EXHIBIT 10.3
AGREEMENT AND PLAN OF ORGANIZATION
dated as of the 10th day of September, 1997
by and among
HOMEUSA, INC.
▇▇▇▇▇▇▇▇ HOMES ACQUISITION CORP.
(a subsidiary of HomeUSA, Inc.)
▇▇▇▇▇▇▇▇ HOMES, INC.
and
the STOCKHOLDERS named herein
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TABLE OF CONTENTS
Page
RECITALS.....................................................................1
1. THE MERGER.............................................................5
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER........................5
1.2 EFFECTIVE TIME OF THE MERGER.....................................6
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS
OF SURVIVING CORPORATION.........................................6
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY, HOME AND NEWCO..........................................6
1.5 EFFECT OF MERGER.................................................7
2. CONVERSION OF STOCK....................................................8
2.1 MANNER OF CONVERSION.............................................8
3. DELIVERY OF MERGER CONSIDERATION.......................................9
4. CLOSING................................................................9
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS..................................................10
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS..............................................10
5.1 DUE ORGANIZATION................................................10
5.2 AUTHORIZATION...................................................10
5.3 CAPITAL STOCK OF THE COMPANY....................................11
5.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING..........11
5.5 NO BONUS SHARES.................................................11
5.6 SUBSIDIARIES....................................................11
5.7 PREDECESSOR STATUS; ETC.........................................11
5.8 SPIN-OFF BY THE COMPANY.........................................11
5.9 FINANCIAL STATEMENTS............................................12
5.10 LIABILITIES AND OBLIGATIONS.....................................12
5.11 ACCOUNTS AND NOTES RECEIVABLE...................................12
5.12 PERMITS AND INTANGIBLES.........................................13
5.13 ENVIRONMENTAL MATTERS...........................................13
5.14 PERSONAL PROPERTY...............................................14
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.......14
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5.16 REAL PROPERTY...................................................15
5.17 INSURANCE.......................................................15
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS....16
5.19 EMPLOYEE PLANS..................................................16
5.20 COMPLIANCE WITH ERISA...........................................17
5.21 CONFORMITY WITH LAW; LITIGATION.................................18
5.22 TAXES...........................................................18
5.23 NO VIOLATIONS; NO CONSENTS REQUIRED, ETC.......................19
5.24 GOVERNMENT CONTRACTS............................................19
5.25 ABSENCE OF CHANGES..............................................20
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY............................21
5.27 VALIDITY OF OBLIGATIONS.........................................21
5.28 RELATIONS WITH GOVERNMENTS......................................21
5.29 DISCLOSURE......................................................22
5.30 PROHIBITED ACTIVITIES...........................................22
5.31 DEALER AGREEMENTS AND RELATED MATTERS...........................23
5.32 NO RETAIL FINANCING.............................................23
5.33 NO WARRANTIES OR INSURANCE......................................24
5.34 NO INTERESTS IN OTHER BUSINESSES................................24
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS............24
5.35 AUTHORITY; OWNERSHIP............................................24
5.36 PREEMPTIVE RIGHTS...............................................24
5.37 NO INTENTION TO DISPOSE OF HOME STOCK...........................24
6. REPRESENTATIONS OF HOME AND NEWCO.....................................25
6.1 DUE ORGANIZATION................................................25
6.2 AUTHORIZATION...................................................25
6.3 CAPITAL STOCK OF HOME AND NEWCO.................................25
6.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING..........25
6.5 SUBSIDIARIES....................................................26
6.6 FINANCIAL STATEMENTS............................................26
6.7 LIABILITIES AND OBLIGATIONS.....................................26
6.8 CONFORMITY WITH LAW; LITIGATION.................................26
6.9 NO VIOLATIONS...................................................26
6.10 VALIDITY OF OBLIGATIONS.........................................27
6.11 HOME STOCK......................................................27
6.12 NO SIDE AGREEMENTS..............................................28
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS....................28
6.14 TAXES...........................................................28
6.15 ABSENCE OF CHANGES..............................................28
6.16 DISCLOSURE......................................................29
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6.17 PRIVATE OFFERING................................................30
7. COVENANTS PRIOR TO CLOSING............................................30
7.1 ACCESS AND COOPERATION; DUE DILIGENCE...........................30
7.2 CONDUCT OF BUSINESS PENDING CLOSING.............................30
7.3 PROHIBITED ACTIVITIES...........................................31
7.4 NO SHOP.........................................................33
7.5 NOTICE TO BARGAINING AGENTS.....................................33
7.6 AGREEMENTS......................................................33
7.7 NOTIFICATION OF CERTAIN MATTERS.................................33
7.8 AMENDMENT OF SCHEDULES..........................................34
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT............35
7.10 FINAL FINANCIAL STATEMENTS......................................35
7.11 FURTHER ASSURANCES..............................................35
7.12 AUTHORIZED CAPITAL..............................................35
7.13 COMPLIANCE WITH THE ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ANTITRUST IMPROVEMENTS
ACT OF 1976 (THE "▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT").......................36
7.14 STOCKHOLDERS OF HOME............................................36
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.......36
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS......36
8.2 SATISFACTION....................................................37
8.3 NO LITIGATION...................................................37
8.4 OPINION OF COUNSEL..............................................37
8.5 REGISTRATION STATEMENT..........................................37
8.6 CONSENTS AND APPROVALS..........................................37
8.7 GOOD STANDING CERTIFICATES......................................37
8.8 NO MATERIAL ADVERSE CHANGE......................................38
8.9 CLOSING OF IPO..................................................38
8.10 SECRETARY'S CERTIFICATE.........................................38
8.11 EMPLOYMENT AGREEMENTS...........................................38
8.12 TAX MATTERS.....................................................38
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF HOME AND NEWCO.................38
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS......39
9.2 NO LITIGATION...................................................39
9.3 SECRETARY'S CERTIFICATE.........................................39
9.4 NO MATERIAL ADVERSE EFFECT......................................39
9.5 STOCKHOLDERS' RELEASE...........................................39
9.6 SATISFACTION....................................................40
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9.7 TERMINATION OF RELATED PARTY AGREEMENTS.........................40
9.8 OPINION OF COUNSEL..............................................40
9.9 CONSENTS AND APPROVALS..........................................40
9.10 GOOD STANDING CERTIFICATES......................................40
9.11 REGISTRATION STATEMENT..........................................40
9.12 EMPLOYMENT AGREEMENTS...........................................40
9.13 CLOSING OF IPO..................................................40
9.14 FIRPTA CERTIFICATE..............................................41
10. COVENANTS OF HOME AND THE STOCKHOLDERS AFTER CLOSING..................41
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS.......41
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT....................41
10.3 PREPARATION AND FILING OF TAX RETURNS...........................41
10.4 DIRECTORS.......................................................42
11. INDEMNIFICATION.......................................................42
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.....................42
11.2 INDEMNIFICATION BY HOME.........................................43
11.3 THIRD PERSON CLAIMS.............................................44
11.4 EXCLUSIVE REMEDY................................................45
11.5 LIMITATIONS ON INDEMNIFICATION..................................45
12. TERMINATION OF AGREEMENT..............................................46
12.1 TERMINATION.....................................................46
12.2 LIABILITIES IN EVENT OF TERMINATION.............................47
13. NONCOMPETITION........................................................47
13.1 PROHIBITED ACTIVITIES...........................................47
13.2 DAMAGES.........................................................48
13.3 REASONABLE RESTRAINT............................................48
13.4 SEVERABILITY; REFORMATION.......................................48
13.5 INDEPENDENT COVENANT............................................49
13.6 MATERIALITY.....................................................49
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................49
14.1 STOCKHOLDERS....................................................49
14.2 HOME AND NEWCO..................................................50
14.3 DAMAGES.........................................................50
14.4 SURVIVAL........................................................50
15. TRANSFER RESTRICTIONS.................................................50
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15.1 TRANSFER RESTRICTIONS...........................................50
16. FEDERAL SECURITIES ACT REPRESENTATIONS................................51
16.1 COMPLIANCE WITH LAW.............................................51
16.2 ECONOMIC RISK; SOPHISTICATION...................................51
17. REGISTRATION RIGHTS...................................................52
17.1 PIGGYBACK REGISTRATION RIGHTS...................................52
17.2 DEMAND REGISTRATION RIGHTS......................................53
17.3 REGISTRATION PROCEDURES.........................................53
17.4 INDEMNIFICATION.................................................55
17.5 UNDERWRITING AGREEMENT..........................................56
17.6 RULE 144 REPORTING..............................................56
18. GENERAL...............................................................56
18.1 COOPERATION.....................................................56
18.2 SUCCESSORS AND ASSIGNS..........................................57
18.3 ENTIRE AGREEMENT................................................57
18.4 COUNTERPARTS....................................................57
18.5 BROKERS AND AGENTS..............................................57
18.6 EXPENSES........................................................57
18.7 NOTICES.........................................................58
18.8 GOVERNING LAW...................................................59
18.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................59
18.10 EXERCISE OF RIGHTS AND REMEDIES.................................59
18.11 TIME............................................................59
18.12 REFORMATION AND SEVERABILITY....................................59
18.13 REMEDIES CUMULATIVE.............................................60
18.14 CAPTIONS........................................................60
18.15 AMENDMENTS AND WAIVERS..........................................60
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ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Stockholders and Stock Ownership of the Company
Annex III - Certificate of Incorporation and By-Laws of Home
Annex IV - Certificate of Incorporation and By-Laws of Newco
Annex V - Form of Opinion of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P.
Annex VI - Form of Opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
Annex VII - Form of Key Employee Employment Agreement
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SCHEDULES
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock, Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Permits and Intangibles
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Organized Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes 5.23 No Violations, Consents, etc.
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.28 Relations with Governments
5.30 Prohibited Activities
5.31 Dealer Agreements
5.32 No Retail Financing
5.33 No Warranties or Insurance
5.34 No Interests in Other Businesses
5.35 Authority; Ownership
6.9 No Violations
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Notice to Bargaining Agents
9.12 Employment Agreements
10.1 Guaranties
13.1 Lots Excluded from Noncompete
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
the 10th day of September, 1997, by and among HomeUSA, Inc., a Delaware
corporation ("Home"), MCDONALD HOMES ACQUISITION CORP., a Delaware corporation
("Newco"), MCDONALD HOMES, INC., an Oklahoma corporation (the "Company"), and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (the
"Stockholders"). The Stockholders are all the stockholders of the Company.
RECITALS
WHEREAS, Newco is a corporation duly organized and existing under
the laws of the State of Delaware, having been incorporated on September
8, 1997 solely for the purpose of completing the transactions set forth
herein, and is a wholly-owned subsidiary of Home, a corporation organized
and existing under the laws of the State of Delaware;
WHEREAS, the respective Boards of Directors of Newco and the Company
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the
Constituent Corporations and their respective Stockholders that Newco
merge with and into the Company pursuant to this Agreement and the
applicable provisions of the laws of the States of Delaware and the State
of Incorporation;
WHEREAS, Home is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements"), each of
which is entitled "Agreement and Plan of Organization," with each of the
Other Founding Companies (as defined herein) and their respective
stockholders in order to acquire additional retail manufactured housing
companies;
WHEREAS, this Agreement and the Other Agreements constitute the
"Home Plan of Organization;"
WHEREAS, the Stockholders and the Boards of Directors and the
stockholders of Home, each of the Other Founding Companies and each of the
subsidiaries of Home that are parties to the Other Agreements have
approved and adopted the Home Plan of Organization as an integrated plan
pursuant to which the Stockholders and the stockholders of each of the
other Founding Companies will transfer the capital stock of each of the
Founding Companies to Home and the Stockholders of each of the other
Founding Companies will acquire the stock of Home (but not cash or other
property) as a tax-free transfer of property under Section 351 of the
Code;
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WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
Company has approved this Agreement (which is subject to the terms and
conditions herein set forth), as part of the Home Plan of Organization in
order to transfer the capital stock of the Company to Home;
WHEREAS, unless the context otherwise requires, capitalized terms
used in this Agreement or in any schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of
this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the Company, any subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean Newco and each of the other Delaware
companies wholly-owned by Home prior to the Funding and Consummation Date.
"Affiliates" means, with respect to any Person, any Person or entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger in such forms as may be required by the laws of the
State of Delaware and the State of Incorporation.
"Balance Sheet Date" shall mean June 30, 1997.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
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"Draft Registration Statement" means the draft dated September 5, 1997 of
the Registration Statement, and any corrections thereto and supplemental
information delivered by Home to the Company for delivery to the Stockholders
prior to the time this Agreement is delivered to Home.
"Effective Time of the Merger" shall mean the time as of which the Merger
becomes effective, which shall occur on the Funding and Consummation Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" means:
▇▇▇▇▇▇'▇ Mobile Homes, Inc., a Washington corporation, Home USA,
Inc., a Washington corporation, and Pac West Mgmt., Inc., a Washington
corporation.
CSF&T, Inc. (dba AAA Homes), a Mississippi corporation, AAA Homes,
L.L.C., a Louisiana limited liability company, and Fordham Insurance
Agency, Inc., a Mississippi corporation.
First American Homes, Inc., an Alabama corporation, D & S, Inc., an
Alabama corporation, and Son Development Corporation, an Alabama
corporation.
Home Folks Housing Center, Inc., a Kentucky corporation.
McDonald Homes, Inc., an Oklahoma corporation.
Mobile World, Inc., a Texas corporation, and Showcase of Homes,
Inc., a Texas corporation.
▇▇▇▇▇▇▇ Home Center, Inc., a Mississippi corporation.
Universal Housing, Inc., a Tennessee corporation, ▇▇▇▇▇▇▇ & ▇▇▇▇
Insurance Agency, Inc., a Tennessee corporation, and Universal Housing of
East TN, Inc., a Tennessee corporation.
Willmax Homes of Colorado LLC, a Colorado limited liability company.
"Funding and Consummation Date" has the meaning set forth in Section 4.
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"IPO" means the initial public offering of Home Stock pursuant to the
Registration Statement described herein.
"Knowledge of the Company" means the actual knowledge of the executive
officers of the Company.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Merger" means the merger of Newco with and into the Company pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and the laws of the State of Incorporation.
"Home" has the meaning set forth in the first paragraph of this Agreement.
"Home Charter Documents" has the meaning set forth in Section 6.1.
"Home Stock" means the common stock, par value $.01 per share, of Home.
"Newco" has the meaning set forth in the first paragraph of this
Agreement.
"Newco Stock" means the common stock, par value $.01 per share, of Newco.
"Other Founding Companies" means all of the Founding Companies other than
the Company.
"Person" means an individual or a corporation, limited partnership,
general partnership, limited liability company, trust, unincorporated
association, joint venture, association, or government or any agency,
instrumentality, or political subdivision thereof, or other entity.
"Pricing" means the date of determination by Home and the Underwriters of
the public offering price of the shares of Home Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement on Form
S-1 to be filed with the SEC covering the shares of Home Stock to be issued in
the IPO and all amendments thereto.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
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"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto (as the same may from time
to time be amended), which shall reference the relevant sections of this
Agreement, on which parties hereto disclose information as part of their
respective representations, warranties and covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of Oklahoma.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiary" means, as to any Person, any corporation or entity, 50% or
more of the shares of voting stock (or in the case of an entity which is not a
corporation, 50% or more of the equity interests that provide the power to
manage or direct the management of such entity) of which is at the time any
determination is being made, owned, directly or indirectly, by such Person and
its wholly owned Subsidiaries.
"Surviving Corporation" shall mean the Company as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, excise, property, deed, stamp, alternative
or add on minimum, or other taxes, assessments, duties, fees, levies or other
governmental charges, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Underwriters" means the prospective underwriters identified in the Draft
Registration Statement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause the Articles of Merger to be signed, verified and
delivered to Home to be held for filing with the Secretary of State of the State
of Delaware and the Secretary of State (or other appropriate authority) of the
State of Incorporation on or effective as of the Funding and Consummation Date.
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1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
Newco shall be merged with and into the Company in accordance with the Articles
of Merger, the separate existence of Newco shall cease, the Company shall be the
surviving party in the Merger and the Company is sometimes hereinafter referred
to as the Surviving Corporation. The Merger will be effected in a single
transaction.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of the Company then in effect
shall be the Certificate of Incorporation of the Surviving Corporation
until changed as provided by law;
(ii) the By-laws of Newco then in effect shall become the By-laws of
the Surviving Corporation; and subsequent to the Effective Time of the
Merger, such By-laws shall be the By-laws of the Surviving Corporation
until they shall thereafter be duly amended (and such By-laws shall be
amended from time to time, if necessary, to comply with applicable state
law);
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the Company
immediately prior to the Effective Time of the Merger, provided that ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇ shall become an additional director of the Surviving
Corporation effective as of the Effective Time of the Merger, and the
number of directors constituting the entire Board of Directors of the
Company shall be increased, if necessary, to accommodate the addition of
such additional director; the Board of Directors of the Surviving
Corporation shall hold office subject to the provisions of the laws of the
State of Incorporation and of the Certificate of Incorporation and By-laws
of the Surviving Corporation; and
(iv) the officers of the Company immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, and effective upon the
Effective Time of the Merger ▇▇▇▇▇▇▇ ▇▇▇ shall become an additional Vice
President of the Surviving Corporation, such officers to serve, subject to
the provisions of the Certificate of Incorporation and By-laws of the
Surviving Corporation, until their respective successors are duly elected
and qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
HOME AND NEWCO. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the Company,
Home and Newco as of the date of this Agreement are as follows:
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(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the Company is as set forth on Schedule 5.3 hereto;
(ii) immediately prior to the Closing Date and the Funding and
Consummation Date, except for changes permitted by Section 7.12 hereof,
the authorized capital stock of Home will consist of 50,000,000 shares of
Home Stock, of which the number of issued and outstanding shares will be
set forth in the Registration Statement, 5,000,000 shares of preferred
stock, $.01 par value, of which no shares will be issued and outstanding,
and 5,000,000 shares of Restricted Voting Common Stock, $.01 par value
(the "Restricted Common Stock"), all of which will be issued and
outstanding except as otherwise set forth in the Registration Statement;
and
(iii) as of the date of this Agreement, the authorized capital stock
of Newco consists of 1,000 shares of Newco Stock, of which one hundred
(100) shares are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the law of the
State of Incorporation. Except as herein specifically set forth, the identity,
existence, purposes, powers, franchises, privileges, rights and immunities of
the Company shall continue unaffected and unimpaired by the Merger and the
corporate franchises, existence and rights of Newco shall be merged with and
into the Company, and the Company, as the Surviving Corporation, shall be fully
vested therewith. At the Effective Time of the Merger, the separate existence of
Newco shall cease and, in accordance with the terms of this Agreement, the
Surviving Corporation shall possess all the rights, privileges, immunities and
franchises, of a public, as well as of a private, nature, and all property,
real, personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to the Company and Newco shall be transferred to, and vested
in, the Surviving Corporation without further act or deed; and all property,
rights and privileges, powers and franchises and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the Company and Newco; and the title to any real estate, or
interest therein, whether by deed or otherwise, under the laws of the State of
Incorporation vested in the Company and Newco, shall not revert or be in any way
impaired by reason of the Merger. Except as otherwise provided herein, the
Surviving Corporation shall thenceforth be responsible and liable for all the
liabilities and obligations of the Company and Newco and any claim existing, or
action or proceeding pending, by or against the Company or Newco may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in their place. Neither the rights of creditors nor any liens
upon the property of the Company or Newco shall be impaired by the Merger, and
all debts, liabilities and duties of the Company and Newco shall attach to the
Surviving
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Corporation, and may be enforced against such Surviving Corporation to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the Company ("Company Stock") and (ii) Newco Stock,
issued and outstanding immediately prior to the Effective Time of the Merger,
respectively, into shares of (x) Home Stock and cash and (y) common stock of the
Surviving Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of Company Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (1) the right to receive the
number of shares of Home Stock set forth on Annex I hereto (adjusted as
set forth on such Annex I) with respect to such holder and (2) the right
to receive the amount of cash set forth on Annex I hereto with respect to
such holder (adjusted as set forth on such Annex I);
(ii) all shares of Company Stock that are held by the Company as
treasury stock shall be canceled and retired and no shares of Home Stock
or other consideration shall be delivered or paid in exchange therefor;
and
(iii) each share of Newco Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall, by virtue of the Merger
and without any action on the part of Home, automatically be converted
into one fully paid and non-assessable share of common stock of the
Surviving Corporation which shall constitute all of the issued and
outstanding shares of common stock of the Surviving Corporation
immediately after the Effective Time of the Merger.
All Home Stock received by the Stockholders pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all the other shares of outstanding Home
Stock by reason of the provisions of the Certificate of Incorporation of Home or
as otherwise provided by the Delaware GCL. All Home Stock received by the
Stockholders shall be issued and delivered to the Stockholders free and clear of
any liens, claims or encumbrances of any kind or nature. All voting rights of
such Home Stock received by the Stockholders shall be fully exercisable by the
Stockholders and the Stockholders shall not be deprived nor restricted in
exercising those rights. At the Effective Time of the Merger, Home shall have no
class of capital stock issued and outstanding other than the Home Stock and the
Restricted Voting Common Stock.
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3. DELIVERY OF MERGER CONSIDERATION
3.1 On the Funding and Consummation Date the Stockholders, who are the
holders of all of the outstanding capital stock of the Company, shall, upon
surrender of certificates representing such shares, receive the respective
number of shares of Home Stock and the amount of cash described on Annex I
hereto, said cash to be payable by certified check or wire transfer.
3.2 The Stockholders shall deliver to Home at the Closing the certificates
representing Company Stock, duly endorsed in blank by the Stockholders, or
accompanied by blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Stockholders' expense, affixed and canceled. The
Stockholders agree promptly to cure any deficiencies with respect to the
endorsement of the stock certificates or other documents of conveyance with
respect to such Company Stock or with respect to the stock powers accompanying
any Company Stock.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary
to prepare to (i) effect the Merger (including the execution of the Articles of
Merger which shall be delivered to Home for filing with the appropriate
authorities effective on the Funding and Consummation Date) and (ii) effect the
conversion and delivery of shares referred to in Section 3 hereof; provided,
that such actions shall not include the actual completion of the Merger or the
conversion and delivery of the shares and certified check(s) referred to in
Section 3 hereof, each of which actions shall only be taken upon the Funding and
Consummation Date as herein provided. In the event that there is no Funding and
Consummation Date and this Agreement automatically terminates as provided in
this Section 4 the Articles of Merger shall not be filed and shall be returned
to the Stockholders. The taking of the actions described in clauses (i) and (ii)
above (the "Closing") shall take place on the closing date (the "Closing Date")
at the offices of Bracewell & ▇▇▇▇▇▇▇▇▇, L.L.P., South Tower Pennzoil Place, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. On the Funding and Consummation
Date (x) the Articles of Merger shall be filed with the appropriate state
authorities so that they shall be, as early as practicable on the Funding and
Consummation Date, effective and the Merger shall thereby be effected, (y) all
transactions contemplated by this Agreement, including the conversion and
delivery of shares, the delivery of a certified check or checks in an amount
equal to the cash portion of the consideration which the Stockholders shall be
entitled to receive pursuant to the Merger referred to in Section 3 hereof and
(z) the closing with respect to the IPO shall occur and be completed. The date
on which the actions described in the preceding clauses (x), (y) and (z) occurs
shall be referred to as the "Funding and Consummation Date." During the period
from the Closing Date to the Funding and Consummation Date, this Agreement may
only be terminated by the parties if the underwriting agreement in respect of
the IPO is terminated pursuant to the terms of such underwriting agreement. This
Agreement shall also in any event automatically terminate if the Funding and
Consummation Date has not occurred within 15 business days following the Closing
Date. Time is of the essence.
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
Each of the Company and the Stockholders severally (based on their
relative ownership of the Company Stock on the date hereof) represent and
warrant that all of the following representations and warranties in this Section
5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof,
shall be true at the time of Closing and the Funding and Consummation Date, and
that such representations and warranties shall survive the Funding and
Consummation Date for a period of twelve months (the last day of such period
being the "Expiration Date"), except that the warranties and representations set
forth in Section 5.22 hereof shall survive until such time as the limitations
period has run for all tax periods ended on or prior to the Funding and
Consummation Date, which shall be deemed to be the Expiration Date for Section
5.22. For purposes of this Section 5, the term "Company" shall mean and refer to
the Company and all of its subsidiaries, if any.
5.1 DUE ORGANIZATION. The Company is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except (i) as set forth on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the Company taken as a whole (as used herein with respect to the Company, or
with respect to any other Person, a "Material Adverse Effect"). Schedule 5.1
sets forth a list of all jurisdictions in which the Company is authorized or
qualified to do business. True, complete and correct copies of (i) the
Certificate of Incorporation and By-laws, each as amended, of the Company (the
"Charter Documents"), and (ii) the stock records of the Company, are all
attached to Schedule 5.1. The Company has delivered complete and correct copies
of all minutes of meetings, written consents and other evidence, if any, of
deliberations of or actions taken by the Company's Board of Directors and
stockholders during the last five years.
5.2 AUTHORIZATION. (i) The representatives of the Company executing this
Agreement have the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the Merger. The most recent
resolutions adopted by the Board of Directors of the Company and the most recent
resolutions adopted by the Stockholders approve this Agreement and the
transactions contemplated hereby in all respects, and copies of all such
resolutions, certified by the Secretary or an Assistant Secretary of the Company
as being in full force and effect on the date hereof, are attached hereto as
Schedule 5.2.
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5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company is as set forth on Schedule 5.3. All of the issued and outstanding
shares of the capital stock of the Company are owned by the Stockholders in the
amounts set forth in Annex II. All of the issued and outstanding shares of the
capital stock of the Company have been duly authorized and validly issued, are
fully paid and nonassessable, are owned of record and beneficially by the
Stockholders and further, such shares were offered, issued, sold and delivered
by the Company in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any preemptive rights of any past or present stockholder.
5.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except as set
forth on Schedule 5.4, the Company has not acquired any Company Stock since
January 1, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant,
call, conversion right or commitment of any kind exists which obligates the
Company to issue any of its authorized but unissued capital stock; (ii) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof; and (iii) neither
the voting stock structure of the Company nor the relative ownership of shares
among any of its respective Stockholders has been altered or changed in
contemplation of the Merger and/or the Home Plan of Organization.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the Merger or the Home Plan of Organization.
5.6 SUBSIDIARIES. Except as set forth on Schedule 5.6, the Company has no
Subsidiaries. Except as set forth in Schedule 5.6, the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is the Company,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7 is a listing of all
names of all predecessor companies of the Company, including the names of any
entities acquired by the Company (by stock purchase, merger or otherwise) or
owned by the Company or from whom the Company previously acquired material
assets, in any case, from the earliest date upon which any Stockholder acquired
his or her stock in any Company. Except as disclosed on Schedule 5.7, the
Company has not been, within such period of time, a subsidiary or division of
another corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any Affiliate since January 1, 1995.
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5.9 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached hereto as Schedule 5.9:
(i) the balance sheets of the Company as of December 31, 1996 and
1995 and the related statements of operations, stockholder's equity and
cash flows for the years ended December 31, 1996, 1995 and 1994, together
with the related notes and schedules (such balance sheets, the related
statements of operations, stockholder's equity and cash flows and the
related notes and schedules are referred to herein as the "Year-end
Financial Statements"); and
(ii) the balance sheet (the "Interim Balance Sheet") of the Company
as of June 30, 1997 (the "Balance Sheet Date") and the related statements
of operations, stockholder's equity and cash flows for the six-month
periods ended June 30, 1997 and 1996, together with the related notes and
schedules (such balance sheets, the related statements of operations,
stockholder's equity and cash flows and the related notes and schedules
are referred to herein as the "Interim Financial Statements"). The
Year-end Financial Statements and the Interim Financial Statements are
collectively called the "Financial Statements".
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10 sets forth an accurate
list as of the Balance Sheet Date of (i) all liabilities of the Company of a
nature that they are required in accordance with GAAP to be reflected on a
balance sheet and which are not reflected on the balance sheet of the Company at
the Balance Sheet Date or otherwise reflected in the Company Financial
Statements at the Balance Sheet Date and which are not disclosed on any of the
other Schedules to this Agreement, and (ii) all loan agreements, indemnity or
guaranty agreements, bonds, mortgages, pledges and material security agreements
to which the Company is a party or by which its properties may be bound. To the
best knowledge of the Company and the Stockholders, except as set forth on
Schedule 5.10, since the Balance Sheet Date the Company has not incurred any
material liabilities of any kind, character or description, whether accrued,
absolute, secured or unsecured, contingent or otherwise, other than liabilities
incurred in the ordinary course of business. The Company has also delivered to
Home on Schedule 5.10, in the case of those contingent liabilities related to
pending or threatened litigation, or other liabilities which are not fixed, a
good faith and reasonable estimate of the maximum amount which the Company
reasonably expects will be payable and the amount, if any, accrued or reserved
for each such potential liability on the Company's Financial Statements; in the
case of any such liability for which no estimate has been provided, the estimate
for purposes of this Agreement shall be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the Balance
Sheet Date, including any such amounts which are not reflected in the balance
sheet as of the Balance Sheet Date, and including receivables from and advances
to employees and the Stockholders, which are identified as such. Except to the
extent reflected on Schedule 5.11, such accounts, notes and other receivables
are
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collectible in the amounts shown on Schedule 5.11, net of reserves reflected in
the balance sheet as of the Balance Sheet Date.
5.12 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations ("Licenses") the absence of any of
which could have a Material Adverse Effect on the Company's business, and the
Company has delivered to Home an accurate list and summary description (which is
set forth on Schedule 5.12) of all such Licenses, including any trademarks,
trade names, patents, patent applications and copyrights owned or held by the
Company or any of its employees (including interests in software or other
technology systems, programs and intellectual property) (it being understood and
agreed that a list of environmental permits and other environmental approvals is
set forth on Schedule 5.13). At or prior to the Closing, all such trademarks,
trade names, patents, patent applications, copyrights and other intellectual
property will be assigned or licensed to the Company for no additional
consideration. To the best knowledge of the Company, the Licenses and other
rights listed on Schedules 5.12 and 5.13 are valid, and the Company has not
received any notice that any person intends to cancel, terminate or not renew
any such License or other right. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the Licenses and other rights listed on Schedules 5.12 and 5.13 and
is not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect on the Company. Except as
specifically provided in Schedule 5.12, the transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the Company by, any such
Licenses or other rights.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, and
except where any failure to comply, either singly or in the aggregate, has not
had and will not have any Material Adverse Effect on the Company or its
business, (i) the Company has complied with and is in compliance with all
Federal, state, local and foreign statutes (civil and criminal), laws,
ordinances, regulations, rules, notices, permits, judgments, orders and decrees
applicable to any of them or any of their respective properties, assets,
operations and businesses relating to environmental protection (collectively
"Environmental Laws") including, without limitation, Environmental Laws relating
to air, water, land and the generation, storage, use, handling, transportation,
treatment or disposal of Hazardous Wastes, Hazardous Materials and Hazardous
Substances (as such terms are defined in any applicable Environmental Law), as
well as petroleum and petroleum products (collectively "Hazardous Materials"),
(ii) the Company has obtained and adhered to all necessary permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Materials, a list of all of which permits and approvals is set forth
on Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the Company where Hazardous Materials have been treated, stored,
disposed of or otherwise handled. There have been no releases or threats of
releases (as these terms are defined in Environmental Laws) of any Hazardous
Materials at, from, in or on any property owned or operated by the Company
except as permitted by Environmental Laws, and to the best
-13-
knowledge of the Company and the Stockholders, there is no on-site or off-site
location to which the Company has transported or disposed of Hazardous Materials
or arranged for the transportation of Hazardous Materials which is the subject
of any Federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the Company, Home or Newco
for any clean-up cost, remedial work, damage to natural resources, property
damage or personal injury, including, but not limited to, any claim under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Resource Conservation and Recovery Act, the Hazardous Materials
Transportation Act or comparable state or local statutes or regulations. The
Company has no contingent liability in connection with any release of any
Hazardous Materials into the environment that would have a Material Adverse
Effect.
5.14 PERSONAL PROPERTY. The Company has delivered to Home an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property material to
the operations of the Company included in "plant, property and equipment" on the
balance sheet of the Company, (y) all other personal property owned by the
Company with an individual value in excess of $25,000 (i) as of the Balance
Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all material
leases and agreements in respect of personal property, including, in the case of
each of (x), (y) and (z), (1) true, complete and correct copies of all such
leases and (2) an indication as to which assets are currently owned, or were
formerly owned, by Stockholders, relatives of Stockholders, or Affiliates of the
Company. Except as set forth on Schedule 5.14, (i) all material personal
property used by the Company in its business is either owned by the Company or
leased by the Company pursuant to a lease included on Schedule 5.14, (ii) all of
the personal property listed on Schedule 5.14 is in good working order and
condition, ordinary wear and tear excepted and (iii) all leases and agreements
included on Schedule 5.14 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. The
Company has delivered to Home an accurate list (which is set forth on Schedule
5.15) of all customers (persons or entities) representing 5% or more of the
Company's annual revenues for any period covered by any of the Financial
Statements. Except to the extent set forth on Schedule 5.15, none of such
customers have canceled or substantially reduced or, to the knowledge of the
Company, are currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by the Company.
The Company has listed on Schedule 5.15 all Material Contracts (as defined
below) to which the Company is a party or by which it or any of its properties
are bound, other than agreements listed on Schedules 5.10, 5.14 or 5.16, (a) in
existence as of the Balance Sheet Date and (b) entered into since the Balance
Sheet Date, and in each case has delivered true, complete and correct copies of
such agreements to Home. For purposes of this Section 5.17, Material Contracts
includes contracts between the Company and significant customers, joint venture
or partnership agreements, contracts with any labor organization, strategic
alliances, options to purchase land and other contracts which
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are not terminable on sixty days or less notice and involve payments by the
Company in any twelve month period in excess of $25,000. The Company has also
indicated on Schedule 5.15 a summary description of all plans or projects
involving the opening of new operations, expansion of existing operations, the
acquisition of any personal property, business or assets requiring, in any
event, the payment of more than $25,000 by the Company during any 12-month
period.
5.16 REAL PROPERTY. Schedule 5.16 includes a list of all real property
owned or leased by the Company at the date hereof and all other real property,
if any, used by the Company in the conduct of its business. Except as set forth
on Schedule 5.16, any such real property owned by the Company will be sold or
distributed by the Company on terms reasonably acceptable to Home and leased
back by the Company on terms no less favorable to the Company than those
available from an unaffiliated party and otherwise reasonably acceptable to Home
at or prior to the Closing Date. The Company has good and insurable title to any
real property owned by it that is not shown on Schedule 5.16 as property
intended to be sold or distributed prior to the Closing Date, subject to no
mortgage, pledge, lien, conditional sales agreement, encumbrance or charge,
except for:
(i) liens reflected on Schedules 5.10 or 5.16 as securing specified
liabilities (with respect to which no material default exists);
(ii) liens for current taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title which do not adversely affect the current use of the property.
True, complete and correct copies of all leases and agreements in respect
of such real property leased by the Company are attached to Schedule 5.16, and
an indication as to which such properties, if any, are currently owned, or were
formerly owned, by Stockholders or affiliates of the Company or Stockholders is
included in Schedule 5.16. Except as set forth on Schedule 5.16, all of such
leases included on Schedule 5.16 are in full force and effect and constitute
valid and binding agreements of the parties (and their successors) thereto in
accordance with their respective terms.
5.17 INSURANCE. The Company has delivered to Home (i) an accurate list as
of the Balance Sheet Date of all insurance policies carried by the Company, (ii)
an accurate list of all insurance loss runs or workers compensation claims
received for the past three policy years and (iii) true, complete and correct
copies of all insurance policies currently in effect. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and to the best knowledge of the Company provide adequate coverage against the
risks involved in the Company's business. All of such insurance policies are
currently in full force and effect and shall, to the best knowledge of the
Company,
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remain in full force and effect through the Funding and Consummation Date. Since
January 1, 1995, no insurance carried by the Company has been canceled by the
insurer and the Company has not been denied coverage.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
Company has delivered to Home an accurate list (which is set forth on Schedule
5.18) showing all officers, directors and key employees of the Company, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons as of (i) the
Balance Sheet Date and (ii) the date hereof. The Company has provided to Home
true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.18. Since the Balance Sheet Date, there have been no
material increases in the compensation payable or any special bonuses to any
officer, director, key employee or other employee, except ordinary salary
increases implemented and bonuses paid on a basis consistent with past
practices.
Except as set forth on Schedule 5.18, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the best knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened labor dispute involving the
Company and any group of its employees nor has the Company experienced any labor
interruptions over the past three years. The Company believes its relationship
with employees to be good.
5.19 EMPLOYEE PLANS. The Stockholders have delivered to Home an accurate
schedule (Schedule 5.19) (the "Benefit Plans Schedule") showing all employee
benefit plans of the Company, including all employment agreements and other
agreements or arrangements containing "golden parachute" or other similar
provisions, and deferred compensation agreements, together with true, complete
and correct copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on the Benefit Plans
Schedule, the Company does not sponsor, maintain or contribute to any plan
program, fund or arrangement that constitutes an "employee pension benefit
plan", and the Company has no obligation to contribute to or accrue or pay any
benefits under any deferred compensation or retirement funding arrangement on
behalf of any employee or employees (such as, for example, and without
limitation, any individual retirement account or annuity, any "excess benefit
plan" (within the meaning of Section 3(36) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans set forth
on the Benefit Plans Schedule, and the Company is not required to contribute
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to any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
Company's or any subsidiary's employees.
Except as set forth on the Benefit Plans Schedule, the Company is not now,
or will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on the Benefit Plans Schedule and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company with respect to any
plan listed on the Benefit Plans Schedule have either been fulfilled in their
entirety or are fully reflected on the balance sheet of the Company as of the
Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on the Benefit Plans Schedule
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code are, and have been so qualified and have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
attached to the Benefit Plans Schedule. Except as disclosed on the Benefit Plans
Schedule, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, actuarial reports, audits or tax returns) have
been timely filed or distributed, and copies thereof are included as part of the
Benefit Plans Schedule. Neither Stockholders, any such plan listed in the
Benefit Plans Schedule, nor the Company has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No such Plan listed in the Benefit Plans Schedule has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the Company has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The Stockholders further represent
that except as set forth on the Benefit Plans Schedule hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no plan listed in the Benefit Plans Schedule subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed in
the Benefit Plans Schedule;
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(iv) the Company has not incurred liability under Section 4062 of
ERISA; and
(v) no circumstances exist pursuant to which the Company could have
any direct or indirect liability whatsoever (including, but not limited
to, any liability to any multiemployer plan or the PBGC under Title IV of
ERISA or to the Internal Revenue Service for any excise tax or penalty, or
being subject to any statutory lien to secure payment of any such
liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the Company that is, or at any
time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes the Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or 5.13, and except for violations which, either singly or in the
aggregate, have not had and will not have any Material Adverse Effect, the
Company is not in violation of any law or regulation or any order of any court
or Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it; and except
to the extent set forth on Schedule 5.10 or 5.13, there are no material claims,
actions, suits or proceedings, pending or, to the knowledge of the Company,
threatened against or affecting, the Company, at law or in equity, or before or
by any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over any of them
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received by the Company, and, to the Knowledge of the
Company and the Stockholders, there is no basis for any such claim, action, suit
or proceeding. The Company has conducted and is now conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in applicable Federal, state and local statutes, ordinances, orders, approvals,
variances, rules and regulations, including without limitation to the extent
applicable all regulations promulgated by the Department of Housing and Urban
Development under the National Manufactured Housing Construction and Safety
Standards Act, as amended, or otherwise, and all laws and regulations affecting
the sale of manufactured housing, on credit or otherwise, including the Federal
Consumer Credit Protection Act, the Federal Fair Credit Reporting Act, the
Federal Equal Credit Opportunity Act, the Consumer Credit Protection Act, the
Fair Debt Collection Practices Act and the regulations promulgated under the
foregoing, and all state and local laws and regulations of similar effect, and
including all such orders and other governmental approvals set forth on
Schedules 5.12 and 5.13, except where any such noncompliance, individually or in
the aggregate, would not have a Material Adverse Effect.
5.22 TAXES. The Company has timely filed all requisite Federal, state and
other tax returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 5.22, there
are no examinations in progress or claims pending against any of them for
federal, state and other taxes (including penalties and interest) for any period
or periods prior to and including the Balance Sheet Date and no notice of any
claim for taxes, whether pending or threatened, has been received. All tax,
including interest and penalties (whether or not shown on any tax return) owed
by the Company or any of the Company's Subsidiaries has been paid. The
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amounts shown as accruals for taxes on the Company Financial Statements are
sufficient for the payment of all taxes of the kinds indicated (including
penalties and interest) for all fiscal periods ended on or before that date.
Copies of (i) any tax examinations, (ii) extensions of statutory limitations and
(iii) the federal and local income tax returns and franchise tax returns of the
Company for their last three (3) fiscal years, or such shorter period of time as
any of them shall have existed, are attached hereto as Schedule 5.22 or have
otherwise been delivered to Home. The Company has disclosed to Home when its
taxable year ends. The Company uses the accrual method of accounting for income
tax purposes, and the Company's methods of accounting have not changed in the
past five years. The Company is not an investment Company as defined in Section
351(e)(1) of the Code. The Company is not and has not during the last five years
been a party to any tax sharing agreement or agreement of similar effect. The
Company is not and has not during the last five years been a member of any
consolidated group. Except as described on Schedule 5.22, the Company has not
received, been denied, or applied for any private letter ruling during the last
five years.
5.23 NO VIOLATIONS; NO CONSENTS REQUIRED, ETC. The Company is not in
violation of any Charter Document. Neither the Company nor, to the best
knowledge of the Company, any other party thereto, is in default under any
lease, instrument, agreement, license, or permit set forth on Schedule 5.12,
5.13, 5.14, 5.15 or 5.16, or any other Material Contract (as defined in Section
5.15) to which it is a party or by which its properties are bound (the "Material
Documents") in any manner that could result in a Material Adverse Effect; and,
except as set forth in Schedule 5.23, (a) the rights and benefits of the Company
under the Material Documents will not be materially adversely affected by the
transactions contemplated hereby and (b) the execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any material violation or
breach or constitute a default under, any of the terms or provisions of the
Material Documents or the Charter Documents. Except as set forth on Schedule
5.23, none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
material right or benefit. Except as set forth on Schedule 5.23, none of the
Material Documents prohibits the use or publication by the Company, Home or
Newco of the name of any other party to such Material Document, and none of the
Material Documents prohibits or restricts the Company from freely providing
services to any other customer or potential customer of the Company, Home, Newco
or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
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5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.25 or as otherwise contemplated hereby, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the Company;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant by the Company of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company
except for distributions that would have been permitted after the date
hereof under Section 7.3(iii) hereof;
(v) any material increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by the Company
to any of its officers, directors, Stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of Company to any person,
including, without limitation, the Stockholders and their Affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of any Stockholders or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
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(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(xiii) any transaction by the Company outside the ordinary course of
its business;
(xiv) any cancellation or termination by the Company of a material
contract with a customer or client prior to the scheduled termination
date; or
(xv) any other distribution of property or assets by the Company
other than in the ordinary course of business and other than distributions
of real estate and other assets as permitted by this Agreement (including
the Schedules hereto).
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
Home an accurate schedule (which is set forth on Schedule 5.26) as of the date
of this Agreement of:
(i) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the Company and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the Company and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the Company.
5.28 RELATIONS WITH GOVERNMENTS. Except for legal contributions to
candidates for political office, neither the Company nor any Affiliate of the
Company acting on behalf of the
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Company has given or offered anything of value to any governmental official,
political party or candidate for government office, nor has it or any of them
otherwise taken any action which would cause the Company to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended or any law of similar
effect.
5.29 DISCLOSURE. (a) This Agreement, including the Annexes and Schedules
hereto, and the completed Director and Officer Questionnaires and the completed
S-1 Questionnaire furnished to Home by the Company and the Stockholders in
connection herewith, do not contain an untrue statement of a material fact or
omit to state a material fact necessary to make the statements herein and
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing does not apply to statements
contained in or omitted from any of such documents made or omitted in reliance
upon information furnished in writing by Home. If, prior to the 25th day after
the date of the final prospectus of Home utilized in connection with the IPO,
the Company or the Stockholders become aware of any fact or circumstance which
would affect the accuracy of a representation or warranty of Company or
Stockholders in this Agreement in any material respect, the Company and the
Stockholders shall immediately give notice of such fact or circumstance to Home.
Subject to the provisions of Section 7.8, such notification shall not relieve
either the Company or the Stockholders of their respective obligations under
this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of Home, the truth and accuracy in all material respects of any and all
warranties and representations of the Company, or on behalf of the Company and
of Stockholders at the date of this Agreement and on the Closing Date and on the
Funding and Consummation Date, shall be a precondition to the consummation of
this transaction.
(b) The Company and the Stockholders acknowledge and agree (i) that there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; (ii)
that neither Home or any of its officers, directors, agents or representatives
nor any Underwriter shall have any liability to the Company, the Stockholders or
any other person affiliated or associated with the Company for any failure of
the Registration Statement to become effective, the IPO to occur at a particular
price or to occur at all; and (iii) that the decision of Stockholders to enter
into this Agreement, or to vote in favor of or consent to the proposed Merger,
has been or will be made independent of, and without reliance upon, any
statements, opinions or other communications, or due diligence investigations
which have been or will be made or performed by any prospective Underwriter,
relative to Home or the prospective IPO. Notwithstanding the foregoing, Home has
agreed and herein acknowledges its agreement to use its reasonable efforts to
consummate the Home Plan of Organization and IPO as contemplated hereby.
5.30 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.30, the
Company has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 7.3.
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5.31 DEALER AGREEMENTS AND RELATED MATTERS. Schedule 5.31 sets forth a
complete and accurate list of:
(i) all agreements of any nature (including "Dealer Agreements",
"Home Center Agreements", "Retailer Agreements", "Exclusive Retailer
Agreements", "General Conditions", "Action Plans" and other documents)
between the Company and any dealer, manufacturer, wholesaler or other
distributor (collectively, "Manufacturers") of manufactured housing units
(collectively, "Dealer Agreements"); and
(ii) all volume incentive, rebate and other similar programs of any
Manufacturer (collectively, "Dealer Programs") in which the Company is now
or has within the last three years been a participant.
Schedule 5.31 identifies the Manufacturer that is a party to each such Dealer
Agreement or that sponsors each such Dealer Program, and also identifies the
Company's sales locations subject to or affected by each such Dealer Agreement
and each such Dealer Program. Complete and accurate copies of all Dealer
Agreements and all Dealer Programs listed on Schedule 5.31 are attached to
Schedule 5.31. Except as set forth on Schedule 5.31, the Company is now and for
the last three years has been in compliance in all material respects with all
applicable provisions of the Dealer Agreements and Dealer Programs identified on
Schedule 5.31 and any similar agreements to which the Company has been a party
during the last three years. To the extent that the Company is required by any
Dealer Agreement or Dealer Program to take or refrain from taking specified
actions in order to qualify for the benefits offered thereby (such as the
benefits of an exclusive retailer agreement), the Company is in compliance in
all material respects with all such requirements (it being understood that the
Company is not hereby representing that it qualifies for the highest level of
incentive discounts or rebates offered by such Dealer Agreements or Dealer
Programs). Except as set forth on Schedule 5.31, within the last three years, no
Manufacturer has asserted any claim or right to any refund of any incentive
payment or rebate or other payment or discount granted to the Company by any
such Manufacturer, or any right to offset any amount against any future payment
due or otherwise due to the Company, and no circumstances exist that would
entitle any Manufacturer to make any such claim against the Company. During the
last three years, the Company has accurately calculated and reported to each
Manufacturer with which the Company has done business all financial and sales
data that the Company is required to report to each such Manufacturer, whether
in connection with volume incentive or rebate plans or otherwise.
5.32 NO RETAIL FINANCING. Except as set forth on Schedule 5.32, the
Company does not finance the sale to the Company's customers of manufactured
housing units or related products or services (collectively, "Product"), and is
not liable, directly or indirectly, contingently or otherwise, to any
Manufacturer or any financing source for all or any portion of the purchase
price of any Product that has been sold by the Company or delivered by the
Company to a retail purchaser.
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5.33 NO WARRANTIES OR INSURANCE. Except as set forth on Schedule 5.33, the
Company has not made any express warranties regarding any Products and the
Company does not offer or sell insurance or consumer protection plans or other
arrangements that could result in the Company being required to make any payment
to or perform any service for any person other than routine matters described as
"Retailer Responsibilities", "Retailer General Installation and Home Delivery
Guidelines" and the like in the Dealer Agreements listed on Schedule 5.31.
5.34 NO INTERESTS IN OTHER BUSINESSES. Except as set forth on Schedule
5.34, neither the Company nor any Stockholder, nor any affiliate of any of them,
has any ownership or similar interest in any business that offers or sells
services or products of any nature whatsoever to the Company or to any customers
of the Company in connection with or as a direct or indirect result of the
Company's sales of Product.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each Stockholder severally represents and warrants that the
representations and warranties set forth below as and to the extent relating to
such Stockholder are true as of the date of this Agreement and, subject to
Section 7.8 hereof, shall be true at the time of Closing and on the Funding and
Consummation Date, and that the representations and warranties set forth in
Sections 5.35 and 5.36 shall survive until the first anniversary of the Funding
and Consummation Date, which shall be the Expiration Date for purposes of
Sections 5.35 and 5.36.
5.35 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement. Such Stockholder owns
beneficially and of record all of the shares of the Company Stock identified on
Annex II as being owned by such Stockholder, and, except as set forth on
Schedule 5.35, such Company Stock is owned free and clear of all liens, security
interests, pledges, charges, voting agreements, voting trusts, restrictions,
encumbrances and claims of every kind.
5.36 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby waives,
any preemptive or other right to acquire shares of Company Stock or Home Stock
that such Stockholder has or may have had. Nothing herein, however, shall limit
or restrict the rights of any Stockholder to acquire Home Stock pursuant to (i)
this Agreement or (ii) any option granted by Home.
5.37 NO INTENTION TO DISPOSE OF HOME STOCK. No Stockholder is under any
binding commitment or contract to sell, exchange or otherwise dispose of shares
of Home Stock received as described in Section 3.1.
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6. REPRESENTATIONS OF HOME AND NEWCO
Home and Newco jointly and severally represent and warrant that all of the
following representations and warranties in this Section 6 are true at the date
of this Agreement and, subject to Section 7.8 hereof, shall be true at the time
of Closing and the Funding and Consummation Date, and that such representations
and warranties shall survive the Funding and Consummation Date for a period of
twelve months (the last day of such period being the "Expiration Date"), except
that the warranties and representations set forth in Section 6.14 hereof shall
survive until such time as the limitations period has run for all tax periods
ended on or prior to the Funding and Consummation Date, which shall be deemed to
be the Expiration Date for Section 6.14.
6.1 DUE ORGANIZATION. Home and Newco are each corporations duly
incorporated and organized, validly existing and in good standing under the laws
of the State of Delaware, and each has the requisite power and authority to
carry on its business as it is now being conducted. Home and Newco are each
qualified to do business and are each in good standing in each jurisdiction in
which the nature of its business makes such qualification necessary, except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and By-laws of Home and Newco (the "Home Charter Documents") are
all attached hereto as Annexes III and IV.
6.2 AUTHORIZATION. (i) The respective representatives of Home and Newco
executing this Agreement have the authority to enter into and bind Home and
Newco to the terms of this Agreement and (ii) Home and Newco have the full legal
right, power and authority to enter into this Agreement and consummate the
Merger. All corporate acts and other proceedings required to have been taken by
Home and Newco to authorize the execution, delivery and performance of this
Agreement and the consummation of the Merger have been duly and properly taken.
6.3 CAPITAL STOCK OF HOME AND NEWCO. The authorized capital stock of Home
and Newco is as set forth in Sections 1.4(ii) and (iii), respectively. All of
the issued and outstanding shares of the capital stock of Newco are owned by
Home. All of the issued and outstanding shares of the capital stock of Home and
Newco have been duly authorized and validly issued, are fully paid and
nonassessable, and further, such shares were offered, issued, sold and delivered
by Home and Newco in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of the preemptive rights of any past or present stockholder of Home
or Newco.
6.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except for the
Other Agreements and except as set forth in the Draft Registration Statement,
(i) no option, warrant, call, conversion right or commitment of any kind exists
which obligates Home or Newco to issue any of their respective authorized but
unissued capital stock; and (ii) neither Home nor Newco has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity
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securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 6.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of the stock of Home.
6.5 SUBSIDIARIES. Newco has no subsidiaries. Home has no subsidiaries
except for Newco and each of the companies identified as "Newco" in each of the
Other Agreements. Except as set forth in the preceding sentence, neither Home
nor Newco presently owns, of record or beneficially, or controls, directly or
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation, association or business entity, and
neither Home nor Newco, directly or indirectly, is a participant in any joint
venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. The financial statements of Home included in the
Draft Registration Statement (the "Home Financial Statements") have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated (except as noted thereon),
and the balance sheet included therein presents fairly the financial position of
Home as of its date.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Draft
Registration Statement, Home and Newco have no material liabilities, contingent
or otherwise, except as set forth in or contemplated by this Agreement and the
Other Agreements and except for fees incurred in connection with the
transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in the
Draft Registration Statement, neither Home nor Newco is in violation of any law
or regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a Material Adverse
Effect; and except to the extent set forth in Schedule 6.8, there are no
material claims, actions, suits or proceedings, pending or, to the knowledge of
Home or Newco, threatened against or affecting, Home or Newco, at law or in
equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. Home and Newco
have conducted and are conducting their respective businesses in substantial
compliance with the requirements, standards, criteria and conditions set forth
in applicable Federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations and are not in violation of
any of the foregoing which would have a Material Adverse Effect.
6.9 NO VIOLATIONS. Neither Home nor Newco is in violation of any Home
Charter Document. None of Home, Newco, or, to the knowledge of Home and Newco,
any other party
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thereto, is in default under any lease, instrument, agreement, license, or
permit to which Home or Newco is a party, or by which Home or Newco, or any of
their respective properties, are bound (collectively, the "Home Documents"); and
(a) the rights and benefits of Home and Newco under the Home Documents will not
be adversely affected by the transactions contemplated hereby and (b) the
execution and delivery of this Agreement by Home and Newco and the performance
of their obligations hereunder do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation or default (with or without notice or lapse of
time, or both), under or give rise to a right of termination, cancellation, or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any lien upon any of the assets of Home or any Newco under,
any provision of (i) the Certificate of Incorporation or Bylaws of Home or the
comparable governing instruments of any Newco, (ii) any note, bond, mortgage,
indenture or deed of trust or any license, lease, contract, commitment,
agreement or arrangement to which Home and any Newco is a party or by which any
of their respective properties or assets are bound or (iii) any judgment, order,
decree or law, ordinance, rule or regulation, applicable to Home or any Newco or
their respective properties or assets. The execution of this Agreement and the
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any material violation or
breach or constitute a default under, any of the terms or provisions of the Home
Documents or the Home Charter Documents. Except as set forth on Schedule 6.9,
none of the Home Documents requires notice to, or the consent or approval of,
any governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by Home and Newco and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
Home and Newco and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of Home
and Newco.
6.11 HOME STOCK. At the time of issuance thereof and delivery to the
Stockholders, the Home Stock to be delivered to the Stockholders pursuant to
this Agreement will constitute valid and legally issued shares of Home, fully
paid and nonassessable, and with the exception of restrictions upon resale set
forth in Sections 15 and 16 hereof, will be identical in all substantive
respects (which do not include the form of certificate upon which it is printed
or the presence or absence of a CUSIP number on any such certificate) to the
Home Stock issued and outstanding as of the date hereof by reason of the
provisions of the Delaware GCL. The Home Stock issued and delivered to the
Stockholders shall at the time of such issuance and delivery be free and clear
of any liens, claims or encumbrances of any kind or character. The shares of
Home Stock to be issued to the Stockholders pursuant to this Agreement will not
be registered under the 1933 Act, except as provided in Section 17 hereof.
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6.12 NO SIDE AGREEMENTS. Neither Home nor Newco has entered or will enter
into any agreement with any of the Founding Companies or any of the Stockholders
of the Founding Companies or Home other than the Other Agreements and the
agreements contemplated by each of the Other Agreements, including the
employment agreements and leases referred to herein or entered into in
connection with the transactions contemplated hereby and thereby.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Home was formed in July
1996 and has conducted only limited operations since that time. Neither Home nor
Newco has conducted any material business since the date of its inception,
except in connection with this Agreement, the Other Agreements and the IPO.
Except as described in the Draft Registration Statement, neither Home nor Newco
owns or has at any time owned any real property or any material personal
property or is a party to any other agreement other than the Other Agreements
and the agreements contemplated thereby and to such agreements as will be filed
as Exhibits to the Registration Statement.
6.14 TAXES.Home and Newco have timely filed all requisite federal, state
and other tax returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and there are no examinations in progress or
claims against Home for federal, state and other taxes (including penalties and
interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for taxes, whether pending or threatened, has
been received. All taxes which Home or any Newco has been required to collect or
withhold have been duly and timely collected and withheld and have been set
aside in accounts for such purposes, or have been duly and timely paid to the
proper governmental authority. All tax, including interest and penalties
(whether or not shown on any tax return) owed by Home, any member of an
affiliated or consolidated group which includes or included Home, or with
respect to any payment made or deemed made by Home herein has been paid. The
amounts shown as accruals for taxes on Home Financial Statements are sufficient
for the payment of all taxes of the kinds indicated (including penalties and
interest) for all fiscal periods ended on or before that date. Home and Newco
have not entered into any tax sharing agreement or similar arrangement. Home is
not an investment company as defined in Section 351(e)(1) of the Code.
6.15 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
in the Draft Registration Statement delivered to the Stockholders, and except as
contemplated by this Agreement and the Other Agreements, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of Home or
Newco;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
Home or Newco;
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(iii) any change in the authorized capital of Home or Newco or their
outstanding securities or any change in their ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of Home or
Newco;
(v) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of Home or Newco;
(vi) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of Home or Newco to any person;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to Home or Newco;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of Home or Newco or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(ix) any waiver of any material rights or claims of Home or Newco;
(x) any amendment or termination of any material contract,
agreement, license, permit or other right to which Home or Newco is a
party;
(xi) any transaction by Home or Newco outside the ordinary course of
its business;
(xii) any other distribution of property or assets by Home or Newco
other than in the ordinary course of business.
6.16 DISCLOSURE. The Draft Registration Statement delivered to the Company
and the Stockholders, together with this Agreement and the information furnished
to the Company and the Stockholders in connection herewith, does not contain an
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that the foregoing does not apply
to statements contained in or omitted from any of such documents made or omitted
in reliance upon information furnished by the Company or the Stockholders.
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6.17 PRIVATE OFFERING. (a) Neither Home, any of its Affiliates nor anyone
on its or their behalf, has issued, sold, or offered any securities of Home to
any person under circumstances that would cause the issuance and sale of the
Home Stock to the Stockholders pursuant to this Agreement, to be subject to the
registration requirements of the 1933 Act.
(b) The offering of shares of Home Stock pursuant to the Home Plan of
Organization has been made in compliance with applicable federal and state
securities laws.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Funding and Consummation Date, the Company will afford to the
officers and authorized representatives of Home and the Other Founding Companies
access to all of the Company's sites, properties, books and records and will
furnish Home with such additional financial and operating data and other
information as to the business and properties of the Company as Home or the
Other Founding Companies may from time to time reasonably request. The Company
will cooperate with Home and the Other Founding Companies, its representatives,
auditors and counsel in the preparation of any documents or other materials
which may be required in connection with any documents or materials required by
this Agreement. Home, Newco, the Stockholders and the Company will treat all
information obtained in connection with the negotiation and performance of this
Agreement or the due diligence investigations conducted with respect to the
Other Founding Companies as confidential in accordance with the provisions of
Section 14 hereof. In addition, Home will cause each of the Other Founding
Companies to enter into a provision similar to this Section 7.1 requiring each
such Other Founding Company, its Stockholders, directors, officers,
representatives, employees and agents to keep confidential any information
obtained by such Other Founding Company.
(b) Between the date of this Agreement and the Funding and Consummation
Date, Home will afford to the officers and authorized representatives of the
Company access to all of Home's and Newco's sites, properties, books and records
and will furnish the Company with such additional financial and operating data
and other information as to the business and properties of Home and Newco as the
Company may from time to time reasonably request. Home and Newco will cooperate
with the Company, its representatives, auditors and counsel in the preparation
of any documents or other material which may be required in connection with any
documents or materials required by this Agreement. The Company will cause all
information obtained in connection with the negotiation and performance of this
Agreement to be treated as confidential in accordance with the provisions of
Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the Company will, except as set
forth on Schedule 7.2:
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(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management,
operation or accounting;
(ii) use its reasonable efforts to maintain its properties and
facilities, including those held under leases, in as good working order
and condition as at present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its obligations under
agreements relating to or affecting its respective assets, properties or
rights;
(iv) use its reasonable efforts to keep in full force and effect
present insurance policies or other comparable insurance coverage;
(v) use its reasonable efforts to maintain and preserve its business
organization intact, retain its respective present key employees and
maintain its relationships with suppliers, customers and others having
business relations with the Company;
(vi) use its reasonable efforts to maintain compliance with all
material permits, laws, rules and regulations, consent orders, and all
other orders of applicable courts, regulatory agencies and similar
governmental authorities;
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments without the knowledge and consent
of Home (which consent shall not be unreasonably withheld), provided that
debt and/or lease instruments may be replaced without the consent of Home
if such replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for ordinary and
customary bonus and salary increases for employees in accordance with past
practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Funding and Consummation Date, the Company will not,
without prior written consent of Home, which consent will not be unreasonably
withheld:
(i) make any change in its Articles of Incorporation or By-laws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed in Schedule
5.4;
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(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its stock
except for distributions permitted as described on Annex I hereto;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is in
the normal course of business (consistent with past practice) or involves
an amount not in excess of $25,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $25,000 necessary or desirable for the conduct of
the businesses of the Company, (2) (A) liens for taxes either not yet due
or being contested in good faith and by appropriate proceedings (and for
which contested taxes adequate reserves have been established and are
being maintained) or (B) materialmen's, mechanics', workers', repairmen's,
employees' or other like liens arising in the ordinary course of business
(the liens set forth in clause (2) being referred to herein as "Statutory
Liens"), or (3) liens set forth on Schedule 5.10 and/or 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business and other
than distributions of real estate and other assets as permitted in this
Agreement (including the Schedules hereto);
(vii) negotiate for the acquisition of any business or the start-up
of any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the Company, provided
that the Company may negotiate and adjust bills and accounts in the course
of good faith disputes with customers in a manner consistent with past
practice, provided, further, that such adjustments shall not be deemed to
be included in Schedule 5.11 unless specifically listed thereon;
(x) amend or terminate any material agreement, permit, license or
other right of the Company; or
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
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7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Funding and Consummation Date or the termination of this
Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than Home or its
authorized agents relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the Company
or a merger, consolidation or business combination of the Company.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide Home on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The Stockholders and the Company shall (except as
otherwise agreed to by Home or reflected in Schedule 7.6) terminate (i) any
Stockholders agreements, voting agreements, voting trusts, options, warrants and
employment agreements between the Company and any employee listed on Schedule
9.12 hereto and (ii) any existing agreement between the Company and any
Stockholder, on or prior to the Funding and Consummation Date provided that
nothing herein shall prohibit or prevent the Company from paying (either prior
to or on the Closing Date) notes or other obligations from the Company to the
Stockholders in accordance with the terms thereof, which terms have been
disclosed to Home. Such termination agreements are listed on Schedule 7.6 and
copies thereof shall be attached thereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the Company
shall give prompt notice to Home of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Company or the Stockholders contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
and (ii) any failure of any Stockholder or the Company to comply with or satisfy
any material covenant, condition or agreement to be complied with or satisfied
by such person hereunder. Home and Newco shall give prompt notice to the Company
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of Home or Newco contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing and (ii) any failure of Home or Newco to
comply with or satisfy any material covenant, condition or agreement to be
complied with or satisfied by it hereunder. The delivery of any notice pursuant
to this Section 7.7 shall not be deemed to (i) modify the
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representations or warranties hereunder of the party delivering such notice,
which modification may only be made pursuant to Section 7.8, (ii) modify the
conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
anticipated effectiveness of the Registration Statement to supplement or amend
promptly the Schedules hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall
only have to be delivered at the Closing Date, unless such Schedule is to be
amended to reflect an event occurring other than in the ordinary course of
business. Notwithstanding the foregoing sentence, no amendment or supplement to
a Schedule prepared by the Company that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless Home and
a majority of the Founding Companies other than the Company consent to such
amendment or supplement; and provided further, that no amendment or supplement
to a Schedule prepared by Home or Newco that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless a
majority of the Founding Companies consent to such amendment or supplement. For
all purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 7.8. In the event that one of the Other
Founding Companies seeks to amend or supplement a Schedule pursuant to Section
7.8 of one of the Other Agreements, and such amendment or supplement constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company, Home shall give the Company notice promptly after
it has knowledge thereof. If Home and a majority of the Founding Companies
consent to such amendment or supplement, which consent shall have been deemed
given by Home or any Founding Company if no response is received within 24 hours
following receipt of notice of such amendment or supplement (or sooner if
required by the circumstances under which such consent is requested), but the
Company does not give its consent, the Company may terminate this Agreement
pursuant to Section 12.1(iv) hereof. In the event that the Company seeks to
amend or supplement a Schedule pursuant to this Section 7.8, and Home and a
majority of the Other Founding Companies do not consent to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 12.1(i) hereof. In the event that Home or Newco seeks to amend
or supplement a Schedule pursuant to this Section 7.8 and a majority of the
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. No party to this Agreement shall be liable to any other party if
this Agreement shall be terminated pursuant to the provisions of this Section
7.8. No amendment of or supplement to a Schedule shall be made later than 24
hours prior to the anticipated effectiveness of the Registration Statement.
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7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Company and
Stockholders shall furnish or cause to be furnished to Home and the Underwriters
all of the information concerning the Company and the Stockholders required for
inclusion in, and will cooperate with Home and the Underwriters in the
preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement). The Company and the Stockholders agree promptly to
advise Home if at any time during the period in which a prospectus relating to
the offering is required to be delivered under the Securities Act, any
information contained in the prospectus concerning the Company or the
Stockholders becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy. Insofar as the
information relates solely to the Company or the Stockholders, the Company
represents and warrants as to such information with respect to itself, and each
Stockholder represents and warrants, as to such information with respect to the
Company and himself or herself, that the Registration Statement will not include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
7.10 FINAL FINANCIAL STATEMENTS. The Company shall provide prior to the
Funding and Consummation Date, and Home shall have had sufficient time to review
the unaudited consolidated balance sheets of the Company as of the end of all
fiscal quarters following the Balance Sheet Date, and the unaudited consolidated
statement of income, cash flows and retained earnings of the Company for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the Company or the results of its
operations from the financial statements as of the Balance Sheet Date. Such
financial statements shall have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted therein). Except as noted in such financial
statements, all of such financial statements will present fairly the results of
operations of the Company for the periods indicated therein.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. Prior to the Funding and Consummation Date, Home
shall maintain its authorized capital stock as set forth in the Registration
Statement filed with the SEC except for such changes in authorized capital stock
as are made to respond to comments made by the SEC or requirements of any
exchange or automated trading system for which application is made to register
the Home Stock and any changes necessary or advisable in order to permit the
delivery of the opinion contemplated by Section 8.12 hereof.
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7.13 COMPLIANCE WITH THE ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ANTITRUST IMPROVEMENTS ACT OF
1976 (THE "▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT"). All parties to this Agreement hereby
recognize that one or more filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Act are required, then: (i) each of the parties hereto agrees to
cooperate and use its best efforts to comply with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act,
(ii) such compliance by the Stockholders and the Company shall be deemed a
condition precedent in addition to the conditions precedent set forth in Section
9 of this Agreement, and such compliance by Home and Newco shall be deemed a
condition precedent in addition to the conditions precedent set forth in Section
8 of this Agreement, and (iii) the parties agree to cooperate and use their best
efforts to cause all filings required under the ▇▇▇▇- ▇▇▇▇▇-▇▇▇▇▇▇ Act to be
made. If filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act are required, the costs and
expenses thereof (including legal fees and costs and filing fees) shall be borne
by Home. The obligation of each party to consummate the transactions
contemplated by this Agreement is subject to the expiration or termination of
the waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, if applicable.
7.14 STOCKHOLDERS OF HOME. Promptly after a request by the Company, Home
will deliver to the Company a list of the stockholders of Home as of the date of
this Agreement.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of Stockholders and the Company with respect to actions to
be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The obligations of
the Stockholders and the Company with respect to actions to be taken on the
Funding and Consummation Date are subject to the satisfaction or waiver on or
prior to the Funding and Consummation Date of the conditions set forth in
Sections 8.1, 8.5, 8.8, 8.9 and 8.12. As of the Closing Date or, with respect to
the conditions set forth in Sections 8.1, 8.5, 8.8, 8.9 and 8.12, as of the
Funding and Consummation Date, if any such conditions have not been satisfied,
the Stockholders (acting in unison) shall have the right to terminate this
Agreement, or in the alternative, waive any condition not so satisfied. Any act
or action of the Stockholders in consummating the Closing or delivering
certificates representing Company Stock as of the Funding and Consummation Date
shall constitute a waiver of any conditions not so satisfied. However, no such
waiver shall be deemed to affect the survival of the representations and
warranties of Home and Newco contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of Home and Newco contained in Section 6 shall be
true and correct in all material respects as of the Closing Date and the Funding
and Consummation Date as though such representations and warranties had been
made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by Home and Newco on or before the
Closing Date and the Funding and Consummation Date shall have been duly complied
with and
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performed in all material respects; and certificates to the foregoing effect
dated the Closing Date and the Funding and Consummation Date, respectively, and
signed by the President or any Vice President of Home shall have been delivered
to the Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the Company and its counsel.
The Stockholders and the Company shall be satisfied that the Registration
Statement and the prospectus forming a part thereof, including any amendments
thereof or supplements thereto, shall not contain any untrue statement of a
material fact, or omit to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided
that the condition contained in this sentence shall (for purposes of this
Section 8.2) be deemed satisfied if the Company or Stockholders shall have
failed to inform Home in writing prior to the effectiveness of the Registration
Statement of the existence of an untrue statement of a material fact or the
omission of such a statement of a material fact.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the Company as a result of which
the management of the Company deems it inadvisable to proceed with the
transactions hereunder.
8.4 OPINION OF COUNSEL. The Company shall have received an opinion from
counsel for Home, dated the Closing Date, in the form annexed hereto as Annex V.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the underwriters named therein shall have
agreed to acquire on a firm commitment basis, subject to the conditions set
forth in the underwriting agreement, on terms such that the aggregate value of
the cash and the number of shares of Home Stock to be received by the
Stockholders is not less than the Minimum Value set forth on Annex I.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the Merger and no governmental agency or body shall have taken any other action
or made any request of the Company as a result of which the Company deems it
inadvisable to proceed with the transactions hereunder.
8.7 GOOD STANDING CERTIFICATES. Home and Newco each shall have delivered
to the Company a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State and in each
state in which Home or Newco is authorized to do business, showing that each of
Home and Newco is in good standing and authorized to do business
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and that all state franchise and/or income tax returns and taxes for Home and
Newco, respectively, for all periods prior to the Closing have been filed and
paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to Home or Newco which would constitute a Material Adverse
Effect.
8.9 CLOSING OF IPO. The closing of the sale of the Home Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of Home and of Newco, certifying the truth and correctness of attached copies of
the Home's and Newco's respective Certificates of Incorporation (including
amendments thereto), By-Laws (including amendments thereto), and resolutions of
the boards of directors and, if required, the Stockholders of Home and Newco
approving Home's and Newco's entering into this Agreement and the consummation
of the transactions contemplated hereby.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VII hereto.
8.12 TAX MATTERS. The Stockholders shall have received an opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or other tax advisor reasonably acceptable to the
Stockholders that the Home Plan of Organization will qualify as a tax-free
transfer of property under Section 351 of the Code and that the Stockholders
will not recognize gain to the extent the Stockholders exchange stock of the
Company for Home Stock (but not cash or other property) pursuant to the Home
Plan of Organization.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF HOME AND NEWCO
The obligations of Home and Newco with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. The obligations of Home and
Newco with respect to actions to be taken on the Funding and Consummation Date
are subject to the satisfaction or waiver on or prior to the Funding and
Consummation Date of the conditions set forth in Sections 9.1, 9.4 and 9.13. As
of the Closing Date or, with respect to the conditions set forth in Sections
9.1, 9.4 and 9.13, as of the Funding and Consummation Date, if any such
conditions have not been satisfied, Home and Newco shall have the right to
terminate this Agreement, or waive any such condition, but no such waiver shall
be deemed to affect the survival of the representations and warranties contained
in Section 5 hereof.
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9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the Stockholders and the Company contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date and the Funding and Consummation Date with the same effect as
though such representations and warranties had been made on and as of such date;
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the Stockholders and the Company on or before the Closing Date
or the Funding and Consummation Date, as the case may be, shall have been duly
performed or complied with in all material respects; and the Stockholders shall
have delivered to Home certificates dated the Closing Date and the Funding and
Consummation Date, respectively, and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of Home as a result of which the
management of Home (acting in good faith) deems it inadvisable to proceed with
the transactions hereunder.
9.3 SECRETARY'S CERTIFICATE. Home shall have received a certificate, dated
the Closing Date and signed by the secretary of the Company, certifying the
truth and correctness of attached copies of the Company's Certificate of
Incorporation (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the board of directors and the Stockholders
approving the Company's entering into this Agreement and the consummation of the
transactions contemplated hereby.
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to Home
an instrument dated the Closing Date which shall be effective only upon the
occurrence of the Funding and Consummation Date releasing the Company from (i)
any and all claims of the Stockholders against the Company and Home and (ii)
obligations of the Company and Home to the Stockholders, except for (x) items
specifically identified on Schedules 5.10 and 5.15 as being claims of or
obligations to the Stockholders, (y) continuing obligations to Stockholders
relating to their employment by the Company and (z) obligations arising under
this Agreement or the transactions contemplated hereby. In the event that the
Funding and Consummation Date does not occur, then the release instrument
referenced herein shall be void and of no further force or effect.
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9.6 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to Home.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7 or otherwise approved by Home, all existing agreements between the
Company and the Stockholders (and entities controlled by the Stockholders) other
than real property leases shall have been canceled effective prior to or as of
the Closing Date, and all real property leases between the Company and the
Stockholders (and any entity controlled by the Stockholders) shall have been
amended in a manner reasonably satisfactory to Home.
9.8 OPINION OF COUNSEL. Home shall have received an opinion from Counsel
to the Company and the Stockholders, dated the Closing Date, substantially in
the form annexed hereto as Annex VI.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 5.23 shall have been obtained;
and no action or proceeding shall have been instituted or threatened to restrain
or prohibit the Merger and no governmental agency or body shall have taken any
other action or made any request of Home as a result of which Home deems it
inadvisable to proceed with the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to Home
a certificate, dated as of a date no earlier than ten days prior to the Closing
Date, duly issued by the appropriate governmental authority in the Company's
state of incorporation and, unless waived by Home, in each state in which the
Company is authorized to do business, showing the Company is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes for the Company for all periods prior to the Closing have been
filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall enter into an employment agreement substantially in the form of Annex VII
hereto.
9.13 CLOSING OF IPO. The closing of the sale of the Home Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
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9.14 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to Home a
certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
10. COVENANTS OF HOME AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. Home shall
use reasonable efforts to have the Stockholders released from any and all
guarantees of the Company's indebtedness identified on Schedule 10.1. In the
event that Home cannot obtain such releases from the lenders of any such
guaranteed indebtedness identified on Schedule 10.1 on or prior to 120 days
subsequent to the Funding and Consummation Date, Home shall promptly pay off or
otherwise refinance or retire such indebtedness. From and after the Funding and
Consummation Date and until such time as all of such indebtedness is paid off,
refinanced or retired, Home shall maintain unencumbered funds in amounts
sufficient to provide for such pay off, refinancing or retirement, provided that
Home may use such funds for other purposes, in its sole discretion, with the
prior written consent of each Stockholder who has not as of that time been
released from his or her guarantee as described above and whose indebtedness as
described above has not as of that time been paid off, refinanced or retired.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Funding and
Consummation Date, Home shall not and shall not permit any of its subsidiaries
to undertake any act that would jeopardize the tax-free status of the
organization, including without limitation:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the Home Stock issued in connection with the transactions contemplated
hereby; or
(b) the entering into of financial arrangements for the benefit of the
Stockholders.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The Company, if possible, or otherwise the Stockholders shall
file or cause to be filed all income Tax Returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on or
before the Funding and Consummation Date, and shall permit Home to review
all such Tax Returns prior to such filings. Unless the Company is a C
corporation, the Stockholders shall pay or cause to be paid all Tax
liabilities (in excess of all amounts already paid with respect thereto or
properly accrued or reserved with respect thereto on the Company Financial
Statements) shown by such Returns to be due.
(ii) Home shall file or cause to be filed all separate Returns of,
or that include, any Acquired Party for all taxable periods ending after
the Funding and Consummation Date.
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(iii) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any
audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each
party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party
required to file Returns pursuant to this Agreement shall bear all costs
of filing such Returns.
(iv) Each of the Company, Newco, Home and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the transaction
as a tax-free contribution under Section 351(a) of the Code subject to
gain, if any, recognized on the receipt of cash or other property under
Section 351(b) of the Code subject to gain, if any, recognized on the
receipt of cash or other property under Section 351(b) of the Code.
10.4 DIRECTORS. The persons named in the Draft Registration Statement
shall be appointed as directors and elected as officers of Home, as and to the
extent set forth in the Draft Registration Statement, promptly following the
Funding and Consummation Date.
11. INDEMNIFICATION
The Stockholders, Home and Newco each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders
covenant and agree that they, severally (based on their relative ownership of
the Company Stock on the date hereof), will indemnify, defend, protect and hold
harmless Home, Newco, the Company and the Surviving Corporation at all times,
from and after the date of this Agreement until the Expiration Date (provided
that for purposes of Section 11.1(iii) below, the Expiration Date shall be the
date on which the applicable statute of limitations expires), from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by Home,
Newco, the Company or the Surviving Corporation as a result of or arising from
(i) any breach of the representations and warranties of the Stockholders or the
Company set forth herein or on the schedules or certificates delivered in
connection herewith, (ii) any breach of any agreement on the
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part of the Stockholders or the Company under this Agreement, or (iii) any
liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement of a material fact relating to the Company or the Stockholders, and
provided to Home or its counsel by the Company or the Stockholders (but in the
case of the Stockholders, only if such statement was provided in writing)
contained in the Registration Statement or any prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
relating to the Company or the Stockholders required to be stated therein or
necessary to make the statements therein not misleading, provided, however, that
such indemnity shall not inure to the benefit of Home, Newco, the Company or the
Surviving Corporation to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the Stockholders provided, in writing, corrected
information to Home counsel and to Home for inclusion in the final prospectus,
and such information was not so included or properly delivered, and provided
further, that no Stockholder shall be liable for any indemnification obligation
pursuant to this Section 11.1 to the extent attributable to a breach of any
representation, warranty or agreement made herein individually by any other
Stockholder.
Home and Newco acknowledge and agree that other than the representations
and warranties of Company or Stockholders specifically contained in this
Agreement, there are no representations or warranties of Company or
Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
Home and Newco further acknowledge and agree that, should the Closing
occur, their sole and exclusive remedy with respect to any and all claims
relating to this Agreement and the transactions contemplated in this Agreement,
shall be pursuant to the indemnification provisions set forth in this Section
11. Home and Newco hereby waive, from and after the Closing, to the fullest
extent permitted under applicable law, any and all rights, claims and causes of
action they or any indemnified person may have against the Company or any
Stockholder relating to this Agreement or the transactions arising under or
based upon any federal, state, local or foreign statute, law, rule, regulation
or otherwise.
11.2 INDEMNIFICATION BY HOME. Home covenants and agrees that it will
indemnify, defend, protect and hold harmless the Stockholders at all times from
and after the date of this Agreement until the Expiration Date, from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
Stockholders as a result of or arising from (i) any breach by Home or Newco of
their representations and warranties set forth herein or on the schedules or
certificates attached hereto, (ii) any breach of any agreement on the part of
Home or Newco under this Agreement, (iii) any liabilities which the Stockholders
may incur due to Home's or Newco's failure to be responsible for the liabilities
and
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obligations of the Company as provided in Section 1 hereof (except to the extent
that Home or Newco has claims against the Stockholders by reason of such
liabilities); or (iv) any liability under the 1933 Act, the 1934 Act or other
Federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact relating to Home, Newco or any of the Other Founding Companies contained in
any preliminary prospectus, the Registration Statement or any prospectus forming
a part thereof, or any amendment thereof or supplement thereto, or arising out
of or based upon any omission or alleged omission to state therein a material
fact relating to Home or Newco or any of the Other Founding Companies required
to be stated therein or necessary to make the statements therein not misleading.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the written consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest that prevents counsel
for the Indemnifying Party from representing Indemnified Party, Indemnified
Party shall have the right to participate in such matter through counsel of its
own choosing and Indemnifying Party will reimburse the Indemnified Party for the
reasonable expenses of its counsel. After the Indemnifying Party has notified
the Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be
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limited to the amount so offered in settlement by said Third Person. Upon
agreement as to such settlement between said Third Person and the Indemnifying
Party, the Indemnifying Party shall, in exchange for a complete release from the
Indemnified Party, promptly pay to the Indemnified Party the amount agreed to in
such settlement and the Indemnified Party shall, from that moment on, bear full
responsibility for any additional costs of defense which it subsequently incurs
with respect to such claim and all additional costs of settlement or judgment.
If the Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnified Party may settle such matter, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
All settlements hereunder shall effect a complete release of the Indemnified
Party, unless the Indemnified Party otherwise agrees in writing. The parties
hereto will make appropriate adjustments for insurance proceeds in determining
the amount of any indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party,
provided that, nothing herein shall be construed to limit the right of a party,
in a proper case, to seek injunctive relief for a breach of this Agreement. Any
indemnity payment under this Section 11 shall be treated as an adjustment to the
exchange consideration for tax purposes unless a final determination (which
shall include the execution of a Form 870-AD or successor form) with respect to
the indemnified party or any of its affiliate causes any such payment not to be
treated as an adjustment to the exchange consideration for U.S. Federal Income
Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. Home, Newco, the Surviving
Corporation and the other persons or entities indemnified pursuant to Section
11.1 or 11.2 shall not assert any claim for indemnification hereunder against
the Stockholders until such time as, and solely to the extent that, the
aggregate of all claims which such persons may have against such the
Stockholders shall exceed the greater of (a) 1.0% of the sum of (i) the cash
paid to Stockholders plus (ii) the value of the Home Stock delivered to
Stockholders (calculated as provided in this Section 11.5) or (b) $50,000 (the
"Indemnification Threshold"). Stockholders shall not assert any claim for
indemnification hereunder against Home or Newco until such time as, and solely
to the extent that, the aggregate of all claims which Stockholders may have
against Home or Newco shall exceed the Indemnification Threshold.
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No person shall be entitled to indemnification under this Section 11 if
and to the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
Notwithstanding any other term of this Agreement, no Stockholder shall be
liable under this Section 11 for an amount which exceeds the amount of proceeds
received by such Stockholder in connection with the Merger. For purposes of
calculating the value of the Home Stock received by a Stockholder, Home Stock
shall be valued at its initial public offering price as set forth in the
Registration Statement. It is hereby agreed that a stockholder shall have the
right to satisfy an indemnification obligation through payment of a combination
of stock and cash in proportion equal to the proportion of stock and cash
received by such stockholder in connection with the Merger, valued as described
immediately above, but shall also have the right to satisfy any such obligation
in cash.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION.This Agreement may be terminated at any time prior to the
Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of Home and the
Company;
(ii) by the Stockholders or the Company (acting through its board of
directors), on the one hand, or by Home (acting through its board of
directors), on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by
March 31, 1998, unless the failure of such transactions to be consummated
is due to the willful failure of the party seeking to terminate this
Agreement to perform any of its obligations under this Agreement to the
extent required to be performed by it prior to or on the Funding and
Consummation Date;
(iii) by the Stockholders or Company, on the one hand, or by Home,
on the other hand, if a material breach or default shall be made by the
other party in the observance or in the due and timely performance of any
of the covenants or agreements contained herein, and the curing of such
default shall not have been made on or before the Funding and Consummation
Date or by the Stockholders or the Company, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing Date
or the Funding and Consummation Date, as applicable, or by Home, if the
conditions set forth in Section 9 hereof have not been satisfied or waived
as of the Closing Date or the Funding and Consummation Date, as
applicable;
(iv) pursuant to Section 7.8 hereof; or
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(v) pursuant to Section 4 hereof;
provided, however, that during the period from the Closing Date to the Funding
and Consummation Date, this Agreement may be terminated only if the underwriting
agreement relating to the IPO is terminated in accordance with its terms.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section
7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Stockholders will not, for a period of
five (5) years following the Funding and Consummation Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any retail (new or used, but excluding used home lots
or other activities listed on Schedule 13.1 hereto) manufactured housing
business or operation or related services business (including the
ownership or management of manufactured housing subdivisions, lots or
parks, but excluding any such subdivisions, lots or parks or other
activities listed on Schedule 13.1 hereto) in direct competition with Home
or any of the subsidiaries thereof, within 100 miles of where the Company
or any of its subsidiaries conducted business prior to the effectiveness
of the Merger (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of Home or any subsidiary thereof for the purpose
or with the intent of enticing such employee away from or out of the
employ of Home or any subsidiary thereof;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to the Funding and Consummation
Date, a customer of Home or any subsidiary thereof, of the Company or of
any of the Other Founding Companies within the Territory for the purpose
of soliciting or selling products or services in direct competition with
Home within the Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the retail
manufactured housing business, which
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candidate, to the actual knowledge of such Stockholder after due inquiry,
was called upon by Home or any subsidiary thereof or for which, to the
actual knowledge of such Stockholder after due inquiry, Home or any
subsidiary thereof made an acquisition analysis, for the purpose of
acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the Company has in
the past disclosed such information to the public for valid business
reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit (i) any Stockholder from acquiring as a passive investment not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange or over-the-counter, or (ii) any of
the activities listed on Schedule 13.1 hereto.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
Home as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to Home for which it would
have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by Home in the event of breach by such Stockholder, by
injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of Home and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of Home; but it is also the intent of Home and the Stockholders
that such covenants be construed and enforced in accordance with the changing
activities; business and locations of Home and its subsidiaries throughout the
term of this covenant. During the term of this covenant, if Home or one of its
subsidiaries engages in new activities, enters a new business or establishes new
locations for its current activities or business in addition to or other than
the activities or business it is currently conducting in the locations currently
established therefor (provided such activities or business are related to the
business or operations of the retail manufactured housing business), then the
Stockholders will be precluded from soliciting the customers or employees of
such new activities or business or from such new location and from directly
competing with such new activities or business within 100 miles of its
then-established operating location(s) through the term of this covenant.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties
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that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against Home or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Home of such
covenants. The covenants contained in Section 13 shall not be affected by any
breach of any other provision hereof by any party hereto and shall have no
effect if the transactions contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The Company and the Stockholders hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, the Other Founding Companies,
and/or Home, such as operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company's, the Other Founding
Companies' and/or Home's respective businesses. The Stockholders agree that they
will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of Home, (b) following the Closing,
such information may be disclosed by the Stockholders as is required in the
course of performing their duties for Home or the Surviving Corporation and (c)
to counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.1, unless (i) such
information becomes known to the public generally through no fault of the
Stockholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), the Stockholders shall, if
possible, give prior written notice thereof to Home and provide Home with the
opportunity to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or threatened
breach by any of the Stockholders of the provisions of this Section 14.1, Home
shall be entitled to an injunction restraining such Stockholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Home from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. In the
event the transactions contemplated by this Agreement are not consummated,
Stockholders shall have none of the above-mentioned restrictions on their
ability to disseminate confidential information with respect to the Company.
Each Stockholder further agrees that in the event the transactions contemplated
herein are not consummated (i) neither the Company nor any Stockholder can
thereafter use any confidential information of the Other Founding
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Companies for any purpose and (ii) upon written request of any Other Founding
Company to the Company, the Company and Stockholders will return all
confidential information pertaining to such Other Founding Company to such Other
Founding Company.
14.2 HOME AND NEWCO. Home and Newco recognize and acknowledge that they
had in the past and currently have access to certain confidential information of
the Company, such as operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company's business. Home and
Newco agree that, prior to the Closing, or if the Transactions contemplated by
this Agreement are not consummated, they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(a), unless (i) such information becomes known to the public
generally through no fault of Home or Newco, (ii) disclosure is required by law
or the order of any governmental authority under color of law, provided, that
prior to disclosing any information pursuant to this clause (ii), Home and Newco
shall, if possible, give prior written notice thereof to the Company and the
Stockholders and provide the Company and the Stockholders with the opportunity
to contest such disclosure, or (iii) the disclosing party reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party, and (d) to the public to the extent necessary or
advisable in connection with the filing of the Registration Statement and the
IPO and the securities laws applicable thereto and to the operation of Home as a
publicly held entity after the IPO. In the event of a breach or threatened
breach by Home or Newco of the provisions of this Section 14.2, the Company and
the Stockholders shall be entitled to an injunction restraining Home and Newco
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting the Company and the Stockholders from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of five years from the
Funding and Consummation Date.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Unless otherwise agreed by Home, except for
transfers to immediate family members who agree to be bound by the restrictions
set forth in this Section 15.1
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(or trusts for the benefit of the Stockholders or family members, the trustees
of which so agree), for a period of one year from the Closing, except pursuant
to Section 17 hereof, none of the Stockholders shall sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint, or otherwise dispose of any
shares of Home Stock received by the Stockholders in the Merger. The
certificates evidencing the Home Stock delivered to the Stockholders pursuant to
Section 3 of this Agreement will bear a legend substantially in the form set
forth below and containing such other information as Home may deem necessary or
appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT
OR OTHER DISPOSITION PRIOR TO [FIRST ANNIVERSARY OF CLOSING DATE]. UPON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE DATE SPECIFIED ABOVE.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. The Stockholders acknowledge that the shares of
Home Stock to be delivered to the Stockholders pursuant to this Agreement have
not been and will not be registered under the 1933 Act (except as provided in
Section 17 hereof) and therefore may not be resold without compliance with the
1933 Act. The Home Stock to be acquired by such Stockholders pursuant to this
Agreement is being acquired solely for their own respective accounts, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution. The Stockholders
covenant, warrant and represent that none of the shares of Home Stock issued to
such Stockholders will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the 1933 Act and the rules and regulations of the
SEC. All the Home Stock shall bear the following legend in addition to the
legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE SECURITIES LAW.
16.2 ECONOMIC RISK; SOPHISTICATION. The Stockholders are able to bear the
economic risk of an investment in the Home Stock to be acquired pursuant to this
Agreement and can afford
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to sustain a total loss of such investment and have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the proposed investment in the Home Stock. The
Stockholders party hereto have had an adequate opportunity to ask questions and
receive answers from the officers of Home concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
Home, the plans for the operations of the business of Home, the business,
operations and financial condition of the Founding Companies other than the
Company, and any plans for additional acquisitions and the like. The
Stockholders have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing,
whenever Home proposes to register any Home Stock for its own or others account
under the 1933 Act for a public offering, other than (i) any shelf or other
registration of shares to be used as consideration for acquisitions of
additional businesses by Home and (ii) registrations relating to employee
benefit plans, Home shall give each of the Stockholders prompt written notice of
its intent to do so. Upon the written request of any of the Stockholders given
within 30 days after receipt of such notice, Home shall cause to be included in
such registration all of the Home Stock issued to the Stockholders pursuant to
this Agreement (including any stock issued as (or issuable upon the conversion
or exchange of any convertible security, warrant, right or other security which
is issued by Home as) a dividend or other distribution with respect to, or in
exchange for, or in replacement of such Home Stock) which any such Stockholder
requests, provided that Home shall have the right to reduce the number of shares
included in such registration to the extent that inclusion of such shares could,
in the written opinion of tax counsel to Home or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as a tax-free organization under Section 351 of the Code.
In addition, if Home is advised in writing in good faith by any managing
underwriter of an underwritten offering of the securities being offered pursuant
to any registration statement under this Section 17.1 that the number of shares
to be sold by persons other than Home is greater than the number of such shares
which can be offered without adversely affecting the offering, Home may reduce
pro rata the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter, provided, that, for each such offering made by
Home after the IPO, such reduction shall be made first by reducing the number of
shares to be sold by persons other than Home, the Stockholders and the
stockholders of the Other Founding Companies (collectively, the Stockholders and
the stockholders of the other Founding Companies being referred to herein as the
"Founding Stockholders"), and thereafter, if a further reduction is required, by
reducing the number of shares to be sold by the Founding Stockholders.
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17.2 DEMAND REGISTRATION RIGHTS. At any time after the date one year after
the Closing and prior to the date three years after the Closing, the holders of
a majority of the shares of Home Stock issued to the Founding Stockholders
pursuant to this Agreement and the Other Agreements which have not been
previously registered or sold and which are not entitled to be sold under Rule
144(k) (or any similar or successor provision) promulgated under the 1933 Act
may request in writing that Home file a registration statement under the 1933
Act covering the registration of the shares of Home Stock issued to the
Stockholders pursuant to this Agreement and the Other Agreements (including any
stock issued as (or issuable upon the conversion or exchange of any convertible
security, warrant, right or other security which is issued by Home as) a
dividend or other distribution with respect to, or in exchange for, or in
replacement of such Home Stock) then held by such Founding Stockholders (a
"Demand Registration"). Within ten (10) days of the receipt of such request,
Home shall give written notice of such request to all other Founding
Stockholders and shall, as soon as practicable but in no event later than 45
days after notice from any Stockholder, file and use its best efforts to cause
to become effective a registration statement covering all such shares. Home
shall be obligated to effect only one Demand Registration for all Founding
Stockholders and will keep such Demand Registration current and effective for
not less than 120 days (or such shorter period as is required to sell all of the
shares registered thereby).
Notwithstanding the foregoing paragraph, following any such a demand, a
majority of Home's disinterested directors (i.e. directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the registration statement for up to a 30 day period after the date on which
Home would otherwise be required to make such filing pursuant to the foregoing
paragraph.
If at the time of any request by the Founding Stockholders for a Demand
Registration Home has fixed plans to file within 60 days after such request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' Home
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless Home is no longer proceeding
diligently to effect such registration; provided that Home shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
In the event that the Founding Stockholders make a demand registration
request pursuant to this Section 17.2 and such registration is delayed by Home
as a consequence of the exercise of its rights under this Section 17.2, then the
period during which such demand registration may be requested by the Founding
Stockholders shall be extended for an equal number of days.
17.3 REGISTRATION PROCEDURES. Whenever Home is required to register shares
of Home Stock pursuant to Sections 17.1 and 17.2, Home will, as expeditiously as
possible:
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a. Prepare and file with the SEC a registration statement with respect to
such shares and use its best efforts to cause such registration statement to
become effective (provided that before filing a registration statement or
prospectus or any amendments or supplements or term sheets thereto, Home will
furnish a representative of the Stockholders with copies of all such documents
proposed to be filed) as promptly as practical;
b. Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 120 days;
c. Furnish to each Stockholder who so requests such number of copies of
such registration statement, each amendment and supplement thereto and the
prospectus included in such registration statement (including each preliminary
prospectus and any term sheet associated therewith), and such other documents as
such Stockholder may reasonably request in order to facilitate the disposition
of the relevant shares;
d. Use its best efforts to register or qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Stockholders, and to keep
such registration or qualification effective during the period such registration
statement is to be kept effective, provided that Home shall not be required to
become subject to taxation, to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions;
e. Cause all such shares of Home Stock to be listed or included on any
securities exchanges or trading systems on which similar securities issued by
Home are then listed or included;
f. Notify each Stockholder at any time when a prospectus relating thereto
is required to be delivered under the 1933 Act within the period that Home is
required to keep the registration statement effective of the happening of any
event as a result of which the prospectus included in such registration
statement, together with any associated term sheet, contains an untrue statement
of a material fact or omits any fact necessary to make the statement therein not
misleading, and, at the request of such Stockholder, Home will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of the covered shares, such prospectus will not contain an untrue
statement of material fact or omit to state any fact necessary to make the
statements therein not misleading.
All expenses incurred in connection with the registration under this
Article 17 (including all registration, filing, qualification, legal, printer
and accounting fees, but excluding underwriting commissions and discounts),
shall be borne by Home.
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17.4 INDEMNIFICATION.
(a) In connection with any demand registration, Home shall indemnify, to
the extent permitted by law, each Stockholder (an "Indemnified Party") against
all losses, claims, damages, liabilities and expenses arising out of or
resulting from any untrue or alleged untrue statement of material fact contained
in any registration statement, prospectus or preliminary prospectus or
associated term sheet or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading except insofar as the same are caused by or contained in
or omitted from any information furnished in writing to Home by such Indemnified
Party expressly for use therein or by any Indemnified Parties' failure to
deliver a copy of the registration statement or prospectus or any amendment or
supplements thereto after Home has furnished such Indemnified Party with a
sufficient number of copies of the same.
(b) In connection with any demand registration, each Stockholder shall
furnish to Home in writing such information as is reasonably requested by Home
for use in any such registration statement or prospectus and will indemnify, to
the extent permitted by law, Home, its directors and officers and each person
who controls Home (within the meaning of the ▇▇▇▇ ▇▇▇) against any losses,
claims, damages, liabilities and expenses resulting from any untrue or alleged
untrue statement or material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement or prospectus
or any amendment thereof or supplement thereto necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in information so furnished in writing by such Stockholder
specifically for use in preparing the registration statement. Notwithstanding
the foregoing, the liability of a Stockholder under this Section 17.5 shall be
limited to an amount equal to the net proceeds actually received by such
Stockholder from the sale of the relevant shares covered by the registration
statement.
(c) Any person entitled to indemnification hereunder will (i) give prompt
notice to the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely effected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled or elects not,
to assume the defense of a claim, will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
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17.5 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered offering, Home and
each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of Home's size and investment stature,
including indemnification.
17.6 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of Home stock
to the public without registration, Home agrees to use its best efforts to:
(i) make and keep public information regarding Home available as
those terms are understood and defined in Rule 144 under the 1933 Act for
a period of four years beginning 90 days following the effective date of
the Registration Statement;
(ii) file with the SEC in a timely manner all reports and other
documents required of Home under the 1933 Act and the 1934 Act at any time
after it has become subject to such reporting requirements; and
(iii) so long as a Stockholder owns any restricted Home Common
Stock, furnish to each Stockholder forthwith upon written request a
written statement by Home as to its compliance with the reporting
requirements of Rule 144 (at any time from and after 90 days following the
effective date of the Registration Statement, and of the 1933 Act and the
1934 Act (any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of
Home, and such other reports and documents so filed as a Stockholder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing a Stockholder to sell any such shares without registration.
18. GENERAL
18.1 COOPERATION. The Company, Stockholders, Home and Newco shall each
deliver or cause to be delivered to the other on the Funding and Consummation
Date, and at such other times and places as shall be reasonably agreed to, such
additional instruments as the other may reasonably request for the purpose of
carrying out this Agreement. The Company will cooperate and use its reasonable
efforts to have the present officers, directors and employees of the Company
cooperate with Home on and after the Funding and Consummation Date in furnishing
information, evidence, testimony and other assistance in connection with any tax
return filing obligations, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Funding
and Consummation Date.
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18.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
Home, and the heirs and legal representatives of the Stockholders.
18.3 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company, Newco and Home and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company, Newco and Home,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the Company shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
18.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 BROKERS AND AGENTS. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
18.6 EXPENSES. (a) Whether or not the transactions herein contemplated
shall be consummated, Home will pay the fees, expenses and disbursements of Home
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by Home under this Agreement, including the fees and
expenses of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P., and any other
person or entity retained by Home or by Notre Capital Ventures II, L.L.C., and
the costs of preparing the Registration Statement. Each Stockholder shall pay
all sales, use, transfer, real property transfer, recording, gains, stock
transfer and other similar taxes and fees ("Transfer Taxes") imposed in
connection with the Merger, other than Transfer Taxes, if any, imposed by the
State of Delaware. Each Stockholder shall file all necessary documentation and
Returns with respect to such Transfer Taxes. In addition, each Stockholder
acknowledges that he, and not the Company or Home, will pay all taxes due upon
receipt of the consideration payable pursuant to Section 2 hereof. The
Stockholders acknowledge that the risks of the transactions contemplated hereby
include tax risks,
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with respect to which the Stockholders are relying solely on the opinion
contemplated by Section 8.12 hereof.
(b) In the event that the Funding and Consummation Date occurs, then
Home will reimburse the Stockholders and the stockholders of Other Founding
Companies for incremental and direct accounting costs and expenses incurred by
them in connection with the Merger and IPO and such additional accounting and
legal expenses incurred by them in connection therewith as may be approved by
Home.
18.7 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person to
an officer or agent of such party.
(a) If to Home, or Newco, addressed to them at:
Home USA, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P.
South Tower Pennzoil Place
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(b) If to the Stockholders, addressed to them at their addresses set
forth on Annex II, with copies to:
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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with copies to Local Counsel:
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(c) If to the Company, addressed to it at:
McDonald Homes, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
18.8 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Texas.
18.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the Expiration Date.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
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18.13 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of Home, Newco, the Company and Stockholders who hold or who
will hold at least 50% of the Home Stock issued or to be issued upon
consummation of the Merger. Any amendment or waiver effected in accordance with
this Section 18.15 shall be binding upon each of the parties hereto, any other
person receiving Home Stock in connection with the Merger and each future holder
of such Home Stock.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
HOMEUSA, INC.
By: ________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Chief Executive Officer
MCDONALD HOMES ACQUISITION CORP.
By: ________________________
Name: ___________________
Title: __________________
MCDONALD HOMES, INC.
By: ________________________
Name: ___________________
Title: __________________
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Stockholders:
____________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
____________________________
▇▇▇▇ ▇▇▇▇▇▇▇
____________________________
▇▇▇▇▇▇ ▇▇▇▇▇
____________________________
▇▇▇▇▇ ▇▇▇▇▇▇
____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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SCHEDULE 6.9
None.
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