposits and any other assets acquired by Seller or any of the
Partnerships during the Operating Period in exchange for or in
respect of any claims or other assets which were not reflected on
their respective books and records as of December 31, 1998;
provided, however, that except as expressly provided in Section 3.2(a)(viii)
above, nothing contained in this Section 3.2 or elsewhere in this Agreement
shall be interpreted or construed to
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cause a reduction in the Purchase Price for any amounts paid or incurred by
Seller or any of the Partnerships in respect of legal, financial and tax
accounting, appraisal, lender commitment, financial advisory, exchange agent,
depositary, printing, filing and registration, escrow, title, recording property
transfer and other fees and expenses incurred by Seller, the Partnerships or
their respective affiliates in connection with the transactions contemplated by
this Agreement.
Any adjustment to the Purchase Price shall be determined in
accordance with the foregoing provisions of this Section 3.2 based upon a review
of Seller's and the Partnerships' respective books and records by Ernst & Young
LLP or such other independent accounting firm as may be acceptable to Buyer and
Seller (the "Independent Auditor"). Buyer and Seller shall instruct the
Independent Auditor to perform a preliminary review of such books and records
and notify Buyer, Seller and Escrow Holder in writing not later than five (5)
business days prior to the Closing Date of the Independent Auditor's estimate of
any proposed adjustment to the Purchase Price pursuant to this Section 3.2, such
notice to include reasonable detail as to the nature and calculation of any such
proposed adjustment. Unless Buyer or Seller shall deliver written notice to
Escrow Holder prior to the Closing Date of its objection to any such proposed
adjustment, such adjustment shall be made to the Purchase Price at the Closing
through Escrow. If either Buyer or Seller notifies Escrow Holder in writing
prior to the Closing of its objections to the Independent Auditor's estimated
adjustment, Escrow Holder shall withhold the amount of the proposed adjustment
from the Purchase Price and continue to hold such amount in Escrow (in an
interest bearing account) until such adjustment amount is finally determined in
accordance with the procedures set forth in the following paragraphs.
Following the Closing, Buyer and Seller shall instruct the
Independent Auditor to complete a review of Seller's books and records through
the Closing Date for the purpose of determining the final adjustment (if any) to
the Purchase Price pursuant to this Section 3.2. The Independent Auditor shall
complete such review and deliver to Buyer and Seller written notice of its final
determination of any adjustment to the Purchase Price pursuant to this Section
3.2 within 30 calendar days of the Closing Date. If Buyer and Seller agree with
the Independent Auditor's determination (or fail to deliver written notice of
any objection within 10 business days of receipt of such determination), such
determination shall become final and conclusive for all purposes under this
Agreement. If either Buyer or Seller shall disagree with such determination, it
shall notify the other Party, Escrow Holder and the Independent Auditor in
writing of such objection within 10 business days, such notice to set forth in
reasonable detail the basis for such objection. Buyer and Seller shall make a
good faith attempt to resolve any differences and to agree upon a final
adjustment amount, but if such Parties are unable reach agreement within 20
calendar days of the date of the objection notice, the matter will be directed
to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or another independent accounting firm acceptable to
Buyer and Seller, whose determination pursuant to this Section 3.2 shall be
binding and conclusive for all purposes under this Agreement. The fees and
expenses of such firm shall be shared equally by Buyer and Seller.
Within two (2) business days of the final determination of any
adjustment to the Purchase Price pursuant to this Section 3.2, Buyer and Seller
shall instruct Escrow Holder to remit to such Parties any funds remaining in
Escrow in such relative amounts as are necessary and appropriate to effect such
adjustment, together with any interest earned on such funds from the Closing
Date. After disbursement of any of the funds remaining in Escrow, any additional
amounts due and owing between Buyer and Seller as a result of any adjustment of
the Purchase
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Price pursuant to this Section 3.2 shall be paid within five (5)
business days of the final determination, together with interest on such
additional amount from the Closing Date to the date of payment calculated on the
basis of the prime rate in effect on the Closing Date and published in The Wall
Street Journal.
3.3 Allocation of Purchase Price; Tax Filings. Buyer and Seller
agree to negotiate in good faith with respect to the allocation of the Purchase
Price among the Assets and the Assumed Liabilities. Buyer and Seller agree that
their agreed upon allocation shall be used, reported and implemented for all
federal, state, local and other tax purposes.
4. Assumption of Liabilities. At the Closing, Buyer and Buyer's
Permitted Assigns shall assume, and agree to pay, perform and discharge, or
cause to be paid, performed and discharged, all of Seller's and each of the
Partnerships' obligations and liabilities under or with respect to the
following:
4.1 Contracts. All (a) subcontract agreements on Seller's or the
Partnerships' (as applicable) standard forms of contract for services, materials
or supplies to be incorporated into the works of improvement on the Real
Property, (b) purchase and sale agreements on Seller's or the Partnerships' (as
applicable) standard forms of contract and escrow instructions on Seller's, the
Partnerships' or escrow holders' standard forms for the sale of individual lots
to home buyers which sales have not closed escrow on or before the Closing, (c)
subdivision agreements, development agreements and other entitlement agreements
to which Seller or any of the Partnerships is a party with Governmental Entities
(as hereinafter defined in Section 10.1) relating to the Real Property, (d) all
obligations and liabilities of Seller and any of the Partnerships under
construction or performance bonds, guaranties and similar commitments entered
into in connection with the development of the Real Property, and (e) the
contracts, leases, instruments (including debt instruments), profit
participation agreements and other agreements listed on Schedule 4.1. (The
contracts identified in the previous sentence are hereinafter referred to as the
"Contracts.");
4.2 Accounts Payable and Accrued Liabilities. Accounts payable
and accrued liabilities of Seller and the Partnerships arising in the ordinary
course of business with respect to the Assets and their respective development
businesses; and
4.3 Employee Obligations. Any liabilities or obligations of
Seller and the Partnerships to pay compensation, salary, wages or other benefits
(including vacation, sick leave, retirement, health and other similar benefits)
to employees of Seller or any of the Partnerships who are hired to continue
employment with Buyer or any of Buyer's Permitted Assigns following the Closing
Date, but only to the extent that such liabilities or obligations (a) are
accrued and reflected or otherwise provided for on Seller's or the applicable
Partnership's books and records as of the Closing Date, (b) are disclosed on the
list or in other documents delivered to Buyer pursuant to Section 11.22 of this
Agreement, or (c) represent compensation, salary, wages or other benefit
obligations incurred by Seller or any of the Partnerships with respect to the
payment period in which the Closing Date occurs.
All of the foregoing liabilities and obligations of Seller and
the Partnerships to be assumed, paid, performed and/or discharged by Buyer or
Buyer's Permitted Assigns (other than the Excluded Liabilities set forth in
Section 5 below) are hereinafter collectively referred to as the "Assumed
Liabilities."
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5. Liabilities Not Assumed. Notwithstanding Section 4 of this Agreement,
Buyer and Buyer's Permitted Assigns shall not directly or indirectly assume,
pay, perform, discharge or be responsible for any of the liabilities or
obligations of Seller or any of the Partnerships or any of their respective
affiliates, whether liquidated or unliquidated, known or unknown, actual or
inchoate, accrued, contingent or otherwise, which are identified below (the
"Excluded Liabilities"):
5.1 Any liabilities or obligations incurred, arising from or out
of, or in connection with or as a result of, any alleged or actual defect, or
any alleged or actual breach of warranty (whether express or implied), with
respect to any portion of the Real Property (including all improvements thereon)
worked on by Seller, the Partnerships or any of their respective contractors,
subcontractors or other affiliates prior to the Closing Date;
5.2 Any liabilities or obligations incurred, arising from or out
of, or in connection with or as a result of, any claim, action, suit,
litigation, arbitration or administrative or other proceeding made by or against
Seller or any of the Partnerships either (a) before the Closing Date, or (b)
after the Closing Date with respect to events which occurred or conditions which
existed before the Closing Date (except, in the case of clause (b) hereof only,
for such liabilities and obligations which have been expressly assumed by Buyer
pursuant to Section 4 of this Agreement);
5.3 Any obligation, liability or expense of Seller or any of the
Partnerships for taxes (other than property taxes relating to the Real Property
or any other real estate assets included in the Assets to be transferred to
Buyer pursuant to Section 1 hereof);
5.4 Any obligation, liability or expense relating to or arising
out of the Excluded Assets;
5.5 Any liabilities or obligations of Seller or any of the
Partnerships which are incurred or arise after the Closing Date from, or out of,
or in connection with, this Agreement;
5.6 Any liabilities or obligations of Seller to its shareholders
in respect of their ownership interest in Seller, or any of the Partnerships to
their respective Partners;
5.7 Any liabilities or obligations for indebtedness secured by
mortgages, deeds of trust or other liens or security interests on or in the
Assets, which indebtedness is non-recourse to Seller or the Partnerships (as
applicable) or as to which Seller or the Partnerships (as applicable) are not
directly or indirectly liable or as to which Seller or the Partnerships (as
applicable) do not provide credit support;
5.8 Any liabilities or obligations of Seller or the Partnerships,
or costs and expenses incurred in connection with them, to the extent Seller or
the Partnerships have the right to be indemnified or reimbursed by an insurer or
other third party with respect to such liabilities or obligations; and
5.9 Those liabilities and obligations set forth on Schedule 5.9
hereto.
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6. Opening of Escrow. As soon as reasonably possible after the execution
of this Agreement, Buyer, Seller (on behalf of itself and the Partnerships) and
▇▇▇▇▇▇▇-Del. shall open an escrow ("Escrow") with Escrow Holder. Escrow Holder
shall notify all Parties in writing of the date of Opening of Escrow. As used in
this Agreement, the term "Opening of Escrow" shall mean the date on which three
(3) copies of this Agreement signed by Buyer, Seller and ▇▇▇▇▇▇▇-Del. are
delivered to Escrow Holder. Upon receipt of such items, Escrow Holder is hereby
instructed to open the Escrow, to insert the Escrow Number on page 1 of each
copy of this Agreement, to insert the date of the Opening of Escrow on the
signature page of each copy of this Agreement, to sign the signature page of
each copy of this Agreement, and to deliver one (1) complete copy of this
Agreement to Seller and one (1) complete copy of this Agreement to Buyer and
▇▇▇▇▇▇▇-Del. This Agreement shall also constitute instructions to Escrow Holder.
Escrow Holder's general provisions are attached hereto as Exhibit "A" and
incorporated by reference herein. If there is any conflict between the
provisions of this Agreement and the provisions of Exhibit "A", the provisions
of this Agreement shall control as among ▇▇▇▇▇▇▇-Del., Buyer and Seller, but the
provisions of Exhibit "A" shall control as to the duties of Escrow Holder.
7. Close of Escrow. The closing ("Closing") of the purchase and sale of
the Real Property and the Assets shall take place through the Escrow when all of
the conditions to Closing have been satisfied, but in no event later than
November 30, 1999 (the "Closing Date"); provided, however, that if the Closing
of the Acquisition or the Series A Offer (as hereinafter defined) has not
occurred by November 30, 1999 due to delays in obtaining governmental or
regulatory approvals of any of the transactions contemplated by this Agreement,
then the Parties agree to extend the Closing Date for up to an additional 30
calendar days to allow the process of obtaining such approvals to be completed.
As used in this Agreement, the final act of the "Closing" or the "Close of
Escrow" shall refer to the date on which Buyer deposits the Purchase Price into
Escrow and "Seller's Grant Deeds" (as hereinafter defined) conveying the Real
Property to Buyer (or Buyer's Permitted Assigns) are recorded through Escrow in
the Official Records of the Counties in which each respective parcel of Real
Property is located. All other deliveries pursuant to Section 15 and Section 16
hereof shall have taken place prior to the recording of any of such Seller's
Grant Deeds.
8. Title Report. Seller has caused Escrow Holder to provide Buyer with
preliminary title reports issued by First American Title Insurance Company, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with respect to the Real
Property, together with copies of all documents referred to therein and maps of
the Real Property showing the location of all easements (collectively, the
"Title Documents"). Buyer's failure to approve or disapprove the preliminary
title reports (and any exceptions thereon) by delivery of written notice thereof
to Seller and Escrow Holder within thirty (30) calendar days of the date of this
Agreement shall be deemed Buyer's approval. Seller shall take commercially
reasonable actions to remove from title to the Real Property as of the Closing
Date any matters and exceptions reasonably objected to by Buyer in writing
within such period.
9. The Series A Offer.
9.1 Commencement and Conditions. (a) Provided that this Agreement
shall not have been terminated in accordance with its terms and, subject to
Section 9.2 below, none of
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the events set forth in Exhibit "B" shall have occurred and be existing, as
promptly as practicable (but in no event later than five business days after the
public announcement of the execution of this Agreement), the ▇▇▇▇▇ shall
commence (within the meaning of Rule 14d-2 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), a cash tender offer to
acquire up to 10,678,792 shares of Series A Common Stock at $0.655 per share
(the "Offer Price"), subject to adjustment to ensure that the ▇▇▇▇▇' purchase of
▇▇▇▇▇▇▇-Del. Common Stock pursuant to the Series A Offer and/or the Series B
Purchase Agreements does not result in an "ownership change" of ▇▇▇▇▇▇▇-Del. for
Federal income tax purposes or which would have an adverse effect on
▇▇▇▇▇▇▇-Del.'s (or its successor's) ability to utilize its net operating losses
for tax purposes. Subject to the conditions set forth in Exhibit "B" hereto, the
▇▇▇▇▇ shall use reasonable efforts to consummate the Series A Offer in
accordance with its terms and to accept for payment and pay for shares of Series
A Common Stock tendered pursuant to the Series A Offer as soon as the ▇▇▇▇▇ are
legally permitted to do so under applicable law. The Series A Offer shall be
made by means of the Offer to Purchase (as defined below) and shall be subject
only to the conditions set forth in Exhibit "B" hereto and shall reflect, as
appropriate, the other terms set forth in this Agreement. The ▇▇▇▇▇ may decrease
or waive the Minimum Condition (as defined in Exhibit "B" hereto) but shall not
decrease the Offer Price or decrease the number of shares of Series A Common
Stock sought, or amend any other condition of the Series A Offer in any manner
adverse to the holders of the shares of Series A Common Stock without the
written consent of ▇▇▇▇▇▇▇-Del. The ▇▇▇▇▇ may increase the amount they offer to
pay per share in the Series A Offer, and the Series A Offer may be extended to
the extent required by law in connection with such increase, in each case
without the consent of ▇▇▇▇▇▇▇-Del.
(b) If, after receiving the advice of counsel, ▇▇▇▇▇▇▇-Del.
determines that the consummation of the Series A Offer and/or Series B Purchases
would result in an "ownership change" of ▇▇▇▇▇▇▇-Del. for Federal tax purposes
or other adverse tax consequence to ▇▇▇▇▇▇▇-Del., ▇▇▇▇▇▇▇-Del. will notify the
▇▇▇▇▇, who will reduce the number of shares of Series A Common Stock sought
pursuant to the Series A Offer (but not below the number of shares required to
satisfy the Minimum Condition) to avoid such "ownership change" or other adverse
tax consequence.
(c) If on the initial scheduled expiration date of the Series A
Offer, which shall be no earlier than twenty (20) business days after the date
upon which the Series A Offer is commenced, any of the following shall have
occurred and be continuing:
(i) the condition set forth in clause (i) of Exhibit "B"
hereto shall not have been satisfied or waived by the ▇▇▇▇▇; or
(ii) either of the conditions set forth in clause (ii) or
clause (iii) of Exhibit "B" hereto shall not have been satisfied
or waived by the ▇▇▇▇▇ due to delays in (A) obtaining necessary
governmental or regulatory approvals of, or any necessary third
party consents to, any of the transactions contemplated by the
Agreement, or (B) obtaining the financing required to satisfy the
condition set forth in Section 16.9 of this Agreement, or (C)
obtaining the releases necessary to satisfy the condition set
forth in Section 17.7 of this Agreement;
then the ▇▇▇▇▇ shall extend the expiration date of the Series A Offer from time
to time and for
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such number of business days as may be necessary to allow for such conditions to
be satisfied and for the closing of the Series A Offer to be substantially
coterminous with the closings of the other transactions contemplated under this
Agreement; provided, however, that in no event shall the ▇▇▇▇▇ be obligated to
extend the expiration date of the Series A Offer beyond November 30, 1999 (or 30
calendar days thereafter in the event that the Closing Date is extended pursuant
to Sections 7 and 25.3 hereof).
9.2 Satisfaction of Conditions. Notwithstanding the provisions of
Section 9.1, upon consummation of the Acquisition in accordance with the terms
of this Agreement, all of the conditions set forth in Exhibit "B" (other than
the condition specified in Section (iv)(a) thereof) shall be deemed to have been
satisfied, and the ▇▇▇▇▇' obligation to consummate the Series A Offer hereunder
shall not be subject to such conditions that are deemed satisfied hereunder.
9.3 Lyon SEC Filings. Concurrently with the commencement of the
Series A Offer, the ▇▇▇▇▇ shall file with the SEC a tender offer statement on
Schedule 14D-1 with respect to the Series A Offer (the "Schedule 14D-1"). The
Schedule 14D-1 will include, as exhibits, an Offer to Purchase (the "Offer to
Purchase") and a form of letter of transmittal. The ▇▇▇▇▇ will take all steps
necessary to cause the Offer to Purchase, form of letter of transmittal and
other exhibits to the Schedule 14D-1, together with any amendments and
supplements thereto (the "Offer Documents"), to be filed with the SEC and to be
disseminated to holders of the Series A Common Stock, in each case as and to the
extent required by applicable Federal securities laws. The ▇▇▇▇▇ and Seller, on
the one hand, and ▇▇▇▇▇▇▇-Del. and Buyer, on the other hand, will promptly
correct any information provided by such Party for use in the Offer Documents if
and to the extent that it shall have become false or misleading in any material
respect, and the ▇▇▇▇▇ will take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of the Series A Common Stock, in each case as and to the extent required
by applicable Federal securities laws. ▇▇▇▇▇▇▇-Del. and Buyer and their counsel
shall be given the opportunity to review the initial Schedule 14D-1 before it is
filed with the SEC. The ▇▇▇▇▇ will provide ▇▇▇▇▇▇▇-Del. and Buyer and their
counsel in writing with any comments or other communications, whether written or
oral, that the ▇▇▇▇▇ or their counsel may receive from time to time from the SEC
or its staff with respect to the Offer Documents, promptly after the receipt of
such comments or other communications. The Offer Documents (as hereinafter
defined) will comply in all material respects with the provisions of applicable
Federal securities laws and, on the date filed with the SEC and on the date
first published or sent or given to ▇▇▇▇▇▇▇-Del.'s stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading.
9.4 ▇▇▇▇▇▇▇-Del.'s Actions With Respect to the Series A Offer.
(a) ▇▇▇▇▇▇▇-Del. hereby represents that a Special Committee of
its Board of Directors, at a meeting duly called and held, has, pursuant to
authority granted to it by ▇▇▇▇▇▇▇-Del.'s Board of Directors, (i) unanimously
determined that this Agreement and the transactions contemplated hereby, taken
together, are fair to and in the best interests of ▇▇▇▇▇▇▇-Del. and the holders
of the Series A Common Stock (other than the ▇▇▇▇▇), provided that each such
holder of Series A Common Stock is advised to consult with their financial and
tax advisors regarding the impact thereof on such holder, (ii) received the
opinion of Warburg Dillon Read LLC, financial
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advisor to the Special Committee of the Board of Directors, to the effect that
the shares of common stock of New ▇▇▇▇▇▇▇ and/or, to the extent any holder of
Series A Common Stock (other than the ▇▇▇▇▇ and the Series B Shareholders)
tenders shares of Series A Common Stock in the Offer, the cash that may be
received by each holder of Series A Common Stock (other than the ▇▇▇▇▇ and the
Series B Shareholders), subject to the pro ration provisions of the Offer, after
giving effect to the transactions contemplated by this Agreement, is fair to the
holders of the Series A Common Stock (other than the ▇▇▇▇▇ and the Series B
Shareholders) from a financial point of view, (iii) approved this Agreement and
the transactions contemplated hereby, and (iv) resolved to recommend that the
holders of the Series A Common Stock (other than the ▇▇▇▇▇ and the Series B
Shareholders) accept the Series A Offer and tender their shares pursuant
thereto; provided, however, that such holders of Series A Common Stock should
consult with their financial and tax advisors prior to tendering their shares in
the Series A Offer, and provided further that, subject to the provisions
contained in Section 27 of this Agreement, such recommendation may be withdrawn,
modified, or changed if, in the opinion of ▇▇▇▇▇▇▇-Del.'s Board of Directors or
its Special Committee, after consultation with counsel, the failure to take such
action would be inconsistent with their fiduciary duties under applicable law.
(b) As soon as practicable on or after the date the Series A
Offer is commenced, ▇▇▇▇▇▇▇-Del. shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which shall contain ▇▇▇▇▇▇▇-Del.'s recommendation with respect to the Series A
Offer. At the time the Offer Documents are first mailed to the holders of Series
A Common Stock, or as soon as practicable thereafter, ▇▇▇▇▇▇▇-Del. shall mail or
cause to be mailed to the holders of its Series A Common Stock as of the
applicable record date the Schedule 14D-9 together with the Offer Documents.
▇▇▇▇▇▇▇-Del. further agrees to take all steps necessary to cause the Schedule
14D-9 to be disseminated to the holders of the Series A Common Stock, as and to
the extent required by applicable Federal securities laws. Each of ▇▇▇▇▇▇▇-Del.,
on the one hand, and the ▇▇▇▇▇, on the other hand, agrees to promptly correct
any information provided by it or him for use in the Schedule 14D-9 if and to
the extent that it shall have become false and misleading in any material
respect. ▇▇▇▇▇▇▇-Del. further agrees to take all steps necessary to cause the
Schedule 14D-9, as so corrected, to be filed with the SEC and to be disseminated
to holders of the Series A Common Stock, in each case as and to the extent
required by applicable Federal securities laws. In addition, ▇▇▇▇▇▇▇-Del. agrees
to provide the ▇▇▇▇▇ and their counsel with any comments, whether written or
oral, that ▇▇▇▇▇▇▇-Del. or its counsel may receive from time to time from the
SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt
of such comments or other communications.
(c) In connection with the Series A Offer, ▇▇▇▇▇▇▇-Del. will
furnish or cause to be furnished to the ▇▇▇▇▇ such information and assistance as
the ▇▇▇▇▇ or their agents may reasonably request in communicating the Series A
Offer to the record and beneficial holders of the Series A Common Stock. Except
for such steps as are necessary to disseminate the Offer Documents, the ▇▇▇▇▇
shall hold in confidence the information referred to in the preceding sentence,
will use such information only in connection with the Series A Offer, and, if
this Agreement is terminated, will, upon request by ▇▇▇▇▇▇▇-Del., deliver or
cause to be delivered to ▇▇▇▇▇▇▇-Del. all copies of such information then in its
possession or the possession of its agents or representatives.
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(d) The information supplied by ▇▇▇▇▇▇▇-Del. expressly for
inclusion in the Offer Documents and the Schedule 14D-9 will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The Schedule 14D-9 will comply in all material respects with the provisions of
applicable Federal securities laws and, on the date filed with the SEC and on
the date first published or sent or given to ▇▇▇▇▇▇▇-Del.'s stockholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading, except that no representation is made by ▇▇▇▇▇▇▇-Del. or
Buyer with respect to statements made therein based on information furnished by
the ▇▇▇▇▇ for inclusion in the Schedule 14D-9.
9.5 Over- or Under-Subscription of Offer. In the event that the
Series A Offer is over-subscribed, the ▇▇▇▇▇ will purchase shares of Series A
Common Stock from each tendering holder of Series A Common Stock on a pro rata
basis such that the ▇▇▇▇▇ and their affiliates will not acquire, directly or
indirectly, a number of shares of Common Stock that would result in an
"ownership change" of ▇▇▇▇▇▇▇-Del. for Federal income tax purposes or other
adverse tax consequence of ▇▇▇▇▇▇▇-Del. In the event that the Series A Offer is
under-subscribed, Seller (or Seller's assignee) will purchase additional shares
of Common Stock from each holder of Series B Common Stock on a pro rata basis
pursuant to the Series B Purchase Agreements such that the ▇▇▇▇▇ and their
affiliates will hold up to 49.9% of the outstanding Common Stock (but in no
event shall they acquire a number of shares of Common Stock that would result in
an "ownership change" for Federal income tax purposes or other adverse tax
consequence that would limit ▇▇▇▇▇▇▇-Del. from utilizing its tax net operating
losses).
9.6 Successors in Interest to ▇▇▇▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇ agree that, in the event of the death, disability or other incapacity of
either of them, their respective estates or other successors in interest shall
be obligated to consummate the Series A Offer in accordance with the terms
hereof.
10. ▇▇▇▇▇▇▇-Del./New ▇▇▇▇▇▇▇ Merger and Other Matters.
10.1 Prior to the Closing, upon the terms and subject to the
conditions of this Agreement, each of the Parties shall use its respective
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable (subject to any
applicable laws) to consummate and make effective the merger, in accordance with
the terms set forth in the Certificate of Ownership and Merger attached hereto
as Exhibit "C" (the "Certificate of Ownership and Merger"), of ▇▇▇▇▇▇▇-Del. with
and into its wholly owned subsidiary, ▇▇▇▇▇▇▇ Merger Sub, Inc. ("New ▇▇▇▇▇▇▇")
(the "Merger"), as promptly as practicable including, but not limited to (a) the
preparation and filing of all forms, registrations and notices required to be
filed to consummate the Merger and the taking of such actions as are necessary
to obtain any requisite approvals, consents, orders, exemptions or waivers by
any third party or any court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency (each,
a "Governmental Entity"), and (b) the satisfaction of the conditions to the
closing of the Merger (the "Merger Closing"). In addition, none of the Parties
shall take any action after the date hereof that would reasonably be
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expected to materially delay the obtaining of, or result in not obtaining, any
permission, approval or consent from any Governmental Entity necessary to be
obtained prior to the Merger Closing.
10.2 Prior to the Merger Closing, each Party shall promptly
consult with the other Parties hereto with respect to, provide any necessary
information with respect to, and provide the other Parties (or their respective
counsel) with copies of, all filings made by such Party with any Governmental
Entity or any other information supplied by such Party to a Governmental Entity
in connection with this Agreement or the Merger. Each Party hereto shall
promptly inform the other of any communication from any Governmental Entity
regarding the Merger. If any Party hereto or affiliate thereof receives a
request for additional information or documentary material from any such
Governmental Entity with respect to the Merger, then such Party shall endeavor
in good faith to make, or cause to be made, as soon as reasonably practicable
and after consultation with the other Parties, an appropriate response in
compliance with such request. To the extent that transfers, amendments or
modifications of permits (including environmental permits) are required as a
result of the execution of this Agreement or consummation of the Merger, the
Parties shall use their best efforts to effect such transfers, amendments or
modifications.
10.3 Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to require any Party to commence any litigation against any
entity in order to facilitate the consummation of the Merger or to defend
against any litigation brought by any Governmental Entity seeking to prevent the
consummation of the Merger.
10.4 ▇▇▇▇▇▇▇-Del. has filed with the SEC a proxy statement with
respect to the Merger, which will also serve as a prospectus with respect to the
common stock of New ▇▇▇▇▇▇▇ (the "Proxy Statement/Prospectus") and be included
in a Registration Statement to be filed with the SEC on Form S-4 (the
"Registration Statement"). The Parties agree to use their best reasonable
efforts to cause the Registration Statement to be declared effective by the SEC.
▇▇▇▇▇▇▇-Del. agrees to promptly mail the Proxy Statement/Prospectus to its
stockholders after the Registration Statement has been declared effective by the
SEC. Seller shall cooperate with ▇▇▇▇▇▇▇-Del. and New ▇▇▇▇▇▇▇ in preparing the
Proxy Statement/Prospectus and in seeking the declaration of effectiveness of
the Registration Statement by the SEC.
10.5 Each of ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and Seller agree to
vote all shares of Common Stock owned by them for the Merger at the special
meeting of stockholders of ▇▇▇▇▇▇▇-Del. called for such purpose (the
"Stockholders' Meeting").
10.6 Subject to satisfaction of the conditions to the Merger, and
after receiving the requisite approval of ▇▇▇▇▇▇▇-Del.'s stockholders at the
Stockholders' Meeting, and after the Closing and the consummation of the
purchase of shares of Common Stock pursuant to the Series A Offer and the terms
of the Series B Purchase Agreements, ▇▇▇▇▇▇▇-Del. agrees to cause the
Certificate of Ownership and Merger to be promptly filed with the Secretary of
State of the State of Delaware.
10.7 All notices to third parties and all other publicity
concerning the Merger will be jointly planned and coordinated by and between the
Parties. No Party will act unilaterally in this regard without the prior written
approval of the others unless required under
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applicable securities laws (in which case each party agrees to give reasonable
notice to and consult with the other parties prior to issuing any such release,
statement, or other notice); however, this approval will not be unreasonably
withheld.
11. Representations and Warranties of Seller. Seller hereby makes the
following representations and warranties to Buyer as of the date hereof:
11.1 Good Standing. Seller is a corporation duly organized,
validly existing, and in good standing under the laws of California and has full
corporate power and authority to own the Assets. Each of the Partnerships is
duly organized, validly existing, and in good standing under the laws of their
respective states of formation and have full power and authority to own the Real
Property owned by such Partnerships. The ownership of their properties does not
require Seller or any of the Partnerships to be qualified in any jurisdiction
other than California.
11.2 Power. Seller has the corporate power, right and authority
to enter into this Agreement and the instruments referenced herein, and to
consummate the transactions contemplated hereby.
11.3 Requisite Action. All requisite corporate action has been
taken by Seller in connection with the entering into of this Agreement, the
execution and delivery of the instruments referenced herein, and the
consummation of the transactions contemplated hereby. All requisite partnership
action has been taken by the Partnerships in connection with the Acquisition.
11.4 Authority. The individuals executing this Agreement and the
instruments referenced herein on behalf of Seller have been duly authorized by
Seller and have the legal power, right and actual authority to bind Seller to
the terms and conditions hereof and thereof.
11.5 Binding Agreements. This Agreement and the Series B Purchase
Agreements (in the form previously filed with the SEC as exhibits to ▇▇▇▇▇▇▇
▇▇▇▇'▇ Statement on Schedule 13D relating to the Common Stock) have been duly
executed and delivered by Seller and, assuming due and valid authorization,
execution and delivery thereof by ▇▇▇▇▇▇▇-Del., Buyer, and the Series B
Shareholders, as applicable, this Agreement and the Series B Purchase Agreements
are valid and binding obligations of Seller enforceable against Seller in
accordance with their terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws of general application affecting enforcement of creditors' rights
generally, and (b) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought. To Seller's knowledge, each of the Series B
Purchase Agreements is a valid and binding agreement against each of the Series
B Shareholders which is a party thereto.
11.6 Partnership and Membership Interests in Real Property. The
partnership and limited liability company interests identified on Schedule 1.2
hereto, together with the partnership and limited liability company interests
identified on Schedule 2.6, are the only
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interests that Seller has in any partnership, limited liability company,
corporation, or other organization through which Seller has an interest in Real
Property.
11.7 Income Tax Information. Seller is not a non-resident alien,
a foreign corporation, a foreign partnership, a foreign trust, or a foreign
estate (as those terms are defined in the United States Internal Revenue Code of
1986, as amended (the "Code"), and Income Tax Regulations) for purposes of
United States income taxation. Seller is a California resident within the
meaning of Section 18662 of the California Revenue and Taxation Code. In
connection therewith, Seller shall, and shall cause each of the Partnerships to,
deliver to Escrow Holder for delivery to Buyer at the Closing an affidavit
("Seller's Affidavit") in the form attached hereto as Exhibit "D".
11.8 Condition of Personal Property Assets. Seller and each of
the Partnerships has good and marketable title to the Personal Property which it
owns, free and clear of any claim, charge, easement, encumbrance, security
interest, lien, option or pledge (collectively, "Encumbrances"), except for
Encumbrances for taxes which are not yet due and payable and except for such
encumbrances as Seller has otherwise disclosed to Buyer or ▇▇▇▇▇▇▇-Del. in
writing on or prior to the date of this Agreement. Except as has been disclosed
to Buyer or ▇▇▇▇▇▇▇-Del. in writing on or prior to the date of this Agreement,
Seller and each of the Partnerships have all rights, power and authority to
sell, convey, assign, transfer and deliver the Personal Property to Buyer in
accordance with the terms of this Agreement. At the Closing, Seller shall, and
shall cause the Partnerships to, deliver the Personal Property to Buyer, free
and clear of any Encumbrances except for such as relate to any of the Assumed
Liabilities and except for such matters as would, if strictly enforced, have no
adverse effect upon the continued use and operation of the Personal Property in
the manner in which it has heretofore been used by Seller or the Partnerships or
upon the value of the Personal Property. Except as has been disclosed to Buyer
or ▇▇▇▇▇▇▇-Del. in writing on or prior to the date of this Agreement, the
furniture, computers, vehicles and other equipment included in the Personal
Property are in a good state of maintenance and repair, ordinary wear and tear
excepted.
11.9 Financial Statements; Contingencies; Conduct of Business
Since December 31, 1998. (a) Seller has delivered to Buyer financial statements,
including a balance sheet and related statements of operations, stockholders'
equity and cash flows, for each of Seller and each of the Partnerships as of and
for the period ended December 31, 1998, which financial statements (in the case
of Seller only) are audited, and as of and for the interim period ended June 30,
1999, which financial statements are unaudited. To Seller's knowledge, neither
Seller nor any of the Partnerships has any liabilities except liabilities that
(i) are reflected or disclosed in the financial statements referred to above,
(ii) were incurred after June 30, 1999 in the ordinary course of business, or
(iii) are set forth in any Schedule attached hereto or have otherwise been
disclosed in writing to Buyer or ▇▇▇▇▇▇▇-Del. on or prior to the date hereof.
(b) Since December 31, 1998, (i) Seller and the Partnerships have
conducted their respective businesses in the ordinary course and consistent with
past practices, and (ii) there have been no dividends, redemptions or other
distributions by Seller in respect of its outstanding common stock.
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11.10 Contracts. Each Contract is valid and subsisting; Seller
and/or the applicable Partnership has duly performed all of its material
obligations thereunder to the extent that such obligations to perform have
accrued; and no material breach or default, alleged material breach or default,
or event which would (with the passage of time, notice or both) constitute a
breach or default thereunder by Seller or any of the Partnerships, as the case
may be (or, to the best knowledge of Seller, any other party or obligor with
respect thereto), has occurred or as a result of this Agreement or its
performance will occur. Except as set forth in Schedule 11.10, consummation of
the transactions contemplated by this Agreement will not (and will not give any
person a right to) terminate or modify any rights of, or accelerate or augment
any obligation of, Seller or any of the Partnerships under any of the Contracts.
11.11 Zoning. Except as has been disclosed to Buyer or
▇▇▇▇▇▇▇-Del. in writing on or prior to the date of this Agreement, (a) to
Seller's knowledge, the zoning of each parcel of Real Property permits
residential use (except for 12.2 acres located in Rancho Cucamonga, which
permits commercial use) or such other uses (such as schools, parks, common areas
and similar uses) which are currently contemplated under Seller's or the
applicable Partnership's development plans for such parcel, and (b) neither
Seller nor any of the Partnerships has commenced, or received notice of the
commencement of, any proceeding that would affect the present zoning
classification of any such parcel.
11.12 Governmental Notices. Except as has been disclosed to Buyer
or ▇▇▇▇▇▇▇-Del. in writing on or prior to the date of this Agreement, (a)
neither Seller nor any of the Partnerships has received any notification from
any governmental authority imposing any special assessments on the Real Property
or bringing any condemnation actions against the Real Property, or any part
thereof, nor is Seller or any of the Partnerships aware of any special
assessments or condemnation actions being contemplated, and (b) neither Seller
nor any of the Partnerships has received any notification from the Department of
Building and Safety, Health Department or any other Governmental Entity having
jurisdiction over the Real Property requiring any work to be done on or
affecting the Real Property, the cost of which is reasonably expected to
materially increase the development costs previously budgeted by Seller or the
applicable Partnership for such parcel of Real Property.
11.13 Undisclosed Defects. Except as has been disclosed to Buyer
or ▇▇▇▇▇▇▇-Del. in writing on or prior to the date of this Agreement, to the
knowledge of Seller, (a) no defect or condition of the Real Property,
improvements thereon or soil exists that may materially adversely affect Buyer's
proposed development of the Real Property, and (b) all of the improvements built
on the Real Property by Seller or any of the Partnerships have been built in a
good and workmanlike manner and comply in all material respects with all plans
and specifications, building codes and all applicable laws.
11.14 No Unrecorded Interests. Except as has been disclosed to
Buyer or ▇▇▇▇▇▇▇-Del. in writing on or prior to the date of this Agreement, and
to the knowledge of Seller, there are no unrecorded leases, licenses, or other
possessory interests in the Real Property.
11.15 Real Property in Compliance. Except as has been disclosed
to Buyer or ▇▇▇▇▇▇▇-Del. in writing on or prior to the date of this Agreement,
and to the knowledge of Seller, the Real Property is in compliance in all
material respects with all applicable laws and
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regulations and all covenants, conditions, restrictions, easements and similar
matters affecting the Real Property.
11.16 Public Improvements. Except as has been disclosed to Buyer
or ▇▇▇▇▇▇▇-Del. in writing on or prior to the date of this Agreement, and to the
knowledge of Seller, there are no intended public improvements that may involve
any charge being levied or assessed, or that may result in the creation of any
lien that would have a material adverse effect upon Buyer's ability to develop
the Real Property.
11.17 No Other Agreements. To Seller's knowledge, except as has
otherwise been disclosed to Buyer or ▇▇▇▇▇▇▇-Del. in writing on or prior to the
date of this Agreement, neither Seller nor any of the Partnerships has any oral
or written commitments to, or understandings or agreements with, any private
party or any Governmental Entity that would materially adversely affect (a)
Buyer's (or Buyer's Permitted Assigns') ownership of the Real Property, the
Personal Property, the Contracts and the other Assets, or (b) the proposed
development of the Real Property.
11.18 Litigation. Except as has been disclosed to Buyer or
▇▇▇▇▇▇▇-Del. on or prior to the date of this Agreement, there is no material
action, suit, claim, inquiry, proceeding or investigation by or before any court
or governmental or other regulatory or administrative agency or commission
pending or, to Seller's knowledge, threatened against or involving Seller, any
of the Partnerships, the Assets or the Real Property, or which questions or
challenges the validity of this Agreement or any action taken or to be taken by
Seller or the Partnerships pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement; and to Seller's knowledge, except
as has been disclosed to Buyer or ▇▇▇▇▇▇▇-Del. on or prior to the date of this
Agreement, there is no valid basis for any such action, proceeding or
investigation. Neither Seller, the Partnerships, the Assets, or the Real
Property are subject to any judgment, writ, injunction, order or decree which
individually or in aggregate may have a material adverse effect on (a) Buyer's
(or Buyer's Permitted Assigns') development of the Real Property, (b) Buyer's
(or Buyer's Permitted Assigns') ownership of the Real Property, the Personal
Property, the Contracts and the other Assets, or (c) Seller's or the
Partnerships' ability to consummate the transactions contemplated hereby.
11.19 Environmental Matters. Except as has been disclosed to
Buyer or ▇▇▇▇▇▇▇-Del. on or prior to the date of this Agreement:
(a) To the knowledge of Seller, Seller and each of the
Partnerships are in compliance in all material respects with all applicable
Federal, state and local laws and regulations relating to pollution or
protection of human health or the environment, including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata, and
natural resources (together "Environmental Laws" and including, without
limitation, the California Environmental Quality Act, as amended, Cal. Pub. Res.
Code Section 21000 et seq., the National Environmental Policy Act, as amended,
42 U.S.C. Section 4321 et seq., and laws and regulations relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic or hazardous substances or wastes, petroleum and
petroleum products, asbestos or asbestos-containing materials, polychlorinated
biphenyls, lead or lead-based paints or materials, or radon
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("Materials of Environmental Concern")), or otherwise relating to the
manufacture, generation, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern, or the
preservation of the environment or mitigation of adverse effects thereon and
each law and regulation with regard to record keeping, notification, disclosure,
and reporting requirements respecting Materials of Environmental Concern.
(b) Neither Seller nor any of the Partnerships has received any
written communication, whether from a governmental authority, citizens group,
employee or otherwise, which alleges that there is any restriction on the use or
development of the Real Property on account of the presence of Materials of
Environmental Concern on, under or in the vicinity of the Real Property.
(c) There is no claim, action, investigation or proceeding (each,
an "Environmental Claim") by any person or entity alleging potential liability
(including, without limitation, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or resulting
from (i) the presence, or release into the environment, of any Material of
Environmental Concern on or adjacent to any parcel included in the Real
Property, or (ii) any violation, or alleged violation, of any Environmental Law,
that in either case is pending or, to Seller's knowledge, threatened against
Seller or any of the Partnerships or, to Seller's knowledge, against any person
or entity whose liability for any Environmental Claim Seller or any of the
Partnerships has retained or assumed either contractually or by operation of
law.
(d) To Seller's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents involving or with
respect to the Real Property, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that could reasonably be expected to form the basis of any
Environmental Claim against Seller or any of the Partnerships or, to Seller's
knowledge, against any person or entity whose liability for any Environmental
Claim Seller or any of the Partnerships has retained or assumed either
contractually or by operation of law.
(e) To Seller's knowledge, Seller has provided to Buyer all
assessments, reports, data, results of investigations or audits, and other
information that is in the possession of, or reasonably available to, Seller or
any of the Partnerships regarding environmental matters pertaining to or the
environmental condition of the Real Property, or the compliance (or
noncompliance) by Seller or any of the Partnerships with any Environmental Laws,
with respect to the Real Property.
11.20 Endangered or Threatened Species. To the knowledge of Seller,
except as has been disclosed to Buyer or ▇▇▇▇▇▇▇-Del. in writing on or prior to
the date of this Agreement, Buyer's and each of the Partnerships' proposed
development of the Real Property will not involve the taking of any endangered
or threatened species of animals, plants or insects. To the knowledge of Seller,
there are no environmental or biological characteristics of the Real Property
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which, under existing law, will adversely affect Buyer's (or Buyer's Permitted
Assigns') proposed development of the Real Property.
11.21 Accounts Receivable. As of the date hereof, all of the
accounts receivable shown on the most recent interim financial statements of
Seller and each of the Partnerships (the "Accounts Receivable"), except to the
extent of reserves with respect thereto: (a) arose from valid sales in the
ordinary course of business; (b) to the knowledge of Seller, are valid and
legally enforceable obligations of the persons purported to be liable thereon
and are fully collectible; (c) to the knowledge of Seller, are free of any
defense, counterclaim, setoff or deduction; and (d) reflect adequate reserves
for doubtful accounts and any trade discounts, on a basis consistent with that
of prior years.
11.22 Employment Contracts and Benefits. (a) Seller has
previously delivered to Buyer copies, descriptions and/or a list of all
employment contracts and collective bargaining agreements, and all compensation,
pension, retirement, deferred compensation, health care, bonus, profit-sharing,
stock option or other plans, trusts, funds, agreements or arrangements,
providing for employee remuneration or benefits to any of Seller's present
officers, employees and sales agents (collectively, "Employee Benefit Plans")
and to which Seller or any of the Partnerships is a party or by which Seller or
any of the Partnerships is bound. Such copies, descriptions and list, taken
together, sets forth for the present officers, employees and sales agents of
Seller and each of the Partnership's complete information with respect to
withholding accounts, accrued vacation, sick leave and other amounts, and all
other accruals and accounts held for employee benefit, including but not limited
to, any insurance policies or accounts. Except as set forth in such copies or
descriptions or on such list, neither Seller nor any of the Partnerships has
entered into any severance or similar arrangement in respect of any present or
former officer, employee or sales agent that will result in any absolute or
contingent obligation of Buyer to make any payment to any present or former
officer, employee or sales agent following termination of employment.
(b) Except as set forth in such copies or descriptions or the list
delivered to Buyer pursuant to this Section 11.22 or as otherwise
disclosed in the schedules hereto or in the financial statements
delivered pursuant to Section 11.9 hereof, and to Seller's knowledge,
(i) Neither Seller nor any of the Partnerships, nor any
entity (an "ERISA Affiliate") which, together with any of
them, is deemed a "single employer" within the meaning of
Section 4001(a)(15) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), nor any of the
plans so listed which is an "employee welfare benefit plan"
or "employee pension benefit plan" as such terms are defined
in Sections 3(1) and 3(2) of ERISA (such plans being
referred to herein as "ERISA Plans"), nor any trust created
thereunder, nor any trustee or administrator thereof, has
engaged in a transaction or has taken or failed to take any
action in connection with which Buyer or ▇▇▇▇▇▇▇-Del. could
be subject to a tax imposed pursuant to Section 4980B of the
Internal Revenue Code (the "Code").
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(ii) Each of the plans so listed or described has been
operated and administered in all material respects in
accordance with applicable laws, including but not limited
to ERISA and the Code.
(iii) Each of the ERISA Plans that is intended to be
"qualified" within the meaning of Section 401(a) of the Code
is so qualified.
(iv) No amounts payable under the plans so listed or
any other agreement or arrangement to which Seller, the
Partnerships, or any ERISA Affiliate is a party will fail to
be deductible for Federal income tax purposes by virtue of
Section 280G of the Code.
(v) No "leased employee," as that term is defined in
Section 414(n) of the Code, performs services for Seller or
any of the Partnerships.
(vi) There are no liens against the Assets under
Section 412(n) of the Code or Sections 302(f) or 4068 of
ERISA.
(vii) None of Seller, the Partnerships or any of their
respective ERISA Affiliates is, or at anytime during the
previous six (6) years was, obligated to contribute to any
"multi-employer plan" within the meaning of Section 3(37) of
ERISA or any plan subject to Title IV of ERISA.
(viii) Except for such obligations and liabilities as
are assumed by Buyer pursuant to Section 4.3 of this
Agreement, from and after the Closing, Buyer will have no
obligation to contribute to, or any liability in respect of,
any Employee Benefit Plan sponsored or maintained by Seller,
any Partnership or any ERISA Affiliate, or to which Seller,
any Partnership or any ERISA Affiliate is or was obligated
to contribute.
11.23 Insurance Policies. Seller and the Partnerships, as
applicable, have maintained and now maintain (a) insurance on all of the Assets
and the Real Property of a type customarily insured, covering property damage
and loss of income by fire or other casualty consistent with industry practice,
and (b) adequate insurance protection against all liabilities, claims and risks
against which it is customary to insure including, without limitation, property
damage, comprehensive general liability and workers compensation. Seller and the
Partnerships, as applicable, are not in default with respect to payment of
premiums on any such policy. Seller has previously delivered to Buyer complete
copies of all such insurance policies of Seller and the Partnerships. All such
insurance policies are in full force and effect.
11.24 Authority and Consents. Except as set forth on Schedule
11.24, the consummation of the transactions contemplated by this Agreement will
not result in or constitute any of the following: (a) a default or an event
that, with the giving of notice, the lapse of time, or both, would be a default,
breach, or violation of the articles of incorporation or bylaws of Seller or the
organizational documents of any Partnership or any lease, license, promissory
note, conditional sales contract, commitment, indenture, mortgage, deed of
trust, or other agreement, instrument or arrangement to which Seller or any
Partnership is a party or by which it or the Assets are or the Real Property
bound; (b) an event that would permit any party to terminate any
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agreement or to accelerate the maturity of any indebtedness or other obligation
of Seller or any of the Partnerships; or (c) the creation or imposition of any
lien, charge, or encumbrance on any of the Assets or the Real Property. On or
before the Closing, Seller shall obtain consents, waivers or releases of all
material interests set forth on Schedule 11.24. Buyer will reasonably cooperate
with Seller in obtaining the consents, waivers or releases of all interests set
forth on Schedule 11.24. All such consents, waivers or releases, unless absolute
and unconditional, shall be on terms acceptable to Seller and Buyer in its
reasonable discretion.
11.25 Plant Closing. Subject to Buyer's performance of the
covenant set forth in Section 18.1 hereof, and on the basis of ▇▇▇▇▇▇▇-Del.'s
and Buyer's representation in Section 12.7 hereof, Seller represents to Buyer
and ▇▇▇▇▇▇▇-Del. that neither it nor, to Seller's knowledge, any of Seller's
affiliates, intends to implement a "plant closing" or a "mass lay-off", as those
terms are defined in the Worker Adjustment and Retraining Notification Act (the
"WARN Act"), 29 U.S.C. Sections 2101 et seq., within one hundred fifty (150)
days of the Closing.
11.26 No Brokers or Finders. No agent, broker, finder or
investment or commercial banker, or other person or firms engaged by or acting
on behalf of Seller in connection with the negotiation, execution or performance
of this Agreement or the transactions contemplated hereby, is or will be
entitled to any broker's or finder's or similar fees or other commissions as a
result of this Agreement or the transactions.
11.27 Knowledge Convention. Whenever reference is made in this
Agreement to Seller's knowledge or awareness, such knowledge or awareness
includes only the present actual knowledge of any of ▇▇▇▇▇▇▇ ▇▇▇▇, Chief
Executive Officer, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President of Southern California Division,
▇▇▇▇▇▇▇ ▇▇▇▇▇, President of Northern California Division and Chief Financial
Officer, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice President, or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice
President and Corporate Controller.
12. Representations and Warranties of Buyer and ▇▇▇▇▇▇▇-Del. Buyer and
▇▇▇▇▇▇▇-Del. hereby represent and warrant to Seller and to the ▇▇▇▇▇ as follows:
12.1 Power. Each of ▇▇▇▇▇▇▇-Del. and Buyer has the legal power,
right and authority to enter into this Agreement and the instruments referenced
herein, and to consummate the Acquisition and the Merger.
12.2 Requisite Action. Except for the approval of ▇▇▇▇▇▇▇-Del.'s
stockholders of the Merger, which ▇▇▇▇▇▇▇-Del. agrees to seek at the
Stockholders' Meeting prior to the Closing, all requisite action has been taken
by each of ▇▇▇▇▇▇▇-Del. and Buyer in connection with entering into this
Agreement, the execution and delivery of the instruments referenced herein by
▇▇▇▇▇▇▇-Del. or Buyer, and the consummation of the Acquisition and the Merger.
12.3 Authority. The individuals executing this Agreement and the
instruments referenced herein on behalf of each of ▇▇▇▇▇▇▇-Del. and Buyer have
the power, right and actual authority to bind such Party to the terms and
conditions hereof and thereof.
12.4 No Conflicts. Except as set forth on Schedule 12.4 hereto,
the execution, delivery and performance of this Agreement by each of
▇▇▇▇▇▇▇-Del. and Buyer will not violate the provisions of, or constitute a
breach or default under (a) the charter documents or bylaws of
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each such Party, (b) any law to which such Party is subject, or (c) any contract
to which such Party is a party that is material to the financial condition,
results of operations, business, assets, liabilities, or prospects of such
Party.
12.5 No Brokers or Finders. No agent, broker, finder or
investment or commercial banker, or other person or firms engaged by or acting
on behalf of Buyer or ▇▇▇▇▇▇▇-Del. in connection with the negotiation, execution
or performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any broker's or finder's or similar fees or
other commissions as a result of this Agreement or such transactions, except for
Warburg Dillon Read LLC, as to which Seller shall have no liability.
12.6 Legal Proceedings. There is no order or action pending or,
to the best knowledge of Buyer or ▇▇▇▇▇▇▇-Del., threatened in writing against or
affecting Buyer or ▇▇▇▇▇▇▇-Del. that individually or when aggregated with one or
more other actions or orders has or might reasonably be expected to have a
material adverse effect on Buyer's or ▇▇▇▇▇▇▇-Del.'s ability to perform this
Agreement or any other aspect of the transactions contemplated by this
Agreement.
12.7 Plant Closing. ▇▇▇▇▇▇▇-Del and Buyer represent to Seller
that they do not intend to implement a "plant closing" or a "mass lay-off", as
those terms are defined in the WARN Act, in respect of Seller's Business within
one hundred fifty (150) days of the Closing, it being understood that such
representation does not extend to the intentions of ▇▇▇▇▇▇▇ ▇▇▇▇, Chairman of
the Board of ▇▇▇▇▇▇▇-Del.
13. Survival of Representations and Warranties; Indemnity.
13.1 Survival of Representations and Warranties. The
representations and warranties of Seller contained in or made pursuant to this
Agreement (and the corresponding indemnification obligations set forth in
Section 13.2 hereof) shall survive for a period of one (l) year after the
Closing Date; provided, however, that if a claim or notice is duly given under
this Section 13 with respect to a breach by Seller of any representation or
warranty made hereunder prior to the expiration of such one (1) year period,
such representation or warranty (and the corresponding indemnification
obligation) shall continue (but only with respect to the claim referenced in the
notice) until the applicable claim is finally resolved.
13.2 Seller's Indemnity Obligation. From and after the Closing
Date, Seller agrees to indemnify and hold harmless Buyer and ▇▇▇▇▇▇▇-Del. from
and against any damage, claim, liability or expense, including, without
limitation, reasonable attorney's fees and expenses (collectively, "Losses"),
based upon or arising from: (a) any breach by Seller of its representations and
warranties contained in or made pursuant to this Agreement; (b) any breach by
Seller of its covenants, obligations or other agreements to be performed by
Seller pursuant to this Agreement; and (c) any of the Excluded Liabilities;
provided, however, that (x) Seller's liability under this Section 13.2 for a
particular Loss shall be reduced, dollar for dollar, to the extent that such
Loss has already resulted in a reduction of the Purchase Price pursuant to
Section 3.2(a) of this Agreement; (y) Seller shall not be liable with respect to
the matters described in clause (a) or clause (b) of this Section 13.2 unless
and until the Losses incurred by Buyer and ▇▇▇▇▇▇▇-Del. with respect to such
matters shall exceed $500,000 (the "Threshold") on a cumulative basis, at which
▇▇▇▇ ▇▇▇▇▇▇ shall only be liable to Buyer and ▇▇▇▇▇▇▇-Del. for the
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amount by which such Losses exceed the Threshold; and (z) in no event shall
Seller's aggregate liability (not including liabilities that are covered by
Seller's or any of the Partnership's insurance or indemnification of Seller or
any of the Partnerships by third parties) to the Buyer and ▇▇▇▇▇▇▇-Del. for all
matters indemnified under clause (a) or clause (b) of this Section 13.2 exceed
$2,400,000. Notwithstanding any other provision contained herein to the
contrary, in no event shall Seller's liability to the Buyer or ▇▇▇▇▇▇▇-Del. for
indemnification under clause (c) with respect to any Excluded Liability
referenced in Section 5.1 hereof exceed the amount of Seller's available
insurance coverage therefor. The remedies provided in this Section 13.2 shall be
the sole and exclusive remedy to Buyer and ▇▇▇▇▇▇▇-Del. with respect to all
claims relating to the breach by Seller of any representations, warranties,
covenants or other obligations under this Agreement.
13.3 Buyer's and ▇▇▇▇▇▇▇-Del.'s Indemnity Obligation. From and
after the Closing Date, Buyer and ▇▇▇▇▇▇▇-Del. each agree, jointly and
severally, to indemnify and hold harmless Seller from and against any Losses
based upon or arising from: (a) any breach by Buyer or ▇▇▇▇▇▇▇-Del. of their
respective representations and warranties contained in or made pursuant to this
Agreement; (b) any breach by Buyer or ▇▇▇▇▇▇▇-Del. of their respective
covenants, obligations or other agreements to be performed by Buyer or
▇▇▇▇▇▇▇-Del. pursuant to this Agreement; and (c) any of the Assumed Liabilities;
provided, however, that neither ▇▇▇▇▇▇▇-Del. nor Buyer shall have any liability
with respect to the matters described in clause (a) or clause (b) of this
Section 13.3 unless and until the Losses incurred by Seller with respect to such
matter shall exceed the Threshold on a cumulative basis, at which time Buyer
shall only be liable to Seller for the amount by which such Losses exceed the
Threshold. In no event shall Buyer's or ▇▇▇▇▇▇▇-Del.'s aggregate liability (not
including liabilities that are covered by Buyer's or ▇▇▇▇▇▇▇-Del.'s insurance or
indemnification from third parties) to the Seller for all matters indemnified
under clause (a) or clause (b) of this Section 13.3 exceed $2,400,000. The
remedies provided in this Section 13.3 shall be the sole and exclusive remedy to
Seller with respect to all claims relating to the breach by ▇▇▇▇▇▇▇-Del. and
Buyer of any representations, warranties, covenants or other obligations under
this Agreement.
13.4 Notice. Any party seeking indemnification (an "Indemnified
Party") with respect to any Losses shall give notice thereof to the party
required to provide indemnity hereunder (the "Indemnifying Party") within ten
(10) days after receipt by the Indemnified Party of notice of any demand, claim,
or circumstances which could give rise to a claim, or the commencement (or
threatened commencement) of any action, proceeding, or investigation, which
could give rise to a right to indemnification pursuant to this Section 13.
Notwithstanding the foregoing, the rights of any Indemnified Party to be
indemnified in respect of any Losses resulting from the asserted liability shall
not be adversely affected by the Indemnified Party's failure to give or delay in
giving notice unless (and then only to the extent that) the Indemnifying Party
is materially prejudiced thereby.
14. Seller's Obligations Before Closing. Seller warrants, covenants and
agrees that from the date of this Agreement until the Closing:
14.1 Buyer's Access to Premises and Information. Buyer and its
counsel, accountants and other representatives will have reasonable access
during normal business hours to the Real Property and all properties, books,
accounts, records, contracts and documents of or
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relating to Seller and any of the Partnerships. Seller will furnish or cause to
be furnished to Buyer and its representatives all data and information
concerning the Real Property, the Assets and the Contracts that may reasonably
be requested.
14.2 Conduct of Business in Normal Course. Seller will, and
Seller will cause each of the Partnerships to, carry on its respective business
activities in substantially the same manner as they previously have been carried
out, and such entities will not, without first obtaining Buyer's written
consent, make or institute any unusual or novel methods of purchase, sale,
lease, management, accounting or operation that vary materially from those
methods used by Seller and the applicable Partnership as of the date of this
Agreement.
14.3 Preservation of Real Property and Operations. Seller will
use its best efforts, and will cause each of the Partnerships to use its best
efforts, to preserve their business organizations intact to the extent they
relate to the Real Property, to keep available to Seller and the Partnerships
their present officers and employees, and to preserve their present
relationships with suppliers, contractors, customers and others having business
relationships with them. Seller shall take no action, and Seller shall not cause
the Partnerships to take any action, that would reasonably be expected to
materially impair the value of the Real Property.
14.4 Maintenance of Insurance. Seller will, and shall cause each
of the Partnerships to, continue to carry its existing insurance.
14.5 Maintenance of Intangibles. Seller will not do, or agree to
do, or cause any of the Partnerships to do, any of the following acts without
the prior written consent of Buyer: (a) waive or compromise any material right
or claim; or (b) cancel, without full payment, any material note, loan, or other
obligation owing to Seller or any of the Partnerships.
14.6 Employees and Compensation. Seller will not do, or agree to
do, or cause any of the Partnerships to do, any of the following acts other than
in the ordinary course and consistent with past practice: (a) make any material
change in compensation payable, or to become payable, to any officer, employee,
sales agent, or representative; or (b) make any material change in benefits
payable to any officer, employee, sales agent, or representative under any bonus
or pension plan or other contract or commitment.
14.7 Other Transactions. Without Buyer's prior written consent,
(a) Seller shall not distribute cash, securities or other property to any
shareholder of Seller in respect of its interest in Seller, and (b) Seller shall
not, and shall not cause any of the Partnerships to, enter into any material
contract, commitment or transaction not in the ordinary course of its respective
business.
14.8 Notification of Certain Matters. Seller shall give prompt
notice to Buyer of (a) the occurrence, or failure to occur, of any event that
would be likely to cause any of its representations or warranties contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement to the Closing Date, and (b) any failure on its
part to comply with or satisfy, in any material respect, any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall modify Seller's
representations or warranties or its obligations under
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this Agreement. Seller shall give prompt notice to the other Parties hereto of
any notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Agreement.
14.9 Permits and Approvals; Third Party Consents. Seller will use
its best efforts to obtain any governmental or third party approvals that may be
necessary for Seller to consummate the transactions contemplated by this
Agreement.
14.10 Supplements to Schedules. From time to time prior to the
Closing Date, Seller may supplement or amend the Schedules referred to herein
with respect to any matter arising after the date hereof that, if existing or
occurring at the date hereof, would have been required to be set forth or
described in such Schedules; provided, however, that unless otherwise agreed by
the Parties, no such amendment or supplement shall modify Seller's
representations or warranties or its obligations under this Agreement.
14.11 Financing. Seller shall use its best efforts to cooperate
with Buyer and ▇▇▇▇▇▇▇-Del. in obtaining financing for the Acquisition,
including the preparation of any disclosure documents requested by Buyer or
▇▇▇▇▇▇▇-Del.
15. ▇▇▇▇▇▇▇-Del.'s and Buyer's Obligations Before Closing. Buyer
and ▇▇▇▇▇▇▇-Del. warrant, covenant and agree that from the date of this
Agreement until the Closing:
15.1 Cooperation in Securing Consents of Third Parties. Buyer
will use its best reasonable efforts to assist Seller in obtaining the consent
of all necessary persons and agencies to the assignment and transfer to Buyer of
the Real Property, the Personal Property, the Contracts and the other
properties, Assets and any other agreements to be assigned and transferred under
the terms of this Agreement. Buyer agrees to use its best reasonable efforts to
obtain all approvals and permits of Governmental Entities and third parties that
may be necessary for Buyer to consummate the transactions contemplated by this
Agreement.
15.2 Resale Certificate. Buyer will furnish any resale
certificate or other documents reasonably requested by Seller to comply with the
provisions of the sales and use tax laws of the State of California.
15.3 Conduct of Business in Normal Course. ▇▇▇▇▇▇▇-Del. and Buyer
will carry on their business activities in substantially the same manner as they
previously have been carried out and will not make or institute any unusual or
novel methods of purchase, sale, lease, management, accounting or operation that
vary materially from those methods used by ▇▇▇▇▇▇▇-Del. and Buyer as of the date
of this Agreement.
15.4 Financing. ▇▇▇▇▇▇▇-Del. and Buyer shall use reasonable
efforts to obtain financing and take other action such that, as of the Closing
Date, (a) Buyer will have (i) borrowing capacity under the terms of its existing
bank credit facility, and/or (ii) obtained other bank or third-party financing
on terms reasonably acceptable to Buyer, in any case, in an amount sufficient to
enable Buyer to finance the Acquisition as contemplated herein (inclusive of any
refinancing of existing indebtedness with respect to the Real Property), and (b)
no event of default (or other act or event which would permit acceleration of
the indebtedness) shall have
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occurred and be continuing with respect to ▇▇▇▇▇▇▇-Del.'s 12 1/2% Senior Notes
due 2001 as a result of the transactions contemplated by this Agreement.
15.5 Notification of Certain Matters. Buyer shall give prompt
notice to Seller of (a) the occurrence, or failure to occur, of any event that
would be likely to cause any of its representations or warranties contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement to the Closing Date, and (b) any failure on its
part to comply with or satisfy, in any material respect, any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall modify ▇▇▇▇▇▇▇-Del.'s or
Buyer's representations or warranties or its obligations under this Agreement.
▇▇▇▇▇▇▇-Del. or Buyer shall give prompt notice to Seller of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
16. Conditions Precedent to ▇▇▇▇▇▇▇-Del.'s and Buyer's Performance.
The obligations of ▇▇▇▇▇▇▇-Del. and Buyer to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or before
the Closing, of all the conditions set forth below in this Section 16 and to
the performance by Seller of its obligations set forth in Section 19.1.
▇▇▇▇▇▇▇-Del. and Buyer may waive any or all of these conditions in whole or in
part without prior notice.
16.1 Accuracy of Seller's Representations and Warranties;
Satisfaction of Covenants. All representations and warranties by Seller, or in
any written statement that is delivered to Buyer by Seller under this Agreement,
that are qualified as to materiality shall be true and complete and any such
representations and warranties that are not so qualified shall be true and
complete in all material respects, in each case as of the date of this Agreement
and as of the Closing Date (as if made on the Closing Date); each of Seller and
the ▇▇▇▇▇ shall have performed, satisfied, and complied in all material respects
with all covenants, agreements and conditions required of it and them,
respectively, by this Agreement; and each of Seller and the ▇▇▇▇▇ shall have
delivered a certificate to the foregoing effect, dated the Closing Date, and
signed by a duly authorized officer of Seller (in the case of Seller's
certificate) and the ▇▇▇▇▇ (in the case of the ▇▇▇▇▇' certificate).
16.2 Regulatory Approvals and Other Consents. The Parties shall
have received all required regulatory approvals and third party consents
(including, without limitation, lender consents, but not including those
consents which, if not received, would not have a material adverse effect on the
Parties or their ability to effect the Acquisition), in each case without the
imposition of any condition which is reasonably unacceptable to ▇▇▇▇▇▇▇-Del. or
Buyer.
16.3 No Material Adverse Change. Since the date of this Agreement
through the Closing Date, there shall not have been (a) any change to the Real
Property or Assets that materially adversely affects the value of the Real
Property or Assets taken as a whole, or (b) any material increase in the Assumed
Liabilities other than as may have occurred in the ordinary course of business
and be substantially offset in amount by a corresponding increase in the value
of the Assets to be purchased hereunder.
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16.4 Opinion of Seller's Counsel. Buyer shall have received from
O'Melveny and ▇▇▇▇▇ LLP, counsel for Seller, an opinion dated as of the Closing
Date, in form and substance reasonably satisfactory to Buyer and its counsel,
that:
(a) Due Incorporation. Seller has been duly incorporated and is
validly existing and in good standing under the laws of the State of
California, with corporate power to own its properties and assets, to
enter into this Agreement and to perform its obligations hereunder. Each
of the Partnerships has been validly formed and is in good standing in
the State of its formation, with the power to own its properties and
assets.
(b) Due Authorization Execution and Delivery. The execution,
delivery and performance of this Agreement have been duly authorized by
all necessary corporate action on the part of Seller, and this Agreement
has been duly executed and delivered by Seller.
(c) Enforceability. This Agreement constitutes the legally valid
and binding obligation of Seller, enforceable against Seller in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally (including, without limitation,
fraudulent conveyance laws) and by general principles of equity,
including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing and the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law.
(d) No Consents Required. No order, consent, permit or approval
of any California or Federal governmental authority that such counsel
has, in the exercise of customary professional diligence, recognized as
applicable to the Seller or to transactions of the type contemplated by
this Agreement is required on the part of Seller for the execution and
delivery of, and the performance by Seller on or prior to the date of
such opinion under this Agreement, except for such as have been
obtained.
(e) No Violation of Charter Documents, Agreements, Orders, Etc.
The Seller's execution and delivery of, and performance of its
obligations on or prior to the date of such opinion under, this
Agreement do not (i) violate the Seller's articles of incorporation or
bylaws, (ii) violate, breach or result in a default under any of the
Contracts identified, in good faith, to such counsel in an officer's
certificate as being material to Seller and the Partnerships taken as a
whole (which Seller hereby agrees shall be, as of the Closing Date, all
of the Contracts material to Seller and the Partnerships taken as a
whole), or (iii) breach or otherwise violate any judgment or decree of
any California or Federal court or governmental authority binding on the
Seller and identified to such counsel in an officer's certificate. Such
counsel need express no opinion as to the effect of the Seller's
performance of its obligations in this Agreement on the Seller's
compliance with financial covenants in any loan agreement to which it is
a party.
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In rendering such opinion, counsel for Seller may rely on
certificates of officers and directors of Seller as to factual matters,
certificates of public officials, and opinions of associate counsel approved by
Buyer.
16.5 Absence of Litigation. No action, suit, or proceeding before
any court or any Governmental Entity, which could reasonably be expected to have
a material adverse effect on the Real Property, the Assets or the transactions
contemplated by this Agreement or to their consummation, shall have been
instituted or threatened in writing on or before the Closing Date.
16.6 Title Policy. The Title Company shall have issued or be
committed to issue to Buyer or to Buyer's Permitted Assigns, at Seller's
expense, standard coverage CLTA owner's policies of title insurance ("Title
Policies") in the total amount for each parcel of Real Property as set forth on
Schedule 1.1(a) and Schedule 1.2(a) (as such Schedules shall be updated at the
Closing to omit parcels which have been sold and to add parcels which have been
acquired by Seller since the date of this Agreement in the ordinary course of
business), together with a CLTA 101.4 mechanic's lien endorsement, dated as of
the Close of Escrow, insuring Buyer (or Buyer's Permitted Assigns, as
applicable) as the fee owner of the Real Property, and showing title to Seller's
Real Property vested in Buyer (or Buyer's Permitted Assigns) subject only to:
(a) Nondelinquent general and special real property taxes, bonds
and assessments, which shall be prorated as of the Close of Escrow;
(b) All exceptions approved by Buyer.
If Buyer requires any endorsements to the Title Policy (other than
mechanic's lien coverage), or if Buyer requires an American Land Title
Association ("ALTA") policy of title insurance or a binder in lieu of a policy
of title insurance, then: (i) Buyer shall make such election in a timely manner
so as to not interfere with or delay the Close of Escrow; (ii) Seller shall pay
only the cost of the CLTA owner's policy described above and the mechanic's lien
endorsement; and (iii) Buyer shall pay the additional cost of obtaining any
other endorsements or such ALTA policy or binder, including, without limitation,
any survey costs.
16.7 Assignment of Real Property Documents. Seller shall have
assigned to Buyer all documents, warranties, rights and claims, including, but
not limited to, reports, plans, surveys, maps, development agreements,
conditions of approval, entitlements, subdivision agreements, licenses and
permits, studies, drawings, books and records, financial data, and all other
similar documents or materials issued or prepared in connection with the
ownership, operation, use and development of the Real Property. Such assignment
shall be in the form of the "Assignment of Plans and Warranties" (as hereinafter
defined).
16.8 Solvency Opinion. ▇▇▇▇▇▇▇-Del. shall have received a solvency
opinion (in form and substance reasonably satisfactory to ▇▇▇▇▇▇▇-Del.) from
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Financial Advisors (or such other firm of national
standing and reasonably acceptable to ▇▇▇▇▇▇▇-Del. and Seller) with respect to
the solvency of ▇▇▇▇▇▇▇-Del. and New ▇▇▇▇▇▇▇ following the consummation of the
Transactions.
16.9 Financing. As of the Closing Date, (a) Buyer will have (i)
borrowing capacity under the terms of its existing bank credit facility, and/or
(ii) obtained other bank or
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third-party financing on terms reasonably acceptable to Buyer, in any case, in
an amount sufficient to enable Buyer to finance the Acquisition as contemplated
herein (inclusive of any refinancing of existing indebtedness with respect to
the Real Property), and (b) no event of default (or other act or event which
would permit acceleration of the indebtedness) shall have occurred and be
continuing with respect to ▇▇▇▇▇▇▇-Del.'s 12 1/2% Senior Notes due 2001 as a
result of the transactions contemplated by this Agreement.
16.10 No "Ownership Change". ▇▇▇▇▇▇▇-Del. shall have determined to
its satisfaction that the purchases of shares of Common Stock pursuant to the
Series A Offer and the Series B Purchase Agreements will not result in an
"ownership change" of ▇▇▇▇▇▇▇-Del. for Federal tax purposes that would impair
▇▇▇▇▇▇▇-Del.'s ability to utilize its tax net operating losses.
16.11 Series A Offer. The conditions to the Series A Offer set forth
in Exhibit "B" hereto (other than the condition in clause (ii) thereof) shall
have been satisfied or waived by the ▇▇▇▇▇.
16.12 ▇▇▇▇▇▇▇-Del. Stockholder Approval. The stockholders of
▇▇▇▇▇▇▇-Del., by a vote sufficient under applicable law and ▇▇▇▇▇▇▇-Del's
Certificate of Incorporation, shall have approved the Merger.
16.13 Series B Purchase Agreements. Each of the Series B Purchase
Agreements shall be in full force and effect and enforceable by Seller against
the Series B Shareholders in accordance with their terms.
16.14 Cancellation of Lyon Stock Options. ▇▇▇▇▇▇▇ ▇▇▇▇ shall have
executed and delivered to ▇▇▇▇▇▇▇-Del. an instrument in the form of Exhibit E
attached hereto, canceling his outstanding options to acquire 750,000 shares of
▇▇▇▇▇▇▇-Del. Common Stock.
17. Conditions Precedent to Seller's Performance. The obligations of
Seller to sell and transfer the Assets under this Agreement are subject to the
satisfaction, at or before Closing, of all the following conditions set forth in
this Section 17 and to the performance by Buyer and ▇▇▇▇▇▇▇-Del. of their
respective obligations set forth in Section 19.2 below. Seller may waive any or
all of these conditions in whole or in part without prior notice.
17.1 Accuracy of Buyer's and ▇▇▇▇▇▇▇-Del.'s Warranties. All
representations and warranties by Buyer and ▇▇▇▇▇▇▇-Del. contained in this
Agreement or in any written statement delivered by Buyer or ▇▇▇▇▇▇▇-Del. under
this Agreement that are qualified as to materiality shall be true and complete
and any such representations and warranties that are not so qualified shall be
true and complete in all material respects, in each case as of the date of this
Agreement and as of the Closing Date (as if made on the Closing Date). Buyer and
▇▇▇▇▇▇▇-Del. shall have performed and complied with all covenants and agreements
and satisfied all conditions that they are required by this Agreement to
perform, comply with, or satisfy, before or at the Closing; and Buyer and
▇▇▇▇▇▇▇-Del. shall have each delivered to Seller a certificate to the foregoing
effect, dated as of the Closing Date and signed by a duly authorized officer of
each entity.
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17.2 Regulatory Approvals and Other Consents. The Parties shall have
received all required regulatory approvals and third party consents (including,
without limitation, lender consents, but not including those consents which, if
not received, would not have a material adverse effect on the Parties or their
ability to effect the Acquisition), in each case without the imposition of any
condition which is reasonably unacceptable to Seller.
17.3 Opinion of Buyer's and ▇▇▇▇▇▇▇-Del.'s Counsel. Buyer and
▇▇▇▇▇▇▇-Del. shall have furnished to Seller opinions, dated as of the Closing
Date, of each of Irell & ▇▇▇▇▇▇▇ LLP and Morris, Nichols, Arsht & ▇▇▇▇▇▇▇,
counsel for Buyer and ▇▇▇▇▇▇▇-Del., and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., Senior Vice
President and General Counsel of ▇▇▇▇▇▇▇-Del., each opinion to be in form and
substance reasonably satisfactory to Seller and its counsel, and such opinions
collectively to be to the effect that:
(a) Due Incorporation. Buyer and ▇▇▇▇▇▇▇-Del. have each been
duly incorporated and are validly existing and in good standing under
the laws of their respective states of incorporation, with corporate
power to own their properties and assets, to enter into this Agreement
and to perform their respective obligations hereunder.
(b) Due Authorization, Execution, and Delivery. The execution,
delivery and performance of this Agreement have been duly authorized by
all necessary corporate action on the part of Buyer and ▇▇▇▇▇▇▇-Del.,
and this Agreement has been duly executed and delivered by each of Buyer
and ▇▇▇▇▇▇▇-Del.
(c) Enforceability. This Agreement constitutes the legally valid
and binding obligation of Buyer and ▇▇▇▇▇▇▇-Del., enforceable against
them in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally (including, without
limitation, fraudulent conveyance laws) and by general principles of
equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or injunctive relief, regardless
of whether considered in a proceeding in equity or at law.
(d) No Consents Required. No order, consent, permit or approval
of any California or Federal governmental authority that such counsel
has, in the exercise of customary professional diligence, recognized as
applicable to Buyer or ▇▇▇▇▇▇▇-Del. or to transactions of the type
contemplated by this Agreement is required on the part of Buyer or
▇▇▇▇▇▇▇-Del. for the execution and delivery of, and the performance by
Buyer and ▇▇▇▇▇▇▇-Del. under this Agreement, except for such as have
been obtained.
(e) No Violation of Charter Documents, Agreements, Orders, Etc.
Buyer's and ▇▇▇▇▇▇▇-Del.'s execution or delivery of, and performance of
their respective obligations under, this Agreement do not (i) violate
Buyer's or ▇▇▇▇▇▇▇-Del.'s respective charter documents, (ii) violate,
breach, or result in a default under, any existing obligation of or
restriction on either Buyer or ▇▇▇▇▇▇▇-Del. under any agreement
identified to such counsel in an officer's certificate as being material
to Buyer or ▇▇▇▇▇▇▇-Del., or (iii) breach or otherwise violate any
judgment or decree of any California or Federal court or governmental
authority binding on Buyer or ▇▇▇▇▇▇▇-Del and identified in an officer's
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certificate of Buyer and ▇▇▇▇▇▇▇-Del. Such counsel need express no
opinion as to the effect of Buyer's or ▇▇▇▇▇▇▇-Del.'s performance under
this Agreement on such Parties' compliance with financial covenants in
any loan agreement which either of them is a party.
In rendering such opinion, counsel for Buyer may rely on
certificates of officers and directors of ▇▇▇▇▇▇▇-Del. and/or Buyer as to
factual matters, certificates of Governmental Entities and opinions of associate
counsel approved by Seller.
17.4 Absence of Litigation. No action, suit, or proceeding before
any court or any governmental body or authority, pertaining to the transactions
contemplated in this Agreement or to their consummation, shall have been
instituted or threatened in writing on or before the Closing Date.
17.5 Series A Offer. The conditions to the Series A Offer set forth
in Exhibit "B" hereto (other than the condition set forth in clause (ii)
thereof) shall have been satisfied or waived by the ▇▇▇▇▇.
17.6 ▇▇▇▇▇▇▇-Del. Stockholder Approval. The stockholders of
▇▇▇▇▇▇▇-Del., by a vote sufficient under applicable law and ▇▇▇▇▇▇▇-Del.'s
Certificate of Incorporation, shall have approved the Merger.
17.7 Release of Seller From Certain Assumed Liabilities. Seller
shall have been released from its obligations under the contracts and
instruments identified on Schedule 17.7, such releases to be in form and
substance reasonably satisfactory to Seller.
17.8 Series B Purchase Agreements. The Series B Purchase Agreements
shall continue to be in full force and effect, and shall be enforceable by
Seller against the Series B Shareholders in accordance with their terms;
provided, however, that the condition set forth in this Section 17.8 shall be
deemed to have been satisfied if any failure of the Series B Purchase Agreements
to be in full force and effect and enforceable by Seller against the Series B
Shareholders is due solely to a breach of such Series B Purchase Agreements by
Seller.
17.9 No "Ownership Change". Seller and the ▇▇▇▇▇ shall have
determined to their satisfaction that the purchases of shares of Common Stock
pursuant to the Series A Offer and the Series B Purchase Agreements will not
result in an "ownership change" of ▇▇▇▇▇▇▇-Del. for Federal tax purposes that
would impair ▇▇▇▇▇▇▇-Del.'s ability to utilize its tax net operating losses.
18. The Parties' Obligations after Closing.
18.1 Employee Matters.
(a) Effective as of the Closing Date, Buyer will offer
employment on an "at will" basis to officers, employees and sales agents
of Seller on such terms and conditions of employment that are
substantially similar in the aggregate to the terms and conditions
applicable to similarly situated employees of Buyer. Buyer shall credit
each Seller Employee who accepts such offer of employment for his or her
service with Seller
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for purposes of eligibility, benefit accrual and vesting with respect to
vacation, personal and sick days and benefits under each ERISA Plan
maintained by Buyer and provided to such Seller Employee.
(b) Seller shall take all actions necessary to comply with the
applicable requirements of Section 4980B of the Code and part 6 of
Subtitle B of Title I of ERISA ("COBRA") and any comparable state or
local law with respect to the termination of its employees and the
employees of the Partnerships in connection with the transactions
contemplated by this Agreement. Seller, the Partnerships and their ERISA
Affiliates will continue any group health plan coverage to their
employees to the extent necessary to prevent Buyer from being deemed to
be a successor employer of Seller, any Partnership or any of their ERISA
Affiliates within the meaning of Proposed Treasury Regulations Section
54.4980B-9 Q&A-8(c).
18.2 WARN Act. The Parties acknowledge and agree that, for the
purposes of the WARN Act, any person who is a Seller Employee who accepts
Buyer's offer of employment made pursuant to Section 18.1 hereof shall be
considered to be an employee of Buyer immediately upon the Closing and the
Parties agree to comply with any applicable requirements of the WARN Act with
respect to such Seller Employees.
18.3 Maintenance of Seller's Corporate Existence; Tangible Net
Worth. The ▇▇▇▇▇ and Seller agree to maintain the corporate existence of Seller
for a period of one (1) year after the Closing Date and to maintain a Tangible
Net Worth (as defined below) of not less than $2.4 million for a period of one
(1) year after the Closing Date, and for such period thereafter as such one (1)
year period may be extended with respect to certain representations and
warranties as provided in Section 13.1 above. The term "Tangible Net Worth" as
used herein shall be equal to the difference between (a) the sum of Seller's
cash; accounts receivable; liquid securities and investments; other current
assets; real property and other property (but not including goodwill or other
intangibles) and (b) the sum of Seller's accounts payable; accrued salary and
wages; accrued sales and other tax liabilities; bank revolver and term loans.
Calculation of Tangible Net Worth shall take into account any reserves,
including, without limitation, reserves for uncollectible accounts receivable.
18.4 Corporate Governance. The ▇▇▇▇▇ and Seller shall, and shall
cause ▇▇▇▇▇▇▇-Del. and New ▇▇▇▇▇▇▇ to, comply with all applicable Federal and
state law and all applicable listing criteria of the New York Stock Exchange,
Inc. (or such other securities exchange on which the New ▇▇▇▇▇▇▇ Common Stock
shall be listed) concerning the corporate governance of ▇▇▇▇▇▇▇-Del. and New
▇▇▇▇▇▇▇, as applicable, following consummation of the Series A Offer, including
obligations in respect of New ▇▇▇▇▇▇▇'▇ stockholders, directors, officers and
otherwise.
18.5 Further Agreements. Each of the Parties hereto agrees to
cooperate in good faith with each other, and to execute and deliver such further
documents and perform such other acts as may be reasonably necessary or
appropriate to consummate and carry into effect the transactions contemplated
under this Agreement including, but not limited to, the following:
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(a) Prior to the Closing and the consummation of the Series A
Offer, the Series B Purchase Agreements and the Merger, upon the terms
and subject to the conditions of this Agreement, the Parties shall use
their respective reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done and cooperate with each
other in order to do, all things necessary, proper or advisable (subject
to any applicable laws) to consummate the Closing and the other
transactions contemplated hereby as promptly as practicable including,
but not limited to (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the Closing
and the other transactions contemplated hereby and the taking of such
actions as are necessary to obtain any requisite approvals,
authorizations, consents, orders, licenses, permits, qualifications,
exemptions or waivers by any third party or Governmental Entity, (ii)
the preparation of any disclosure documents requested by Buyer in order
to facilitate financing of the Acquisition, and (iii) the satisfaction
of the other parties' conditions to Closing. In addition, no party
hereto shall take any action after the date hereof that could reasonably
be expected to materially delay the obtaining of, or result in not
obtaining, any permission, approval or consent from any Governmental
Entity or other person required to be obtained prior to Closing or
consummation of the other transactions contemplated hereby.
(b) Prior to the Closing and the consummation of the other
transactions contemplated hereby, each Party shall promptly consult with
the other Parties hereto with respect to, provide any necessary
information with respect to, and provide the other Parties (or their
respective counsel) with copies of, all filings made by such Party with
any Governmental Entity or any other information supplied by such Party
to a Governmental Entity in connection with this Agreement or the
transactions contemplated hereby. Each Party hereto shall promptly
inform the others of any communication received by such Party from any
Governmental Entity regarding the transactions contemplated hereby. If
any Party hereto or affiliate thereof receives a request for additional
information or documentary material from any such Governmental Entity
with respect to any of the transactions contemplated hereby, then such
Party shall endeavor in good faith to make, or cause to be made, as soon
as reasonably practicable and after consultation with the other Parties,
an appropriate response in compliance with such request. To the extent
that transfers, amendments or modifications of permits (including
environmental permits) are required as a result of the execution of this
Agreement or consummation of the transactions contemplated hereby, the
Parties shall use their best efforts to effect such transfers,
amendments or modifications.
18.6 Post Closing Obligations. (a) Seller will, and will use its
best efforts to cause each of the Partnerships to, execute, acknowledge, and
deliver any further deeds, assignments, conveyances, and other assurances,
documents, and instruments of transfer, necessary or reasonably requested by
Buyer, and will take any other action consistent with the terms of this
Agreement that may be necessary or reasonably requested by Buyer for the purpose
of assigning, transferring, granting, conveying, and confirming to Buyer, or
reducing to possession, any or all property to be conveyed and transferred under
this Agreement, including, without limitation, the Real Property. If requested
by Buyer, Seller will prosecute or otherwise enforce in its own name (or the
name of the Partnerships) for the benefit of Buyer any claims, rights or
benefits that are transferred to Buyer under this Agreement and that require
prosecution
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or enforcement in Seller's name (or the name of the Partnerships). Any
prosecution or enforcement of claims, rights, or benefits under this paragraph
will be solely at Buyer's expense, unless the prosecution or enforcement is made
necessary by a breach of this Agreement by the Seller.
(b) Seller shall remain liable and indemnify and defend Buyer, in
accordance with the provisions of Section 13.2, for any claims involving any
actual or alleged construction defect or breach of warranty with respect to
homes which are sold by Seller or the Partnerships and which close escrow prior
to the close of Escrow. Buyer shall be liable and indemnify and defend Seller,
in accordance with the provisions of Section 13.3, for any claims involving any
actual or alleged construction defect or breach of warranty with respect to
homes where no work had commenced prior to the close of Escrow. Notwithstanding
any other provision of this Agreement, to the extent that construction has begun
on any improvements prior to close of Escrow hereunder, or a home has been
started but has not yet closed escrow as of such date, Buyer and Seller shall
each remain liable for any claims for alleged construction defects or breach of
warranty for any work done by or for them, respectively, on the Real Property,
and each shall indemnify the other, in accordance with the provisions of
Sections 13.2 and 13.3, respectively for any claims arising from work done by or
for them. The intent of this provision is to maximize insurance coverage,
whether purchased for the benefit of Buyer, any Permitted Assignee of Buyer,
Seller, or any Partnership, and nothing contained in this Agreement shall be
construed to reduce or change coverage to the detriment of any of Buyer, any
Permitted Assignee of Buyer, Seller, or any Partnership. Specifically, the
Parties agree that the floors and ceilings for indemnity set forth in Sections
13.2 and 13.3 shall not be construed to affect or limit in any way any insurance
coverage of any party.
18.7 Management of Certain Excluded Projects Following the Closing.
Following the Closing, Buyer agrees to manage and to provide such other related
services as Seller may reasonably request with respect to the real estate
development projects which are identified on Schedule 2.6 hereto as Excluded
Assets. Seller shall reimburse Buyer for all costs incurred by Buyer in the
performance of such management services.
19. Escrow Closing Obligations.
19.1 Deliveries by Seller to Escrow Holder. Subject to the
conditions set forth in Section 17 hereof, Seller hereby covenants and agrees to
deliver, and shall cause each of the Partnerships to deliver, as applicable, to
Escrow Holder on or prior to the Closing Date the following instruments and
documents, the delivery of each of which shall be a condition to the Close of
Escrow for the benefit of Buyer:
(a) Grant Deeds. Grant Deeds, duly executed and acknowledged by
Seller or the applicable Partnership, conveying the Real Property to
Buyer (or Buyer's Permitted Assigns), in the form attached hereto as
Exhibit "F" (the "Seller Grant Deeds")."
(b) Assignments of Deposits. Assignments of all of Seller's and
the Partnerships' rights (including the right to any deposit made by
Seller), with consents signed by the sellers, optionors or other
parties, in a form reasonably acceptable to Buyer,
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of any purchase agreements, escrow instructions, options, rights of
first refusal or other agreements to purchase or acquire real property,
including, but not limited to, the properties listed on Schedule
19.1(b).
(c) Assignments of Plans and Warranties. Two (2) copies of each
Assignment of Plans and Warranties, executed by Seller or the applicable
Partnership, in the form attached hereto as Exhibit "G" (the
"Assignments of Plans and Warranties").
(d) Bills of Sale. Two (2) copies of each ▇▇▇▇ of Sale conveying
the Personal Property, executed by Seller or the applicable Partnership,
in the form attached hereto as Exhibit "H" (the "Bills of Sale"). Any
other instruments of transfer, such as Department of Motor Vehicle
title, shall be in the form required by law or as reasonably acceptable
to Buyer.
(e) Assignments of Other Assets. Two (2) copies, executed by
Seller or the applicable Partnership, of each of the instruments of
assignment and transfer of all other Assets to be transferred by Seller
or any of the Partnerships pursuant to Section 1.1(c) and Section 1.2(c)
hereof, respectively. The general assignments shall be in the form
attached hereto as Exhibit "I" (the "Assignments of Other Assets"). Any
other instruments of transfer shall be in the form required by law,
executed by the entity holding the asset and reasonably acceptable to
Buyer.
(f) Assignments and Assumption of Leaseholds. Two (2) copies of
assignments and assumption of all leaseholds, properly executed and
acknowledged by Seller and the applicable Partnerships, and accompanied
by all consents of lessors required by this Agreement and the leases
being assigned. The assignment and assumption shall be in the form
attached hereto as Exhibit "J" (the "Assignment and Assumption of
Leaseholds").
(g) Seller's Affidavits. The Seller's Affidavits, duly executed
by Seller and each of the Partnerships, respectively.
(h) Assignment and Assumption Agreements. Two (2) copies,
executed by Seller or the applicable Partnership, of an Assignment and
Assumption Agreement in the form attached hereto as Exhibit "K" (the
"Assignment and Assumption Agreements").
19.2 Deliveries by Buyer to Escrow Holders. Subject to the
conditions set forth in Section 16 hereof, Buyer hereby covenants and agrees to
deliver to Escrow Holder on or prior to the Closing Date the following, the
delivery of each of which shall be a condition to the Close of Escrow for the
benefit of Seller:
(a) Funds. The Purchase Price, together with Buyer's share of
any Escrow closing costs and prorations in the amount determined by
Escrow Holder consistent with the terms hereof, shall be delivered to
Escrow Holder by Buyer in cash or other immediately available funds not
later than the business day immediately prior to the Closing Date.
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(b) Assignments of Plans and Warranties. Two (2) copies of the
Assignments of Plans and Warranties, executed by Buyer.
(c) Assignment and Assumption Agreements. Two (2) copies of the
Assignment and Assumption Agreement, executed by Buyer.
(d) Assignments and Assumption of Leaseholds. Two (2) copies of
each Assignment and Assumption of leasehold, executed by Buyer.
19.3 Disbursements and Other Actions by Escrow Holder. Upon the
Close of Escrow, and when all required funds and documents have been deposited
into the Escrow, Escrow Holder shall promptly undertake all of the following in
the following order:
(a) Cause Seller's Grant Deeds for the Real Property (with
documentary transfer tax information to be affixed after recording) to
be recorded in the Official Records of the County in which the Real
Property is located.
(b) Disburse all funds deposited with Escrow Holder by Buyer in
payment of the Purchase Price for the Assets and in payment of Buyer's
share of any Escrow closing costs and prorations as follows:
(i) Deduct from the funds deposited with Escrow Holder by
Buyer in payment of Buyer's share of any Escrow closing costs and prorations the
amount of all such items chargeable to the account of Buyer hereunder;
(ii) Deduct from the funds deposited with Escrow Holder by
Buyer in payment of the Purchase Price all items chargeable to the account of
Seller, including, without limitation, the amount of any deeds of trust, tax
liens or other monetary encumbrances to be paid by Seller and Seller's share of
any Escrow closing costs and prorations;
(iii) Disburse the remaining balance of the Purchase Price
(as such may be adjusted pursuant to Section 3.2) to Seller (or to Seller's
designee) promptly upon the Close of Escrow. Any funds deposited by or on behalf
of Buyer in excess of the sum of the Purchase Price and Buyer's share of any
Escrow closing costs and prorations shall be returned to Buyer (except for any
amounts which are to be withheld pursuant to Section 3.2).
(c) Deliver the Seller's Affidavit to Buyer.
(d) Deliver one (1) copy of the (i) ▇▇▇▇ of Sale, (ii)
Assignment of Plans and Warranties, (iii) each Assignment and Assumption
of Leasehold, (iv) Assignment of Other Assets, and (v) Assignment and
Assumption Agreement to Buyer, and one (1) copy to Seller and each of
the Partnerships.
(e) Cause the Title Policy described in Section 16.6 above to be
delivered to Buyer.
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20. Escrow Cancellation. If any Party defaults with respect to its
obligations hereunder, or if Escrow is not in a condition to close by the agreed
Closing Date, Escrow Holder shall continue to comply with the instructions
contained herein until a written demand has been made by a party entitled to do
so for the cancellation of Escrow. Escrow Holder shall notify the other party of
any such demand.
20.1 Charges. If the Close of Escrow fails to occur due to Seller's
default, Seller shall pay all Escrow cancellation charges. If the Close of
Escrow fails to occur due to Buyer's default, Buyer shall pay all Escrow
cancellation charges. If the Close of Escrow fails to occur for any reason other
than the foregoing, Buyer and Seller shall each pay one-half (1/2) of any Escrow
cancellation charges, and each party shall release the other party from all
liability hereunder for the failure of the Close of Escrow to occur, provided
that any other funds deposited by Buyer into Escrow, together with all interest
earned thereon in Escrow, less Buyer's one-half (1/2) share of any Escrow
cancellation charges, shall be returned to Buyer. "Escrow cancellation charges"
means all fees, charges and expenses charged by Escrow Holder as well as all
charges related to the services of the Title Company in connection with title
matters relating to this Escrow.
21. Escrow Costs; Taxes and Assessments.
21.1 Escrow and Other Costs. Subject to Section 20.1 above, Buyer
and Seller shall each pay one-half (1/2) of Escrow Holder's escrow fees for the
Escrow. Seller shall bear the cost of all documentary transfer taxes and the
cost of the CLTA standard owner's title policy described in Section 16.6 above
including the mechanic's lien endorsement. If Buyer requires any other
endorsements to the Title Policy, or if Buyer requires an ALTA policy of title
insurance or a binder in lieu of a policy of title insurance, then Buyer shall
pay the additional cost of obtaining such endorsements or such ALTA policy or
binder, including, without limitation, any survey cost. Buyer and Seller shall
each bear their own respective legal and accounting costs, if any, outside of
Escrow. All recording costs or fees and all other costs or expenses not
otherwise provided for in this Agreement shall be apportioned or allocated
between Buyer and Seller in the manner customary in Orange County, California.
21.2 Real Property Taxes and Assessments. All nondelinquent general
and special real property taxes, bonds and assessments with respect to the Real
Property shall be paid by Buyer outside of Escrow. To the extent that the
applicable tax assessor parcels, or any assessment district or other tax
parcels, which have been established as of the Closing include both the Real
Property hereunder and other adjacent real property, then the applicable
nondelinquent general and special real property taxes, bonds and assessments
shall be allocated between the Real Property hereunder and such other adjacent
real property based on acreage. Finally, if the regular tax ▇▇▇▇ or bills for
the Real Property for the fiscal year in which this Escrow closes are not
available as of the Closing, Buyer shall pay all such general and special real
property taxes, bonds and assessments for the Property outside of Escrow based
upon the then current fiscal year's regular tax ▇▇▇▇ or bills within thirty (30)
days following the date such regular tax ▇▇▇▇ or bills are actually received by
the parties. Any ▇▇▇▇▇-▇▇▇▇ assessments, special assessments, district
assessments or any other bonds and assessments with respect to the Real Property
shall not be paid in full by Buyer.
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21.3 Supplemental Real Property Taxes. With respect to any
supplemental taxes assessed against the Real Property pursuant to California
Revenue and Taxation Code Section 75, et seq., Buyer and Seller hereby agree
between themselves that Buyer shall be obligated to pay all such supplemental
taxes assessed against the Property for any period from and after January 1,
1999.
21.4 Other Taxes. Buyer will pay all sales and use taxes arising
from the transfer of the Assets.
22. Condemnation and Destruction.
22.1 Condemnation. If all or any material portion of any particular
development project included in the Real Property is taken prior to the Close of
Escrow as a result of condemnation (including the filing of any notice of
intended condemnation or proceedings in the nature of eminent domain), then
Seller shall immediately notify Buyer of such fact. In such event, Buyer shall
have the option to terminate its obligation to acquire such project (the
"Condemnation Excluded Property") under this Agreement upon written notice to
Seller given not later than thirty (30) days after Buyer's receipt of such
notice, and the remainder of this Agreement shall remain in full force and
effect; provided, however, that the Purchase Price shall be reduced by the
amount allocated to the Condemnation Excluded Property by mutual determination
of the parties hereto. Buyer shall have no right to terminate its obligations
with respect to any project under this Agreement as a result of any taking of a
portion of such project that is not a material portion. If Buyer does not elect
or has no right to terminate as to such project, Seller shall assign and turn
over to Buyer, and Buyer shall be entitled to receive and keep, all awards for
the taking by condemnation of such project and Buyer shall be deemed to have
accepted the Real Property subject to the taking without reduction in the
Purchase Price.
22.2 Fire or Other Casualty During Escrow. If there is damage to any
portion of the Real Property or if any portion of the Real Property is destroyed
by earthquake, flood, landslide, fire or other casualty prior to the Closing
Date, then this Agreement shall remain in full force and effect, and all
insurance proceeds payable to Seller or any of the Partnerships with respect to
such damage or destruction, if any, shall be assigned and delivered by Seller to
Buyer at the Close of Escrow hereunder, and Buyer shall receive, as a credit
against the Purchase Price, an amount equal to the deductible amount with
respect to the insurance.
23. Waiver and Consent. Either party may specifically and expressly
waive in writing any breach by the other party of any provision of this
Agreement, but no such waiver shall constitute a further or continuing waiver of
any preceding or succeeding breach of the same or any other provision. A waiving
party may at any time thereafter require further compliance by the other party
with any breach so waived. The consent by one party to any act by the other for
which such consent was required shall not be deemed to imply consent or waiver
of the necessity of obtaining such consent for the same or any similar acts in
the future. No waiver or consent shall be implied from silence or any failure of
a party to act, except as otherwise specified in this Agreement.
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24. Miscellaneous.
24.1 Successors and Assigns. Buyer shall not voluntarily or by
operation of law assign or transfer any right, interest or obligation hereunder
without Seller's prior written consent, which consent shall not be unreasonably
delayed or withheld by Seller. Each and all of the covenants and conditions and
other terms of this Agreement shall inure to the benefit of and shall be binding
upon the respective heirs, executors, administrators, successors and assigns of
Buyer, ▇▇▇▇▇▇▇-Del. (including New ▇▇▇▇▇▇▇) and Seller. As used in this Section
24, the term "successors" shall refer to the successors to all or substantially
all of the assets of a party and to a party's successors by merger or
consolidation. Notwithstanding the foregoing, Buyer shall have the right,
without the consent of Seller or the ▇▇▇▇▇, to transfer Buyer's rights and
interests under this Agreement to a partnership, limited liability company or
other entity, so long as Buyer retains at least a fifty percent (50%) interest
in such partnership, limited liability company or other entity (such a
partnership, limited liability company or other entity being herein referred to
as a "Permitted Assign").
24.2 Expenses. Subject to Sections 3.2, 19.3, 20.1, 21.1, 24.3, 25.5
and 27 hereof, (a) ▇▇▇▇▇▇▇-Del. shall pay all fees, costs, and expenses incurred
in connection with obtaining the fairness and solvency opinions referenced in
Sections 9.4(a) and 16.8 hereof or required under the Indenture relating to
▇▇▇▇▇▇▇-Del.'s 12 1/2% Senior Notes due 2001, and any appraisals of assets of
▇▇▇▇▇▇▇-Del. or of Buyer that may be required in connection with obtaining any
requisite financing for Buyer to consummate the Acquisition, and (b) Seller
shall pay all fees, costs, and expenses incurred in connection with obtaining
financing commitments and any appraisals of assets of Seller that may be
required in connection with the Acquisition, or the satisfaction of the
condition set forth in Section 16.9 hereof. Subject to the provisions of Section
3.2, and except as provided in Sections 19.3, 20.1, 21.1, 24.3, 25.5 and 27
hereof and in this Section 24.2, each Party shall pay its own expenses incurred
in connection with the transactions contemplated hereby.
24.3 Attorney's Fees. If any legal action is instituted among any of
Seller, the ▇▇▇▇▇ and Buyer and ▇▇▇▇▇▇▇-Del. or Escrow Holder in connection with
this Agreement, then the prevailing party or parties shall be entitled to
recover from the losing party or parties all of its costs and expenses,
including court costs and reasonable attorneys' fees.
24.4 Notices. All notices, requests, demands, and other
communications required or permitted under this Agreement shall be in writing
(including telex and telegraphic communications) and shall be (as elected by the
person giving such notice) hand delivered by messenger or courier service,
telecommunicated with confirming copy by mail, or mailed by United States mail
(postage prepaid), registered or certified, return receipt requested, addressed
as follows:
If to Buyer or ▇▇▇▇▇▇▇-Del.: The ▇▇▇▇▇▇▇ Companies
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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Mailing Address:
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
With a copy to: The ▇▇▇▇▇▇▇ Companies
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Mailing Address:
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Irell & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seller or the ▇▇▇▇▇: ▇▇▇▇▇▇▇ ▇▇▇▇ Homes, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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If to Escrow Holder: First American Title Insurance Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Escrow Officer: ▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Each notice shall be deemed delivered: (1) on the date delivered if by personal
delivery, (2) on the date telecommunicated if by telegraph, (3) on the date of
transmission with confirmed answer back if by telex or telecopier, and (4)
seventy-two (72) hours after deposit in the United States mail (postage prepaid)
if by registered or certified mail. By giving to the other parties at least
fifteen (15) days' written notice, the parties to this Agreement and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
and each shall have the right to specify as its address any other address within
the State of California.
24.5 Gender and Name. In this Agreement (unless the context requires
otherwise), the masculine, feminine and neuter genders and the singular and the
plural shall be deemed to include one another, as appropriate.
24.6 Entire Agreement. This Agreement and its Exhibits constitute
the entire agreement between the parties hereto pertaining to the subject matter
hereof, and the final, complete and exclusive expression of the terms and
conditions thereof. All prior agreements, representations, negotiations and
understandings of the parties hereto, oral or written, express or implied, are
hereby superseded and merged herein.
24.7 Captions. The captions used herein are for convenience only and
are not a part of this Agreement and do not in any way limit or amplify the
terms and provisions hereof.
24.8 Time of Essence. Time is of the essence of every provision of
this Agreement in which time is an element.
24.9 Governing Law. This Agreement and the Exhibits attached hereto
have been negotiated and executed in the State of California and shall be
governed by and construed in accordance with the laws of the State of California
without giving effect to conflicts of laws principles.
24.10 Invalidity of Provision. If any provision of this Agreement as
applied to either party or to any circumstance shall be adjudged by a court of
competent jurisdiction to be void or unenforceable for any reason, the same
shall in no way affect (to the maximum extent permissible by law) any other
provision of this Agreement, the application of any such provision under
circumstances different from those adjudicated by the court, or the validity or
enforceability of the Agreement as a whole.
24.11 Amendments. No addition to or modification of any provision
contained in this Agreement shall be effective unless fully set forth in writing
by both Buyer and Seller.
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24.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
24.13 Schedules and Exhibits. All Schedules and Exhibits to this
Agreement are incorporated herein by this reference as though fully set forth in
the body hereof.
24.14 Time References. Any references in this Agreement to time for
performance of obligations or elapsed time shall mean consecutive calendar days,
months, or years, as applicable, unless otherwise explicitly indicated herein.
In the event that the day on which Buyer or Seller is required to take any
action-under the terms of this Agreement is not a business day, such action
shall be taken on the next succeeding business day. Whenever notice, approval or
disapproval must be given to Escrow Holder and Escrow Holder is closed on the
last day for taking such action, then the parties shall have until 5:00 p.m. on
the first following day Escrow Holder is open to take such action.
24.15 Construction of Agreement. The agreements contained herein
shall not be construed in favor of or against either party, but shall be
construed as if both parties prepared this Agreement.
24.16 No Recording Without Consent. Pending the Close of Escrow,
neither Buyer nor Seller shall, without the consent of the other party, record
this Agreement or a short form or memorandum hereof, or take any other action
that would materially and adversely affect the marketability of Seller's title
to the Property.
24.17 Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and assigns; nothing in this Agreement is intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement; and no provision will give any third persons any right
of subrogation or action against any party to this Agreement other than those
obligations expressly assumed in writing by Buyer. Except for the Assumed
Liabilities, Buyer is not assuming, and shall not be deemed to assume, any
liability of any kind or nature whatsoever (i) of Seller, or (ii) arising out of
or in connection with the Assets or Seller's operations or construction of
improvements.
24.18 Specific Performance and Waiver of Rescission Rights. Each
Party's obligation under this Agreement is unique. If any Party should default
in its obligations under this Agreement, the Parties each acknowledge that it
would be extremely impracticable to measure the resulting damages; accordingly,
the nondefaulting Party or Parties, in addition to any other available rights or
remedies, may ▇▇▇ in equity for specific performance, and the Parties each
expressly waive the defense that a remedy in damages will be adequate. Despite
any breach or default by any of the Parties of any of their respective
representations, warranties, covenants, or agreements under this Agreement, if
the purchase and sale contemplated by it has been consummated, each of the
Parties waives any rights that they may have to rescind this Agreement or the
transaction consummated by it provided that this waiver will not affect any
other rights or remedies available to the parties under this Agreement or under
the law.
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25. Termination Events. This Agreement may, by written notice delivered
prior to the Closing Date, be terminated:
25.1 by mutual consent of Buyer, ▇▇▇▇▇▇▇-Del. and Seller;
25.2 by Buyer, ▇▇▇▇▇▇▇-Del. or Seller if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the Parties hereto shall use their
reasonable efforts to lift), which permanently restrains, enjoins or otherwise
prohibits the acceptance for payment of, or payment for, shares pursuant to the
Series A Offer or the Series B Purchases and such order, decree, ruling or other
action shall have become final and non-appealable;
25.3 by Buyer, ▇▇▇▇▇▇▇-Del. or Seller if the Closing has not
occurred (other than through the failure of any Party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before November 30, 1999; provided, however, that if the Closing has not
occurred by such date due to delays in obtaining governmental or regulatory
approvals with respect to the Acquisition, the Series A Offer or the Merger,
then the Parties agree to extend the Closing Date for up to an additional 30
calendar days to allow the process of obtaining such approvals to be completed;
25.4 by Buyer or ▇▇▇▇▇▇▇-Del. if Seller shall have failed to
commence the Series A Offer on or prior to the time required in Section 9.1
hereof; provided, however, that Buyer may not terminate this Agreement pursuant
to this Section 25.4 if Buyer is at such time in material breach of its
obligations under this Agreement;
25.5 by Buyer or ▇▇▇▇▇▇▇-Del. in connection with entering into a
definitive agreement as permitted under this Agreement in respect of
▇▇▇▇▇▇▇-Del.'s Board of Directors' fiduciary duties to ▇▇▇▇▇▇▇-Del.'s
stockholders; provided, however, that Buyer has complied with all provisions of
this Agreement, including the notice provisions of Section 27 hereof, and that
Buyer makes concurrent payment to Seller of fees and expenses as required by
Section 27 hereof;
25.6 by Buyer or ▇▇▇▇▇▇▇-Del. if Seller shall have breached in any
material respect any of its respective representations, warranties, covenants or
other agreements contained in this Agreement, which breach cannot be or has not
been cured within 30 days after the giving of written notice by Buyer to Seller,
as applicable;
25.7 by Seller if, due to an occurrence not involving a breach by
Seller or the ▇▇▇▇▇ of their obligations hereunder, which breach makes it
impossible to satisfy any of the conditions set forth in Exhibit "B" hereto, the
▇▇▇▇▇ shall have failed to commence the Series A Offer on or prior to the time
required under Section 9.1(a) hereof;
25.8 by Seller if, prior to the purchase of shares of Common Stock
by Seller pursuant to the Series A Offer, ▇▇▇▇▇▇▇-Del.'s Board of Directors
shall have withdrawn, modified or changed in a manner adverse to Seller its
approval or recommendation of the Series A Offer or the Merger or shall have
recommended an Acquisition Proposal or shall have executed an agreement in
principle or definitive agreement relating to an Acquisition Proposal (as
hereinafter
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defined) or similar business combination with a person or entity other than
Seller or its affiliates; or
25.9 by Seller if Buyer or ▇▇▇▇▇▇▇-Del. shall have breached in any
material respect any representation, warranty, covenant or other agreement
contained in this Agreement, which breach cannot be or has not been cured within
30 days after the giving of written notice to Buyer or ▇▇▇▇▇▇▇-Del., as
applicable.
26. Effect of Termination. If this Agreement is terminated pursuant to
Section 25 hereof prior to the Closing, all further obligations of the parties
under this Agreement shall terminate; provided, however, that a termination of
this Agreement shall not relieve any party of any liability it may have for
breach of any representation or warranty or nonperformance of any covenant or
obligation hereunder, or constitute a waiver of any available remedy (including
specific performance, if available) for any such breach or nonperformance.
27. No Solicitation. Each of the Parties agrees that, prior to the
Closing, neither it nor any of its directors, officers, employees,
representatives or agents (including financial advisors and attorneys)
(collectively referred to herein as "Representatives") will (a) solicit,
initiate, encourage or facilitate the submission of, or consider, enter into
discussions concerning or agree to, any Acquisition Proposal (as defined below)
other than from the other party hereto, or (b) provide any information
concerning it or its assets or business operations to any person or permit any
person to visit its premises in connection with or for the purpose of soliciting
or facilitating any Acquisition Proposal, in each case, other than the other
party hereto and its Representatives. In the event any other potential acquiror
or Representative thereof contacts a party or any of its Representatives with
respect to an Acquisition Proposal, such party shall notify the other party
hereto and provide such party with the details of such contact. Further, the
person so contacted will inform the contacting party that the party is in a
period of exclusive negotiations and terminate such contact without disclosing
any details concerning the negotiations with the other party hereto.
Notwithstanding the foregoing provisions of this Section 27, if
the Board of Directors of ▇▇▇▇▇▇▇-Del. or Seller, as the case may be, after
receiving advice from outside legal counsel, determines that a failure to act
would be inconsistent with such Board of Directors' fiduciary duties to
stockholders under applicable law, such party may (i) furnish information with
respect to such party to any person in response to an unsolicited request
pursuant to a confidentiality agreement with terms and conditions similar to
those contained in the confidentiality agreements by and between the Parties,
and (ii) participate in discussions and negotiations regarding any potential
Acquisition Proposal. Such party shall promptly notify the other party hereto of
any request received by such party with respect to a potential competing
Acquisition Proposal. If a party receives a competing Acquisition Proposal, such
party shall promptly, and in any event at least three (3) business days prior to
entering into any agreement with respect to such competing Acquisition Proposal,
notify the other party of the receipt of such competing Acquisition Proposal,
specifying the material terms and conditions of the proposal and identifying the
person making such proposal. If a party enters into a definitive agreement with
respect to a competing Acquisition Proposal, such party shall concurrently with
entering into such agreement pay, or cause to be paid, all fees and expenses
incurred by the other party through such date in connection with the
transactions contemplated by this Agreement
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(including, without limitation, all attorneys', accountants', financial
advisors', bankers', appraisers' and similar professional fees and expenses).
For purposes of this Section 27, the term "Acquisition Proposal"
means any proposal to acquire (whether by merger, stock or asset purchase,
direct investment, or otherwise) any equity interest in the other party hereto,
any of its subsidiaries, or all or any material portion of its assets (except
with respect to sales of homes, lots or parcels in the ordinary course of
business).
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ HOMES, INC.
(as to Sections 9.1-9.3, 9.5-9.6, 10.1-10.6, a California corporation
10.7, 18.3, 18.4, 18.5, 24.1-24.18 and 27, only)
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------------------------- --------------------------
▇▇▇▇▇▇▇ ▇▇▇▇ Its: President and CEO
---------------------
"SELLER"
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
(as to Sections 9.1-9.3, 9.5-9.6, 10.1-10.6,
10.7, 18.3, 18.4, 18.5, 24.1-24.18 and 27, only)
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
THE ▇▇▇▇▇▇▇ COMPANIES, ▇▇▇▇▇▇▇ HOMES,
a Delaware corporation a California corporation
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------- -------------------------
Its: Senior Vice President and Its: Senior Vice President and
General Counsel General Counsel
----------------------- --------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------- -------------------------
Its: Vice President and Its: Vice President and
Corporate Secretary Corporate Secretary
----------------------- --------------------
"▇▇▇▇▇▇▇-DEL." "BUYER"
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First American Title Insurance Company, the Escrow Holder under
this Agreement, hereby certifies that the date of Opening of Escrow pursuant to
Section 6 of this Agreement is October __, 1999.
FIRST AMERICAN TITLE INSURANCE COMPANY
a California corporation
By:
----------------------------------------
Its:
-----------------------------------
"ESCROW HOLDER"
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EXHIBIT B
CONDITIONS TO THE SERIES A OFFER
The capitalized terms used in this Exhibit "B" shall have the
meaning set forth in the Purchase Agreement and Escrow Instructions to which
this Exhibit is attached, except that the term "Agreement" shall be deemed to
refer to such Purchase Agreement and Escrow Instructions.
CONDITIONS TO THE OFFER. Notwithstanding any other provisions of
the Series A Offer, the ▇▇▇▇▇ shall not be required to accept for payment or pay
for any tendered shares of Series A Common Stock and may terminate or, subject
to the terms of the Agreement, amend the Series A Offer, if (i) there shall not
be validly tendered and not properly withdrawn prior to the expiration date for
the Series A Offer (the "Expiration Date") that number of shares of Series A
Common Stock which, when added to (x) the number of shares of Common Stock owned
by Seller, the ▇▇▇▇▇ and their affiliates as of the date of such test (exclusive
of the shares underlying the stock options to be cancelled as contemplated in
Section 16.14 of the Agreement), and (y) the number of shares of Common Stock
held by each of the Series B Shareholders which such holders are legally
obligated to sell to Seller pursuant to the Series B Purchase Agreements
(including pursuant to Seller's option to purchase additional shares of Series B
Common Stock in the event of an undersubscribed Series A Offer), would aggregate
at least 45% of the outstanding number of shares of Common Stock (the "Minimum
Condition"); (ii) the Acquisition has not been consummated in accordance with
the terms of the Agreement; (iii) the stockholders of ▇▇▇▇▇▇▇-Del. shall not
have approved the Merger by the requisite vote at the Stockholders' Meeting; or
(iv) at any time on or after the date of the Agreement and prior to the time of
payment for any shares of Common Stock, any of the following events (each, an
"Event") shall have occurred and be continuing as of the Expiration Date:
(a) there shall be any action taken, instituted or pending, or
any statute, rule, regulation, legislation, interpretation, ruling,
condition, judgment, order or injunction enacted, enforced, promulgated,
proposed, amended, issued or deemed applicable to the Series A Offer,
the Series B Purchases, the Acquisition or the Merger, by any
Governmental Entity, that could reasonably be expected to, directly or
indirectly: (1) make illegal or otherwise prohibit consummation of the
Series A Offer, the Series B Purchases, the Acquisition or the Merger as
contemplated by the Agreement, (2) impose a limitation on the ability of
the ▇▇▇▇▇ effectively to acquire, hold or exercise full rights of
ownership of the Common Stock, including, without limitation, the right
to vote any shares acquired or owned by the ▇▇▇▇▇ on all matters
properly presented to ▇▇▇▇▇▇▇-Del.'s or New ▇▇▇▇▇▇▇'▇ stockholders, or
(3) require divestiture by the ▇▇▇▇▇, Seller or their respective
affiliates of shares of Common Stock of ▇▇▇▇▇▇▇-Del. or any material
portion of the business or assets of ▇▇▇▇▇▇▇-Del. taken as a whole; or
(b) (1) the representations of ▇▇▇▇▇▇▇-Del. and Buyer set forth
in the Merger Agreement shall not be true and correct in any material
respect as of the date of the Agreement and as of consummation of the
Series A Offer as though made on and as of such date, (2) ▇▇▇▇▇▇▇-Del.
or Buyer shall have failed to comply in all material respects with their
respective covenants and agreements set forth in the Agreement, (3)
there shall
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60
have occurred any events or changes which have had or could reasonably
be expected to have a material adverse effect on the business, assets,
prospects, condition (financial and other) and results of operations of
▇▇▇▇▇▇▇-Del. taken as a whole; or
(c) (1) it shall have been publicly disclosed, or the ▇▇▇▇▇ and
Seller shall have otherwise learned, that beneficial ownership
(determined for the purposes of this paragraph (c) as set forth in Rule
13d-3 promulgated under the Exchange Act) of 50% or more of the
outstanding shares of Common Stock has been acquired by any person
(including ▇▇▇▇▇▇▇-Del. and the Buyer or any of their subsidiaries or
affiliates) or group (as defined in Section 13(d)(3) under the Exchange
Act), (2) the Board of Directors of ▇▇▇▇▇▇▇-Del. or any committee
thereof shall have withdrawn, or shall have modified or amended in a
manner adverse to the ▇▇▇▇▇ and Seller, the approval, adoption or
recommendation, as the case may be, of the Series A Offer or the Merger,
or approved or recommended any, merger, consolidation, other business
combination, sale of material assets, takeover proposal or other
acquisition of shares of Common Stock other than the Series A Offer, the
Acquisition, the Merger and the other transactions contemplated by the
Agreement, (3) a third party shall have entered into a definitive
agreement or a written agreement in principle with ▇▇▇▇▇▇▇-Del. with
respect to a tender offer or exchange offer for any shares of Common
Stock or a merger, consolidation, other business combination with
▇▇▇▇▇▇▇-Del. or sale of material assets with or involving ▇▇▇▇▇▇▇-Del.
or any of its subsidiaries (except as specifically permitted by the
Agreement), or (4) the Board of Directors of ▇▇▇▇▇▇▇-Del. or any
committee thereof shall have resolved to do any of the foregoing and
such resolution shall be made public; or
(d) ▇▇▇▇▇▇▇-Del., the Buyer and the Seller shall have reached an
agreement that the Series A Offer, the Acquisition or the Agreement be
terminated, or the Agreement shall have been otherwise terminated in
accordance with its terms; or
(e) there shall have occurred, and continued to exist, (1) any
general suspension of, or limitation on prices for, trading in
securities on the New York Stock Exchange (excluding any coordinated
trading half-triggered solely as a result of a specified decrease in a
market index and suspensions on limitations resulting solely from
physical damage or interference with such exchanges not related to
market conditions), or (2) a banking moratorium in the United States or
other limitation on the extension of credit, or (3) a commencement of a
war, armed hostilities or other national or international calamity
involving the United States and having a material adverse effect on the
business, assets, prospects, condition (financial and other) and results
of operations of ▇▇▇▇▇▇▇-Del., taken as a whole, or materially adversely
affecting or delaying the Series A Offer, or (4) in the case of any
condition, circumstance or event referenced in any of the foregoing
clauses (1), (2) and (3) and existing at the time of the commencement of
the Series A Offer, a material acceleration or worsening thereof; or
(f) the Series B Purchase Agreements shall no longer be in full
force or effect, or the Series B Purchase Agreements shall no longer be
enforceable against the Series B Shareholders in accordance with their
terms (except for any such failure to be in full force or effect or
enforceable which is due solely to a breach thereof by Seller); or
B-2
61
(g) it is reasonably determined that upon consummation of the
Series A Offer, the Series B Purchases and the Merger, (1) the shares of
Common Stock will cease to be listed on the New York Stock Exchange or
another national securities exchange, or will not be quoted on an
inter-dealer quotation system of a registered national securities
association, or (2) the shares of Common Stock to be outstanding
immediately following consummation of such transactions will be held of
record by less than 300 persons.
The foregoing conditions are for the benefit of the ▇▇▇▇▇ and may
be asserted by them regardless of the circumstances giving rise to any such
conditions and may be waived by them, in whole or in part, at any time and from
time to time in their reasonable discretion, in each case, subject to the terms
of the Agreement, including Section 9.2 thereof. Subject to Section 9.2 of the
Agreement, the failure by the ▇▇▇▇▇ at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. Any reasonable determination by the ▇▇▇▇▇ concerning the events described
in this Exhibit "B" will be final and binding on all Parties.
B-3