PURCHASE AGREEMENT
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TABLE OF CONTENTS
PAGE
R E C I T A L S
A G R E E M E N T
DEFINITIONS/PURCHASE & SALE/CLOSING
1.1 Definitions.............................................................................................2
1.2 Purchase Price..........................................................................................7
1.3 Transfer of Stock by Sellers............................................................................7
1.4 Transfer of Member Interests by Sellers.................................................................8
1.5 Transfer of Partnership Interests.......................................................................8
1.6 Post-Closing Adjustments to Purchase Price..............................................................8
1.7 The Closing............................................................................................10
1.8 Purchase Price Allocation..............................................................................10
REPRESENTATIONS AND WARRANTIES OF SELLERS
2.1 Management Corp. and Branching Tree....................................................................10
2.2 Stock..................................................................................................11
2.3 Holding LLCs, Mather and Desert Inn....................................................................11
2.4 Parent Partnerships....................................................................................12
2.5 Financial Statements; Changes; Contingencies...........................................................13
2.6 Tax and Other Returns and Reports......................................................................14
2.7 Material Contracts.....................................................................................15
2.8 Real and Personal Property; Title to Property; Leases..................................................16
2.9 Intangible Property....................................................................................17
2.10 No Conflicts...........................................................................................17
2.11 Legal Proceedings and Certain Labor Matters............................................................18
2.12 Minute Books...........................................................................................18
2.13 Accounting Records.....................................................................................19
2.14 Insurance..............................................................................................19
2.15 Permits................................................................................................19
2.16 Employee Benefits......................................................................................19
2.17 Certain Interests......................................................................................21
2.18 Bank Accounts, Powers, etc.............................................................................21
2.19 No Brokers or Finders..................................................................................21
2.20 Environmental Compliance...............................................................................21
2.21 Certain Indebtedness...................................................................................22
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ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLERS
3.1 Ownership by Sellers; No Conflicts.....................................................................23
3.2 Securities Act Matters.................................................................................24
3.3 Authority of Corporations; No Conflicts................................................................25
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Related Matters.......................................................................25
4.2 Authorization..........................................................................................26
4.3 No Conflicts...........................................................................................26
4.4 No Brokers or Finders..................................................................................26
4.5 Legal Proceedings......................................................................................26
4.6 Investment Representation..............................................................................26
4.7 Financing..............................................................................................27
4.8 Capital Stock..........................................................................................27
4.9 SEC Filings; Financial Statements......................................................................27
COVENANTS PRIOR TO CLOSING
5.1 Access.................................................................................................28
5.2 Material Adverse Changes...............................................................................28
5.3 Conduct of Business....................................................................................29
5.4 Notification of Certain Matters........................................................................31
5.5 Permits and Approvals..................................................................................31
5.6 Preservation of Business Prior to Closing Date.........................................................31
5.7 Government Filings.....................................................................................32
5.8 Elimination of Intercompany and Affiliate Liabilities..................................................32
5.9 Representative.........................................................................................32
5.10 Exchange Listing; Registration Rights..................................................................33
5.11 Shareholders Agreement.................................................................................33
5.12 Cost Sharing Agreements and Option Agreement...........................................................33
5.13 Employees..............................................................................................33
ADDITIONAL CONTINUING COVENANTS
6.1 Noncompetition.........................................................................................34
6.2 Non-disclosure of Proprietary Data.....................................................................35
6.3 Tax Returns............................................................................................35
6.4 Tax Cooperation........................................................................................36
6.5 Other Cooperation......................................................................................38
6.6 Employees and Employee Benefits........................................................................38
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6.7 Lewis Name and Mark License............................................................................38
6.8 Fiscal 1998 Audited Financial Statements...............................................................38
6.9 Tenant Lists...........................................................................................39
6.10 Buyer's Right of First Offer...........................................................................39
6.11 Wells Fargo Loans......................................................................................41
CONDITIONS OF PURCHASE
7.1 General Conditions.....................................................................................42
7.2 Conditions to Obligations of Buyer.....................................................................43
7.3 Conditions to Obligations of Sellers...................................................................44
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 Termination of Agreement...............................................................................45
8.2 Effect of Termination..................................................................................45
8.3 Survival of Representations and Warranties.............................................................46
INDEMNIFICATION
9.1 Obligations of Sellers and Corporation.................................................................46
9.2 Obligations of Buyer...................................................................................46
9.3 Procedure..............................................................................................47
9.4 Survival...............................................................................................48
9.5 Limitation of Remedies.................................................................................48
GENERAL
10.1 Amendments; Waivers....................................................................................48
10.2 Schedules, Exhibits, Integration.......................................................................49
10.3 Efforts; Further Assurances............................................................................49
10.4 Governing Law..........................................................................................49
10.5 No Assignment..........................................................................................49
10.6 Headings...............................................................................................50
10.7 Counterparts...........................................................................................50
10.8 Publicity and Reports..................................................................................50
10.9 Confidentiality........................................................................................50
10.10 Alternative Dispute Resolution.........................................................................51
10.11 Parties in Interest....................................................................................52
10.12 Knowledge Convention...................................................................................52
10.13 Notices................................................................................................52
10.14 Expenses...............................................................................................54
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10.15 Remedies; Waiver.......................................................................................54
10.16 Attorney's Fees........................................................................................54
10.17 Representation By Counsel; Interpretation..............................................................54
10.18 Severability...........................................................................................54
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PURCHASE AGREEMENT
This Purchase Agreement is entered into among Kaufman and
Broad Home Corporation, a Delaware corporation ("Buyer"), the individuals,
corporations and limited liability companies identified on the signature page of
this Agreement as "Sellers" (individually a "Seller" and collectively, the
"Sellers") and the corporations identified on the signature page of this
Agreement as "Corporations" (individually a "Corporation" and collectively, the
"Corporations").
R E C I T A L S
WHEREAS, Sellers collectively own (i) all the partnership
interests in Lewis Homes of California, a California general partnership
("LHC"), Lewis Development Co., a California general partnership ("Lewis
Development"), Lewis Homes Enterprises, a California general partnership
("LHE"), Lewis Homes of Nevada, a Nevada general partnership ("LHN"), and Lewis
Properties, a Nevada general partnership ("Lewis Properties," and collectively
with LHC, Lewis Development, LHE and LHN, the "Parent Partnerships"), (ii) all
of the issued and outstanding capital stock of Lewis Homes Management Corp., a
California corporation ("Management Corp."), and Branching Tree Corp., a
California corporation ("Branching Tree"), and (iii) all the member interests of
(a) LDC Arctic, LLC, a Delaware limited liability company, LHC Arctic, LLC, a
Delaware limited liability company, LHE Arctic, LLC, a Delaware limited
liability company, LHN Arctic, LLC, a Delaware limited liability company, and LP
Arctic, LLC, a Delaware limited liability company (collectively, the "Holding
LLCs"), (b) Mather Housing Company, LLC, a California limited liability company
("Mather"), and (c) Desert Inn Development, L.L.C., a Nevada limited liability
company ("Desert Inn"). The Parent Partnerships, directly and through their
interests in joint ventures, general partnerships and limited liability
companies, and Management Corp., Branching Tree, Mather and Desert Inn,
excluding the Excluded Assets (as defined below), collectively constitute the
homebuilding operations of the members of the Lewis Homes group of companies in
California and Nevada (the "Homebuilding Business");
WHEREAS, certain non-Homebuilding Business and other assets
and liabilities of the Homebuilding Entities identified on Exhibit A hereto
(collectively, the "Excluded Assets" and "Excluded Liabilities") will be removed
by Sellers prior to the Closing (as defined below) or conveyed to Sellers or
their designees after the Closing, and certain Homebuilding Business assets and
liabilities of Sellers identified on Exhibit A hereto (the "Included Assets" and
"Included Liabilities") will be transferred by Sellers or their non-Homebuilding
Entity affiliates to the Homebuilding Entities prior to the Closing;
WHEREAS, Sellers desire to sell and Buyer desires to buy the
partnership interests in the Parent Partnerships (the "Partnership Interests"),
all of the issued and outstanding capital stock of Management Corp. and
Branching Tree (the "Stock") and all the member interests of the Holding LLCs,
Mather and Desert Inn (the "Member Interests") for the consideration set forth
herein.
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WHEREAS, the Corporations, who were formerly partners of one
or more of the Parent Partnerships and are currently members of one or more of
the Partnership Sellers, desire to make certain representations and warranties
to and agreements with Buyer and Buyer desires to make certain representations
and warranties to and agreements with the Corporations, all in accordance with
the terms of this Agreement.
A G R E E M E N T
In consideration of the mutual promises contained herein and
intending to be legally bound the parties agree as follows:
ARTICLE I
DEFINITIONS/PURCHASE & SALE/CLOSING
1.1 DEFINITIONS.
For all purposes of this Agreement, except as otherwise
expressly provided,
(a) the terms defined in this Article I have the meanings
assigned to them in this Article I and include the plural as well as the
singular,
(b) all accounting terms not otherwise defined herein have the
meanings assigned under GAAP,
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement,
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and
(e) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
As used in this Agreement and the Exhibits and Schedules
delivered pursuant to this Agreement, the following definitions shall apply.
"Action" means any action, complaint, petition, investigation,
suit or other proceeding, whether civil or criminal, in law or in equity, or
before any arbitrator or Governmental Entity.
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"Affiliate" means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified Person.
"Agreement" means this Agreement by and among Buyer and
Sellers as amended or supplemented together with all Exhibits and Schedules
attached or incorporated by reference.
"Approval" means any approval, authorization, consent, consent
to assignment or transfer, qualification or registration, or any waiver of any
of the foregoing, required to be obtained from, or any notice, statement or
other communication required to be filed with or delivered to, any Governmental
Entity or any other Person.
"Associate" of a Person means
(i) a corporation or organization of which such
Person is an officer or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities;
(ii) any trust or other estate in which such Person
has a substantial beneficial interest or as to which such person serves as
trustee or in a similar capacity; and
(iii) any relative or spouse of such Person or any
relative of such spouse.
"Auditors" means Ernst & Young LLP, independent public
accountants to Management Corp., Branching Tree, Mather, Desert Inn, the Parent
Partnerships and their respective Subsidiaries.
"Branching Tree Sellers" means the Sellers identified as such
on Exhibit B.
"Buyer Common Stock" has the meaning set forth in Section 1.2.
"Closing" means the consummation of the purchase and sale of
the Partnership Interests, Member Interests, and Stock under this Agreement.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"Cost Sharing Agreements" has the meaning set forth in Section
5.12.
"Desert Inn Sellers" means the Sellers identified as such on
Exhibit B.
"Disclosure Schedule" means the Disclosure Schedules dated
January 7, 1999 and delivered by Sellers to Buyer, or Buyer to Sellers, as the
case may be, as exhibits to this Agreement. The Sections of the Disclosure
Schedules shall be numbered to correspond to the
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applicable Section of this Agreement and, together with all matters under such
heading, shall be deemed to qualify only that Section.
"Encumbrance" means any claim, charge, easement, encumbrance,
lease, covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable federal
or state securities law.
"Equity Securities" means any capital stock or other equity
interest or any securities convertible into or exchangeable for capital stock or
other equity interest or any other rights, warrants or options to acquire any of
the foregoing securities.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the related regulations and published interpretations.
"Excluded Assets" has the meaning set forth in the Recitals.
"Excluded Liabilities" has the meaning set forth in the
Recitals.
"Former Partnership Properties" means those Excluded Assets
listed on Exhibit O.
"GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time.
"Governmental Entity" means any government or any agency
(including any licensing agency), bureau, board, commission, court, department,
official, political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the related regulations and published
interpretations.
"Hazardous Substance" means (but shall not be limited to)
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable Laws as "hazardous substances," "hazardous materials," "hazardous
wastes" or "toxic substances," or any other formulation intended to define, list
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, radioactivity or carcinogenicity, and petroleum and
drilling fluids, produced waters and other wastes associated with the
exploration, development, or production of crude oil, natural gas or geothermal
energy, derivatives of petroleum products, and asbestos or asbestos-containing
materials.
"Holding LLCs" has the meaning set forth in the Recitals.
"Holding LLC Sellers" means the Sellers identified as such on
Exhibit B.
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"Homebuilding Business" has the meaning set forth in the
Recitals and shall be deemed to include the Former Partnership Properties
despite their status as Excluded Assets.
"Homebuilding Entities" means Management Corp., Branching
Tree, Mather, Desert Inn, the Holding LLCs, the Parent Partnerships and their
respective Subsidiaries.
"Homebuilding Line of Business Financial Information" means
the financial information in the column labeled "Homebuilding" in the Combined
Companies (California and Nevada) Line of Business Operations/Selected Financial
Information as of December 31, 1997 and for the year then ended included in the
audited financial statements of the Lewis Homes group of companies referred to
in Section 2.5(a).
"Included Assets" and "Included Liabilities" have the meanings
set forth in the Recitals.
"Indemnifiable Claim" means any Loss for or against which any
party is entitled to indemnification under Article IX of this Agreement;
"Indemnified Party" means the party entitled to indemnity hereunder; and
"Indemnifying Party" means the party obligated to provide indemnification
hereunder.
"Intangible Property" means any trade secret, secret process
or other confidential information or know-how and any and all Marks.
"IRS" means the Internal Revenue Service or any successor
entity.
"Law" means any constitutional provision, statute or other
law, rule, regulation, or interpretation of any Governmental Entity and any
Order.
"License Agreement" has the meaning set forth in Section 6.7.
"Loss" means any cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including but not limited to, interest or other carrying costs, penalties,
reasonable legal, accounting and other professional fees and expenses actually
incurred in the investigation, collection, prosecution and defense of claims,
and amounts paid in settlement, that may be imposed on or otherwise incurred or
suffered by the specified person.
"Management Corp. Sellers" means the Sellers identified as
such on Exhibit B.
"Mark" means any brand name, copyright, patent, service mark,
trademark, trademark, and all registrations or application for registration of
any of the foregoing.
"material adverse change," "material adverse effect,"
"material" or related terms herein mean a material adverse effect on the
business, financial condition, results of operations or prospects of the
Homebuilding Business of the Homebuilding Entities, taken as a whole; provided,
however, that a decline in general economic conditions or matters generally
affecting real estate markets or homebuilding companies in California or Nevada
(or both) shall not be
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deemed to be a material adverse change or material adverse effect; and provided,
further that solely for the purposes of determining whether a breach of a
representation or warranty made in or pursuant to this Agreement by Sellers or
the nonperformance by Sellers of any of the covenants or agreements made
hereunder results in Losses that are indemnifiable under Article IX hereof,
"material adverse change," "material adverse effect", "material" or related
terms herein mean a change or effect that results in Losses exceeding $750,000.
"Material Contract" means any Contract material to the
Homebuilding Business and includes but is not limited to those Contracts deemed
material by Section 2.7.
"Mather Sellers" means the Sellers identified as such on
Exhibit B.
"Member Interests" means the member interests in the Holding
LLCs, Mather and Desert Inn.
"Net Worth" means the stockholders', members' and partners'
equity of each of the Homebuilding Entities determined on a combined basis in
accordance with GAAP applied consistently with the audited financial statements
referred to in Section 7.2(g); provided, however, that (i) any severance
payments payable to officers or employees of any Homebuilding Entity on or after
the Closing Date shall not be considered in determining Net Worth, (ii) any
bonuses payable to officers or employees of any Homebuilding Entity on or after
the Closing Date (which shall be limited in accordance with Section 5.3(g))
shall be pro rated over the period from the date the employee was notified of
the intent to pay such a bonus to the end of such bonus period and only that
portion of the bonus allocated to periods prior to the Closing Date shall be
considered in determining Net Worth (it being understood that all bonuses with
respect to the fiscal year ended December 31, 1998 shall be paid prior to the
Closing), and (iii) no amount payable by any of the Homebuilding Entities to
related parties shall be treated as equity in determining Net Worth.
"Option Agreement" has the meaning set forth in Section 5.12.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"Partnership Interests" has the meaning set forth in the
Recitals.
"Partnership Sellers" means the Sellers identified as such on
Exhibit B.
"Permit" means any license, permit, franchise, certificate of
authority, consent, variance, development agreement, exemption, or order, or any
waiver of the foregoing, required to be issued by any Governmental Entity.
"Person" means an association, a corporation, an individual, a
partnership, a limited liability company, a trust or any other entity or
organization, including a Governmental Entity.
"Purchase Price" has the meaning set forth in Section 1.2.
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"Registration Rights Agreement" has the meaning set forth in
Section 5.10.
"Representative" has the meaning set forth in Section 5.9.
"Shareholders" means the equity owners of those Sellers or
Corporations that are "S" corporations under the Code.
"Shareholders Agreement" has the meaning set forth in Section
5.11.
"Stock" means all of the outstanding capital stock of
Management Corp. and Branching Tree.
"Subsidiary" means any Person in which any Homebuilding Entity
has a direct or indirect equity or ownership interest in excess of 10%, other
than Persons included in Excluded Assets.
"Tax" means any foreign, federal, state, county or local
income, sales and use, excise, franchise, real and personal property, transfer,
gross receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance or withholding tax or charge imposed by any
Governmental Entity, any interest and penalties (civil or criminal) related
thereto or to the nonpayment thereof.
"Tax Return" means a report, return or other information
required to be supplied to a Governmental Entity with respect to Taxes
including, where permitted or required, combined or consolidated returns for any
group of entities that includes any Homebuilding Entity.
1.2 PURCHASE PRICE.
Subject to the terms and conditions of this Agreement, the
Buyer agrees to acquire the Stock, Partnership Interests and Member Interests
for an aggregate purchase price (the "Purchase Price") of $51,000 in cash and
7,886,686 shares of the common stock, par value $1.00 per share, of Buyer (the
"Buyer Common Stock"), subject to adjustment as set forth in Section 1.6.
1.3 TRANSFER OF STOCK BY SELLERS.
Subject to the terms and conditions of this Agreement, the
Management Corp. Sellers and the Branching Tree Sellers agree to sell the Stock
of Management Corp. and Branching Tree, respectively, and deliver the
certificates evidencing such Stock to Buyer or its nominee(s) at the Closing.
The certificates will be properly endorsed for transfer to or accompanied by a
duly executed stock power in favor of Buyer or its nominee(s) as Buyer may have
directed prior to the Closing Date and otherwise in a form acceptable for
transfer on the books of said corporation.
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1.4 TRANSFER OF MEMBER INTERESTS BY SELLERS.
Subject to the terms and conditions of this Agreement, the
Holding LLC Sellers, the Mather Sellers and the Desert Inn Sellers agree to sell
the Member Interests of the Holding LLCs, Mather and Desert Inn, respectively,
to Buyer or its nominee(s) at the Closing by executing and delivering to Buyer
or its nominee(s) an assignment, in the form attached hereto as Exhibit C, of
all such Seller's right, title and interest in the Member Interests.
1.5 TRANSFER OF PARTNERSHIP INTERESTS.
Subject to the terms and conditions of this Agreement,
Partnership Sellers agree to sell the Partnership Interests to Buyer or its
nominee(s) at the Closing by executing and delivering to Buyer or its
nominees(s) at the Closing an assignment, in the form attached hereto as Exhibit
D, of all such Partnership Seller's right, title and interest in the Parent
Partnerships.
1.6 POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE.
(a) As soon as practicable after the Closing, and in any event
within 45 days following the Closing Date, Sellers shall cause to be delivered
to Buyer a combined balance sheet of the Homebuilding Entities as of December
31, 1998 (if the Closing occurs on or before January 8, 1999) or the Closing
Date (if the Closing occurs after January 8, 1999), prepared in accordance with
GAAP (the "Closing Date Balance Sheet") applied on a basis consistent with that
used in preparation of the audited financial statements referred to in Section
7.2(g), a combined statement of the Net Worth of the Homebuilding Business of
the Homebuilding Entities as of December 31, 1998 (if the Closing occurs on or
before January 8, 1999) or the Closing Date (if the Closing occurs after January
8, 1999), and a certificate signed by Sellers' to the effect that such
statements have been prepared in accordance with GAAP applied on a basis
consistent with that used in the preparation of the audited financial statements
referred to in Section 7.2(g) and the terms of this Agreement (the "Post-Closing
Certificate"). Buyer shall cooperate fully with Sellers and shall provide
Sellers with access to the books and records of the Homebuilding Entities and
such other assistance as Sellers reasonably request (including, without
limitation, assignment of Buyer's or Homebuilding Entities' personnel to this
project). Buyer will reimburse Sellers upon request 50% of all reasonable
out-of-pocket costs and expenses actually incurred by Sellers in the preparation
of such statement. Within 30 days following the delivery of such information,
Buyer shall notify Sellers in writing whether Buyer agrees or disagrees with the
determination of the Net Worth of the Homebuilding Business of the Homebuilding
Entities set forth in the Post-Closing Certificate. If Buyer disagrees with such
determination, Buyer shall specify in writing in reasonable detail the nature
and amount of its disagreement. Unless such disagreement is resolved (or to the
extent not resolved) by Buyer and Sellers in writing within 10 days after
delivery of Buyer's statement of disagreement, the Closing Date Balance Sheet
shall be audited, and the Net Worth of the Homebuilding Business of the
Homebuilding Entities as of the Closing Date shall be determined, by E & Y
Kenneth Leventhal Real Estate Group of Ernst & Young LLP or another independent
public accounting firm selected by mutual agreement of the Sellers and Buyer.
Such accounting firm shall resolve the disagreement consistent with the language
of this Agreement. The determination of the Net Worth of the Homebuilding
Business of the Homebuilding Entities as of December 31, 1998 (if
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the Closing occurs on or before January 8, 1999) or the Closing Date (if the
Closing occurs after January 8, 1999), shall be made by such accounting firm
within 30 days of submission of the disagreement to it, shall be final and
binding on Buyer and the Sellers (absent manifest error in calculations) and the
fees and expenses of such accounting firm shall be borne equally by the Sellers,
on the one hand, and Buyer, on the other hand. If the Net Worth of the
Homebuilding Business of the Homebuilding Entities as of December 31, 1998 (if
the Closing occurs on or before January 8, 1999) or the Closing Date (if the
Closing occurs after January 8, 1999), as finally determined pursuant to this
Section 1.6, is greater than $192,849,362, Buyer shall pay to the Sellers the
amount of such excess, plus interest thereon at the rate of interest per annum
publicly announced from time to time by Morgan Guaranty Trust Company of New
York as its prime commercial lending rate (the "Agreed Rate") from (and
including) the Closing Date to (but excluding) the date of such payment. If the
Net Worth of the Homebuilding Business of the Homebuilding Entities as of
December 31, 1998 (if the Closing occurs on or before January 8, 1999) or the
Closing Date (if the Closing occurs after January 8, 1999), as finally
determined pursuant to this Section 1.6, is less than $192,849,362, the Sellers
shall pay to Buyer the amount of such deficiency, plus interest thereon at the
Agreed Rate from (and including) the Closing Date to (but excluding) the date of
such payment. Any payment contemplated by this Section 1.6 shall be made by wire
transfer in federal or other immediately available funds on or before the tenth
day following the final determination thereof, and any payment by Buyer to
Sellers shall be delivered to the accounts and in the names designated by the
Representative prior to the Closing Date unless the Representative gives Buyer
other instructions at least one day prior to the date of payment.
(b) Notwithstanding the requirements in Section 1.6(a) of
consistency in the preparation of the Closing Date Balance Sheet and Net Worth
statement, and notwithstanding any other provision of this Agreement, for
purposes of the preparation and review of, and any resolution of disagreements
regarding, the Closing Date Balance Sheet and Net Worth of the Homebuilding
Business of the Homebuilding Entities as of December 31, 1998 (if the Closing
occurs on or before January 8, 1999) or the Closing Date (if the Closing occurs
after January 8, 1999), the distribution or transfer of all of the Excluded
Assets and Excluded Liabilities by the Homebuilding Entities and transfer of all
of the Included Assets and Included Liabilities to the Homebuilding Entities
shall be deemed to have occurred prior to December 31, 1998 (if the Closing
occurs on or before January 8, 1999) or the Closing Date (if the Closing occurs
after January 8, 1999), even if not all such transfers have been effected as of
such date.
(c) Notwithstanding any other provision of this Agreement, no
fractional shares of Buyer Common Stock, or certificates therefore, will be
issued in payment of the Purchase Price. Each Seller who would otherwise be
entitled to receive a fractional share of Buyer Common Stock in payment of the
Purchase Price (after aggregating all whole and fractional shares of Buyer
Common Stock to which such Seller would be entitled but for this Section in
consideration for all Stock, Member Interests and Partnership Interests
delivered by such Seller) shall receive, in lieu of such fractional share, cash
equal to the product of such fraction and the average closing price of Buyer
Common Stock for the ten trading days ending two business days prior to the
Closing Date as reported on the New York Stock Exchange Composite Tape.
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1.7 THE CLOSING.
The Closing will take place at the offices of Munger, Tolles & Olson LLP, 355 South Grand Avenue, Los Angeles, California 90071. The Closing
will take place no earlier than January 7, 1999 or, if later, the fifth business
day after the satisfaction of the conditions set forth in Sections 7.1(b),
7.1(c), 7.2(c), 7.2(f), 7.2(g), 7.3(b) and 7.3(d) or such later date as Sellers
and Buyer may agree. The parties shall use their best efforts to effectuate the
Closing on January 7, 1999. At the Closing, Buyer, in exchange for the Stock,
Partnership Interests and Member Interests, shall pay to Sellers the Purchase
Price by wire transfer of the cash portion of the Purchase Price to an account
designated by the Representative at least three business days prior to the
Closing and by delivery to the Representative, on behalf of the Sellers, of
stock certificates in the Sellers' names as designated by the Representative at
least three business days prior to the Closing.
1.8 PURCHASE PRICE ALLOCATION.
The Purchase Price shall be allocated among the Stock, the
Member Interests and the Partnership Interests in a manner that will facilitate
allocations being made in accordance with Section 6.4(c), and that is consistent
with the other provisions of this Agreement. The parties intend that the
acquisitions of Stock be taxable purchases, and a sufficient amount of the cash
portion of the Purchase Price shall be allocated to each of the acquisitions of
the Stock of Management Corp. and the Stock of Branching Tree so that neither
acquisition will qualify as a reorganization within the meaning of Section
368(a) of the Code. Subject to the foregoing, prior to the Closing Sellers shall
provide a schedule to Buyer, to become a part of this Agreement, that shall set
forth the manner in which the Purchase Price shall be allocated among the
Sellers.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as otherwise indicated on the Sellers' Disclosure
Schedule as applying to a particular Section in this Article II, Sellers and the
Corporations, jointly and severally, represent, warrant and agree as follows:
2.1 MANAGEMENT CORP. AND BRANCHING TREE.
Each of Management Corp. and Branching Tree is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California. Each of Management Corp. and Branching Tree has all
necessary corporate power and authority to own its properties and to carry on
its business as now conducted and is duly qualified to do business as a foreign
corporation in good standing in all jurisdictions in which the character or the
location of its assets owned or leased or the nature of its business requires
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Homebuilding Business. Neither Management Corp.
nor Branching Tree has any Subsidiaries.
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2.2 STOCK.
Management Corp. Sellers own all of the outstanding shares of
the capital stock of Management Corp. The authorized capital stock of Management
Corp. consists of 10,000 shares of common stock, no par value, of which 2,000
shares are issued and outstanding. Branching Tree Sellers own all the
outstanding shares of the capital stock of Branching Tree. The authorized
capital stock of Branching Tree consists of 10,000 shares of common stock, no
par value, of which 480 shares are issued and outstanding. There are no
outstanding Contracts or other rights to subscribe for or purchase, or Contracts
or other obligations to issue or grant any rights to acquire, any Equity
Securities of Management Corp. or Branching Tree, or to restructure or
recapitalize Management Corp. or Branching Tree. There are no outstanding
Contracts of Sellers, Corporations, Management Corp. or Branching Tree to
repurchase, redeem or otherwise acquire any Equity Securities of Management
Corp. or Branching Tree. All Equity Securities of Management Corp. and Branching
Tree are duly authorized, validly issued and outstanding and are fully paid and
nonassessable and were issued in conformity with applicable Laws. There are no,
and never have been, preemptive rights in respect of any Equity Securities of
Management Corp. or Branching Tree. Except as described in Schedule 2.2, neither
Management Corp. nor Branching Tree owns any Equity Securities of any Person.
2.3 HOLDING LLCS, MATHER AND DESERT INN.
Each of the Holding LLCs, Mather and Desert Inn is a limited
liability company duly formed and validly existing and in good standing under
the laws of the state of its organization. Continuously since its formation,
each of Mather and Desert Inn has been treated as a partnership, and the Holding
LLCs have been treated by the Holding LLC Sellers as disregarded entities, for
purposes of federal, state, and local Taxes. Each of the Holding LLCs, Mather
and Desert Inn has all necessary power and authority under its organizational
documents to own its properties and carry on its business as now conducted. Each
of the Holding LLCs, Mather and Desert Inn is duly qualified to do business as a
foreign limited liability company in good standing in all jurisdictions in which
the character or the location of its assets owned or leased or the nature of its
business requires qualification, except where the failure to be so qualified
would not have a material adverse effect on the Homebuilding Business. The
Holding LLC Sellers, Mather Sellers and Desert Inn Sellers own all of the
outstanding membership interests in the Holding LLCs, Mather and Desert Inn,
respectively. Each Holding LLC Seller holds all of the membership interests in
its respective Holding LLC. There are no outstanding Contracts or other rights
to subscribe for or purchase, or Contracts or other obligations to issue or
grant any rights to acquire, any interest in the Holding LLCs, Mather or Desert
Inn, or to restructure or recapitalize the Holding LLCs, Mather or Desert Inn.
There are no outstanding Contracts of Sellers, the Corporations or the Holding
LLCs, Mather or Desert Inn to repurchase, redeem or otherwise acquire any
interest in the Holding LLCs, Mather or Desert Inn. All Member Interests were
issued in conformity with all applicable Laws. Schedule 2.3 lists all
Subsidiaries of the Holding LLCs, Mather or Desert Inn and correctly sets forth
their respective ownership interests therein, any other interest of any other
Person in such Subsidiary and the jurisdiction in which each such Subsidiary was
organized. Except as set forth on Schedule 2.3, all of the Equity Securities,
partnership interests, membership interests, or other interests owned by the
Holding LLCs, Mather or Desert Inn in any such Subsidiary are validly issued and
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outstanding, fully paid and nonassessable, were issued in conformity with
applicable Laws and without violation of, and are free of, any preemptive
rights, and are owned by the Holding LLCs, Mather or Desert Inn, as applicable,
free and clear of any and all covenants, conditions, or other Encumbrances. Each
of such Subsidiaries is duly formed and validly existing and in good standing
under the laws of the jurisdiction of its organization. Each such Subsidiary has
all necessary power and authority under its organizational documents to own its
properties and to carry on its business as now conducted and is duly qualified
to do business in all jurisdictions in which the character or the location of
the assets owned or leased by it or the nature of the business conducted by it
requires qualification, except where the failure to be so qualified would not
have a material adverse effect on the Homebuilding Business. Except for such
Subsidiaries or as set forth on Schedule 2.3, neither the Holding LLCs, Mather
nor Desert Inn own any Equity Securities of any Person.
2.4 PARENT PARTNERSHIPS.
Each of the Parent Partnerships is a duly formed and validly
existing general partnership in good standing under the laws of the state of its
organization. As of the Closing Date, each of the Parent Partnerships shall be
treated by the Partnership Sellers as a disregarded entity for purposes of
federal, state and local Taxes. Each Parent Partnership has all necessary power
and authority under its partnership agreement to own its property and to carry
on its business as now conducted and is duly qualified to do business in all
jurisdictions in which the character or the location of the assets owned or
leased by it or the nature of its business requires qualification, except where
the failure to be so qualified would not have a material adverse effect on the
Homebuilding Business. The Partnership Sellers and the Holding LLCs own all the
outstanding partnership interests in the Parent Partnerships. There are no
outstanding Contracts or other rights to subscribe for or purchase, or Contracts
or other obligations to issue or grant any rights to acquire, any interest in
the Parent Partnerships, or to restructure or recapitalize the Parent
Partnerships. There are no outstanding Contracts of Sellers, the Corporations,
the Holding LLCs or the Parent Partnerships to repurchase, redeem or otherwise
acquire any interest in the Parent Partnerships. All Partnership Interests were
issued in conformity with all applicable Laws. Schedule 2.4 lists all
Subsidiaries of the Parent Partnerships and correctly sets forth the Parent
Partnership's ownership interest and profit or loss allocation (and any special
allocations with priority over the Parent Partnership's profit or loss
allocation) therein, any other interest of any other Person in such Subsidiary
and the jurisdiction in which each such Subsidiary was organized. Except as set
forth on Schedule 2.4, all of the Equity Securities, partnership interests,
membership interests, or other interests owned by a Parent Partnership in any
such Subsidiary are validly issued and outstanding, fully paid and
nonassessable, were issued in conformity with applicable Laws and without
violation of, and are free of, any preemptive rights, and are owned by such
Parent Partnership free and clear of any and all covenants, conditions, or other
Encumbrances. Each of such Subsidiaries is duly formed and validly existing
under the laws of the jurisdiction of its organization. Each such Subsidiary has
all necessary power and authority under its organizational documents to own its
properties and to carry on its business as now conducted and is duly qualified
to do business in all jurisdictions in which the character or the location of
the assets owned or leased by it or the nature of the business conducted by it
requires qualification, except where the failure to be so qualified would not
have a material adverse effect
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on the Homebuilding Business. Except for such Subsidiaries or as set forth on
Schedule 2.4, the Parent Partnerships own no Equity Securities of any Person.
None of the Holding LLCs have any assets or liabilities of any nature
whatsoever, other than a Partnership Interest in one of the Parent Partnerships
and $100 in cash. Each of the Holding LLCs was formed solely for the purpose of
holding such Partnership Interest and has conducted no other business activities
whatsoever.
2.5 FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.
(a) Audited Financial Statements. Sellers have delivered to
Buyer combined balance sheets for the Lewis Homes group of companies at December
31, 1997 (the "Audited Balance Sheet Date") and 1996 and the related combined
statements of operations, equity and cash flows for the years ended December 31,
1997 and 1996. Such balance sheets and statements of operations, equity and cash
flows have been examined by the Auditors whose audit report thereon is included
with such statements. All such financial statements have been prepared in
conformity with GAAP applied on a consistent basis (except for changes, if any,
required by GAAP and disclosed therein) and present fairly, in all material
respects, the combined financial position of the Lewis Homes group of companies
at December 31, 1997 and 1996 and the combined results of their operations and
cash flows for the years then ended. Sellers have also delivered to Buyer
combined Line of Business Operations/Selected Financial Information for the
Homebuilding Business at and for the year ended December 31, 1997. Such combined
Line of Business Operations/Selected Financial Information has been subjected to
the auditing procedures applied in the audit by Auditors of the audited combined
financial statements referred to above, except as noted , and exclude the
Excluded Assets (other than the properties identified on Exhibit A as Sierra
Lakes and Fontana (Zee) property) and Excluded Liabilities and include the
Included Assets and Included Liabilities.
(b) Interim Financial Statements Sellers have delivered to
Buyer a combined balance sheet of the Homebuilding Business at June 30, 1998 and
a related combined income statement for the six months ended June 30, 1998. Such
financial statements have been prepared in conformity with GAAP on a basis
consistent with the audited financial statements referred to in Section 7.2(g)
(except for changes, if any, required by GAAP, the lack of notes thereto and the
exclusion of the Excluded Assets (other than the properties identified on
Exhibit A as Sierra Lakes and Fontana (Zee) property) and Excluded Liabilities
and the inclusion of the Included Assets and Included Liabilities) and present
fairly, in all material respects, the combined financial position of the
Homebuilding Business of the Homebuilding Entities at June 30, 1998 and the
combined results of operations for the six months ended June 30, 1998.
(c) No Material Adverse Changes. Except as set forth in
Schedule 2.5, since June 30, 1998, the Homebuilding Entities have conducted the
Homebuilding Business in the ordinary course of business consistent with past
practices (except for the exclusion of Excluded Assets and Excluded Liabilities
and the inclusion of the Included Assets and Included Liabilities) and, whether
or not in the ordinary course of the Homebuilding Business, there has not been,
occurred or arisen:
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(i) any change in or event affecting the Homebuilding
Business that has had or is reasonably expected to have a material adverse
effect on the Homebuilding Business,
(ii) any agreement, condition, action or omission
which would be proscribed by (or require consent under) subsections (e), (f),
(g), (h), (i), (j), (k), (p), (q), (t), (u) or (v) (solely as it relates to
subsections (e), (f), (g), (h), (i), (j), (k), (p), (q), (t) and (u)) of Section
5.3 had it existed, occurred or arisen after the date of this Agreement,
(iii) any strike or other labor dispute, or
(iv) any casualty, loss, damage or destruction
(whether or not covered by insurance) of any property of the Homebuilding
Entities that constitutes a material adverse change and that has involved or may
involve a loss to any of the Homebuilding Entities in excess of applicable
insurance coverage.
(d) No Other Liabilities or Contingencies. None of the
Homebuilding Entities has any material liabilities of any nature, whether
accrued, absolute, contingent, known, unknown, or otherwise, except liabilities
that (i) are reflected or disclosed in the most recent of the financial
statements referred to in subsection (b) above, (ii) were incurred after June
30, 1998 in the ordinary course of business, or (iii) are set forth in Schedule
2.5 hereto.
(e) Reserves. At December 31, 1997, the reserves for
construction defects and litigation, but not including any warranty reserves,
aggregated $5.5 million and on the Closing Date will be no less than $2.7
million.
2.6 TAX AND OTHER RETURNS AND REPORTS.
The Homebuilding Entities have timely filed (taking into
account any extensions) all required Tax Returns required to be filed by them
before the date hereof and have paid all Taxes shown on such Tax Returns to be
due. The Homebuilding Entities shall timely file (taking into account any
applicable extensions) all Tax Returns that are required to be filed by them on
or after the date hereof and before the Closing Date and shall pay all Taxes
shown on any such Tax Return to be due. All Tax Returns referred to above in
this section were or shall be complete and correct in all material respects.
Adequate provision has been made in the books and records of the Homebuilding
Entities and in the financial statements referred to in Section 2.5 above, for
all Taxes required to be paid or withheld for the periods covered by such
financial statements, whether or not disputed and whether or not due and
payable. Except as listed on Schedule 2.6, there is no audit, examination or
similar proceeding pending or, to Sellers' knowledge, threatened, or claim or
assessment of deficiency pending or, to the Sellers' knowledge, threatened, with
respect to any Tax Return of the Homebuilding Entities, and there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any such Tax Return. None of the Sellers is a "foreign person"
within the meaning of Section 1445(b)(2) of the Code. Each of Management Corp.
and Branching Tree is, and has for all taxable periods beginning on and after
its incorporation, qualified to be, and with all required consents of its
shareholders has validly elected to be, taxed as an "S corporation" under the
Code
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and analogous state tax law. Such elections have never been terminated or
revoked, are currently in effect, and will be in effect through such time as
they terminate as a result of the Closing. Since such elections, neither
Management Corp. nor Branching Tree has acquired assets with a carryover basis
from a C corporation under the Code. Each Seller that is a corporation and every
Corporation is an "S corporation" under the Code. The Homebuilding Entities have
no liability for any Taxes of any person or entity other than themselves under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local,
territorial, or foreign law), as transferee or successor, or by contract or
otherwise. Except as set forth in Schedule 2.6, none of the Homebuilding
Entities is a party to any agreement, contract, arrangement, or plan that has
resulted or would result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the Code.
2.7 MATERIAL CONTRACTS.
Schedule 2.7 lists each Contract to which any Homebuilding
Entity is a party or to which any Homebuilding Entity or any of their respective
properties or any of the Former Partnership Properties is subject or by which
any of the foregoing is bound that is deemed a Material Contract under this
Agreement. Each Contract that (a) after June 30, 1998, obligates any
Homebuilding Entity to pay an amount of $500,000 or more or obligates the owners
of Former Partnership Properties to pay such amount with respect to any Former
Partnership Property, (b) represents a Contract upon which the Homebuilding
Business is substantially dependent, (c) provides for an extension, assumption,
or guarantee of credit to or by a Homebuilding Entity or secured by a Former
Partnership Property in an amount of $500,000 or more, (d) limits or restricts
the ability of any Homebuilding Entity to compete or otherwise to conduct its
business in any manner or place, (e) provides for a guaranty or indemnity by any
Homebuilding Entity or encumbering any Former Partnership Property, (f) grants a
power of attorney, agency or similar authority to another person or entity, (g)
contains a right of first refusal, (h) contains a right or obligation of any
Affiliate, officer or director or any Associate of any Homebuilding Entity with
respect to any Homebuilding Entity or Former Partnership Property that cannot be
terminated by Buyer within 30 days after the Closing without penalty or payment,
(i) requires any Homebuilding Entity to buy or sell goods or services, or
requires the sale of any Former Partnership Property, with respect to which
there will be material losses or will be costs and expenses materially in excess
of expected receipts (other than as provided for or otherwise reserved against
on the most recent of the balance sheet referred to in Section 2.5), (j)
provides for the acquisition or disposition of real property in an amount of
$500,000 or more, (k) provides for a joint venture, partnership, or other profit
or loss sharing arrangement, or (l) is a development, entitlement, or similar
agreement with any Governmental Entity, shall be deemed to be a Material
Contract and has been identified on such Schedule 2.7. True copies of the
agreements appearing on Schedule 2.7, including all amendments and supplements,
have been made available to Buyer. Each Material Contract is valid and
enforceable; each Homebuilding Entity, as applicable, has duly performed all its
obligations thereunder to the extent that such obligations to perform have
accrued; and no breach or default, alleged breach or default, or event which
would (with the passage of time, notice or both) constitute a breach or default
thereunder by any Homebuilding Entity, or encumber the Former Partnership
Property, or, to the knowledge of Sellers, any other party or obligor with
respect thereto, has occurred or, except as set forth in
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Schedule 2.7, as a result of this Agreement or the consummation of the
transactions contemplated hereby will occur. Except as set forth in Schedule
2.7, consummation of the transactions contemplated by this Agreement will not
(and will not give any person a right to) terminate or modify any rights or
accelerate or augment any obligation of any Homebuilding Entity or with respect
to any Former Partnership Property. The parties agree that special assessment
districts need not be listed on Schedule 2.7.
2.8 REAL AND PERSONAL PROPERTY; TITLE TO PROPERTY; LEASES.
(a) The Homebuilding Entities have good and marketable title
to, a valid leasehold interest in, or other right to use, all properties and
assets material to the conduct of the Homebuilding Business as reflected in the
balance sheet as of June 30, 1998 referred to in Section 2.5(b) or acquired
since that date, except for the Former Partnership Properties, which have been
disposed of since that date, and except for other properties and assets in an
aggregate amount that would not constitute a material adverse change in the
Homebuilding Business that were disposed of since such date in the ordinary
course of business consistent with past practice. Except as set forth on
Schedule 2.8(a), the Homebuilding Entities hold all such title, interest, or
right free and clear of Encumbrances other than (i) liens securing taxes,
assessments, or payments not yet due, (ii) such imperfections or irregularities
in title, easements, or other liens as are not substantial in character, amount
or extent and do not interfere with the Homebuilding Entity's or Subsidiary's
current use of the property subject thereto or affected thereby or the
development of such property in accordance with current entitlement,
development, or similar agreements with Governmental Entities, and (iii) other
matters which, individually or in the aggregate, do not and would not have a
material adverse effect with respect to the Homebuilding Entities. The
Homebuilding Entities have obtained title insurance policies covering the Former
Partnership Properties and other real property owned by a Homebuilding Entity
with, in either case, an initial purchase price in excess of $1 million. All of
such tangible properties and assets are in good operating condition and repair
(ordinary wear and tear excepted and subject to normal scheduled maintenance).
Schedule 2.8(a) lists all of the real property owned or leased by any
Homebuilding Entity and with respect to leased property sets forth the lessor,
lease term (including any renewal rights), and lease payment amounts and
schedule. All leased real property held by any Homebuilding Entity, as lessee or
sublessee, as the case may be, under a lease providing for annual lease payments
exceeding $25,000 are held under valid, binding and enforceable leases or
subleases, and none of the Homebuilding Entities are in default thereunder. To
the knowledge of Sellers, there is no pending or threatened Action that would
materially interfere with the quiet enjoyment of any such leased real property
by any Homebuilding Entity.
(b) Except as set forth on Schedule 2.8(b), to the knowledge
of Sellers, (i) there are no endangered species or protected natural habitat,
flora or fauna located on any of the real property owned or leased by any
Homebuilding Entity constituting part of the Homebuilding Business or on the
Former Partnership Properties and no such real property is designated as
wetlands, (ii) none of such real property is located within a 100-year flood
plain as designated by any United States Governmental Entity or is subject to
seismic safety problems that prevent residential development thereon, (iii) none
of the Homebuilding Entities has received any notice of any condemnation or
eminent domain proceedings with respect to any of such real property, or
negotiations for the purchase of any such real property in lieu of condemnation,
and (iv) there are
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no moratoriums (including utility moratoriums) by Governmental Entities
responsible for issuing approvals or according other entitlements with respect
to any such real property.
(c) Schedule 2.8(c) sets forth: (i) a true and complete list
of all those matters for which a file was opened by Management Corp.'s Legal
Department (which employs all the in-house lawyers serving the Homebuilding
Entities) on behalf of a Homebuilding Entity on or after January 1, 1997,
relating to a claim or complaint by the purchaser (a "Lewis Homeowner") of a
residence (a "Lewis Home") developed or constructed by a Homebuilding Entity
with respect to his/her Lewis Home; (ii) the aggregate net customer service
expenditures (excluding any overhead allocation) of the Homebuilding Entities
for 1996, 1997, and January 1 through August 31, 1998 (whether or not such
customer service expenditures related to requests for customer service from
Lewis Homeowners during the Homebuilding Entities' formal one-year warranty
period) by tract; (iii) a true and complete list of all home repurchases by any
of the Homebuilding Entities which closed escrow between January 1, 1997 and
September 30, 1998; and (iv) the number of customer service requests by tract
with respect to any Lewis Home which were open and not resolved as of September
30, 1998. Except as set forth on Schedule 2.8(c), to the knowledge of Sellers,
there are no warranty claims exceeding $12,000 per individual house pending or
settled or which resulted in home purchases since January 1, 1997 against any
Homebuilding Entity.
2.9 INTANGIBLE PROPERTY.
Schedule 2.9 lists all Marks and other items of Intangible
Property in which any Homebuilding Entity has an interest, other than Marks or
Intangible Property the loss of which would not have a material adverse effect
on the Homebuilding Entities, and the nature of such interest. Schedule 2.9 also
lists all Permits or other rights with respect to any of the foregoing. The
Homebuilding Entities have the rights to and ownership of all Intangible
Property required for use in connection with the Homebuilding Business, the
absence of which would have a material adverse effect on the Homebuilding
Business. Without limiting the foregoing, Branching Tree owns the exclusive
right to the distinctive tree symbol used in the Homebuilding Business. Except
as set forth in Schedule 2.9, none of the Homebuilding Entities use any
Intangible Property by consent of any other person or are required to and do
make any payments to others with respect thereto. The Homebuilding Entities have
in all material respects performed all obligations required to be performed by
them, and none of such entities is in default in any material respect under any
Contract relating to any of the foregoing. Except as set forth in Schedule 2.9,
none of the Homebuilding Entities has received any notice to the effect that the
Intangible Property or any use by any Homebuilding Entity of any such property
conflicts with or allegedly conflicts with or infringes the rights of any
Person, and, to the knowledge of Sellers, no other person is infringing upon the
rights of any of the Homebuilding Entities with respect to any Marks or other
Intangible Property.
2.10 NO CONFLICTS.
Except as set forth on Schedule 2.10, the execution, delivery
and performance of this Agreement by Sellers and the Corporations and the
performance by Sellers and the Corporations of any of the transactions
contemplated hereby will not violate, or constitute a
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breach or default (whether upon lapse of time or notice or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
under, the charter, partnership, or other operating documents of any
Homebuilding Entity or any Material Contract of any of such entities, result in
the imposition of any Encumbrance against any material asset or material
properties of any Homebuilding Entity or against the Former Partnership
Properties, or violate any Law (assuming that the appropriate governmental
approvals are received as contemplated by Section 7.1(b)), except for such
violations, breaches, defaults, terminations, cancellations, accelerations, or
impositions that would not have a material adverse effect on the Homebuilding
Business. Except as set forth in Schedule 2.10, the execution and delivery of
this Agreement by Sellers and the Corporations and the performance of this
Agreement by Sellers and the Corporations will not require a filing or
registration with, or the issuance of any Permit or Approval by, any other third
party or Governmental Entity.
2.11 LEGAL PROCEEDINGS AND CERTAIN LABOR MATTERS.
Except as set forth in Schedule 2.11, there is no Order or
Action pending, or, to the knowledge of Sellers, threatened, against or
affecting any Homebuilding Entity or any of their respective properties or
assets or the Former Partnership Properties that individually or when aggregated
with one or more other Orders or Actions has or is reasonably expected to have a
material adverse effect on the Homebuilding Entities or the Former Partnership
Properties or on Sellers' or the Corporations' ability to perform this
Agreement. Schedule 2.l1 sets forth all Orders or Actions pending or, to the
knowledge of Sellers, threatened against or affecting any Homebuilding Entity or
any of their respective properties or assets or the Former Partnership
Properties involving a claim for more than $100,000 or seeking or imposing
injunctive or other equitable relief against any Homebuilding Entity. Except as
set forth in Schedule 2.11, (i) each Homebuilding Entity and each Former
Partnership Property is in compliance in all material respects with the terms
and requirements of each Order listed on Schedule 2.11, which it, or any of the
assets owned or used by it, is or has been subject and (ii) to Sellers'
knowledge, no Homebuilding Entity has received any notice or other communication
(whether oral or written) from any Governmental Entity or any other person
regarding any actual, alleged, possible, or potential violation of, or failure
to comply with, any term or requirement of any Order listed on Schedule 2.11,
except for any such violation that, individually or in the aggregate, will not
or could not reasonably be expected to result in a material adverse change to
the Homebuilding Entities. Except as set forth in Schedule 2.11, there is no
organized labor strike, dispute, slowdown or stoppage, or collective bargaining
or unfair labor practice claim pending or, to the knowledge of Sellers,
threatened against or affecting any Homebuilding Entity, the Homebuilding
Business or the Former Partnership Properties. To Sellers' knowledge, none of
the Homebuilding Entities nor any of their respective officers, directors,
partners, employees or agents has given or made or agreed to give or make any
illegal commissions, payment, gratuity, gift, political contribution or similar
benefit to any governmental employee who is in a position to help or hinder the
business of the Homebuilding Entities.
2.12 MINUTE BOOKS.
The minute books and similar records of organizational
proceedings of each of the Homebuilding Entities, to the extent required,
accurately reflect all actions and proceedings taken
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to date by the shareholders, board of directors and committees, partners, or
members (to the extent that any consent of partners or members as a class has
been required) of the Homebuilding Entities, and such minute books and similar
records contain true and complete copies of the charter documents, partnership
agreements, or operating agreement, as applicable, of the Homebuilding Entities,
and all related amendments. The stock, partnership interest, or membership
interest record books of each of the Homebuilding Entities reflect accurately
all transactions in its capital stock, partnership interests, or membership
interests of all classes.
2.13 ACCOUNTING RECORDS.
The Homebuilding Entities have records that accurately and
validly reflect their respective transactions, and accounting controls
sufficient to insure that such transactions are (i) executed in accordance with
management's general or specific authorization and (ii) recorded in conformity
with GAAP so as to maintain accountability for assets.
2.14 INSURANCE.
Schedule 2.14 lists all insurance policies and bonds held by
the Homebuilding Entities as of September 30, 1998. None of the Homebuilding
Entities is in default under any policy or bond. None of the Homebuilding
Entities has received any notice from any insurer or agent of any intent to
cancel or not to renew any insurance policy.
2.15 PERMITS.
The Homebuilding Entities hold all Permits that are required
by any Governmental Entity to permit each of them to conduct their respective
Homebuilding Businesses as now conducted, and the Homebuilding Entities are in
compliance with such Permits, except (i) where the failure to hold or be in
compliance with such Permits would not, individually or in the aggregate, have a
material adverse effect on the Homebuilding Entities, and (ii) for Permits and
entitlements for the development of real property which is not yet developed or
Permits not yet required in the development process of real property, and all
such Permits are valid and in full force and effect. To the knowledge of
Sellers, no suspension, cancellation or termination of any of such Permits is
threatened or imminent and no event has occurred that has resulted or would
reasonably be expected to result (with the passage of time, or notice, or both)
in a suspension, cancellation or termination of any such Permit.
2.16 EMPLOYEE BENEFITS.
(a) Employee Benefit Plans, Collective Bargaining and Employee
Agreements, and Similar Arrangements.
(i) Schedule 2.16 lists all employee benefit plans
and collective bargaining, employment or severance agreements or other
similar arrangements to which any Homebuilding Entity is a party or by
which any of them is bound, including, without limitation, (a) any
profit-sharing, deferred compensation, bonus (including any
change-of-control, continuance or stay bonus), stock option, stock
purchase, phantom stock, restricted stock, pension, retainer,
consulting, retirement severance, termination, welfare
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or incentive plan, agreement or arrangement, (b) any plan, agreement or
arrangement providing for "fringe benefits" or perquisites to
employees, officers, directors or agents, including but not limited to
benefits relating to automobiles, clubs, vacation, child care,
parenting, sabbatical, sick leave, medical, dental, hospitalization,
life insurance and other types of insurance, (c) any employment
agreement, or (d) any other "employee benefit plan" (within the meaning
of Section 3(3) or ERISA).
(ii) Sellers have made available to Buyer true and
complete copies of all documents and summary plan descriptions with
respect to such plans, agreements and arrangements, or summary
descriptions of any such plans, agreements or arrangements not
otherwise in writing.
(iii) The Homebuilding Entities are in full
compliance with the applicable provisions of ERISA (as amended through
the date of this Agreement), the regulations and published authorities
thereunder, and all other Laws applicable with respect to all such
employee benefit plans, agreements and arrangements, except where the
failure to be in compliance would not have a material adverse effect on
the Homebuilding Entities. The Homebuilding Entities have performed all
of their obligations under all such plans, agreements and arrangements.
There are no Actions (other than routine claims for benefits) pending
or threatened against such plans or their assets, or arising out of
such plans, agreements or arrangements, and, to the knowledge of
Sellers, no facts exist which could give rise to any such Actions.
(iv) Except as set forth in Schedule 2.16, each of
the plans, agreements or arrangements can be terminated by the
Homebuilding Entities within a period of 30 days following the Closing
Date, without payment of any additional compensation or amount or the
additional vesting or acceleration of any such benefits.
(v) Sellers shall pay or reimburse Buyer, upon
request, for (A) any severance payments made by Buyer or any
Homebuilding Entity within the first 12 months after the Closing Date
to Leon C. Swails pursuant to that certain Employment Agreement dated
as of February 27, 1995, as amended February 27, 1998 and December __,
1998, and (B) any "Deferred Salary" and "Special Bonus" under Section 3
of that agreement if Mr. Swails' employment is terminated in the first
12 months of the Closing Date as if Mr. Swails' employment was
terminated as of the Closing Date.
(b) Qualified Plans. None of the Homebuilding Entities have a
stock bonus, pension or profit-sharing plan within the meaning of Section 401
(a) of the Code.
(c) Health Plans. All group health plans of the Homebuilding
Entities have been operated in substantial compliance with the group health plan
continuation coverage requirements of Section 162(k) and Section 4980B of the
Code to the extent such requirements are applicable.
(d) Fines and Penalties. There has been no act or omission by
any Homebuilding Entity or any ERISA Affiliate that has given rise to or may
give rise to fines,
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penalties, taxes, or related charges under Section 502(c) or (k) or Section 4071
of ERISA or Chapter 43 of the Code.
(e) Other Plans. None of the Homebuilding Entities have an
employee pension benefit plan, a multi-employer plan (as defined in Section
3(37) of ERISA) or a voluntary employees' beneficiary association as defined in
Section 501(c) of the Code.
2.17 CERTAIN INTERESTS.
Except as set forth in Schedule 2.17, no Affiliate of any
Seller, Corporation or Homebuilding Entity nor any officer, director, or partner
of any thereof, nor Associate of any such individual, has any material interest
in any property or other asset used in or pertaining to the Homebuilding
Business or the Former Partnership Properties. Except as set forth in Schedule
2.17, the consummation of the transactions contemplated by this Agreement will
not (either alone, or upon the occurrence of any act or event, or with the lapse
of time, or both) result in any benefit or payment (severance or other) arising
or becoming due from any Homebuilding Entity or the successor or assign of any
thereof to, or burdening the Former Partnership Properties for the benefit of,
any Person.
2.18 BANK ACCOUNTS, POWERS, ETC.
Schedule 2.18 lists each bank, trust company, savings
institution, brokerage firm, mutual fund or other financial institution with
which any Homebuilding Entity has an account or safe deposit box and the names
and identification of all Persons authorized to draw thereon or to have access
thereto, and lists the names of each Person holding powers of attorney or agency
authority from any Homebuilding Entity.
2.19 NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker,
or other Person or firm engaged by or acting on behalf of Sellers, the
Corporations or any Homebuilding Entity or any of their respective Affiliates in
connection with the negotiation, execution or performance of this Agreement or
the transactions contemplated by this Agreement, is or will be entitled to any
brokerage or finder's or similar fee or other commission as a result of this
Agreement or such transactions, except Salomon Smith Barney, Inc. as to which
Sellers and the Corporations shall have full responsibility and neither Buyer
nor any Homebuilding Entity shall have any liability.
2.20 ENVIRONMENTAL COMPLIANCE.
Except as set forth in Schedule 2.20, (i) none of the
Homebuilding Entities has generated, used, transported, treated, stored,
released or disposed of, nor has suffered or permitted anyone else to generate,
use, transport, treat, store, release or dispose of any Hazardous Substance in
violation of any Laws, nor is in violation of or liable under any Laws relating
to environmental protection and compliance; (ii) there has not been any
generation, use, transportation, treatment, storage, release or disposal of any
Hazardous Substance in connection with the conduct of the Homebuilding Business
or on or in connection with the use of any property or facility of any
Homebuilding Entity or the Former Partnership Properties or, to the
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knowledge of Sellers, any nearby or adjacent properties or facilities, which has
created or might reasonably be expected to create any liability under any Laws
or which would require reporting to or notification of any Governmental Entity;
(iii) no asbestos or polychlorinated biphenyl or underground storage tank is
contained in or located at any facility of any Homebuilding Entity or Former
Partnership Properties; and (iv) any Hazardous Substance handled or dealt with
in any way in connection with the Former Partnership Properties or the
businesses of any Homebuilding Entity has been and is being handled or dealt
with in all respects in compliance with applicable Laws, in each case of clauses
(i) through (iv) except where such action would not have a material adverse
effect on the Homebuilding Business. Sellers have made available to Buyer true
and complete copies of all reports, studies, analyses, tests, or monitoring
prepared or made by or on behalf of Sellers, the Corporations or the
Homebuilding Entities pertaining to Hazardous Materials in, on, or under
property (including the Former Partnership Properties) now or previously owned
or operated by any Homebuilding Entity, including without limitation any Phase I
or Phase II assessments referred to in Schedule 2.20 of Sellers' Disclosure
Schedule. With respect to properties that are the subject of any such Phase I or
Phase II assessments, Sellers have no knowledge of facts or circumstances
inconsistent with the assessments therein.
2.21 CERTAIN INDEBTEDNESS.
Sellers have provided to Buyer true and complete copies of
those certain loan agreements, each dated November 30, 1998 (the "Wells Fargo
Loans"), between Wells Fargo Bank N.A. and LHN, LHE, Lewis Development and Lewis
Properties, together with all related guarantees, security and pledge
agreements, subordinated loan agreements, and other agreements, documents, and
instruments delivered in connection with entering into such loan agreements and
borrowing thereunder. The Homebuilding Entities' aggregate principal
indebtedness under the Wells Fargo Loans is $240 million as of the date of this
Agreement, and, without limiting anything in Section 5.3 hereof, shall not
increase on or prior to the Closing Date other than through the ordinary accrual
of interest at the non-default rate in accordance with the terms of such loan
agreements. No assets of the Homebuilding Entities, nor Former Partnership
Properties, and no Included Assets have been pledged as collateral for the Wells
Fargo Loans or in any other way serve as security for or are subject to the
Wells Fargo Loans. The Wells Fargo Loans may be prepaid at any time, and may be
prepaid concurrently with the Closing, without penalty or fee of any kind under
such loan agreements. Without limiting Section 10.14, all fees and expenses
incurred or to be incurred by any Homebuilding Entity in connection with the
Wells Fargo Loans, including any and all facility fees, loan fees, underwriting
fees, and fees and expenses of counsel, will be paid by Sellers or the
Corporations or reimbursed by them to the Homebuilding Entities, except to the
extent that such fees arise from events after the Closing Date if Buyer elects
to assume the Wells Fargo Loans.
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ARTICLE III
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as otherwise indicated on the Sellers' Disclosure
Schedule as applying to a particular Section of this Article III, each Seller
individually represents, warrants and agrees as set forth in Sections 3.1 and
3.2 and each Corporation individually represents, warrants and agrees as set
forth in Section 3.3:
3.1 OWNERSHIP BY SELLERS; NO CONFLICTS.
(a) Seller owns the number of shares of Stock, the Member
Interests or the Partnership Interests, as the case may be, set forth opposite
his, her or its name on Exhibit B hereto.
(b) Seller has good and marketable title to, and sole record
and beneficial ownership of, the shares of the Stock, the Member Interests or
the Partnership Interests, as the case may be, which are to be transferred to
Buyer by Seller pursuant hereto, free and clear of any and all covenants,
conditions, marital property rights, or other Encumbrances.
(c) If Seller is a entity, it has been duly incorporated or
formed and is validly existing in good standing under the laws of its state of
incorporation or formation. Whether an individual or an entity, Seller has the
right, power and authority to enter into this Agreement and any ancillary
agreements hereto, to transfer, convey and sell to Buyer at the Closing the
Stock, the Member Interests or the Partnership Interests, as the case may be, to
be sold to Buyer by such Seller, and otherwise to perform its obligations under
this Agreement and any ancillary agreements. Upon consummation of the Closing,
Buyer will acquire from such Seller legal and beneficial ownership of, and all
right to vote and other rights (including the right to admission as a partner or
member of the pertinent partnership or limited liability company) inhering in
the Stock, the Member Interests or the Partnership Interests, as the case may
be, to be sold to Buyer by such Seller, free and clear of all covenants,
conditions, marital property rights, or other Encumbrances.
(d) Seller is not a party to, subject to or bound by any Law
or Order, and no Action is pending against Seller or any Homebuilding Entity or,
to such Seller's knowledge, threatened, that would prevent the execution,
delivery or performance of this Agreement by Seller or the transfer, conveyance
and sale of the Stock, Member Interests, or Partnership Interests, as the case
may be, to be sold by Seller to Buyer pursuant to the terms hereof.
(e) This Agreement has been duly authorized by all necessary
corporate, partnership, or limited liability company action on the part of
Seller, if Seller is a corporation, partnership or limited liability company,
has been executed and delivered by Seller and is a valid and binding obligation
of Seller, enforceable against Seller in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws limiting creditors' rights generally and equitable principles.
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(f) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby by Seller violates or
will violate or results or will result in a breach of any of the terms and
provisions of, or constitutes or will constitute a default under, or results or
will result in any augmentation or acceleration of rights, benefits or
obligations of any party under, any Contract to which Seller is a party or is
bound or which applies to the Stock, Member Interests, or Partnership Interests
being sold, or any Order applicable to Seller or to the Stock, Member Interests,
or Partnership Interests being sold.
(g) If and to the extent required, Seller hereby consents to
the execution, delivery, and performance of this Agreement by each other Seller
and consents to the admission of Buyer as a stockholder, partner, or member of
each Homebuilding Entity, as applicable.
3.2 SECURITIES ACT MATTERS.
(a) Seller will acquire the shares of Buyer Common Stock
comprising the stock portion of the Purchase Price for investment for Seller's
own accounts and not with a view to or for offer or sale in connection with any
distribution thereof. Seller understands that the shares of Buyer Common Stock
delivered pursuant to this Agreement will not have been registered under the
Securities Act of 1933, as amended (the "Securities Act") or any applicable
state securities laws by reason of a specific exemption or exception from the
registration requirements thereof which depend upon, among other things, the
accuracy of Seller's representations and warranties in this Section. Seller
understands that, until such time as a registration statement covering the
resale of such shares of Buyer Common Stock is effective under the Securities
Act, or such shares may otherwise be freely traded by Seller without
registration under the Securities Act, each stock certificate evidencing such
shares may bear a legend substantially to the effect that the shares represented
by such certificate have not been registered under the Securities Act or any
applicable state securities laws and may be offered and sold only if so
registered or upon delivery to Buyer of an opinion of counsel that an exemption
or exception from such registration is applicable.
(b) Seller acknowledges receipt, either directly or through
the Representative, of all information requested from Buyer and considered by
Seller to be necessary or appropriate for deciding whether to acquire the shares
of Buyer Common Stock to be delivered pursuant to this Agreement, including,
without limitation, the Buyer SEC Reports referred to in Section 4.9. Seller is
an "accredited investor" within the meaning of Rule 501(a) under the Securities
Act or has such knowledge and experience in financial and business matters that
Seller is capable of evaluating the merits and risks of, and Seller is able to
bear the economic risk of, acquiring such shares of Buyer Common Stock. Seller
has had the opportunity to ask questions and receive answers regarding the terms
and conditions of the acquisition of Buyer Common Stock pursuant to this
Agreement.
(c) Seller does not currently own, beneficially or of record,
any shares of Buyer Common Stock.
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3.3 AUTHORITY OF CORPORATIONS; NO CONFLICTS.
(a) The Corporation has been duly incorporated and is validly
existing in good standing under the laws of its state of incorporation. The
Corporation has the right, power and authority to enter into this Agreement and
any ancillary agreements hereto and perform its obligations under this Agreement
and any ancillary agreements hereto.
(b) The Corporation is not a party to, subject to or bound by
any Law or Order, and no Action is pending against the Corporation or, to such
Corporation's knowledge, threatened, that would prevent the execution, delivery
or performance of this Agreement by the Corporation.
(c) This Agreement has been duly authorized by all necessary
corporate action on the part of the Corporation, has been executed and delivered
by the Corporation and is a valid and binding obligation of the Corporation,
enforceable against the Corporation in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws limiting creditors' rights generally and equitable principles.
(d) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, by the Corporation
violates or will violate or results or will result in a breach of any of the
terms and provisions of, or constitutes or will constitute a default under, or
results or will result in any augmentation or acceleration of rights, benefits
or obligations of any party under, any Contract to which the Corporation is a
party or is bound or which applies to the Stock, Member Interests, or
Partnership Interests being sold, or any Order applicable to the Corporation or
to the Stock, Member Interests, or Partnership Interests being sold.
(e) The Corporation does not currently own, beneficially or of
record, any shares of Buyer Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as otherwise indicated on the Buyer's Disclosure
Schedule as applying to a particular Section in this Article IV, Buyer
represents, warrants and agrees as follows:
4.1 ORGANIZATION AND RELATED MATTERS.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Buyer has all necessary
corporate power and authority to carry on its business as now being conducted.
Buyer has the necessary corporate power and authority to execute, deliver and
perform this Agreement.
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4.2 AUTHORIZATION.
The execution, delivery and performance of this Agreement by
Buyer have been duly and validly authorized by the Board of Directors of Buyer
and by all other necessary corporate action on the part of Buyer. This Agreement
has been duly executed and delivered by Buyer and constitutes the legal, valid
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms except as may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or limiting creditors' rights
generally and equitable principles.
4.3 NO CONFLICTS.
The execution, delivery and performance of this Agreement by
Buyer will not violate the provisions of, or constitute a breach or default
(whether upon lapse of time and/or the occurrence of any act or event or
otherwise) under (a) the certificate of incorporation or bylaws of Buyer, (b)
any Law or Order to which Buyer is subject or (c) any Contract to which Buyer is
a party that is material to the financial condition, results of operations or
conduct of the business of Buyer, provided (as to clauses (b) and (c)
respectively) that the appropriate regulatory approvals set forth on Schedule
4.3 are received as contemplated by Section 7. 1 (b). Except as set forth in
Schedule 4.3, the execution and delivery of this Agreement by Buyer and the
performance of this Agreement by Buyer will not require a filing or registration
with, or the issuance of any Permit or Approval by, any other third party or
Governmental Entity.
4.4 NO BROKERS OR FINDERS.
No agent, broker, finder or investment or commercial banker,
or other Person or firms engaged by or acting on behalf of Buyer or its
Affiliates in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is or will be
entitled to any broker's or finder's or similar fees or other commissions as a
result of this Agreement or such transactions, except Warburg Dillon Read LLC,
as to which Buyer shall have full responsibility and none of the Sellers or the
Homebuilding Entities shall have any liability.
4.5 LEGAL PROCEEDINGS.
Except as set forth in Schedule 4.5, there is no Order or
Action pending or to the knowledge of Buyer, threatened against or affecting
Buyer that individually or when aggregated with one or more other Actions has or
might reasonably be expected to have a material adverse effect on Buyer's
ability to perform this Agreement.
4.6 INVESTMENT REPRESENTATION.
Buyer is acquiring the Stock and Partnership Interests from
Sellers for Buyer's own accounts for investment purposes only and not with a
view to or for sale in connection with the public distribution thereof. Buyer is
knowledgeable and experienced in the purchase of businesses and securities of
the type contemplated by this Agreement and has the capacity to protect its own
interest in connection with the transactions contemplated hereby. Buyer
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acknowledges that neither the Shares nor the Partnership Interests have been
registered under the Securities Act of 1933, as amended, or qualified under any
state securities or blue sky laws.
4.7 FINANCING.
The Buyer has available sufficient funds to enable it to
consummate the transactions contemplated hereby.
4.8 CAPITAL STOCK.
The shares of Buyer Common Stock to be issued as the stock
portion of the Purchase Price have been duly authorized by all necessary
corporate action on the part of the Buyer and, when issued pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, and such shares
will be issued without any violation of preemptive rights.
4.9 SEC FILINGS; FINANCIAL STATEMENTS.
Buyer has delivered to the Sellers, in the form filed with the
SEC, (i) its Annual Report to Shareholders and Annual Report on Form 10-K for
the fiscal year ended November 30, 1997, (ii) its Proxy Statement for Annual
Meeting of Shareholders on April 2, 1998, (iii) its Quarterly Reports on Form
10-Q for the quarters ended February 28, 1998, May 30, 1998, and August 30,
1998, (iv) its Current Reports on Form 8-K, dated June 23, 1998 and August 14,
1998, and (v) any amendments and supplements to any such reports filed by Buyer
with the SEC (collectively, the "Buyer SEC Reports"). The Buyer SEC Reports did
not at the time they were filed (or if amended or superseded by a filing prior
to the date hereof, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The consolidated financial statements of Buyer
included in the Buyer SEC Reports comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited consolidated quarterly statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of Buyer and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments). Neither
Buyer nor any of its subsidiaries has any material liability of any nature,
whether accrued, absolute, contingent or otherwise, except liabilities that (i)
are reflected or disclosed in the most recent financial statements included in
the Buyer SEC Reports, (ii) were incurred after August 30, 1998 in the ordinary
course of business, or (iii) are set forth in Schedule 4.5 hereto. Since August
30, 1998, there has not been, occurred or arisen any change in or event
affecting Buyer or any of its subsidiaries that has or is reasonably expected to
have a material adverse effect on Buyer, except as set forth in Schedule 4.5.
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ARTICLE V
COVENANTS PRIOR TO CLOSING
5.1 ACCESS.
Sellers shall cause the Homebuilding Entities to authorize and
permit Buyer and its representatives (which term shall be deemed to include its
independent accountants and counsel) to have reasonable access during normal
business hours, upon reasonable notice and in such manner as will not
unreasonably interfere with the conduct of their respective businesses, to all
of their respective properties, books, records, operating instructions and
procedures, Tax Returns and all other information with respect to the
Homebuilding Business as Buyer may from time to time reasonably request, and to
make copies of such books, records and other documents and to discuss their
respective businesses with such other Persons, including, without limitation,
their respective directors, officers, employees, accountants, counsel,
suppliers, customers, and creditors, as Buyer considers necessary or appropriate
for the purposes of familiarizing itself with the Homebuilding Business,
obtaining any necessary Approvals of or Permits for the transactions
contemplated by this Agreement and conducting an evaluation of the organization
and Homebuilding Business. Without limiting the generality of the foregoing,
Buyer shall be entitled to conduct or cause to be conducted (at its expense) on
any real property of the Homebuilding Entities such soils and geological tests
and environmental inspections, audits and tests (including the taking of soils
and ground water samples) and such structural and other physical inspections as
Buyer shall deem necessary or useful in connection with the transactions
contemplated by this Agreement. Buyer shall cause any damages resulting from any
such testing, inspection or audit to be repaired at Buyer's sole cost, and Buyer
agrees to indemnify and hold the Sellers and the Homebuilding Entities harmless
from any loss, cost, expense or liability incurred by any Seller or Homebuilding
Entity relating to or arising out of the conduct of any such tests, inspections
or audits. Neither Buyer's making nor omitting to make any such test,
inspection, or audit shall affect the representations and warranties of Sellers
or the Corporations or the conditions to Buyer's obligations hereunder, or
Seller's or the Corporation's indemnification obligations.
5.2 MATERIAL ADVERSE CHANGES.
Sellers will promptly notify Buyer of any event of which such
Seller or a Corporation obtains knowledge which has had or is reasonably
expected to have a material adverse effect on the Homebuilding Business or which
if known as of the date hereof would have been required to be included on a
Schedule to this Agreement. No such notification shall affect the
representations or warranties of Sellers or the Corporations or the conditions
to Buyer's obligations hereunder, or Seller's or the Corporation's
indemnification obligations. Sellers will promptly notify Buyer of any Action
that commences or is threatened on or after the date hereof and before the
Closing Date that involves a claim for damages in excess of $50,000 or seeks
injunctive relief, specific performance, or other equitable remedies.
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5.3 CONDUCT OF BUSINESS.
Sellers shall cause the Homebuilding Entities not to take, and
with respect to the Former Partnership Properties the Partnership Sellers shall
not take, any of the following actions without the prior consent in writing of
Buyer (which consent shall not be unreasonably withheld, except that Buyer may
give or withhold its consent in its sole discretion with respect to the matters
specified in clauses (f), (h), (i), (k), (l), (m), (n), (s) and (u)):
(a) conduct the Homebuilding Business in any manner except in
the ordinary course substantially as now conducted; or
(b) amend, terminate, renew, fail to renew or renegotiate any
Material Contract or default (or take or omit to take any action that, with or
without the giving of notice or passage of time, would constitute a default) in
any of its obligations under any Material Contract or enter into any new
Material Contract; or
(c) terminate, amend or fail to renew any existing insurance
coverage; or
(d) terminate or fail to renew or preserve any Permits; or
(e) create, incur, assume or guarantee any long-term debt or
capitalized lease obligation of more than $250,000 in any specific case or
$1,000,000 in the aggregate; or
(f) create, incur, assume or guarantee any long-term debt or
capitalized lease obligation of more than $500,000 in any specific case or
$2,000,000 in the aggregate, or assume or guarantee any debt or obligation of
any person that is not one of the Homebuilding Entities; or
(g) make any loan, guaranty or other extension of credit, or
enter into any commitment to make any loan, guaranty or other extension of
credit, to or for the benefit of, or enter into any agreement for the
acquisition or disposition of property from or to, any director, officer,
employee, stockholder, partner, Corporation or any of their respective
Associates or Affiliates of less than or equal to $500,000 in any specific case
or $1,000,000 in the aggregate; or
(h) make any loan, guaranty or other extension of credit, or
enter into any commitment to make any loan, guaranty or other extension of
credit, to or for the benefit of, or enter into any agreement for the
acquisition or disposition of property from or to, any director, officer,
employee, stockholder, partner, Corporation or any of their respective
Associates or Affiliates of more than $500,000 in any specific case or
$1,000,000 in the aggregate.
(i) grant any general or uniform increase in the rates of pay
or benefits to officers, directors or employees (or a class thereof) or any
increase in salary or benefits of or pay any bonus to any officer, director,
employee or agent, or enter into any new, or amend, supplement, or renew any
existing, employment, collective bargaining, severance, change in control,
bonus, profit sharing, deferred compensation, fringe benefit, consultancy, or
other employee benefit agreement or plan, or increase or accelerate any benefits
payable under any of the foregoing; or
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(j) sell, transfer, mortgage, encumber or otherwise dispose of
any assets, except (i) for dispositions of property not greater than $250,000 in
any specific case or $1,500,000 in the aggregate, (ii) the disposition of
Excluded Assets (other than Former Partnership Properties) or (iii) in the
ordinary course of business consistent with past practice; or
(k) sell, transfer, mortgage, encumber or otherwise dispose of
any assets, except (i) for dispositions of property not greater than $500,000 in
any specific case or $3,000,000 in the aggregate, (ii) the disposition of
Excluded Assets (other than Former Partnership Properties) or (iii) in the
ordinary course of business consistent with past practice; or
(l) issue, sell, redeem or acquire for value, or agree to do
so, any debt obligations or Equity Securities of any Homebuilding Entity; or
(m) split, combine, dividend, distribute or reclassify any
shares of the Equity Securities of Management Corp., Branching Tree, the Holding
LLCs, Mather, Desert Inn or the Parent Partnerships; or declare, issue, make or
pay any dividend or other distribution of assets, whether consisting of money,
other personal property, real property or other thing of value, to the
shareholders of Management Corp. or Branching Tree, the members of the Holding
LLCs, Mather or Desert Inn or the partners of the Parent Partnerships, other (i)
than the distribution of the Excluded Assets, (ii) pursuant to those agreements
existing on the date of this Agreement and identified on Schedules 2.3 or 2.4
and (iii) cash on hand so long as the Net Worth of the Homebuilding Business of
the Homebuilding Entities as of the Closing Date is not less than $192,849,362;
or
(n) change or amend the charter documents or bylaws of
Management Corp. or Branching Tree or the governing agreements of the Holding
LLCs, Mather, Desert Inn or the Parent Partnerships or any of their Subsidiaries
or merge, consolidate, transfer substantially all the assets of (other than
Excluded Assets), liquidate, or dissolve any of the Homebuilding Entities; or
(o) make any investment, by purchase, contributions to
capital, property transfers, loan, or otherwise, in any other Person; or
(p) make any Tax election or make any change in any method or
period of accounting or in any accounting policy, practice or procedure; or
(q) introduce any new method of management or operation in
respect of the Homebuilding Business; or
(r) acquire or agree to acquire any assets the consideration
for which would exceed $250,000 individually or $1,000,000 in the aggregate; or
(s) acquire or agree to acquire any assets the consideration
for which would exceed $500,000 individually or $2,000,000 in the aggregate; or
(t) settle or compromise any Action; or
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(u) settle or consent to the entry in any Action of any Order
that would have or reasonably be expected to have a material adverse effect on
the Homebuilding Business or the Former Partnership Properties; or
(v) agree to or make any commitment to take any actions
prohibited by this Section 5.3.
5.4 NOTIFICATION OF CERTAIN MATTERS.
Each Seller or Corporation shall give prompt written notice to
Buyer, and Buyer shall give prompt written notice to Sellers and the
Corporations, of (i) the occurrence, or failure to occur, of any event that is
reasonably likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect (or with respect to
those representations and warranties that are qualified by reference to
materiality or a material adverse effect, to be untrue or inaccurate in any
respect taking into account such qualification) at any time from the date of
this Agreement to the Closing Date and (ii) any failure of Buyer or Sellers or
Corporations, as the case may be, to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement.
No such notification shall affect the representations or
warranties of the parties or the conditions to their respective obligations
hereunder, or their respective indemnification obligations.
5.5 PERMITS AND APPROVALS.
(a) Sellers and Buyer each agree to cooperate and use their
commercially reasonable efforts to obtain (and will promptly prepare all
registrations, filings and applications, requests and notices preliminary to
all) Approvals and Permits that may be necessary to consummate the transactions
contemplated by this Agreement.
(b) To the extent that the Approval of a third party with
respect to any Material Contract is required in connection with the transactions
contemplated by this Agreement, Sellers shall use its commercially reasonable
efforts to obtain such Approval prior to the Closing Date and in the event that
any such Approval is not obtained (but without limitation on Buyer's rights
under Section 7.2), Sellers shall cooperate with Buyer to ensure that Buyer
obtains the benefits of each such Contract.
5.6 PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE.
During the period beginning on the date hereof and ending on
the Closing Date, (a) Sellers will use their commercially reasonable efforts to
preserve the Homebuilding Business and to preserve the goodwill of employees,
customers, suppliers and others having business relations with the Homebuilding
Entities and (b) Sellers and Buyer will consult with each other concerning, and
Sellers will cooperate to keep available to Buyer, the services of the officers
and employees of the Homebuilding Entities that Buyer may wish to have any
Homebuilding Entity retain.
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5.7 GOVERNMENT FILINGS.
Buyer will make and Sellers will make, and will cause the
Homebuilding Entities to make, any and all filings required under the
Hart-Scott-Rodino Act. Sellers and Buyer shall furnish each other such necessary
information and reasonable assistance as the other may reasonably request in
connection with its preparation of necessary filings or submissions under the
provisions of such law, and shall provide each other a reasonable opportunity to
review, prior to filing, any filing with a Governmental Entity related to this
Agreement. Sellers and Buyer will supply to each other copies of all
correspondence, filings or communications, including file memoranda evidencing
telephonic conferences, by such party or its affiliates with any Governmental
Entity or members of its staff, with respect to the transactions contemplated by
this Agreement and any related or contemplated transactions, except for
documents filed pursuant to Item 4(c) of the Hart-Scott Rodino Notification and
Report Form or communications regarding the same.
5.8 ELIMINATION OF INTERCOMPANY AND AFFILIATE LIABILITIES.
No later than the Closing Date, Sellers shall purchase, cause
to be repaid or (with respect to guarantees) assume liability for any and all
loans or other extensions of credit made or guaranteed by any Homebuilding
Entity, or to which a Former Partnership Property is subject, to or for the
benefit of a Seller or any of such Seller's Associates. At the Closing Date,
neither Buyer nor any Homebuilding Entity shall have, nor shall any Former
Partnership Property be subject to, any continuing commitment, obligation or
liability of any kind with respect to any Seller or any Associates of any
Seller, except as set forth in Schedule 5.8.
5.9 REPRESENTATIVE.
Each Seller and Corporation hereby appoints John M. Goodman as
representative (the "Representative") to represent such Seller or Corporation in
connection with the transactions contemplated by this Agreement, and to take any
and all action, and to receive any and all notices, on Seller's or Corporation's
behalf hereunder that may be taken or received by Seller or Corporation under
the terms hereof. Without giving notice to the Sellers or the Corporations, the
Representative shall have full and irrevocable authority on behalf of the
Sellers and the Corporations to (i) deal with Buyer, (ii) accept and give
notices and other communications relating to this Agreement, (iii) settle any
disputes relating to this Agreement, (iv) waive any condition to the obligations
of the Sellers or Corporations included in this Agreement, (v) execute any
document or instrument that the Representative may deem necessary or desirable
in the exercise of the authority granted under this Section, and (vi) act in
connection with all matters arising out of, based upon, or in connection with,
this Agreement and the transactions contemplated hereby. Each Seller and
Corporation understands and agrees that the Representative has been appointed as
the Representative by each of the other Sellers and Corporations. Buyer shall be
entitled to rely on the advice, information and decisions of the Representative
evidenced by a writing signed by him without any obligation independently to
verify, authenticate or seek the confirmation or approval of the
Representative's advice, information or decisions or any other facts from
Sellers or the Corporations or any other Person. Any certificate or other
document to be delivered by Sellers or the Corporations at the Closing
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may be executed and delivered by the Representative on behalf of all Sellers and
Corporations and shall constitute a reaffirmation of any representations herein
as of the Closing by such Seller or Corporation unless he, she or it otherwise
notifies Buyer in writing on or prior to the Closing of any exceptions thereto.
5.10 EXCHANGE LISTING; REGISTRATION RIGHTS.
Buyer will use its best efforts to cause the shares of Buyer
Common Stock comprising the stock portion of the Purchase Price to be authorized
for listing on the New York Stock Exchange, upon notice of issuance, prior to
the Closing Date. On the Closing Date, Buyer will enter into an agreement in
substantially the form of Exhibit E providing for registration rights upon the
terms and conditions set forth therein (the "Registration Rights Agreement").
5.11 SHAREHOLDERS AGREEMENT.
On the Closing Date, Buyer and Sellers shall enter into a
shareholders agreement in substantially the form of Exhibit F hereto (the
"Shareholder Agreement").
5.12 COST SHARING AGREEMENTS AND OPTION AGREEMENT.
On the Closing Date, Buyer and Sellers (or their designee(s))
shall enter into cost sharing agreements with respect to the Highland/Lytle
Creek and Terra Vista projects in substantially the forms of Exhibit G and H,
respectively, hereto (collectively, the "Cost Sharing Agreements"), and an
option agreement with respect to the Sierra Lakes project in substantially the
form of Exhibit I hereto (the "Option Agreement").
5.13 EMPLOYEES.
The parties agree to consult in good faith with each other
prior to the Closing and prior to soliciting Homebuilding Entities' employees to
determine which employees of the Homebuilding Entities will remain with the
Homebuilding Business of the Homebuilding Entities and which employees of the
Homebuilding Entities will become employees of the non-Homebuilding Business of
Sellers. Sellers shall provide to Buyer such information regarding the employees
of the Homebuilding Entities as Buyer may reasonably request. The parties agree
to consult in good faith with each other prior to the Closing to determine which
employees, if any, of the Homebuilding Entities need to be loaned on a
short-term basis between them and the reasonable expense charges for any loaned
employees.
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ARTICLE VI
ADDITIONAL CONTINUING COVENANTS
6.1 NONCOMPETITION.
(a) Restrictions on Competitive Activities. Subject to the
provisions of Section 6.10, each Seller and Corporation agrees that after the
Closing, Buyer and the Homebuilding Entities shall be entitled to the goodwill
and going concern value of the Homebuilding Business and to protect and preserve
the same to the maximum extent permitted by law. For these and other reasons and
as an inducement to Buyer to enter into this Agreement, each Seller and
Corporation, other than John M. Goodman, agrees that for a period of four years
after the Closing Date or one year after termination of that Seller's employment
or consulting agreement with Buyer or any of the Homebuilding Entities,
whichever is later, and in the case of John M. Goodman, for a period of two
years after the Closing Date, such Seller or Corporation will not, in the States
of California or Nevada, directly or indirectly, for its own benefit or as agent
for another carry on or participate in the ownership, management or control of,
or be employed by, or consult for, or serve as a director of, or otherwise
render services to, the business of constructing or selling single family homes
of any business entity.
(b) Exceptions. Nothing contained herein shall limit the right
of a Seller or Corporation as an investor to hold and make investments in
securities of any corporation or limited partnership that is registered on a
national securities exchange or admitted to trading privileges thereon or
actively traded in a generally recognized over-the-counter market, provided such
Seller's or Corporation's equity interest therein does not exceed 5% of the
outstanding shares or interests in such corporation or partnership.
(c) Nonsolicitation. During the period of one year after the
Closing Date, Sellers, Corporations and their respective affiliates (excluding
the Homebuilding Entities after the Closing Date) shall refrain from soliciting
for employment, directly or indirectly, any then employees of the Homebuilding
Entities. This prohibition shall not extend to employing any such person who
contacts Sellers, the Corporations or their respective affiliates on his or her
own initiative without any direct or indirect solicitation or encouragement from
any Seller, Corporation or its affiliates or employees (it being understood that
placing a general advertisement does not constitute solicitation).
(d) Special Remedies and Enforcement. Each Seller or
Corporation recognizes and agrees that a breach by such Seller or Corporation of
any of the covenants set forth in this Section 6.1 could cause irreparable harm
to Buyer, that Buyer's remedies at law in the event of such breach would be
inadequate, and that, accordingly, in the event of such breach a restraining
order or injunction or both may be issued against such Seller or Corporation, in
addition to any other rights and remedies which are available to Buyer. If this
Section 6.1 is more restrictive than permitted by the Laws of the jurisdiction
in which Buyer seeks enforcement hereof, this Section 6.1 shall be limited to
the extent required to permit enforcement under such Laws. Without limiting the
generality of the foregoing, the parties intend that the covenants
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contained in the preceding portions of this Section 6.1 shall be construed as a
series of separate covenants, one for each state. Except for geographic
coverage, each such separate covenant shall be deemed identical in terms. If, in
any judicial proceeding, a court shall refuse to enforce any of the separate
covenants deemed included in this Section 6.1, then such unenforceable covenant
shall be deemed eliminated from these provisions for the purpose of those
proceedings to the extent necessary to permit the remaining separate covenants
to be enforced.
6.2 NON-DISCLOSURE OF PROPRIETARY DATA.
Each Seller and Corporation agrees that such Seller or
Corporation will not, at any time, make use of, divulge or otherwise disclose,
directly or indirectly, any trade secret or other proprietary data concerning
the business or policies of any Homebuilding Entity as they relate to the
Homebuilding Business, other than form documents used by any Homebuilding
Entity, or of Buyer obtained in connection with the negotiation, execution, or
performance of this Agreement. In addition, each Seller and Corporation agrees
not to make use of, divulge or otherwise disclose, directly or indirectly, to
persons other than Buyer, any confidential information concerning the business
or policies of any Homebuilding Entity as they relate to the Homebuilding
Business which may have been learned in any such capacity or of Buyer which may
have been learned in connection with the negotiation, execution, or performance
of this Agreement. The Seller's and Corporation's obligations under this Section
with respect to any trade secret, other proprietary data, or confidential
information of Buyer shall survive the termination of this Agreement if this
Agreement is terminated prior to the Closing.
6.3 TAX RETURNS.
(a) The Sellers shall cause to be prepared and timely filed
(or provided to Buyer for execution and filing, if applicable) when due (taking
into account all extensions properly obtained) all income and franchise Tax
Returns of the Homebuilding Entities for taxable periods ending on or before the
Closing Date, and all other Tax Returns required to be filed by or on behalf of
such entities on or before the Closing Date. All Tax Returns described in this
Section 6.3(a) shall be prepared and filed in a manner consistent with past
practice and, on such Tax Returns, no position shall be taken, election made or
method adopted without Buyer's written consent (which shall not be unreasonably
withheld) that is inconsistent with positions taken, elections made or methods
used in preparing and filing similar Tax Returns in prior periods (including,
but not limited to, positions, elections or methods which would have the effect
of deferring income to periods after the Closing Date).
(b) Buyer shall cause to be prepared and timely filed all Tax
Returns of the Homebuilding Entities that are not described in Section 6.3(a)
above. If any such Tax Return covers a period beginning before the Closing Date,
Sellers shall have the right to review and approve (which approval shall not be
unreasonably withheld) such Tax Return before it is filed if it could affect the
Sellers' or Shareholders' liability for Taxes to any taxing authority or their
indemnification obligations to Buyer under this Agreement. Any Tax Return
described in the preceding sentence shall be provided to the Sellers not less
than 14 days prior to the proposed filing date together with any underlying
information or records requested by the Sellers to assist their review.
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6.4 TAX COOPERATION.
(a) After the Closing, the Sellers, the Corporations, the
Holding LLCs and the Buyer shall, and shall cause their respective Affiliates
to, cooperate fully with each other in the preparation and filing of all Tax
Returns and any Tax investigation, audit or other proceeding respecting the
Homebuilding Business (a "Tax Proceeding") and shall provide, or cause to be
provided, any records and other information in their possession or control or in
the control of their agents reasonably requested by such other party in
connection therewith as well as access to, and the cooperation of, their
respective auditors. Buyer shall notify Sellers in writing promptly upon receipt
by Buyer or any Affiliate of any notice of any pending or threatened audits or
assessments relating to Taxes with respect to any Homebuilding Entity other than
Taxes as to which Sellers or the Shareholders have no indemnification obligation
or other liability relating to Taxes. Sellers shall have the right to control
the handling and disposition of such audit and any administrative or court
proceeding relating thereto (and to employ counsel of their choice at their
expense) to the extent that such audit or proceeding might result in increased
Tax liabilities of the Sellers or the Shareholders for the period covered by the
Tax Proceeding or an increase in their indemnification obligations to Buyer
under this Agreement; provided, however, that Buyer may monitor the Tax
Proceeding. Sellers shall not agree to any settlement concerning Taxes of any
Homebuilding Entity for any taxable period which would result in an increase in
Taxes of Buyer or any Homebuilding Entity for any taxable period ending after
the Closing Date, without the prior written consent of the Buyer (which consent
shall not be unreasonably withheld). The Buyer and the Sellers shall bear their
respective costs and expenses in connection with any Tax Proceeding. Any
information obtained pursuant to this Section 6.4 or pursuant to any other
Section hereof providing for the sharing of information or the review of any Tax
Return or other information relating to Taxes shall be subject to Section 10.9.
(b) At Buyer's election, made not less than 60 days before any
such election must be made, (i) the Management Corp. Sellers and Branching Tree
Sellers, jointly with Buyer, shall make timely and irrevocable elections under
Section 338(h)(10) of the Code and similar elections under any applicable state
or local Tax laws for Management Corp. and Branching Tree (the "Section
338(h)(10) Elections"), and (ii) the Sellers, Corporations, Holding LLCs and
their Affiliates shall make, or cause to be made, timely and irrevocable
elections under Section 754 of the Code and similar elections under any
applicable state or local Tax laws for any or all of Mather, Desert Inn, or any
Subsidiaries of Parent Partnerships, Mather or Desert Inn that are partnerships
or limited liability companies (collectively, the "Section 754 Elections" and
collectively with the Section 338(h)(10) Elections, the "Tax Elections"). No
elections under Section 754 of the Code effective for a tax year beginning in
1998 shall be made on or after October 20, 1998 for any entities, other than the
Parent Partnerships or the Partnership Sellers, that are or were utilized to
remove Excluded Assets from the Homebuilding Entities. If the Tax Elections are
made, Buyer, Sellers, the Corporations, the Holding LLCs, the Homebuilding
Entities, and each of their Affiliates, shall report the transactions
contemplated herein consistently with the Tax Elections and shall take no
position contrary thereto unless and to the extent required to do so pursuant to
a final determination of liability in respect of a Tax that, under applicable
law, is not subject to further appeal, review, or modification through
proceedings or otherwise); provided, however, that the parties shall treat, for
federal and state
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income and franchise tax purposes, the purchase of the Holding LLC member
interest and Parent Partnership partnership interests as taxable purchases, from
the Partnership Sellers, of the assets owned by the Parent Partnerships. To the
extent possible, Buyer, Sellers, the Corporations, the Holding LLCs, the
Homebuilding Entities, and each of their Affiliates, as applicable, shall
execute at the Closing any and all documents, statements, and other forms that
are required to be submitted to any Taxing authority in connection with the Tax
Elections (the "Tax Election Forms"). If any Tax Election Forms are not executed
at the Closing, Buyer, Sellers, and the Homebuilding Entities, as applicable,
shall prepare and complete each such Tax Election Form no later than 30 days
before the date such Tax Election Form is required to be filed, shall cause such
Tax Election Forms to be duly executed by their respective authorized persons,
and shall timely file such Tax Election Forms in accordance with applicable Tax
laws.
(c) Buyer and Sellers agree to use their best efforts to agree
upon a schedule and supporting sub-allocation schedules, in substantially the
form of (but without regard to the specific numbers on) Schedule 6.4(c) hereto
(collectively the "Allocation Agreement"), and Sellers and Buyer agree to cause
each of the Homebuilding Entities to agree to the Allocation Agreement insofar
as the Allocation Agreement addresses them, (i) to allocate the Purchase Price
allocated to the Management Corp. Stock and the liabilities of Management Corp.
(and other relevant items) to the assets of Management Corp. and the Purchase
Price allocated to the Branching Tree Stock and liabilities of Branching Tree
(and other relevant items) to the assets of Branching Tree, in both cases for
all applicable Tax purposes, including the Section 338(h)(10) Elections, (ii) to
make and allocate the basis adjustments to the assets of Mather and the assets
of Desert Inn and its Subsidiary, and (iii) to allocate the Purchase Price
allocated to each of the other Homebuilding Entities and their Subsidiaries,
together with the liabilities (and other relevant items) of each other
Homebuilding Entity and its Subsidiaries, among the assets of each such
Homebuilding Entity and its Subsidiaries, in each case for all applicable Tax
purposes. Sellers shall initially prepare the schedules setting forth the
allocations described above and submit the proposed allocations to Buyer within
the later of (x) 30 days after the date of delivery to Buyer of the 1998 audited
financial statements referred to in Section 6.8 hereof, and (y) 30 days after
the final determination of the adjustment to the Purchase Price pursuant to
Section 1.6 hereof, but in no event later than 120 days after the Closing Date.
If, within 30 days after Sellers' submission, Buyer has not objected in writing
to such allocation, specifying in reasonable detail the nature and amount of the
disagreement, Sellers' proposed allocation shall become the Allocation
Agreement. If Buyer objects, then unless Buyer and Sellers resolve such
disagreement within 10 days after delivery of Buyer's notice of disagreement,
the disagreement shall be resolved by an accounting firm chosen as stated in
Section 1.6. Such accounting firm shall resolve such disagreement within 30 days
of submission of the disagreement to it. The determination of such accounting
firm shall be final and binding on Buyer and Sellers (absent manifest error in
calculations) and the fees and expenses of such accounting firm shall be borne
equally by Sellers, on the one hand, and Buyer, on the other hand.
Notwithstanding the foregoing, Buyer and Sellers hereby agree that the Purchase
Price shall be allocated on the Allocation Agreement among the Homebuilding
Entities, in a manner consistent with the schedule described in the last
sentence of Section 1.8, and the portion of the Purchase Price so allocated to a
Homebuilding Entity shall be further allocated among the assets of such
Homebuilding Entity, in a manner that allocates with respect to the total
Purchase Price
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(A) sixty-two million dollars ($62,000,000) of the Basis Increase (defined
below) to real property inventory, in such manner as the Sellers shall
reasonably determine, provided at least sixty-five percent (65%) of such
sixty-two million dollars ($62,000,000) shall be allocated to real property
inventory located in California, and (B) the remainder of the Basis Increase to
goodwill. "Basis Increase" means the aggregate net increase to the "baseline"
tax basis (as reflected on Schedule 6.4(c)) of the assets owned by the
Homebuilding Entities on the Closing Date resulting from the purchase
transactions described in this Agreement, the Tax Elections, and other
transactions involving the Homebuilding Entities and their Affiliates occurring
on or after October 20, 1998 and on or prior to the Closing Date.
6.5 OTHER COOPERATION.
After the Closing, the Buyer will afford the Sellers, and
their respective accountants, counsel and other representatives, reasonable
access during normal business hours to the books and records of the Homebuilding
Entities for the periods prior to the Closing. Sellers, or their respective
representatives may, at such Seller's own expense, make copies of such books and
records.
6.6 EMPLOYEES AND EMPLOYEE BENEFITS.
Buyer shall provide, or cause the Homebuilding Entities to
provide, employee benefits to the Homebuilding Entities employees who are
retained after the Closing Date that are at least as favorable to such employees
in the aggregate as the benefits provided by the Homebuilding Entities to their
employees as of the date of this Agreement.
6.7 LEWIS NAME AND MARK LICENSE.
Upon the Closing, Buyer, Branching Tree and Sellers will enter
into an agreement in substantially the form of Exhibit J hereto (the "License
Agreement"). Nothing in this Agreement shall prohibit Sellers or their
affiliates from using the name "Lewis" alone or in combination with any of the
following words: Investment, Industrial, Commercial, Retail, Apartment
Communities, Retirement, Asset Management, Family Asset Management, Operating,
Holding, Family Holdings and any name consisting of initials, and in each case
such names may include the words "Company," "Inc.," "LLC," or similar words.
6.8 FISCAL 1998 AUDITED FINANCIAL STATEMENTS.
As soon as practicable after the Closing, and in any event
within 60 days following the Closing Date, Sellers shall cause to be delivered
to Buyer a combined balance sheet for the Homebuilding Business of the
Homebuilding Entities as of December 31, 1998 and related combined statements of
operations, equity and cash flows of the Homebuilding Business of the
Homebuilding Entities for the year then ended, all examined by Ernst & Young LLP
(or another independent public accounting firm selected by mutual agreement of
the Sellers and Buyer) whose audit report thereon shall be included with such
statements, prepared in conformity with GAAP applied on a basis consistent with
the audited financial statements referred to in Section 7.2(g). Buyer shall
cooperate fully with Sellers and shall provide Sellers with access to
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the books and records of the Homebuilding Entities and such other assistance as
Sellers reasonably request (including, without limitation, assignment of Buyer's
or Homebuilding Entities' personnel to the project). Buyer will reimburse
Sellers upon request 50% of all reasonable out-of-pocket costs and expenses
actually incurred by Sellers in the preparation of such statements.
6.9 TENANT LISTS.
At the Closing, Sellers shall deliver to Buyer a list of the
then current tenants of apartment buildings owned by Sellers or their Affiliates
who are entitled to participate in Sellers or their Affiliates "Rent to Own"
program. For so long as both Buyer and Sellers, in their respective sole
discretion, determine to continue to participate in the "Rent to Own" program,
Sellers will provide to Buyer at least semiannually a list of tenants of
apartment buildings owned by Sellers or their Affiliates who are entitled to
participate in such program.
6.10 BUYER'S RIGHT OF FIRST OFFER.
(a) Right of First Offer. Restricted Party agrees that during
the period from the Closing Date to the fourth anniversary of the Closing Date
(the "Right of First Offer Period"), the Restricted Party shall not, and the
Restricted Party shall cause any Controlled Entity not to, offer to sell or
sell, or propose to enter into any joint venture with respect to, any Covered
Properties without first offering such Covered Properties for sale or joint
venture to Buyer pursuant to the procedures described below (the "Right of First
Offer"). Notwithstanding the foregoing, neither the Restricted Party nor the
Controlled Entity shall be required to offer any Covered Properties to Buyer
hereunder if such Covered Properties (i) are being transferred to another
Controlled Entity or to any other Seller, or (ii) if such Covered Properties
consists of 20 or fewer lots (provided that not more than 40 lots may be
excluded from the Right of First Offer pursuant to this clause (ii) during any
calendar year) or (iii) the project in which the Covered Lots is located
consists of 20 or fewer lots. For the purposes of this Section 6.10, (A)
"Restricted Party" means the Seller which is developing the Covered Property in
question; (B) "Covered Properties" means any for sale residential lots that are
developed by a Restricted Party or any Controlled Entity in California or
Nevada, whether for attached or detached housing, other than lots to be sold for
$300,000 or more or to a governmental entity; and (C) "Controlled Entity" means
any entity in which direct or indirect beneficial ownership (as described in
Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities
represents at least 51% of the outstanding voting power of a Person is held by
one or more Restricted Parties. In the event that a Restricted Party or a
Controlled Entity is developing a mixed use project, only the lots included
therein that would constitute Covered Properties as defined above shall be
deemed Covered Properties.
(b) Offer. Prior to offering for sale or joint venture any
Covered Properties, the Restricted Party shall (or the Restricted Party shall
cause the Controlled Entity to) provide written notice to Buyer describing such
Covered Properties (the "Offered Properties") and stating the lot prices or
joint venture terms, whether such Offered Properties are being offered as
finished lots, mapped lots or in another entitlement state, and other material
terms at which the
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Restricted Party (or the Controlled Entity) offers to sell or joint venture the
Offered Properties to Buyer (the "Offer").
(c) Evaluation Notice. Within ten (10) days following receipt
of the Initial Offer, Buyer shall notify the Restricted Party in writing whether
or not Buyer intends to evaluate the Offered Properties (an "Evaluation
Notice"). If the Evaluation Notice indicates that Buyer does not wish to
evaluate the Offered Properties or if Buyer fails to deliver an Evaluation
Notice to the Restricted Party within such ten (10) day period, the Restricted
Party (or the Controlled Entity) shall be free to negotiate and conclude a sale
or joint venture, as specified in the Offer, of the Offered Properties with
other Persons for a period of one (1) year following receipt by the Buyer of the
Offer. If the Evaluation Notice is received by the Restricted Party within such
ten (10) day period and it indicates that Buyer wishes to evaluate the Offered
Properties, then for thirty (30) days following receipt by the Restricted Party
of the Evaluation Notice, Buyer shall have the right to evaluate the Offered
Properties (the "Evaluation Period") and the remainder of this Section 6.10
shall apply.
(d) Certain Information. During the first ten (10) days of the
Evaluation Period, the Restricted Party shall, or shall cause the Controlled
Entity to, promptly provide Buyer with such documents and information concerning
the Offered Properties as Buyer shall reasonably request to the extent such
documents and information are possessed by or reasonably available (without cost
or expense) to the Restricted Party and the Controlled Entity. The type of
information to be provided shall include the square footage minimums applicable
to such lots and other restrictions (including deed restrictions, if applicable)
relating to such lots. Neither the Restricted Party nor the Controlled Entity
makes or shall be deemed to make any representation or warranty as to the
accuracy or completeness of such documents and information. Buyer will maintain
the confidentiality of such documents and information, provided that this will
not prevent disclosure by Buyer to the extent that such disclosure is required
by law or court order.
(e) Acceptance; Rejection; Matching. Prior to the end of the
Evaluation Period, Buyer shall either accept or reject the Offer. If Buyer
accepts the Offer, the Restricted Party and Buyer shall use their, and the
Restricted Party shall cause the Controlled Entity to use its, good faith
efforts to conclude the sale or joint venture, as the case may be, of such
Offered Properties on the terms contained in the Offer as expeditiously as
practicable. If Buyer rejects the Offer, the Restricted Party (or the Controlled
Party) shall be free to negotiate with, and sell or joint venture, as specified
in the Offer, the Offered Properties to, other Persons provided that:
(i) the Restricted Party may not (or the Restricted
Party shall cause the Controlled Entity not to) accept any offer to
purchase or joint venture, as the case may be, the Offered Properties
from any other Person during the Right of First Offer Period without
first re-offering the Offered Properties on the same terms to Buyer if
(a) the other offer contains a closing sales price for the Offered
Properties that is less than the closing sales price contained in the
Offer or, if the Offer relates to a joint venture, contains terms in
the aggregate less favorable to the Restricted Party (or the Controlled
Entity), (b) the Restricted Party (or the Controlled Entity) changes
the entitlement state of the Offered Properties, or (c) the other offer
is for the purchase of the Offered Properties and the Offer was for a
joint venture of the Offered Properties, or vice versa. For this
purpose, if
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the price contained in either the Offer or in the other offer is
payable over time in whole or in part (the "financed portion"), then
the present value of the financed portion shall be calculated using an
8% discount rate, and such present value shall be deemed to be included
in the "price" for comparison purposes; and
(ii) the Restricted Party shall be required to give
(or the Restricted Party shall cause the Controlled Entity to give) to
Buyer ten (10) days to match any offer described in Section 6.10(e)(i)
above.
(f) Reoffer in Certain Circumstance. Subject to the terms of
Section 6.10(g), the Restricted Party shall be required to (and the Restricted
Party shall cause the Controlled Entity to) offer Buyer another Evaluation
Period in accordance with this Section 6.10 with respect to any Offered
Properties which the Restricted Party or a Controlled Entity, as the case may
be, is continuing to offer for sale or propose to joint venture if such Offered
Properties have not been sold or joint ventured by the later of one (1) year
after the expiration of (i) the previous Evaluation Period with respect to such
Offered Properties or (ii) if applicable, to such Offered Properties, the ten
(10) day match period described in Section 6.10(e)(ii).
(g) Termination of Right of First Offer. In the event of a
breach or default by Buyer under (i) an agreement for purchase and sale or joint
venture for any of the Offered Properties or (ii) any obligations or
restrictions imposed by the documents of conveyance of any Offered Properties to
Buyer (the Offered Properties described in (i) or (ii) being the "Subject
Offered Properties") and such breach or default is not cured within any
applicable cure period provided in the applicable agreement or document and
after any notice required by any such agreement or document has been given, the
provisions of this Section 6.10 shall automatically terminate and be of no
further force and effect with respect to all Subject Offered Properties and with
respect to all other Covered Properties located in the project(s) in which the
Subject Offered Properties are located.
(h) No Obligation to Sell. It is understood that neither the
Restricted Party nor any Controlled Entity has an obligation to market or sell
any Covered Properties (provided that the foregoing shall not relieve the
Restricted Party from complying with this Section 6.10 if it decides to offer
for sale any Covered Properties) or to accept any offer made by Buyer.
(i) Sierra Lakes Adjacent Property. Without Buyer's consent in
its sole discretion, Sellers will not enter into any joint venture, partnership,
or similar agreement with a third party with respect to the approximately
135-acre property adjacent to the Sierra Lakes property, if such agreement would
prevent Sellers from offering such property to Buyer in accordance with this
Section 6.10.
6.11 WELLS FARGO LOANS.
At the Closing, Buyer may elect to assume or pay in full the
Wells Fargo Loans. If the Wells Fargo Loans are repaid in full at the Closing,
Buyer shall assist Sellers in causing all guarantees and pledges by Sellers,
Corporations, Shareholders or their Affiliates related to the Wells Fargo Loans
to be released in full. If the Wells Fargo Loans are not repaid in full at the
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Closing, Buyer shall have assumed all guarantees of Sellers, Corporations and
Shareholders (and caused any pledges to be released in full) with respect to the
Wells Fargo Loans by instruments reasonably acceptable to Sellers, Corporations
and Shareholders that fully and completely release each Seller, Corporation or
Shareholder from any liability under such guarantees and pledges.
ARTICLE VII
CONDITIONS OF PURCHASE
7.1 GENERAL CONDITIONS.
The obligations of the parties to effect the Closing shall be
subject to the following conditions unless waived in writing by all parties:
(a) No Orders, Legal Proceedings. No Law or Order shall have
been enacted, entered, issued, promulgated or enforced by any Governmental
Entity, nor shall any Action by a Governmental Entity have been instituted and
remain pending at what would otherwise be the Closing Date, which prohibits or
restricts the transactions contemplated by this Agreement.
(b) Approvals. All Permits and Approvals required to be
obtained from any Governmental Entity shall have been received or obtained on or
prior to the Closing Date and any applicable waiting period under the
Hart-Scott-Rodino Act shall have expired or been terminated.
(c) Removal and Inclusion of Assets and Liabilities. The
Excluded Assets shall have been distributed and the Excluded Liabilities shall
have been assumed by Sellers, and the Included Assets and Included Liabilities
shall have been transferred to and assumed by the Homebuilding Entities, all in
form and substance reasonably satisfactory to Sellers and Buyer, without the
imposition of any tax or other adverse tax consequences to the Homebuilding
Entities; provided, however, that if Sellers are unable to distribute any of the
Excluded Assets or assume the Excluded Liabilities or transfer the Included
Assets and Included Liabilities prior to the Closing Date, Buyer will, and will
cause the Homebuilding Entities to, cooperate with Sellers after the Closing to
ensure that any such transfers and assumptions are effected as soon as
practicable.
(d) Execution and Delivery of Agreements. Each of the Cost
Sharing Agreements, License Agreement, Option Agreement, Registration Rights
Agreement, Shareholders Agreement, the Consulting and Noncompetition Agreement
between Buyer and John M. Goodman, in the form of Exhibit O and the
Representation, Warranty and Indemnity Agreement in the form of Exhibit P, shall
have been executed and delivered by the parties thereto and the employment
agreements, dated the date of this Agreement, and executed by Buyer or a
Homebuilding Entity and the persons named on Schedule 7.1(d) shall be in full
force and effect.
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7.2 CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to effect the Closing shall be
subject to the following conditions except to the extent waived in writing by
Buyer:
(a) Representations and Warranties and Covenants of Sellers
and Corporations. The representations and warranties of Sellers and the
Corporations herein contained (as qualified by matters set forth as exceptions
thereto in the Disclosure Schedule of Sellers) shall be true in all material
respects (except for such representations and warranties as are qualified by
their terms by reference to materiality, a material adverse change or a material
adverse effect, which representations and warranties as so qualified shall be
true in all respects) at the Closing Date with the same effect as though made at
such time; Sellers and the Corporations shall have performed all obligations and
complied with all covenants and conditions required by this Agreement to be
performed or complied with by them at or prior to the Closing Date (except for
such failures to perform as have not had and are not reasonably expected to
have, individually or in the aggregate, a material adverse effect with respect
to the Homebuilding Entities and the Former Partnership Properties, considered
as a whole, or to adversely affect the ability of Sellers or the Corporations to
consummate the transactions contemplated by this Agreement); and Sellers and the
Corporations shall have delivered to Buyer a certificate of Sellers and the
Corporations in form and substance satisfactory to Buyer, dated the Closing
Date, and signed by the Representative, to such effect.
(b) Opinion of Counsel. Buyer shall receive at the Closing
from O'Melveny & Myers LLP and Kenneth P. Corhan, Esq., General Counsel to
Management Corp., opinions dated the Closing Date, in form and substance
substantially as set forth in Exhibits K and L, respectively.
(c) Consents. Sellers shall have obtained and provided to
Buyer the Approvals of third parties set forth on Schedule 2.10 in form and
substance reasonably acceptable to Buyer.
(d) Resignation of Directors and Certain Officers. The
directors and officers of Management Corp., Branching Tree, the Holding LLCs,
Mather and Desert Inn listed in a letter to be delivered by Buyer to Sellers not
less than 3 days prior to the Closing Date, shall have submitted their
resignations in writing to Management Corp., Branching Tree, the Holding LLCs,
Mather, and Desert Inn, as the case may be. Such resignations shall be effective
as of the Closing.
(e) Delivery of Stock, Member Interests and Partnership
Interests and Other Deliveries. All Sellers shall have delivered for sale to
Buyer on or before the Closing, stock certificates representing all shares of
Stock as contemplated hereby and Bills of Sale representing all Member Interests
and Partnership Interests as contemplated hereby, and such other customary
closing documents as Buyer may reasonably request for the consummation of the
transactions contemplated hereby.
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(f) Release from Obligations. Buyer and each of the
Homebuilding Entities shall have been released from any liability with respect
to the obligations identified in Schedule 7.2(f) by instruments reasonably
acceptable to Buyer.
(g) Audited Financial Statements. Sellers shall have delivered
to Buyer audited combined balance sheets for the Homebuilding Business of the
Homebuilding Entities as of December 31, 1996 and 1997, and related audited
combined statements of operations, equity, and cash flows of the Homebuilding
Business of the Homebuilding Entities for the years ended December 31, 1996 and
1997, along with the Auditor's audit report thereon (collectively, the "Audited
Homebuilding Financial Statements"), prepared in conformity with GAAP applied on
a consistent basis for the periods reflected therein, and such Audited
Homebuilding Financial Statements shall not reflect any material adverse change
in the financial position or results of operations of the Homebuilding Entities
as of or for the year ended December 31, 1997 from the financial position and
results of operations of the Homebuilding Entities reflected in the Homebuilding
Line of Business Financial Information as of and for the year ended December 31,
1997.
7.3 CONDITIONS TO OBLIGATIONS OF SELLERS.
The obligations of Sellers to effect the Closing shall be
subject to the following conditions, except to the extent waived in writing by
Sellers:
(a) Representations and Warranties and Covenants of Buyer. The
representations and warranties of Buyer herein contained (as qualified by
matters set forth as exceptions thereto in the Disclosure Schedule of Buyer)
shall be true in all material respects (except for such representations and
warranties as are qualified by their terms by reference to materiality, a
material adverse change, or a material adverse effect, which representations and
warranties as so qualified shall be true in all respects) at the Closing Date
with the same effect as though made at such time; Buyer shall have in performed
all obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by it at or prior to the Closing Date
(except for such failures to perform as have not had and are not reasonably
expected to have, individually or in the aggregate, a material adverse effect
with respect to Buyer or to adversely affect the ability of Buyer to consummate
the transactions contemplated by this Agreement); and Buyer shall have delivered
to Sellers and the Corporations a certificate of Buyer in form and substance
satisfactory to Sellers and the Corporations, dated the Closing Date and signed
by its chief executive officer and chief financial officer, to such effect.
(b) Consents. Buyer shall have obtained all Approvals of third
parties set forth on Schedule 4.3 in form and substance reasonably acceptable to
Sellers.
(c) Opinion of Counsel. Sellers and the Corporations shall
receive at the Closing from Munger, Tolles & Olson LLP and Barton P. Pachino,
Senior Vice President, General Counsel of Buyer, opinions dated the Closing
Date, in form and substance substantially as set forth in Exhibits M and N,
respectively.
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(d) Assumption of Guarantees; Other Deliveries. Buyer shall
have assumed the guarantees identified in Schedule 7.3(d) by instruments
reasonably acceptable to Sellers that fully and completely release each Seller,
Corporation and Shareholder from any liability under said guarantees, and shall
have delivered to Sellers such other customary closing documents as Sellers may
reasonably request for the consummation of the transactions contemplated hereby.
ARTICLE VIII
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 TERMINATION OF AGREEMENT.
Anything herein to the contrary notwithstanding, this
Agreement and the transactions contemplated by this Agreement shall terminate
upon written notice by Buyer or Sellers if the Closing does not occur on or
before the close of business on February 15, 1999 and otherwise may be
terminated at any time before the Closing as follows and in no other manner:
(a) Mutual Consent. By mutual consent in writing of Buyer and
Sellers.
(b) Conditions to Buyer's Performance Not Met. By Buyer by
written notice to Sellers if any event occurs or condition exists which would
render impossible the satisfaction of one or more conditions to the obligations
of Buyer to consummate the transactions contemplated by this Agreement as set
forth in Section 7.1 or 7.2.
(c) Conditions to Sellers' Performance Not Met. By Sellers by
written notice to Buyer if any event occurs or condition exists which would
render impossible the satisfaction of one or more conditions to the obligation
of Seller to consummate the transactions contemplated by this Agreement as set
forth in Section 7.1 or 7.3.
(d) Material Breach. By Buyer or Sellers if there has been a
misrepresentation or other breach by the other party in its representations,
warranties, or covenants set forth in or pursuant to this Agreement sufficient
to result in a material adverse change; provided, however, that if such breach
is susceptible to cure, the breaching party shall have ten business days after
receipt of notice from the other party of its intention to terminate this
Agreement if such breach continues in which to cure such breach.
8.2 EFFECT OF TERMINATION.
In the event that this Agreement shall be terminated pursuant
to Section 8.1, all further obligations of the parties under this Agreement
shall terminate without further liability of any party to another; provided that
the obligations of the parties contained in Section 6.2, Section 10.9 and
Section 10.14 shall survive any such termination. A termination under Section
8.1 shall not relieve any party of any liability for a breach of, or for any
misrepresentation under, this Agreement, or be deemed to constitute a waiver of
any available remedy (including specific performance if available) for any such
breach or misrepresentation.
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8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in or made
pursuant to this Agreement shall survive the Closing and shall remain in full
force and effect until March 31, 2001, except that (i) the representations and
warranties in Sections 2.2, 2.3, 2.4, 2.5(d), and 2.20 shall remain in full
force and effect until March 31, 2002 and (ii) the representation and warranty
in the second sentence of Section 2.8(a) shall terminate upon the Closing. The
parties acknowledge and agree that the only representations and warranties
regarding product or construction warranties, construction defects and product
defects are the representations and warranties contained in Section 2.8(c) and
shall not be deemed to be covered by Section 2.5(d).
ARTICLE IX
INDEMNIFICATION
9.1 OBLIGATIONS OF SELLERS AND CORPORATION.
Each Seller and Corporation, jointly and severally, agrees to
indemnify and hold harmless Buyer (including with respect to claims for
indemnification by its officers, directors and agents) and, after the Closing,
the Homebuilding Entities, from and against any and all Losses of such an
Indemnified Party as a result of, or based upon or arising from, (i) any breach
of any of the representations or warranties made by Sellers and the Corporations
in or pursuant to this Agreement (other than the second sentence of Section
2.8(a) and Section 2.21) or any nonperformance of any of the covenants or
agreements of Sellers and the Corporations hereunder, (ii) the litigation
identified on Schedule 9.1, (iii) the severance payments referred to in Section
2.16(a) (v), (iv) any Excluded Assets or Excluded Liabilities (including without
limitation any non-Homebuilding Business conducted by the Homebuilding Entities
prior to the Closing Date and any non-Homebuilding Business conducted by
entities in the Lewis group of companies other than the Homebuilding Entities at
any time), or (v) any breach of the representations and warranties made by
Sellers and the Corporations in or pursuant to, or any nonperformance of any of
the covenants or agreements of Sellers and the Corporations under, Section 2.21.
9.2 OBLIGATIONS OF BUYER.
Buyer agrees to indemnify and hold harmless Sellers and the
Corporations (including with respect to claims for indemnification by its
officers, directors and agents) and Shareholders from and against any Losses of
such an Indemnified Party as a result of, or based upon or arising from, (i) any
breach of any of the representations or warranties made by Buyer in or pursuant
to this Agreement or any nonperformance of any of the covenants or agreement of
Buyer hereunder, or (ii) the Included Liabilities and the Homebuilding Business
of the Homebuilding Entities (including, without limitation, all litigation
existing on the Closing Date or instituted thereafter relating to the
Homebuilding Business of the Homebuilding Entities, except for litigation
referred to in Schedule 9.1).
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9.3 PROCEDURE.
Except as otherwise specifically provided in Section 6.4:
(a) Notice. Any party seeking indemnification with respect to
any Loss shall give notice to the Indemnifying Party on or before the applicable
date specified in Section 9.4.
(b) Defense. If any claim, demand or liability is asserted by
any third party against any Indemnified Party, the Indemnifying Party shall have
the right, if requested by the Indemnifying Party, and shall upon the written
request of the Indemnified Party, defend any actions or proceedings brought
against the Indemnified Party in respect of matters embraced by the indemnity.
In any such action or proceeding, the Indemnified Party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
its own expense unless (i) the Indemnifying Party and the Indemnified Party
mutually agree to the retention of such counsel or (ii) the named parties to any
such suit, action or proceeding (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party, and in the reasonable judgment
of the Indemnified Party, representation of the Indemnifying Party and the
Indemnified Party by the same counsel would be inadvisable due to potential
conflicts of interests between them. The parties shall cooperate in the defense
of all third party claims which may give rise to Indemnifiable Claims hereunder.
In connection with the defense of any claim, each party shall make available to
the party controlling such defense, any books, records or other documents within
its control that are reasonably requested in the course of or necessary or
appropriate for such defense. Neither the Indemnifying Party nor the Indemnified
Party (a "Settling Party") will, without the written consent of the other, (i)
settle or compromise any third party claim or consent to the entry of any
judgment with respect to a third party claim that does not include as an
unconditional term thereof the delivery by the third party claimant to the other
of a written release from all liability in respect of such third party claim or
(ii) settle or compromise any third party claim in any manner or consent to the
entry of any judgment or order that may adversely affect the other, except for
or as a result of money damages or other money payments for which the
Indemnifying Party has acknowledged in writing its obligation and ability to
indemnify the Indemnified Party in full.
(c) Calculation of Loss. The amount of any Loss for which
indemnification is provided under Section 9.1 or 9.2 shall be net of any
insurance proceeds received by the Indemnified Party. If such insurance proceeds
are received after payment by the Indemnifying Party of any amount otherwise
required to be paid to an Indemnified Party pursuant to Section 9.1 or 9.2, the
Indemnified Party shall repay to the Indemnifying Party promptly after such
receipt any amount the Indemnifying Party would not have had to pay pursuant to
Section 9.1 or 9.2 had such receipt occurred at the time of such payment.
(d) Tax Treatment of Indemnification Payments; Reduction for
Tax Benefits. Any payment under this Article IX shall be treated by the parties
as an adjustment to the Purchase Price. Any payment under Section 9.1 otherwise
due and payable hereunder shall be decreased to the extent of any net reduction
in Taxes payable by the Buyer and/or any affiliate thereof resulting from the
Loss (whether such reduction is realized with respect to the year in
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which the Loss occurs or with respect to an earlier or later year), such net
reduction to be determined at an assumed marginal tax rate equal to 40%.
9.4 SURVIVAL.
This indemnification shall survive the Closing and shall
remain in effect until March 31, 2001, except that this indemnification shall
remain in effect until March 31, 2002 with respect to the representations and
warranties in Sections 2.2, 2.3, 2.4, 2.5(d), and 2.20 and until the expiration
according to its terms of any covenant herein contemplating performance for a
longer period. Any matter as to which a claim has been asserted by notice to the
other party that is pending or unresolved at March 31, 2001 or 2002, as
applicable, shall continue to be covered by this Article IX until such matter is
finally terminated or otherwise resolved by the parties under this Agreement and
any amounts payable hereunder are finally determined and paid.
9.5 LIMITATION OF REMEDIES.
The remedies provided in this Article IX shall constitute the
sole and exclusive remedy with respect to matters set forth in this Article IX.
The indemnification obligations of Sellers and Corporations set forth in clauses
(ii), (iii), (iv) and (v) of Section 9.1 and the indemnification obligations of
Buyer set forth in Section 9.2(ii) shall be unlimited as to time or amount. With
respect to the indemnification obligations of Sellers and Corporations set forth
in Section 9.1(i) and the indemnification obligations of Buyer set forth in
Section 9.2(i), neither Buyer or Sellers and the Corporations shall be obligated
to indemnify the Indemnified Parties until the aggregate amount of Losses for
which indemnity would otherwise be available is in excess of $750,000, in which
event the Indemnifying Party shall be obligated to indemnify for Losses in
excess of such amount; provided, however, that Sellers and Corporations, in the
aggregate, and Buyer shall be obligated to indemnify for Losses up to $25
million and, for Losses in excess of $25 million and less than or equal to $51.5
million, one-half of such Losses, it being understood that neither Sellers and
Corporations, in the aggregate, nor Buyer shall have any obligation to indemnify
with respect to Losses in excess of $51.5 million.
ARTICLE X
GENERAL
10.1 AMENDMENTS; WAIVERS.
This Agreement and any schedule or exhibit attached hereto may
be amended only by agreement in writing of all parties. No waiver of any
provision nor consent to any exception to the terms of this Agreement shall be
effective unless in writing and signed by the party to be bound and then only to
the specific purpose, extent and instance so provided.
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10.2 SCHEDULES, EXHIBITS, INTEGRATION.
Each schedule and exhibit delivered pursuant to the terms of
this Agreement shall be in writing and shall constitute a part of this
Agreement, although schedules need not be attached to each copy of this
Agreement. This Agreement, together with such schedules and exhibits,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof. This Agreement amends and restates in its entirety that certain
Purchase Agreement, dated October 20, 1998, among Buyer and the sellers named
therein as contemplated by and for the parties' convenience as stated in Section
2 of that certain Amendment to Purchase Agreement dated the date of this
Agreement.
10.3 EFFORTS; FURTHER ASSURANCES.
Each party will use its commercially reasonable efforts to
cause all conditions to its obligations hereunder to be timely satisfied and to
perform and fulfill all obligations on its part to be performed and fulfilled
under this Agreement, to the end that the transactions contemplated by this
Agreement shall be effected substantially in accordance with its terms as soon
as reasonably practicable. The parties shall cooperate with each other in such
actions and in securing requisite Approvals. Each party shall execute and
deliver both before and after the Closing such further certificates, agreements
and other documents and take such other actions as the other party may
reasonably request to consummate or implement the transactions contemplated
hereby or to evidence such events or matters.
10.4 GOVERNING LAW.
This Agreement, the legal relations between the parties and
any Action, whether contractual or non-contractual, instituted by any party with
respect to matters arising under or growing out of or in connection with or in
respect of this Agreement, including but not limited to the negotiation,
execution, interpretation, coverage, scope, performance, breach, termination,
validity, or enforceability of this Agreement, shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and performed in such State and without regard to conflicts of
law doctrines.
10.5 NO ASSIGNMENT.
Neither this Agreement nor any rights or obligations under it
are assignable except that (i) Buyer may assign its rights hereunder (including
but not limited to its rights under Article IX) to any Affiliates of Buyer, in
which event Buyer shall remain liable to Sellers and the Corporations for the
payment of the Purchase Price and other obligations of Buyer hereunder
notwithstanding a permitted assignment, and (ii) Sellers may assign their rights
hereunder to any Affiliates of Sellers, in which event Sellers shall remain
liable to Buyer for the delivery of the Stock, Partnership Interests and Member
Interests and other obligations of Sellers hereunder notwithstanding a permitted
assignment.
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10.6 HEADINGS.
The descriptive headings of the Articles, Sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
10.7 COUNTERPARTS.
This Agreement may be executed in any number of identical
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute but one and the same instrument. Any
signature page of this instrument may be detached from any counterpart without
impairing the legal effect of any signatures thereof, and may be attached to
another counterpart, identical in form thereto, but having attached to it one or
more additional signature pages. Delivery by any party or its respective
representatives of telecopied (counterpart) signature pages shall be as binding
an execution and delivery of this Agreement by such party as if the other party
had received the actual physical copy of the entire Agreement with an ink
signature from such party.
10.8 PUBLICITY AND REPORTS.
Sellers, Corporations and Buyer shall coordinate all publicity
relating to the transactions contemplated by this Agreement and no party shall
issue any press release, publicity statement or other public notice relating to
this Agreement, or the transactions contemplated by this Agreement, without
consulting with the other party except to the extent that a particular action is
required by applicable law or rule of or listing agreement with a securities
exchange on which such party's securities are listed for trading or quotation.
10.9 CONFIDENTIALITY.
All information disclosed by any party (or its
representatives) whether before or after the date hereof, in connection with the
transactions contemplated by, or the discussions and negotiations preceding,
this Agreement to any other party (or its representatives) shall be kept
confidential by such other party and its representatives and shall not be used
by any such Persons other than as contemplated by this Agreement, except to the
extent that such information (i) was known by the recipient when received, (ii)
it is or hereafter becomes lawfully obtainable from other sources, (iii) is
necessary or appropriate to disclose to a Governmental Entity having
jurisdiction over the parties, (iv) as may otherwise be required by law or (v)
to the extent such duty as to confidentiality is waived in writing by the other
party; provided, however, that following the Closing Date nothing in this
section shall apply to or restrict the use of information by Buyer or the
Homebuilding Entities in their businesses. If this Agreement is terminated in
accordance with its terms, each party shall use all reasonable efforts to return
upon written request from the other party all documents (and reproductions
thereof) received by it or its representatives from such other party (and, in
the case of reproductions, all such reproductions made by the receiving party)
that include information not within the exceptions contained in the first
sentence of this Section 10.9, unless the recipients provide assurances
reasonably satisfactory to the requesting party that such documents have been
destroyed.
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10.10 ALTERNATIVE DISPUTE RESOLUTION.
(a) Negotiation. In the event of any dispute or disagreement
among Sellers, the Corporations and Buyer as to the interpretation of any
provision of this Agreement or any other agreement or instrument delivered in
connection with this Agreement, or the performance of obligations hereunder or
thereunder, the matter, upon written request of either party, shall be referred
to representatives of the parties for decision, each party being represented by
a senior executive officer of the party or a controlling affiliate (a "Dispute
Representative"). The Dispute Representatives shall promptly meet in a good
faith effort to resolve the dispute. If the Dispute Representatives do not agree
upon a decision within thirty (30) calendar days after reference of the matter
to them, Sellers, the Corporations and Buyer shall be free to exercise the
remedies available to them under subsection (b).
(b) Arbitration. Any controversy, dispute or claim (a "Claim")
arising out of or relating in any way to this Agreement or any other agreement
or instrument delivered in connection with this Agreement, or the transactions
arising hereunder or thereunder that cannot be resolved by negotiation pursuant
to subsection (a) shall be settled exclusively by a binding arbitration
("Arbitration"), conducted by a single arbitrator (the "Arbitrator") chosen by
the parties as described below. Any party may initiate the Arbitration by
written notice to the other and to the Arbitration Tribunal (as defined below).
The date on which the notice is given is called the "Arbitration Initiation
Date." The fees and expenses of the Arbitration Tribunal and the Arbitrator
shall be shared equally by the parties and advanced by them from time to time as
required; provided, however, that at the conclusion of the Arbitration, the
Arbitrator may award costs and expenses (including the costs of the Arbitration
previously advanced and the fees and expenses of attorneys, accountants and
other experts) to the prevailing party. Except as expressly modified herein, the
Arbitration shall be conducted in accordance with the provisions of Section 1280
et seq. of the California Code of Civil Procedure or their successor sections
("CCP"), and shall constitute the exclusive remedy for the determination of any
Claim, including whether the Claim is subject to arbitration. The Arbitration
shall be conducted under the procedures of the Arbitration Tribunal, except as
modified herein. The Arbitration Tribunal shall be the Los Angeles Office of
JAMS/ENDISPUTE ("JAMS"), unless the parties to the dispute cannot agree on a
JAMS arbitrator, in which case the Arbitration Tribunal shall be the Los Angeles
Office of the American Arbitration Association ("AAA"). The Arbitrator shall be
a retired judge or other arbitrator employed by JAMS selected by mutual
agreement of the parties to the dispute, and if they cannot so agree within 30
days after the Arbitration Initiation Date, then the Arbitrator shall be
selected from the Large and Complex Case Project ("LCCP") panel of the AAA, by
mutual agreement of the parties to the dispute. If the parties to the dispute
cannot agree on an Arbitrator within 60 days after the Arbitration Initiation
Date, the Arbitrator shall be selected by the AAA, from its LCCP panel, through
such procedures as the AAA regularly follows. In all events, the Arbitrator must
have had not less than 15 years experience as a practitioner or arbitrator of
complex business transactions. If for any reason the AAA does not so act, any
party to the dispute may apply to the Superior Court in and for Los Angeles
County, California, for the appointment of a single arbitrator. No
pre-arbitration discovery shall be permitted, except that the Arbitrator shall
have the power in his or her sole discretion, on application by either party, to
order pre-arbitration examination solely of those witnesses and documents that
the other party
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intends to introduce in its case-in-chief at the arbitration hearing. Prior to
the commencement of arbitration hearings, the Arbitrator shall have the power,
in his or her discretion, upon either party's motion but not on his or her own
initiative, to order the parties to engage in pre-arbitration mediation for a
period not exceeding 30 days before a mediator mutually acceptable to the
parties. The Arbitrator shall try any and all issues of law or fact and be
prepared to make the award within 90 days after the close of evidence in the
Arbitration. When prepared to make the award, the Arbitrator shall first so
inform the parties, who shall have 10 days to attempt to resolve the matter by a
binding agreement between them. If the parties so resolve the matter, the
Arbitrator shall not make any award. If the parties do not so resolve the
matter, the Arbitrator shall make the award on the eleventh day following his
notice of being prepared to make the award. The Arbitrator's award shall dispose
of all of the claims that are the subject of the Arbitration and shall follow
California law and precedent, and shall include written statements of fact and
conclusions of law. The Arbitrator shall be empowered to (i) enter equitable as
well as legal relief, (ii) provide all temporary and/or provisional remedies,
and (iii) enter binding equitable orders. The award rendered by the Arbitrator
shall be final and not subject to judicial review, and judgment thereon may be
entered in any court of competent jurisdiction.
10.11 PARTIES IN INTEREST.
This Agreement shall be binding upon and inure to the benefit
of each party, and nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement except for Sections 6.6, 9.1 and 10.5
(which are intended to be for the benefit of the persons provided for therein
and may be enforced by such persons).
10.12 KNOWLEDGE CONVENTION.
Whenever any statement herein or in any schedule, exhibit,
certificate or other documents delivered to any party pursuant to this Agreement
is made "to Sellers' knowledge" or words of similar intent or effect, such
statement shall be deemed to mean the actual conscious knowledge of (i) any
Seller who is an individual, (ii) the Shareholders, for any Seller or
Corporation that is a corporation or (iii) any Seller after inquiry of Kenneth
P. Corhan, Leon C. Swails and Leah S. Bryant as to the subject matter.
10.13 NOTICES.
Any notice or other communication hereunder must be given in
writing and delivered in person or sent by telecopy, by a nationally-recognized
overnight courier service or by certified or registered mail, postage prepaid,
receipt requested, addressed as follows:
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IF TO BUYER, ADDRESSED TO:
Kaufman and Broad Home Corporation
10990 Wilshire Boulevard
Los Angeles, California 90024
Attention: Michael F. Henn
Chief Financial Officer
Barton P. Pachino
General Counsel
Fax No.: 310-231-4280
with a copy to
Munger, Tolles & Olson LLP
355 South Grand Avenue
Los Angeles, California 90071
Attention: R. Gregory Morgan, Esq.
Fax No.: 213-687-3702
IF TO SELLERS OR CORPORATIONS, ADDRESSED TO:
John M. Goodman
Lewis Operating Corp.
11 56 N. Mountain Ave.
Upland, CA 91785
Fax No.: (909) 912-6770
WITH A COPY TO:
O'Melveny & Myers LLP
400 S. Hope Street
Los Angeles, California 90071
Attention: Richard A. Boehmer, Esq.
Fax: No.: (213) 430-6407
or to such other address or to such other person as any party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 10.13 and an appropriate answer back is received, (ii) if given by
overnight courier, one business day following delivery by sender to such
overnight courier, (iii) if given by mail, three days after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid or (iv) if given by any other means, when actually received at such
address.
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10.14 EXPENSES.
Except as set forth in Sections 10.10 and 10.16, Sellers,
Corporations and Buyer shall each pay their own expenses incident to the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including but not limited to the fees, expenses and
disbursements of their respective investment bankers, accountants and counsel.
Any such expenses of the Homebuilding Entities, or any expenses paid by the
Homebuilding Entities on behalf of Sellers or Corporations, shall be paid by
Sellers or Corporations prior to or concurrently with the Closing.
10.15 REMEDIES; WAIVER.
To the extent permitted by Law, all rights and remedies
existing under this Agreement are cumulative to and not exclusive of, any rights
or remedies otherwise available under applicable Law. No failure on the part of
any party to exercise or delay in exercising any right hereunder shall be deemed
a waiver thereof, nor shall any single or partial exercise preclude any further
or other exercise of such or any other right.
10.16 ATTORNEY'S FEES.
In the event of any Action by any party arising under or out
of, in connection with or in respect of, this Agreement or the transactions
contemplated hereby, the prevailing party shall be entitled to reasonable
attorney's fees, costs and expenses incurred in such Action. Attorney's fees
incurred in enforcing any judgement in respect of this Agreement are recoverable
as a separate item. The parties intend that the preceding sentence be severable
from the other provisions of this Agreement, survive any judgment and, to the
maximum extent permitted by law, not be deemed merged into such judgment.
10.17 REPRESENTATION BY COUNSEL; INTERPRETATION.
Sellers, Corporations and Buyer each acknowledge that each
party to this Agreement has been represented by counsel in connection with this
Agreement and the transactions contemplated by this Agreement. Accordingly, any
rule of Law, including but not limited to Section 1654 of the California Civil
Code, or any legal decision that would require interpretation of any claimed
ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the intent of Buyer, Sellers and
Corporations.
10.18 SEVERABILITY.
If any provision of this Agreement is determined to be
invalid, illegal or unenforceable by any Governmental Entity, the remaining
provisions of this Agreement shall remain in full force and effect provided that
the economic and legal substance of the transactions contemplated is not
affected in any manner materially adverse to any party. In event of any such
determination, the parties agree to negotiate in good faith to modify this
Agreement to fulfill as closely as possible the original intents and purposes
hereof. To the extent permitted by Law, the
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parties hereby to the same extent waive any provision of Law that renders any
provision hereof prohibited or unenforceable in any respect.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers.
Dated: January 7, 1999 BUYER
KAUFMAN AND BROAD HOME CORPORATION
By: /s/ MICHAEL F. HENN
-----------------------------------------
Its: Senior Vice President & Chief
Financial Officer
SELLERS
Ralph M. Lewis
By: /s/ ROBERT E. LEWIS
--------------------------------------------
Robert E. Lewis, his attorney-in-fact
/s/ ROBERT E. LEWIS ON BEHALF
OF GOLDY S. LEWIS
--------------------------------------------
Goldy S. Lewis
/s/ RICHARD A. LEWIS
--------------------------------------------
Richard A. Lewis
/s/ ROBERT E. LEWIS
--------------------------------------------
Robert E. Lewis
/s/ ROGER G. LEWIS
--------------------------------------------
Roger G. Lewis
/s/ RANDALL W. LEWIS
--------------------------------------------
Randall W. Lewis
/s/ JOHN M. GOODMAN
--------------------------------------------
John M. Goodman
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COLLINE ENTERPRISES, INC.
By: /s/ RICHARD A. LEWIS
----------------------------------------
Name: Richard A. Lewis
Title: President
TERRAIN ENTERPRISES, INC.
By: /s/ ROBERT E. LEWIS
----------------------------------------
Name: Robert E. Lewis
Title: President
MARMOT ENTERPRISES, INC.
By: /s/ ROGER G. LEWIS
----------------------------------------
Name: Roger G. Lewis
Title: President
GITAN ENTERPRISES, INC.
By: /s/ RANDALL W. LEWIS
----------------------------------------
Name: Randall W. Lewis
Title: President
TOPSPIN ENTERPRISES, INC.
By: /s/ JOHN M. GOODMAN
----------------------------------------
Name: John M. Goodman
Title: President
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LDC PLATTE, LLC
By: Lewis Holding Company, a Delaware
limited liability company, its member
By: Forehand Development Corp., a
California corporation,
its member
By /s/ JOHN M. GOODMAN
--------------------------
John M. Goodman,
its Authorized Agent
LHC PLATTE, LLC
By: Lewis Holding Company, a Delaware
limited liability company, its member
By: Forehand Development Corp., a
California corporation, its
member
By /s/ JOHN M. GOODMAN
---------------------------
John M. Goodman,
its Authorized Agent
LHE PLATTE, LLC
By: Lewis Holding Company, a Delaware
limited liability company, its member
By: Forehand Development Corp., a
California corporation, its
member
By /s/ JOHN M. GOODMAN
--------------------------
John M. Goodman,
its Authorized Agent
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LHN PLATTE, LLC
By: Lewis Holding Company, a Delaware
limited liability company, its member
By: Forehand Development Corp., a
California corporation, its
member
By /s/ JOHN M. GOODMAN
-------------------------
John M. Goodman,
its Authorized Agent
LP PLATTE, LLC
By: Lewis Holding Company, a Delaware
limited liability company, its member
By: Forehand Development Corp., a
California corporation, its
member
By /s/ JOHN M. GOODMAN
---------------------------
John M. Goodman,
its Authorized Agent
CORPORATIONS
ROSEBUD CONSTRUCTION, INC.
By /s/ RICHARD A. LEWIS
---------------------------------------
Name: Richard A. Lewis
Title: President
WESTERN SUPPLY CORP.
By /s/ RICHARD A. LEWIS
---------------------------------------
Name: Richard A. Lewis
Title: President
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KIMMEL ENTERPRISES, INC.
By /s/ ROBERT E. LEWIS
--------------------------------------
Name: Robert E. Lewis
Title: President
REPUBLIC SALES CO., INC.
By /s/ RANDALL W. LEWIS
--------------------------------------
Name: Randall W. Lewis
Title: President
PARKSIDE CONSTRUCTION CO., INC.
By /s/ ROBERT E. LEWIS
--------------------------------------
Name: Robert E. Lewis
Title: President
REGAL CONSTRUCTION CO., INC.
By /s/ RANDALL W. LEWIS
--------------------------------------
Name: Randall W. Lewis
Title: President
FOREHAND DEVELOPMENT CORP.
By /s/ JOHN M. GOODMAN
--------------------------------------
Name: John M. Goodman
Title: President
REVERS ENTERPRISES, INC.
By /s/ RANDALL W. LEWIS
--------------------------------------
Name: Randall W. Lewis
Title: President
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EMPIRE BUILDING CORP.
By /s/ ROBERT E. LEWIS
--------------------------------------
Name: Robert E. Lewis
Title: President
ROSEMONT OF NEVADA, INC.
By /s/ ROBERT E. LEWIS
--------------------------------------
Name: Robert E. Lewis
Title: President
LARKWOOD DEVELOPMENT OF
NEVADA, INC.
By /s/ RICHARD A. LEWIS
--------------------------------------
Name Richard A. Lewis
Title: President
FLAGSTONE DEVELOPMENT OF
NEVADA, INC.
By /s/ RICHARD A. LEWIS
---------------------------------------
Name: Richard A. Lewis
Title: President
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CRESTVIEW CONSTRUCTION OF
NEVADA, INC.
By /s/ ROBERT E. LEWIS
-------------------------------------
Name: Robert E. Lewis
Title: President
CORONET CONSTRUCTION OF
NEVADA, INC.
By /s/ RANDALL W. LEWIS
-------------------------------------
Name: Randall W. Lewis
Title: President
BACKHAND DEVELOPMENT CORP.
By /s/ JOHN M. GOODMAN
-------------------------------------
Name: John M. Goodman
Title: President
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