\n10.15 Remedies; Waiver……………………………………………………………………………54
\n10.16 Attorney’s Fees…………………………………………………………………………….54
\n10.17 Representation By Counsel; Interpretation……………………………………………………..54
\n10.18 Severability……………………………………………………………………………….54
\n<\/c><\/c><\/s><\/caption>\n<\/table>\n -iv-<\/p>\n
6<\/p>\n
PURCHASE AGREEMENT<\/p>\n
This Purchase Agreement is entered into among Kaufman and
\nBroad Home Corporation, a Delaware corporation (“Buyer”), the individuals,
\ncorporations and limited liability companies identified on the signature page of
\nthis Agreement as “Sellers” (individually a “Seller” and collectively, the
\n“Sellers”) and the corporations identified on the signature page of this
\nAgreement as “Corporations” (individually a “Corporation” and collectively, the
\n“Corporations”).<\/p>\n
R E C I T A L S<\/p>\n
WHEREAS, Sellers collectively own (i) all the partnership
\ninterests in Lewis Homes of California, a California general partnership
\n(“LHC”), Lewis Development Co., a California general partnership (“Lewis
\nDevelopment”), Lewis Homes Enterprises, a California general partnership
\n(“LHE”), Lewis Homes of Nevada, a Nevada general partnership (“LHN”), and Lewis
\nProperties, a Nevada general partnership (“Lewis Properties,” and collectively
\nwith LHC, Lewis Development, LHE and LHN, the “Parent Partnerships”), (ii) all
\nof the issued and outstanding capital stock of Lewis Homes Management Corp., a
\nCalifornia corporation (“Management Corp.”), and Branching Tree Corp., a
\nCalifornia corporation (“Branching Tree”), and (iii) all the member interests of
\n(a) LDC Arctic, LLC, a Delaware limited liability company, LHC Arctic, LLC, a
\nDelaware limited liability company, LHE Arctic, LLC, a Delaware limited
\nliability company, LHN Arctic, LLC, a Delaware limited liability company, and LP
\nArctic, LLC, a Delaware limited liability company (collectively, the “Holding
\nLLCs”), (b) Mather Housing Company, LLC, a California limited liability company
\n(“Mather”), and (c) Desert Inn Development, L.L.C., a Nevada limited liability
\ncompany (“Desert Inn”). The Parent Partnerships, directly and through their
\ninterests in joint ventures, general partnerships and limited liability
\ncompanies, and Management Corp., Branching Tree, Mather and Desert Inn,
\nexcluding the Excluded Assets (as defined below), collectively constitute the
\nhomebuilding operations of the members of the Lewis Homes group of companies in
\nCalifornia and Nevada (the “Homebuilding Business”);<\/p>\n
WHEREAS, certain non-Homebuilding Business and other assets
\nand liabilities of the Homebuilding Entities identified on Exhibit A hereto
\n(collectively, the “Excluded Assets” and “Excluded Liabilities”) will be removed
\nby Sellers prior to the Closing (as defined below) or conveyed to Sellers or
\ntheir designees after the Closing, and certain Homebuilding Business assets and
\nliabilities of Sellers identified on Exhibit A hereto (the “Included Assets” and
\n“Included Liabilities”) will be transferred by Sellers or their non-Homebuilding
\nEntity affiliates to the Homebuilding Entities prior to the Closing;<\/p>\n
WHEREAS, Sellers desire to sell and Buyer desires to buy the
\npartnership interests in the Parent Partnerships (the “Partnership Interests”),
\nall of the issued and outstanding capital stock of Management Corp. and
\nBranching Tree (the “Stock”) and all the member interests of the Holding LLCs,
\nMather and Desert Inn (the “Member Interests”) for the consideration set forth
\nherein.<\/p>\n
1
\n 7<\/p>\n
WHEREAS, the Corporations, who were formerly partners of one
\nor more of the Parent Partnerships and are currently members of one or more of
\nthe Partnership Sellers, desire to make certain representations and warranties
\nto and agreements with Buyer and Buyer desires to make certain representations
\nand warranties to and agreements with the Corporations, all in accordance with
\nthe terms of this Agreement.<\/p>\n
A G R E E M E N T<\/p>\n
In consideration of the mutual promises contained herein and
\nintending to be legally bound the parties agree as follows:<\/p>\n
ARTICLE I<\/p>\n
DEFINITIONS\/PURCHASE & SALE\/CLOSING<\/p>\n
1.1 DEFINITIONS.<\/p>\n
For all purposes of this Agreement, except as otherwise
\nexpressly provided,<\/p>\n
(a) the terms defined in this Article I have the meanings
\nassigned to them in this Article I and include the plural as well as the
\nsingular,<\/p>\n
(b) all accounting terms not otherwise defined herein have the
\nmeanings assigned under GAAP,<\/p>\n
(c) all references in this Agreement to designated “Articles,”
\n“Sections” and other subdivisions are to the designated Articles, Sections and
\nother subdivisions of the body of this Agreement,<\/p>\n
(d) pronouns of either gender or neuter shall include, as
\nappropriate, the other pronoun forms, and<\/p>\n
(e) the words “herein,” “hereof” and “hereunder” and other
\nwords of similar import refer to this Agreement as a whole and not to any
\nparticular Article, Section or other subdivision.<\/p>\n
As used in this Agreement and the Exhibits and Schedules
\ndelivered pursuant to this Agreement, the following definitions shall apply.<\/p>\n
“Action” means any action, complaint, petition, investigation,
\nsuit or other proceeding, whether civil or criminal, in law or in equity, or
\nbefore any arbitrator or Governmental Entity.<\/p>\n
2
\n 8<\/p>\n
“Affiliate” means a Person that directly, or indirectly
\nthrough one or more intermediaries, controls, or is controlled by, or is under
\ncommon control with, a specified Person.<\/p>\n
“Agreement” means this Agreement by and among Buyer and
\nSellers as amended or supplemented together with all Exhibits and Schedules
\nattached or incorporated by reference.<\/p>\n
“Approval” means any approval, authorization, consent, consent
\nto assignment or transfer, qualification or registration, or any waiver of any
\nof the foregoing, required to be obtained from, or any notice, statement or
\nother communication required to be filed with or delivered to, any Governmental
\nEntity or any other Person.<\/p>\n
“Associate” of a Person means<\/p>\n
(i) a corporation or organization of which such
\nPerson is an officer or partner or is, directly or indirectly, the beneficial
\nowner of 10% or more of any class of equity securities;<\/p>\n
(ii) any trust or other estate in which such Person
\nhas a substantial beneficial interest or as to which such person serves as
\ntrustee or in a similar capacity; and<\/p>\n
(iii) any relative or spouse of such Person or any
\nrelative of such spouse.<\/p>\n
“Auditors” means Ernst & Young LLP, independent public
\naccountants to Management Corp., Branching Tree, Mather, Desert Inn, the Parent
\nPartnerships and their respective Subsidiaries.<\/p>\n
“Branching Tree Sellers” means the Sellers identified as such
\non Exhibit B.<\/p>\n
“Buyer Common Stock” has the meaning set forth in Section 1.2.<\/p>\n
“Closing” means the consummation of the purchase and sale of
\nthe Partnership Interests, Member Interests, and Stock under this Agreement.<\/p>\n
“Closing Date” means the date of the Closing.<\/p>\n
“Code” means the Internal Revenue Code of 1986, as amended.<\/p>\n
“Contract” means any agreement, arrangement, bond, commitment,
\nfranchise, indemnity, indenture, instrument, lease, license or understanding,
\nwhether or not in writing.<\/p>\n
“Cost Sharing Agreements” has the meaning set forth in Section
\n5.12.<\/p>\n
“Desert Inn Sellers” means the Sellers identified as such on
\nExhibit B.<\/p>\n
“Disclosure Schedule” means the Disclosure Schedules dated
\nJanuary 7, 1999 and delivered by Sellers to Buyer, or Buyer to Sellers, as the
\ncase may be, as exhibits to this Agreement. The Sections of the Disclosure
\nSchedules shall be numbered to correspond to the <\/p>\n
3
\n 9<\/p>\n
applicable Section of this Agreement and, together with all matters under such
\nheading, shall be deemed to qualify only that Section.<\/p>\n
“Encumbrance” means any claim, charge, easement, encumbrance,
\nlease, covenant, security interest, lien, option, pledge, rights of others, or
\nrestriction (whether on voting, sale, transfer, disposition or otherwise),
\nwhether imposed by agreement, understanding, law, equity or otherwise, except
\nfor any restrictions on transfer generally arising under any applicable federal
\nor state securities law.<\/p>\n
“Equity Securities” means any capital stock or other equity
\ninterest or any securities convertible into or exchangeable for capital stock or
\nother equity interest or any other rights, warrants or options to acquire any of
\nthe foregoing securities.<\/p>\n
“ERISA” means the Employee Retirement Income Security Act of
\n1974, as amended, and the related regulations and published interpretations.<\/p>\n
“Excluded Assets” has the meaning set forth in the Recitals.<\/p>\n
“Excluded Liabilities” has the meaning set forth in the
\nRecitals.<\/p>\n
“Former Partnership Properties” means those Excluded Assets
\nlisted on Exhibit O.<\/p>\n
“GAAP” means generally accepted accounting principles in the
\nUnited States, as in effect from time to time.<\/p>\n
“Governmental Entity” means any government or any agency
\n(including any licensing agency), bureau, board, commission, court, department,
\nofficial, political subdivision, tribunal or other instrumentality of any
\ngovernment, whether federal, state or local, domestic or foreign.<\/p>\n
“Hart-Scott-Rodino Act” means the Hart-Scott-Rodino Antitrust
\nImprovements Act of 1976, as amended, and the related regulations and published
\ninterpretations.<\/p>\n
“Hazardous Substance” means (but shall not be limited to)
\nsubstances that are defined or listed in, or otherwise classified pursuant to,
\nany applicable Laws as “hazardous substances,” “hazardous materials,” “hazardous
\nwastes” or “toxic substances,” or any other formulation intended to define, list
\nor classify substances by reason of deleterious properties such as ignitability,
\ncorrosivity, reactivity, radioactivity or carcinogenicity, and petroleum and
\ndrilling fluids, produced waters and other wastes associated with the
\nexploration, development, or production of crude oil, natural gas or geothermal
\nenergy, derivatives of petroleum products, and asbestos or asbestos-containing
\nmaterials.<\/p>\n
“Holding LLCs” has the meaning set forth in the Recitals.<\/p>\n
“Holding LLC Sellers” means the Sellers identified as such on
\nExhibit B.<\/p>\n
4
\n 10<\/p>\n
“Homebuilding Business” has the meaning set forth in the
\nRecitals and shall be deemed to include the Former Partnership Properties
\ndespite their status as Excluded Assets.<\/p>\n
“Homebuilding Entities” means Management Corp., Branching
\nTree, Mather, Desert Inn, the Holding LLCs, the Parent Partnerships and their
\nrespective Subsidiaries.<\/p>\n
“Homebuilding Line of Business Financial Information” means
\nthe financial information in the column labeled “Homebuilding” in the Combined
\nCompanies (California and Nevada) Line of Business Operations\/Selected Financial
\nInformation as of December 31, 1997 and for the year then ended included in the
\naudited financial statements of the Lewis Homes group of companies referred to
\nin Section 2.5(a).<\/p>\n
“Included Assets” and “Included Liabilities” have the meanings
\nset forth in the Recitals.<\/p>\n
“Indemnifiable Claim” means any Loss for or against which any
\nparty is entitled to indemnification under Article IX of this Agreement;
\n“Indemnified Party” means the party entitled to indemnity hereunder; and
\n“Indemnifying Party” means the party obligated to provide indemnification
\nhereunder.<\/p>\n
“Intangible Property” means any trade secret, secret process
\nor other confidential information or know-how and any and all Marks.<\/p>\n
“IRS” means the Internal Revenue Service or any successor
\nentity.<\/p>\n
“Law” means any constitutional provision, statute or other
\nlaw, rule, regulation, or interpretation of any Governmental Entity and any
\nOrder.<\/p>\n
“License Agreement” has the meaning set forth in Section 6.7.<\/p>\n
“Loss” means any cost, damage, disbursement, expense,
\nliability, loss, deficiency, diminution in value, obligation, penalty or
\nsettlement of any kind or nature, whether foreseeable or unforeseeable,
\nincluding but not limited to, interest or other carrying costs, penalties,
\nreasonable legal, accounting and other professional fees and expenses actually
\nincurred in the investigation, collection, prosecution and defense of claims,
\nand amounts paid in settlement, that may be imposed on or otherwise incurred or
\nsuffered by the specified person.<\/p>\n
“Management Corp. Sellers” means the Sellers identified as
\nsuch on Exhibit B.<\/p>\n
“Mark” means any brand name, copyright, patent, service mark,
\ntrademark, trademark, and all registrations or application for registration of
\nany of the foregoing.<\/p>\n
“material adverse change,” “material adverse effect,”
\n“material” or related terms herein mean a material adverse effect on the
\nbusiness, financial condition, results of operations or prospects of the
\nHomebuilding Business of the Homebuilding Entities, taken as a whole; provided,
\nhowever, that a decline in general economic conditions or matters generally
\naffecting real estate markets or homebuilding companies in California or Nevada
\n(or both) shall not be <\/p>\n
5
\n 11<\/p>\n
deemed to be a material adverse change or material adverse effect; and provided,
\nfurther that solely for the purposes of determining whether a breach of a
\nrepresentation or warranty made in or pursuant to this Agreement by Sellers or
\nthe nonperformance by Sellers of any of the covenants or agreements made
\nhereunder results in Losses that are indemnifiable under Article IX hereof,
\n“material adverse change,” “material adverse effect”, “material” or related
\nterms herein mean a change or effect that results in Losses exceeding $750,000.<\/p>\n
“Material Contract” means any Contract material to the
\nHomebuilding Business and includes but is not limited to those Contracts deemed
\nmaterial by Section 2.7.<\/p>\n
“Mather Sellers” means the Sellers identified as such on
\nExhibit B.<\/p>\n
“Member Interests” means the member interests in the Holding
\nLLCs, Mather and Desert Inn.<\/p>\n
“Net Worth” means the stockholders’, members’ and partners’
\nequity of each of the Homebuilding Entities determined on a combined basis in
\naccordance with GAAP applied consistently with the audited financial statements
\nreferred to in Section 7.2(g); provided, however, that (i) any severance
\npayments payable to officers or employees of any Homebuilding Entity on or after
\nthe Closing Date shall not be considered in determining Net Worth, (ii) any
\nbonuses payable to officers or employees of any Homebuilding Entity on or after
\nthe Closing Date (which shall be limited in accordance with Section 5.3(g))
\nshall be pro rated over the period from the date the employee was notified of
\nthe intent to pay such a bonus to the end of such bonus period and only that
\nportion of the bonus allocated to periods prior to the Closing Date shall be
\nconsidered in determining Net Worth (it being understood that all bonuses with
\nrespect to the fiscal year ended December 31, 1998 shall be paid prior to the
\nClosing), and (iii) no amount payable by any of the Homebuilding Entities to
\nrelated parties shall be treated as equity in determining Net Worth.<\/p>\n
“Option Agreement” has the meaning set forth in Section 5.12.<\/p>\n
“Order” means any decree, injunction, judgment, order, ruling,
\nassessment or writ.<\/p>\n
“Partnership Interests” has the meaning set forth in the
\nRecitals.<\/p>\n
“Partnership Sellers” means the Sellers identified as such on
\nExhibit B.<\/p>\n
“Permit” means any license, permit, franchise, certificate of
\nauthority, consent, variance, development agreement, exemption, or order, or any
\nwaiver of the foregoing, required to be issued by any Governmental Entity.<\/p>\n
“Person” means an association, a corporation, an individual, a
\npartnership, a limited liability company, a trust or any other entity or
\norganization, including a Governmental Entity.<\/p>\n
“Purchase Price” has the meaning set forth in Section 1.2.<\/p>\n
6
\n 12<\/p>\n
“Registration Rights Agreement” has the meaning set forth in
\nSection 5.10.<\/p>\n
“Representative” has the meaning set forth in Section 5.9.<\/p>\n
“Shareholders” means the equity owners of those Sellers or
\nCorporations that are “S” corporations under the Code.<\/p>\n
“Shareholders Agreement” has the meaning set forth in Section
\n5.11.<\/p>\n
“Stock” means all of the outstanding capital stock of
\nManagement Corp. and Branching Tree.<\/p>\n
“Subsidiary” means any Person in which any Homebuilding Entity
\nhas a direct or indirect equity or ownership interest in excess of 10%, other
\nthan Persons included in Excluded Assets.<\/p>\n
“Tax” means any foreign, federal, state, county or local
\nincome, sales and use, excise, franchise, real and personal property, transfer,
\ngross receipt, capital stock, production, business and occupation, disability,
\nemployment, payroll, severance or withholding tax or charge imposed by any
\nGovernmental Entity, any interest and penalties (civil or criminal) related
\nthereto or to the nonpayment thereof.<\/p>\n
“Tax Return” means a report, return or other information
\nrequired to be supplied to a Governmental Entity with respect to Taxes
\nincluding, where permitted or required, combined or consolidated returns for any
\ngroup of entities that includes any Homebuilding Entity.<\/p>\n
1.2 PURCHASE PRICE.<\/p>\n
Subject to the terms and conditions of this Agreement, the
\nBuyer agrees to acquire the Stock, Partnership Interests and Member Interests
\nfor an aggregate purchase price (the “Purchase Price”) of $51,000 in cash and
\n7,886,686 shares of the common stock, par value $1.00 per share, of Buyer (the
\n“Buyer Common Stock”), subject to adjustment as set forth in Section 1.6.<\/p>\n
1.3 TRANSFER OF STOCK BY SELLERS.<\/p>\n
Subject to the terms and conditions of this Agreement, the
\nManagement Corp. Sellers and the Branching Tree Sellers agree to sell the Stock
\nof Management Corp. and Branching Tree, respectively, and deliver the
\ncertificates evidencing such Stock to Buyer or its nominee(s) at the Closing.
\nThe certificates will be properly endorsed for transfer to or accompanied by a
\nduly executed stock power in favor of Buyer or its nominee(s) as Buyer may have
\ndirected prior to the Closing Date and otherwise in a form acceptable for
\ntransfer on the books of said corporation.<\/p>\n
7
\n 13<\/p>\n
1.4 TRANSFER OF MEMBER INTERESTS BY SELLERS.<\/p>\n
Subject to the terms and conditions of this Agreement, the
\nHolding LLC Sellers, the Mather Sellers and the Desert Inn Sellers agree to sell
\nthe Member Interests of the Holding LLCs, Mather and Desert Inn, respectively,
\nto Buyer or its nominee(s) at the Closing by executing and delivering to Buyer
\nor its nominee(s) an assignment, in the form attached hereto as Exhibit C, of
\nall such Seller’s right, title and interest in the Member Interests.<\/p>\n
1.5 TRANSFER OF PARTNERSHIP INTERESTS.<\/p>\n
Subject to the terms and conditions of this Agreement,
\nPartnership Sellers agree to sell the Partnership Interests to Buyer or its
\nnominee(s) at the Closing by executing and delivering to Buyer or its
\nnominees(s) at the Closing an assignment, in the form attached hereto as Exhibit
\nD, of all such Partnership Seller’s right, title and interest in the Parent
\nPartnerships.<\/p>\n
1.6 POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE.<\/p>\n
(a) As soon as practicable after the Closing, and in any event
\nwithin 45 days following the Closing Date, Sellers shall cause to be delivered
\nto Buyer a combined balance sheet of the Homebuilding Entities as of December
\n31, 1998 (if the Closing occurs on or before January 8, 1999) or the Closing
\nDate (if the Closing occurs after January 8, 1999), prepared in accordance with
\nGAAP (the “Closing Date Balance Sheet”) applied on a basis consistent with that
\nused in preparation of the audited financial statements referred to in Section
\n7.2(g), a combined statement of the Net Worth of the Homebuilding Business of
\nthe Homebuilding Entities as of December 31, 1998 (if the Closing occurs on or
\nbefore January 8, 1999) or the Closing Date (if the Closing occurs after January
\n8, 1999), and a certificate signed by Sellers’ to the effect that such
\nstatements have been prepared in accordance with GAAP applied on a basis
\nconsistent with that used in the preparation of the audited financial statements
\nreferred to in Section 7.2(g) and the terms of this Agreement (the “Post-Closing
\nCertificate”). Buyer shall cooperate fully with Sellers and shall provide
\nSellers with access to the books and records of the Homebuilding Entities and
\nsuch other assistance as Sellers reasonably request (including, without
\nlimitation, assignment of Buyer’s or Homebuilding Entities’ personnel to this
\nproject). Buyer will reimburse Sellers upon request 50% of all reasonable
\nout-of-pocket costs and expenses actually incurred by Sellers in the preparation
\nof such statement. Within 30 days following the delivery of such information,
\nBuyer shall notify Sellers in writing whether Buyer agrees or disagrees with the
\ndetermination of the Net Worth of the Homebuilding Business of the Homebuilding
\nEntities set forth in the Post-Closing Certificate. If Buyer disagrees with such
\ndetermination, Buyer shall specify in writing in reasonable detail the nature
\nand amount of its disagreement. Unless such disagreement is resolved (or to the
\nextent not resolved) by Buyer and Sellers in writing within 10 days after
\ndelivery of Buyer’s statement of disagreement, the Closing Date Balance Sheet
\nshall be audited, and the Net Worth of the Homebuilding Business of the
\nHomebuilding Entities as of the Closing Date shall be determined, by E & Y
\nKenneth Leventhal Real Estate Group of Ernst & Young LLP or another independent
\npublic accounting firm selected by mutual agreement of the Sellers and Buyer.
\nSuch accounting firm shall resolve the disagreement consistent with the language
\nof this Agreement. The determination of the Net Worth of the Homebuilding
\nBusiness of the Homebuilding Entities as of December 31, 1998 (if <\/p>\n
8
\n 14<\/p>\n
the Closing occurs on or before January 8, 1999) or the Closing Date (if the
\nClosing occurs after January 8, 1999), shall be made by such accounting firm
\nwithin 30 days of submission of the disagreement to it, shall be final and
\nbinding on Buyer and the Sellers (absent manifest error in calculations) and the
\nfees and expenses of such accounting firm shall be borne equally by the Sellers,
\non the one hand, and Buyer, on the other hand. If the Net Worth of the
\nHomebuilding Business of the Homebuilding Entities as of December 31, 1998 (if
\nthe Closing occurs on or before January 8, 1999) or the Closing Date (if the
\nClosing occurs after January 8, 1999), as finally determined pursuant to this
\nSection 1.6, is greater than $192,849,362, Buyer shall pay to the Sellers the
\namount of such excess, plus interest thereon at the rate of interest per annum
\npublicly announced from time to time by Morgan Guaranty Trust Company of New
\nYork as its prime commercial lending rate (the “Agreed Rate”) from (and
\nincluding) the Closing Date to (but excluding) the date of such payment. If the
\nNet Worth of the Homebuilding Business of the Homebuilding Entities as of
\nDecember 31, 1998 (if the Closing occurs on or before January 8, 1999) or the
\nClosing Date (if the Closing occurs after January 8, 1999), as finally
\ndetermined pursuant to this Section 1.6, is less than $192,849,362, the Sellers
\nshall pay to Buyer the amount of such deficiency, plus interest thereon at the
\nAgreed Rate from (and including) the Closing Date to (but excluding) the date of
\nsuch payment. Any payment contemplated by this Section 1.6 shall be made by wire
\ntransfer in federal or other immediately available funds on or before the tenth
\nday following the final determination thereof, and any payment by Buyer to
\nSellers shall be delivered to the accounts and in the names designated by the
\nRepresentative prior to the Closing Date unless the Representative gives Buyer
\nother instructions at least one day prior to the date of payment.<\/p>\n
(b) Notwithstanding the requirements in Section 1.6(a) of
\nconsistency in the preparation of the Closing Date Balance Sheet and Net Worth
\nstatement, and notwithstanding any other provision of this Agreement, for
\npurposes of the preparation and review of, and any resolution of disagreements
\nregarding, the Closing Date Balance Sheet and Net Worth of the Homebuilding
\nBusiness of the Homebuilding Entities as of December 31, 1998 (if the Closing
\noccurs on or before January 8, 1999) or the Closing Date (if the Closing occurs
\nafter January 8, 1999), the distribution or transfer of all of the Excluded
\nAssets and Excluded Liabilities by the Homebuilding Entities and transfer of all
\nof the Included Assets and Included Liabilities to the Homebuilding Entities
\nshall be deemed to have occurred prior to December 31, 1998 (if the Closing
\noccurs on or before January 8, 1999) or the Closing Date (if the Closing occurs
\nafter January 8, 1999), even if not all such transfers have been effected as of
\nsuch date.<\/p>\n
(c) Notwithstanding any other provision of this Agreement, no
\nfractional shares of Buyer Common Stock, or certificates therefore, will be
\nissued in payment of the Purchase Price. Each Seller who would otherwise be
\nentitled to receive a fractional share of Buyer Common Stock in payment of the
\nPurchase Price (after aggregating all whole and fractional shares of Buyer
\nCommon Stock to which such Seller would be entitled but for this Section in
\nconsideration for all Stock, Member Interests and Partnership Interests
\ndelivered by such Seller) shall receive, in lieu of such fractional share, cash
\nequal to the product of such fraction and the average closing price of Buyer
\nCommon Stock for the ten trading days ending two business days prior to the
\nClosing Date as reported on the New York Stock Exchange Composite Tape.<\/p>\n
9
\n 15<\/p>\n
1.7 THE CLOSING.<\/p>\n
The Closing will take place at the offices of Munger, Tolles & Olson LLP, 355 South Grand Avenue, Los Angeles, California 90071. The Closing
\nwill take place no earlier than January 7, 1999 or, if later, the fifth business
\nday after the satisfaction of the conditions set forth in Sections 7.1(b),
\n7.1(c), 7.2(c), 7.2(f), 7.2(g), 7.3(b) and 7.3(d) or such later date as Sellers
\nand Buyer may agree. The parties shall use their best efforts to effectuate the
\nClosing on January 7, 1999. At the Closing, Buyer, in exchange for the Stock,
\nPartnership Interests and Member Interests, shall pay to Sellers the Purchase
\nPrice by wire transfer of the cash portion of the Purchase Price to an account
\ndesignated by the Representative at least three business days prior to the
\nClosing and by delivery to the Representative, on behalf of the Sellers, of
\nstock certificates in the Sellers’ names as designated by the Representative at
\nleast three business days prior to the Closing.<\/p>\n
1.8 PURCHASE PRICE ALLOCATION.<\/p>\n
The Purchase Price shall be allocated among the Stock, the
\nMember Interests and the Partnership Interests in a manner that will facilitate
\nallocations being made in accordance with Section 6.4(c), and that is consistent
\nwith the other provisions of this Agreement. The parties intend that the
\nacquisitions of Stock be taxable purchases, and a sufficient amount of the cash
\nportion of the Purchase Price shall be allocated to each of the acquisitions of
\nthe Stock of Management Corp. and the Stock of Branching Tree so that neither
\nacquisition will qualify as a reorganization within the meaning of Section
\n368(a) of the Code. Subject to the foregoing, prior to the Closing Sellers shall
\nprovide a schedule to Buyer, to become a part of this Agreement, that shall set
\nforth the manner in which the Purchase Price shall be allocated among the
\nSellers.<\/p>\n
ARTICLE II<\/p>\n
REPRESENTATIONS AND WARRANTIES OF SELLERS<\/p>\n
Except as otherwise indicated on the Sellers’ Disclosure
\nSchedule as applying to a particular Section in this Article II, Sellers and the
\nCorporations, jointly and severally, represent, warrant and agree as follows:<\/p>\n
2.1 MANAGEMENT CORP. AND BRANCHING TREE.<\/p>\n
Each of Management Corp. and Branching Tree is a corporation
\nduly organized, validly existing and in good standing under the laws of the
\nState of California. Each of Management Corp. and Branching Tree has all
\nnecessary corporate power and authority to own its properties and to carry on
\nits business as now conducted and is duly qualified to do business as a foreign
\ncorporation in good standing in all jurisdictions in which the character or the
\nlocation of its assets owned or leased or the nature of its business requires
\nqualification, except where the failure to be so qualified would not have a
\nmaterial adverse effect on the Homebuilding Business. Neither Management Corp.
\nnor Branching Tree has any Subsidiaries.<\/p>\n
10
\n 16<\/p>\n
2.2 STOCK.<\/p>\n
Management Corp. Sellers own all of the outstanding shares of
\nthe capital stock of Management Corp. The authorized capital stock of Management
\nCorp. consists of 10,000 shares of common stock, no par value, of which 2,000
\nshares are issued and outstanding. Branching Tree Sellers own all the
\noutstanding shares of the capital stock of Branching Tree. The authorized
\ncapital stock of Branching Tree consists of 10,000 shares of common stock, no
\npar value, of which 480 shares are issued and outstanding. There are no
\noutstanding Contracts or other rights to subscribe for or purchase, or Contracts
\nor other obligations to issue or grant any rights to acquire, any Equity
\nSecurities of Management Corp. or Branching Tree, or to restructure or
\nrecapitalize Management Corp. or Branching Tree. There are no outstanding
\nContracts of Sellers, Corporations, Management Corp. or Branching Tree to
\nrepurchase, redeem or otherwise acquire any Equity Securities of Management
\nCorp. or Branching Tree. All Equity Securities of Management Corp. and Branching
\nTree are duly authorized, validly issued and outstanding and are fully paid and
\nnonassessable and were issued in conformity with applicable Laws. There are no,
\nand never have been, preemptive rights in respect of any Equity Securities of
\nManagement Corp. or Branching Tree. Except as described in Schedule 2.2, neither
\nManagement Corp. nor Branching Tree owns any Equity Securities of any Person.<\/p>\n
2.3 HOLDING LLCS, MATHER AND DESERT INN.<\/p>\n
Each of the Holding LLCs, Mather and Desert Inn is a limited
\nliability company duly formed and validly existing and in good standing under
\nthe laws of the state of its organization. Continuously since its formation,
\neach of Mather and Desert Inn has been treated as a partnership, and the Holding
\nLLCs have been treated by the Holding LLC Sellers as disregarded entities, for
\npurposes of federal, state, and local Taxes. Each of the Holding LLCs, Mather
\nand Desert Inn has all necessary power and authority under its organizational
\ndocuments to own its properties and carry on its business as now conducted. Each
\nof the Holding LLCs, Mather and Desert Inn is duly qualified to do business as a
\nforeign limited liability company in good standing in all jurisdictions in which
\nthe character or the location of its assets owned or leased or the nature of its
\nbusiness requires qualification, except where the failure to be so qualified
\nwould not have a material adverse effect on the Homebuilding Business. The
\nHolding LLC Sellers, Mather Sellers and Desert Inn Sellers own all of the
\noutstanding membership interests in the Holding LLCs, Mather and Desert Inn,
\nrespectively. Each Holding LLC Seller holds all of the membership interests in
\nits respective Holding LLC. There are no outstanding Contracts or other rights
\nto subscribe for or purchase, or Contracts or other obligations to issue or
\ngrant any rights to acquire, any interest in the Holding LLCs, Mather or Desert
\nInn, or to restructure or recapitalize the Holding LLCs, Mather or Desert Inn.
\nThere are no outstanding Contracts of Sellers, the Corporations or the Holding
\nLLCs, Mather or Desert Inn to repurchase, redeem or otherwise acquire any
\ninterest in the Holding LLCs, Mather or Desert Inn. All Member Interests were
\nissued in conformity with all applicable Laws. Schedule 2.3 lists all
\nSubsidiaries of the Holding LLCs, Mather or Desert Inn and correctly sets forth
\ntheir respective ownership interests therein, any other interest of any other
\nPerson in such Subsidiary and the jurisdiction in which each such Subsidiary was
\norganized. Except as set forth on Schedule 2.3, all of the Equity Securities,
\npartnership interests, membership interests, or other interests owned by the
\nHolding LLCs, Mather or Desert Inn in any such Subsidiary are validly issued and<\/p>\n
11
\n 17<\/p>\n
outstanding, fully paid and nonassessable, were issued in conformity with
\napplicable Laws and without violation of, and are free of, any preemptive
\nrights, and are owned by the Holding LLCs, Mather or Desert Inn, as applicable,
\nfree and clear of any and all covenants, conditions, or other Encumbrances. Each
\nof such Subsidiaries is duly formed and validly existing and in good standing
\nunder the laws of the jurisdiction of its organization. Each such Subsidiary has
\nall necessary power and authority under its organizational documents to own its
\nproperties and to carry on its business as now conducted and is duly qualified
\nto do business in all jurisdictions in which the character or the location of
\nthe assets owned or leased by it or the nature of the business conducted by it
\nrequires qualification, except where the failure to be so qualified would not
\nhave a material adverse effect on the Homebuilding Business. Except for such
\nSubsidiaries or as set forth on Schedule 2.3, neither the Holding LLCs, Mather
\nnor Desert Inn own any Equity Securities of any Person.<\/p>\n
2.4 PARENT PARTNERSHIPS.<\/p>\n
Each of the Parent Partnerships is a duly formed and validly
\nexisting general partnership in good standing under the laws of the state of its
\norganization. As of the Closing Date, each of the Parent Partnerships shall be
\ntreated by the Partnership Sellers as a disregarded entity for purposes of
\nfederal, state and local Taxes. Each Parent Partnership has all necessary power
\nand authority under its partnership agreement to own its property and to carry
\non its business as now conducted and is duly qualified to do business in all
\njurisdictions in which the character or the location of the assets owned or
\nleased by it or the nature of its business requires qualification, except where
\nthe failure to be so qualified would not have a material adverse effect on the
\nHomebuilding Business. The Partnership Sellers and the Holding LLCs own all the
\noutstanding partnership interests in the Parent Partnerships. There are no
\noutstanding Contracts or other rights to subscribe for or purchase, or Contracts
\nor other obligations to issue or grant any rights to acquire, any interest in
\nthe Parent Partnerships, or to restructure or recapitalize the Parent
\nPartnerships. There are no outstanding Contracts of Sellers, the Corporations,
\nthe Holding LLCs or the Parent Partnerships to repurchase, redeem or otherwise
\nacquire any interest in the Parent Partnerships. All Partnership Interests were
\nissued in conformity with all applicable Laws. Schedule 2.4 lists all
\nSubsidiaries of the Parent Partnerships and correctly sets forth the Parent
\nPartnership’s ownership interest and profit or loss allocation (and any special
\nallocations with priority over the Parent Partnership’s profit or loss
\nallocation) therein, any other interest of any other Person in such Subsidiary
\nand the jurisdiction in which each such Subsidiary was organized. Except as set
\nforth on Schedule 2.4, all of the Equity Securities, partnership interests,
\nmembership interests, or other interests owned by a Parent Partnership in any
\nsuch Subsidiary are validly issued and outstanding, fully paid and
\nnonassessable, were issued in conformity with applicable Laws and without
\nviolation of, and are free of, any preemptive rights, and are owned by such
\nParent Partnership free and clear of any and all covenants, conditions, or other
\nEncumbrances. Each of such Subsidiaries is duly formed and validly existing
\nunder the laws of the jurisdiction of its organization. Each such Subsidiary has
\nall necessary power and authority under its organizational documents to own its
\nproperties and to carry on its business as now conducted and is duly qualified
\nto do business in all jurisdictions in which the character or the location of
\nthe assets owned or leased by it or the nature of the business conducted by it
\nrequires qualification, except where the failure to be so qualified would not
\nhave a material adverse effect <\/p>\n
12
\n 18<\/p>\n
on the Homebuilding Business. Except for such Subsidiaries or as set forth on
\nSchedule 2.4, the Parent Partnerships own no Equity Securities of any Person.
\nNone of the Holding LLCs have any assets or liabilities of any nature
\nwhatsoever, other than a Partnership Interest in one of the Parent Partnerships
\nand $100 in cash. Each of the Holding LLCs was formed solely for the purpose of
\nholding such Partnership Interest and has conducted no other business activities
\nwhatsoever.<\/p>\n
2.5 FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.<\/p>\n
(a) Audited Financial Statements. Sellers have delivered to
\nBuyer combined balance sheets for the Lewis Homes group of companies at December
\n31, 1997 (the “Audited Balance Sheet Date”) and 1996 and the related combined
\nstatements of operations, equity and cash flows for the years ended December 31,
\n1997 and 1996. Such balance sheets and statements of operations, equity and cash
\nflows have been examined by the Auditors whose audit report thereon is included
\nwith such statements. All such financial statements have been prepared in
\nconformity with GAAP applied on a consistent basis (except for changes, if any,
\nrequired by GAAP and disclosed therein) and present fairly, in all material
\nrespects, the combined financial position of the Lewis Homes group of companies
\nat December 31, 1997 and 1996 and the combined results of their operations and
\ncash flows for the years then ended. Sellers have also delivered to Buyer
\ncombined Line of Business Operations\/Selected Financial Information for the
\nHomebuilding Business at and for the year ended December 31, 1997. Such combined
\nLine of Business Operations\/Selected Financial Information has been subjected to
\nthe auditing procedures applied in the audit by Auditors of the audited combined
\nfinancial statements referred to above, except as noted , and exclude the
\nExcluded Assets (other than the properties identified on Exhibit A as Sierra
\nLakes and Fontana (Zee) property) and Excluded Liabilities and include the
\nIncluded Assets and Included Liabilities.<\/p>\n
(b) Interim Financial Statements Sellers have delivered to
\nBuyer a combined balance sheet of the Homebuilding Business at June 30, 1998 and
\na related combined income statement for the six months ended June 30, 1998. Such
\nfinancial statements have been prepared in conformity with GAAP on a basis
\nconsistent with the audited financial statements referred to in Section 7.2(g)
\n(except for changes, if any, required by GAAP, the lack of notes thereto and the
\nexclusion of the Excluded Assets (other than the properties identified on
\nExhibit A as Sierra Lakes and Fontana (Zee) property) and Excluded Liabilities
\nand the inclusion of the Included Assets and Included Liabilities) and present
\nfairly, in all material respects, the combined financial position of the
\nHomebuilding Business of the Homebuilding Entities at June 30, 1998 and the
\ncombined results of operations for the six months ended June 30, 1998.<\/p>\n
(c) No Material Adverse Changes. Except as set forth in
\nSchedule 2.5, since June 30, 1998, the Homebuilding Entities have conducted the
\nHomebuilding Business in the ordinary course of business consistent with past
\npractices (except for the exclusion of Excluded Assets and Excluded Liabilities
\nand the inclusion of the Included Assets and Included Liabilities) and, whether
\nor not in the ordinary course of the Homebuilding Business, there has not been,
\noccurred or arisen:<\/p>\n
13
\n 19<\/p>\n
(i) any change in or event affecting the Homebuilding
\nBusiness that has had or is reasonably expected to have a material adverse
\neffect on the Homebuilding Business,<\/p>\n
(ii) any agreement, condition, action or omission
\nwhich would be proscribed by (or require consent under) subsections (e), (f),
\n(g), (h), (i), (j), (k), (p), (q), (t), (u) or (v) (solely as it relates to
\nsubsections (e), (f), (g), (h), (i), (j), (k), (p), (q), (t) and (u)) of Section
\n5.3 had it existed, occurred or arisen after the date of this Agreement,<\/p>\n
(iii) any strike or other labor dispute, or<\/p>\n
(iv) any casualty, loss, damage or destruction
\n(whether or not covered by insurance) of any property of the Homebuilding
\nEntities that constitutes a material adverse change and that has involved or may
\ninvolve a loss to any of the Homebuilding Entities in excess of applicable
\ninsurance coverage.<\/p>\n
(d) No Other Liabilities or Contingencies. None of the
\nHomebuilding Entities has any material liabilities of any nature, whether
\naccrued, absolute, contingent, known, unknown, or otherwise, except liabilities
\nthat (i) are reflected or disclosed in the most recent of the financial
\nstatements referred to in subsection (b) above, (ii) were incurred after June
\n30, 1998 in the ordinary course of business, or (iii) are set forth in Schedule
\n2.5 hereto.<\/p>\n
(e) Reserves. At December 31, 1997, the reserves for
\nconstruction defects and litigation, but not including any warranty reserves,
\naggregated $5.5 million and on the Closing Date will be no less than $2.7
\nmillion.<\/p>\n
2.6 TAX AND OTHER RETURNS AND REPORTS.<\/p>\n
The Homebuilding Entities have timely filed (taking into
\naccount any extensions) all required Tax Returns required to be filed by them
\nbefore the date hereof and have paid all Taxes shown on such Tax Returns to be
\ndue. The Homebuilding Entities shall timely file (taking into account any
\napplicable extensions) all Tax Returns that are required to be filed by them on
\nor after the date hereof and before the Closing Date and shall pay all Taxes
\nshown on any such Tax Return to be due. All Tax Returns referred to above in
\nthis section were or shall be complete and correct in all material respects.
\nAdequate provision has been made in the books and records of the Homebuilding
\nEntities and in the financial statements referred to in Section 2.5 above, for
\nall Taxes required to be paid or withheld for the periods covered by such
\nfinancial statements, whether or not disputed and whether or not due and
\npayable. Except as listed on Schedule 2.6, there is no audit, examination or
\nsimilar proceeding pending or, to Sellers’ knowledge, threatened, or claim or
\nassessment of deficiency pending or, to the Sellers’ knowledge, threatened, with
\nrespect to any Tax Return of the Homebuilding Entities, and there are no
\noutstanding agreements or waivers extending the statutory period of limitation
\napplicable to any such Tax Return. None of the Sellers is a “foreign person”
\nwithin the meaning of Section 1445(b)(2) of the Code. Each of Management Corp.
\nand Branching Tree is, and has for all taxable periods beginning on and after
\nits incorporation, qualified to be, and with all required consents of its
\nshareholders has validly elected to be, taxed as an “S corporation” under the
\nCode <\/p>\n
14
\n 20<\/p>\n
and analogous state tax law. Such elections have never been terminated or
\nrevoked, are currently in effect, and will be in effect through such time as
\nthey terminate as a result of the Closing. Since such elections, neither
\nManagement Corp. nor Branching Tree has acquired assets with a carryover basis
\nfrom a C corporation under the Code. Each Seller that is a corporation and every
\nCorporation is an “S corporation” under the Code. The Homebuilding Entities have
\nno liability for any Taxes of any person or entity other than themselves under
\nTreasury Regulation Section 1.1502-6 (or any similar provision of state, local,
\nterritorial, or foreign law), as transferee or successor, or by contract or
\notherwise. Except as set forth in Schedule 2.6, none of the Homebuilding
\nEntities is a party to any agreement, contract, arrangement, or plan that has
\nresulted or would result, separately or in the aggregate, in the payment of any
\n“excess parachute payments” within the meaning of Section 280G of the Code.<\/p>\n
2.7 MATERIAL CONTRACTS.<\/p>\n
Schedule 2.7 lists each Contract to which any Homebuilding
\nEntity is a party or to which any Homebuilding Entity or any of their respective
\nproperties or any of the Former Partnership Properties is subject or by which
\nany of the foregoing is bound that is deemed a Material Contract under this
\nAgreement. Each Contract that (a) after June 30, 1998, obligates any
\nHomebuilding Entity to pay an amount of $500,000 or more or obligates the owners
\nof Former Partnership Properties to pay such amount with respect to any Former
\nPartnership Property, (b) represents a Contract upon which the Homebuilding
\nBusiness is substantially dependent, (c) provides for an extension, assumption,
\nor guarantee of credit to or by a Homebuilding Entity or secured by a Former
\nPartnership Property in an amount of $500,000 or more, (d) limits or restricts
\nthe ability of any Homebuilding Entity to compete or otherwise to conduct its
\nbusiness in any manner or place, (e) provides for a guaranty or indemnity by any
\nHomebuilding Entity or encumbering any Former Partnership Property, (f) grants a
\npower of attorney, agency or similar authority to another person or entity, (g)
\ncontains a right of first refusal, (h) contains a right or obligation of any
\nAffiliate, officer or director or any Associate of any Homebuilding Entity with
\nrespect to any Homebuilding Entity or Former Partnership Property that cannot be
\nterminated by Buyer within 30 days after the Closing without penalty or payment,
\n(i) requires any Homebuilding Entity to buy or sell goods or services, or
\nrequires the sale of any Former Partnership Property, with respect to which
\nthere will be material losses or will be costs and expenses materially in excess
\nof expected receipts (other than as provided for or otherwise reserved against
\non the most recent of the balance sheet referred to in Section 2.5), (j)
\nprovides for the acquisition or disposition of real property in an amount of
\n$500,000 or more, (k) provides for a joint venture, partnership, or other profit
\nor loss sharing arrangement, or (l) is a development, entitlement, or similar
\nagreement with any Governmental Entity, shall be deemed to be a Material
\nContract and has been identified on such Schedule 2.7. True copies of the
\nagreements appearing on Schedule 2.7, including all amendments and supplements,
\nhave been made available to Buyer. Each Material Contract is valid and
\nenforceable; each Homebuilding Entity, as applicable, has duly performed all its
\nobligations thereunder to the extent that such obligations to perform have
\naccrued; and no breach or default, alleged breach or default, or event which
\nwould (with the passage of time, notice or both) constitute a breach or default
\nthereunder by any Homebuilding Entity, or encumber the Former Partnership
\nProperty, or, to the knowledge of Sellers, any other party or obligor with
\nrespect thereto, has occurred or, except as set forth in <\/p>\n
15
\n 21
\nSchedule 2.7, as a result of this Agreement or the consummation of the
\ntransactions contemplated hereby will occur. Except as set forth in Schedule
\n2.7, consummation of the transactions contemplated by this Agreement will not
\n(and will not give any person a right to) terminate or modify any rights or
\naccelerate or augment any obligation of any Homebuilding Entity or with respect
\nto any Former Partnership Property. The parties agree that special assessment
\ndistricts need not be listed on Schedule 2.7.<\/p>\n
2.8 REAL AND PERSONAL PROPERTY; TITLE TO PROPERTY; LEASES.<\/p>\n
(a) The Homebuilding Entities have good and marketable title
\nto, a valid leasehold interest in, or other right to use, all properties and
\nassets material to the conduct of the Homebuilding Business as reflected in the
\nbalance sheet as of June 30, 1998 referred to in Section 2.5(b) or acquired
\nsince that date, except for the Former Partnership Properties, which have been
\ndisposed of since that date, and except for other properties and assets in an
\naggregate amount that would not constitute a material adverse change in the
\nHomebuilding Business that were disposed of since such date in the ordinary
\ncourse of business consistent with past practice. Except as set forth on
\nSchedule 2.8(a), the Homebuilding Entities hold all such title, interest, or
\nright free and clear of Encumbrances other than (i) liens securing taxes,
\nassessments, or payments not yet due, (ii) such imperfections or irregularities
\nin title, easements, or other liens as are not substantial in character, amount
\nor extent and do not interfere with the Homebuilding Entity’s or Subsidiary’s
\ncurrent use of the property subject thereto or affected thereby or the
\ndevelopment of such property in accordance with current entitlement,
\ndevelopment, or similar agreements with Governmental Entities, and (iii) other
\nmatters which, individually or in the aggregate, do not and would not have a
\nmaterial adverse effect with respect to the Homebuilding Entities. The
\nHomebuilding Entities have obtained title insurance policies covering the Former
\nPartnership Properties and other real property owned by a Homebuilding Entity
\nwith, in either case, an initial purchase price in excess of $1 million. All of
\nsuch tangible properties and assets are in good operating condition and repair
\n(ordinary wear and tear excepted and subject to normal scheduled maintenance).
\nSchedule 2.8(a) lists all of the real property owned or leased by any
\nHomebuilding Entity and with respect to leased property sets forth the lessor,
\nlease term (including any renewal rights), and lease payment amounts and
\nschedule. All leased real property held by any Homebuilding Entity, as lessee or
\nsublessee, as the case may be, under a lease providing for annual lease payments
\nexceeding $25,000 are held under valid, binding and enforceable leases or
\nsubleases, and none of the Homebuilding Entities are in default thereunder. To
\nthe knowledge of Sellers, there is no pending or threatened Action that would
\nmaterially interfere with the quiet enjoyment of any such leased real property
\nby any Homebuilding Entity.<\/p>\n
(b) Except as set forth on Schedule 2.8(b), to the knowledge
\nof Sellers, (i) there are no endangered species or protected natural habitat,
\nflora or fauna located on any of the real property owned or leased by any
\nHomebuilding Entity constituting part of the Homebuilding Business or on the
\nFormer Partnership Properties and no such real property is designated as
\nwetlands, (ii) none of such real property is located within a 100-year flood
\nplain as designated by any United States Governmental Entity or is subject to
\nseismic safety problems that prevent residential development thereon, (iii) none
\nof the Homebuilding Entities has received any notice of any condemnation or
\neminent domain proceedings with respect to any of such real property, or
\nnegotiations for the purchase of any such real property in lieu of condemnation,
\nand (iv) there are <\/p>\n
16
\n 22<\/p>\n
no moratoriums (including utility moratoriums) by Governmental Entities
\nresponsible for issuing approvals or according other entitlements with respect
\nto any such real property.<\/p>\n
(c) Schedule 2.8(c) sets forth: (i) a true and complete list
\nof all those matters for which a file was opened by Management Corp.’s Legal
\nDepartment (which employs all the in-house lawyers serving the Homebuilding
\nEntities) on behalf of a Homebuilding Entity on or after January 1, 1997,
\nrelating to a claim or complaint by the purchaser (a “Lewis Homeowner”) of a
\nresidence (a “Lewis Home”) developed or constructed by a Homebuilding Entity
\nwith respect to his\/her Lewis Home; (ii) the aggregate net customer service
\nexpenditures (excluding any overhead allocation) of the Homebuilding Entities
\nfor 1996, 1997, and January 1 through August 31, 1998 (whether or not such
\ncustomer service expenditures related to requests for customer service from
\nLewis Homeowners during the Homebuilding Entities’ formal one-year warranty
\nperiod) by tract; (iii) a true and complete list of all home repurchases by any
\nof the Homebuilding Entities which closed escrow between January 1, 1997 and
\nSeptember 30, 1998; and (iv) the number of customer service requests by tract
\nwith respect to any Lewis Home which were open and not resolved as of September
\n30, 1998. Except as set forth on Schedule 2.8(c), to the knowledge of Sellers,
\nthere are no warranty claims exceeding $12,000 per individual house pending or
\nsettled or which resulted in home purchases since January 1, 1997 against any
\nHomebuilding Entity.<\/p>\n
2.9 INTANGIBLE PROPERTY.<\/p>\n
Schedule 2.9 lists all Marks and other items of Intangible
\nProperty in which any Homebuilding Entity has an interest, other than Marks or
\nIntangible Property the loss of which would not have a material adverse effect
\non the Homebuilding Entities, and the nature of such interest. Schedule 2.9 also
\nlists all Permits or other rights with respect to any of the foregoing. The
\nHomebuilding Entities have the rights to and ownership of all Intangible
\nProperty required for use in connection with the Homebuilding Business, the
\nabsence of which would have a material adverse effect on the Homebuilding
\nBusiness. Without limiting the foregoing, Branching Tree owns the exclusive
\nright to the distinctive tree symbol used in the Homebuilding Business. Except
\nas set forth in Schedule 2.9, none of the Homebuilding Entities use any
\nIntangible Property by consent of any other person or are required to and do
\nmake any payments to others with respect thereto. The Homebuilding Entities have
\nin all material respects performed all obligations required to be performed by
\nthem, and none of such entities is in default in any material respect under any
\nContract relating to any of the foregoing. Except as set forth in Schedule 2.9,
\nnone of the Homebuilding Entities has received any notice to the effect that the
\nIntangible Property or any use by any Homebuilding Entity of any such property
\nconflicts with or allegedly conflicts with or infringes the rights of any
\nPerson, and, to the knowledge of Sellers, no other person is infringing upon the
\nrights of any of the Homebuilding Entities with respect to any Marks or other
\nIntangible Property.<\/p>\n
2.10 NO CONFLICTS.<\/p>\n
Except as set forth on Schedule 2.10, the execution, delivery
\nand performance of this Agreement by Sellers and the Corporations and the
\nperformance by Sellers and the Corporations of any of the transactions
\ncontemplated hereby will not violate, or constitute a <\/p>\n
17
\n 23<\/p>\n
breach or default (whether upon lapse of time or notice or both) under, or give
\nrise to a right of termination, cancellation or acceleration of any obligation
\nunder, the charter, partnership, or other operating documents of any
\nHomebuilding Entity or any Material Contract of any of such entities, result in
\nthe imposition of any Encumbrance against any material asset or material
\nproperties of any Homebuilding Entity or against the Former Partnership
\nProperties, or violate any Law (assuming that the appropriate governmental
\napprovals are received as contemplated by Section 7.1(b)), except for such
\nviolations, breaches, defaults, terminations, cancellations, accelerations, or
\nimpositions that would not have a material adverse effect on the Homebuilding
\nBusiness. Except as set forth in Schedule 2.10, the execution and delivery of
\nthis Agreement by Sellers and the Corporations and the performance of this
\nAgreement by Sellers and the Corporations will not require a filing or
\nregistration with, or the issuance of any Permit or Approval by, any other third
\nparty or Governmental Entity.<\/p>\n
2.11 LEGAL PROCEEDINGS AND CERTAIN LABOR MATTERS.<\/p>\n
Except as set forth in Schedule 2.11, there is no Order or
\nAction pending, or, to the knowledge of Sellers, threatened, against or
\naffecting any Homebuilding Entity or any of their respective properties or
\nassets or the Former Partnership Properties that individually or when aggregated
\nwith one or more other Orders or Actions has or is reasonably expected to have a
\nmaterial adverse effect on the Homebuilding Entities or the Former Partnership
\nProperties or on Sellers’ or the Corporations’ ability to perform this
\nAgreement. Schedule 2.l1 sets forth all Orders or Actions pending or, to the
\nknowledge of Sellers, threatened against or affecting any Homebuilding Entity or
\nany of their respective properties or assets or the Former Partnership
\nProperties involving a claim for more than $100,000 or seeking or imposing
\ninjunctive or other equitable relief against any Homebuilding Entity. Except as
\nset forth in Schedule 2.11, (i) each Homebuilding Entity and each Former
\nPartnership Property is in compliance in all material respects with the terms
\nand requirements of each Order listed on Schedule 2.11, which it, or any of the
\nassets owned or used by it, is or has been subject and (ii) to Sellers’
\nknowledge, no Homebuilding Entity has received any notice or other communication
\n(whether oral or written) from any Governmental Entity or any other person
\nregarding any actual, alleged, possible, or potential violation of, or failure
\nto comply with, any term or requirement of any Order listed on Schedule 2.11,
\nexcept for any such violation that, individually or in the aggregate, will not
\nor could not reasonably be expected to result in a material adverse change to
\nthe Homebuilding Entities. Except as set forth in Schedule 2.11, there is no
\norganized labor strike, dispute, slowdown or stoppage, or collective bargaining
\nor unfair labor practice claim pending or, to the knowledge of Sellers,
\nthreatened against or affecting any Homebuilding Entity, the Homebuilding
\nBusiness or the Former Partnership Properties. To Sellers’ knowledge, none of
\nthe Homebuilding Entities nor any of their respective officers, directors,
\npartners, employees or agents has given or made or agreed to give or make any
\nillegal commissions, payment, gratuity, gift, political contribution or similar
\nbenefit to any governmental employee who is in a position to help or hinder the
\nbusiness of the Homebuilding Entities.<\/p>\n
2.12 MINUTE BOOKS.<\/p>\n
The minute books and similar records of organizational
\nproceedings of each of the Homebuilding Entities, to the extent required,
\naccurately reflect all actions and proceedings taken <\/p>\n
18
\n 24<\/p>\n
to date by the shareholders, board of directors and committees, partners, or
\nmembers (to the extent that any consent of partners or members as a class has
\nbeen required) of the Homebuilding Entities, and such minute books and similar
\nrecords contain true and complete copies of the charter documents, partnership
\nagreements, or operating agreement, as applicable, of the Homebuilding Entities,
\nand all related amendments. The stock, partnership interest, or membership
\ninterest record books of each of the Homebuilding Entities reflect accurately
\nall transactions in its capital stock, partnership interests, or membership
\ninterests of all classes.<\/p>\n
2.13 ACCOUNTING RECORDS.<\/p>\n
The Homebuilding Entities have records that accurately and
\nvalidly reflect their respective transactions, and accounting controls
\nsufficient to insure that such transactions are (i) executed in accordance with
\nmanagement’s general or specific authorization and (ii) recorded in conformity
\nwith GAAP so as to maintain accountability for assets.<\/p>\n
2.14 INSURANCE.<\/p>\n
Schedule 2.14 lists all insurance policies and bonds held by
\nthe Homebuilding Entities as of September 30, 1998. None of the Homebuilding
\nEntities is in default under any policy or bond. None of the Homebuilding
\nEntities has received any notice from any insurer or agent of any intent to
\ncancel or not to renew any insurance policy.<\/p>\n
2.15 PERMITS.<\/p>\n
The Homebuilding Entities hold all Permits that are required
\nby any Governmental Entity to permit each of them to conduct their respective
\nHomebuilding Businesses as now conducted, and the Homebuilding Entities are in
\ncompliance with such Permits, except (i) where the failure to hold or be in
\ncompliance with such Permits would not, individually or in the aggregate, have a
\nmaterial adverse effect on the Homebuilding Entities, and (ii) for Permits and
\nentitlements for the development of real property which is not yet developed or
\nPermits not yet required in the development process of real property, and all
\nsuch Permits are valid and in full force and effect. To the knowledge of
\nSellers, no suspension, cancellation or termination of any of such Permits is
\nthreatened or imminent and no event has occurred that has resulted or would
\nreasonably be expected to result (with the passage of time, or notice, or both)
\nin a suspension, cancellation or termination of any such Permit.<\/p>\n
2.16 EMPLOYEE BENEFITS.<\/p>\n
(a) Employee Benefit Plans, Collective Bargaining and Employee
\nAgreements, and Similar Arrangements.<\/p>\n
(i) Schedule 2.16 lists all employee benefit plans
\n and collective bargaining, employment or severance agreements or other
\n similar arrangements to which any Homebuilding Entity is a party or by
\n which any of them is bound, including, without limitation, (a) any
\n profit-sharing, deferred compensation, bonus (including any
\n change-of-control, continuance or stay bonus), stock option, stock
\n purchase, phantom stock, restricted stock, pension, retainer,
\n consulting, retirement severance, termination, welfare <\/p>\n
19
\n 25<\/p>\n
or incentive plan, agreement or arrangement, (b) any plan, agreement or
\n arrangement providing for “fringe benefits” or perquisites to
\n employees, officers, directors or agents, including but not limited to
\n benefits relating to automobiles, clubs, vacation, child care,
\n parenting, sabbatical, sick leave, medical, dental, hospitalization,
\n life insurance and other types of insurance, (c) any employment
\n agreement, or (d) any other “employee benefit plan” (within the meaning
\n of Section 3(3) or ERISA).<\/p>\n
(ii) Sellers have made available to Buyer true and
\n complete copies of all documents and summary plan descriptions with
\n respect to such plans, agreements and arrangements, or summary
\n descriptions of any such plans, agreements or arrangements not
\n otherwise in writing.<\/p>\n
(iii) The Homebuilding Entities are in full
\n compliance with the applicable provisions of ERISA (as amended through
\n the date of this Agreement), the regulations and published authorities
\n thereunder, and all other Laws applicable with respect to all such
\n employee benefit plans, agreements and arrangements, except where the
\n failure to be in compliance would not have a material adverse effect on
\n the Homebuilding Entities. The Homebuilding Entities have performed all
\n of their obligations under all such plans, agreements and arrangements.
\n There are no Actions (other than routine claims for benefits) pending
\n or threatened against such plans or their assets, or arising out of
\n such plans, agreements or arrangements, and, to the knowledge of
\n Sellers, no facts exist which could give rise to any such Actions.<\/p>\n
(iv) Except as set forth in Schedule 2.16, each of
\n the plans, agreements or arrangements can be terminated by the
\n Homebuilding Entities within a period of 30 days following the Closing
\n Date, without payment of any additional compensation or amount or the
\n additional vesting or acceleration of any such benefits.<\/p>\n
(v) Sellers shall pay or reimburse Buyer, upon
\n request, for (A) any severance payments made by Buyer or any
\n Homebuilding Entity within the first 12 months after the Closing Date
\n to Leon C. Swails pursuant to that certain Employment Agreement dated
\n as of February 27, 1995, as amended February 27, 1998 and December __,
\n 1998, and (B) any “Deferred Salary” and “Special Bonus” under Section 3
\n of that agreement if Mr. Swails’ employment is terminated in the first
\n 12 months of the Closing Date as if Mr. Swails’ employment was
\n terminated as of the Closing Date.<\/p>\n
(b) Qualified Plans. None of the Homebuilding Entities have a
\nstock bonus, pension or profit-sharing plan within the meaning of Section 401
\n(a) of the Code.<\/p>\n
(c) Health Plans. All group health plans of the Homebuilding
\nEntities have been operated in substantial compliance with the group health plan
\ncontinuation coverage requirements of Section 162(k) and Section 4980B of the
\nCode to the extent such requirements are applicable.<\/p>\n
(d) Fines and Penalties. There has been no act or omission by
\nany Homebuilding Entity or any ERISA Affiliate that has given rise to or may
\ngive rise to fines, <\/p>\n
20
\n 26<\/p>\n
penalties, taxes, or related charges under Section 502(c) or (k) or Section 4071
\nof ERISA or Chapter 43 of the Code.<\/p>\n
(e) Other Plans. None of the Homebuilding Entities have an
\nemployee pension benefit plan, a multi-employer plan (as defined in Section
\n3(37) of ERISA) or a voluntary employees’ beneficiary association as defined in
\nSection 501(c) of the Code.<\/p>\n
2.17 CERTAIN INTERESTS.<\/p>\n
Except as set forth in Schedule 2.17, no Affiliate of any
\nSeller, Corporation or Homebuilding Entity nor any officer, director, or partner
\nof any thereof, nor Associate of any such individual, has any material interest
\nin any property or other asset used in or pertaining to the Homebuilding
\nBusiness or the Former Partnership Properties. Except as set forth in Schedule
\n2.17, the consummation of the transactions contemplated by this Agreement will
\nnot (either alone, or upon the occurrence of any act or event, or with the lapse
\nof time, or both) result in any benefit or payment (severance or other) arising
\nor becoming due from any Homebuilding Entity or the successor or assign of any
\nthereof to, or burdening the Former Partnership Properties for the benefit of,
\nany Person.<\/p>\n
2.18 BANK ACCOUNTS, POWERS, ETC.<\/p>\n
Schedule 2.18 lists each bank, trust company, savings
\ninstitution, brokerage firm, mutual fund or other financial institution with
\nwhich any Homebuilding Entity has an account or safe deposit box and the names
\nand identification of all Persons authorized to draw thereon or to have access
\nthereto, and lists the names of each Person holding powers of attorney or agency
\nauthority from any Homebuilding Entity.<\/p>\n
2.19 NO BROKERS OR FINDERS.<\/p>\n
No agent, broker, finder, or investment or commercial banker,
\nor other Person or firm engaged by or acting on behalf of Sellers, the
\nCorporations or any Homebuilding Entity or any of their respective Affiliates in
\nconnection with the negotiation, execution or performance of this Agreement or
\nthe transactions contemplated by this Agreement, is or will be entitled to any
\nbrokerage or finder’s or similar fee or other commission as a result of this
\nAgreement or such transactions, except Salomon Smith Barney, Inc. as to which
\nSellers and the Corporations shall have full responsibility and neither Buyer
\nnor any Homebuilding Entity shall have any liability.<\/p>\n
2.20 ENVIRONMENTAL COMPLIANCE.<\/p>\n
Except as set forth in Schedule 2.20, (i) none of the
\nHomebuilding Entities has generated, used, transported, treated, stored,
\nreleased or disposed of, nor has suffered or permitted anyone else to generate,
\nuse, transport, treat, store, release or dispose of any Hazardous Substance in
\nviolation of any Laws, nor is in violation of or liable under any Laws relating
\nto environmental protection and compliance; (ii) there has not been any
\ngeneration, use, transportation, treatment, storage, release or disposal of any
\nHazardous Substance in connection with the conduct of the Homebuilding Business
\nor on or in connection with the use of any property or facility of any
\nHomebuilding Entity or the Former Partnership Properties or, to the <\/p>\n
21
\n 27<\/p>\n
knowledge of Sellers, any nearby or adjacent properties or facilities, which has
\ncreated or might reasonably be expected to create any liability under any Laws
\nor which would require reporting to or notification of any Governmental Entity;
\n(iii) no asbestos or polychlorinated biphenyl or underground storage tank is
\ncontained in or located at any facility of any Homebuilding Entity or Former
\nPartnership Properties; and (iv) any Hazardous Substance handled or dealt with
\nin any way in connection with the Former Partnership Properties or the
\nbusinesses of any Homebuilding Entity has been and is being handled or dealt
\nwith in all respects in compliance with applicable Laws, in each case of clauses
\n(i) through (iv) except where such action would not have a material adverse
\neffect on the Homebuilding Business. Sellers have made available to Buyer true
\nand complete copies of all reports, studies, analyses, tests, or monitoring
\nprepared or made by or on behalf of Sellers, the Corporations or the
\nHomebuilding Entities pertaining to Hazardous Materials in, on, or under
\nproperty (including the Former Partnership Properties) now or previously owned
\nor operated by any Homebuilding Entity, including without limitation any Phase I
\nor Phase II assessments referred to in Schedule 2.20 of Sellers’ Disclosure
\nSchedule. With respect to properties that are the subject of any such Phase I or
\nPhase II assessments, Sellers have no knowledge of facts or circumstances
\ninconsistent with the assessments therein.<\/p>\n
2.21 CERTAIN INDEBTEDNESS.<\/p>\n
Sellers have provided to Buyer true and complete copies of
\nthose certain loan agreements, each dated November 30, 1998 (the “Wells Fargo
\nLoans”), between Wells Fargo Bank N.A. and LHN, LHE, Lewis Development and Lewis
\nProperties, together with all related guarantees, security and pledge
\nagreements, subordinated loan agreements, and other agreements, documents, and
\ninstruments delivered in connection with entering into such loan agreements and
\nborrowing thereunder. The Homebuilding Entities’ aggregate principal
\nindebtedness under the Wells Fargo Loans is $240 million as of the date of this
\nAgreement, and, without limiting anything in Section 5.3 hereof, shall not
\nincrease on or prior to the Closing Date other than through the ordinary accrual
\nof interest at the non-default rate in accordance with the terms of such loan
\nagreements. No assets of the Homebuilding Entities, nor Former Partnership
\nProperties, and no Included Assets have been pledged as collateral for the Wells
\nFargo Loans or in any other way serve as security for or are subject to the
\nWells Fargo Loans. The Wells Fargo Loans may be prepaid at any time, and may be
\nprepaid concurrently with the Closing, without penalty or fee of any kind under
\nsuch loan agreements. Without limiting Section 10.14, all fees and expenses
\nincurred or to be incurred by any Homebuilding Entity in connection with the
\nWells Fargo Loans, including any and all facility fees, loan fees, underwriting
\nfees, and fees and expenses of counsel, will be paid by Sellers or the
\nCorporations or reimbursed by them to the Homebuilding Entities, except to the
\nextent that such fees arise from events after the Closing Date if Buyer elects
\nto assume the Wells Fargo Loans.<\/p>\n
22
\n 28<\/p>\n
ARTICLE III<\/p>\n
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLERS<\/p>\n
Except as otherwise indicated on the Sellers’ Disclosure
\nSchedule as applying to a particular Section of this Article III, each Seller
\nindividually represents, warrants and agrees as set forth in Sections 3.1 and
\n3.2 and each Corporation individually represents, warrants and agrees as set
\nforth in Section 3.3:<\/p>\n
3.1 OWNERSHIP BY SELLERS; NO CONFLICTS.<\/p>\n
(a) Seller owns the number of shares of Stock, the Member
\nInterests or the Partnership Interests, as the case may be, set forth opposite
\nhis, her or its name on Exhibit B hereto.<\/p>\n
(b) Seller has good and marketable title to, and sole record
\nand beneficial ownership of, the shares of the Stock, the Member Interests or
\nthe Partnership Interests, as the case may be, which are to be transferred to
\nBuyer by Seller pursuant hereto, free and clear of any and all covenants,
\nconditions, marital property rights, or other Encumbrances.<\/p>\n
(c) If Seller is a entity, it has been duly incorporated or
\nformed and is validly existing in good standing under the laws of its state of
\nincorporation or formation. Whether an individual or an entity, Seller has the
\nright, power and authority to enter into this Agreement and any ancillary
\nagreements hereto, to transfer, convey and sell to Buyer at the Closing the
\nStock, the Member Interests or the Partnership Interests, as the case may be, to
\nbe sold to Buyer by such Seller, and otherwise to perform its obligations under
\nthis Agreement and any ancillary agreements. Upon consummation of the Closing,
\nBuyer will acquire from such Seller legal and beneficial ownership of, and all
\nright to vote and other rights (including the right to admission as a partner or
\nmember of the pertinent partnership or limited liability company) inhering in
\nthe Stock, the Member Interests or the Partnership Interests, as the case may
\nbe, to be sold to Buyer by such Seller, free and clear of all covenants,
\nconditions, marital property rights, or other Encumbrances.<\/p>\n
(d) Seller is not a party to, subject to or bound by any Law
\nor Order, and no Action is pending against Seller or any Homebuilding Entity or,
\nto such Seller’s knowledge, threatened, that would prevent the execution,
\ndelivery or performance of this Agreement by Seller or the transfer, conveyance
\nand sale of the Stock, Member Interests, or Partnership Interests, as the case
\nmay be, to be sold by Seller to Buyer pursuant to the terms hereof.<\/p>\n
(e) This Agreement has been duly authorized by all necessary
\ncorporate, partnership, or limited liability company action on the part of
\nSeller, if Seller is a corporation, partnership or limited liability company,
\nhas been executed and delivered by Seller and is a valid and binding obligation
\nof Seller, enforceable against Seller in accordance with its terms, except as
\nmay be limited by bankruptcy, insolvency, reorganization, moratorium and other
\nsimilar laws limiting creditors’ rights generally and equitable principles.<\/p>\n
23
\n 29<\/p>\n
(f) Neither the execution and delivery of this Agreement, nor
\nthe consummation of the transactions contemplated hereby by Seller violates or
\nwill violate or results or will result in a breach of any of the terms and
\nprovisions of, or constitutes or will constitute a default under, or results or
\nwill result in any augmentation or acceleration of rights, benefits or
\nobligations of any party under, any Contract to which Seller is a party or is
\nbound or which applies to the Stock, Member Interests, or Partnership Interests
\nbeing sold, or any Order applicable to Seller or to the Stock, Member Interests,
\nor Partnership Interests being sold.<\/p>\n
(g) If and to the extent required, Seller hereby consents to
\nthe execution, delivery, and performance of this Agreement by each other Seller
\nand consents to the admission of Buyer as a stockholder, partner, or member of
\neach Homebuilding Entity, as applicable.<\/p>\n
3.2 SECURITIES ACT MATTERS.<\/p>\n
(a) Seller will acquire the shares of Buyer Common Stock
\ncomprising the stock portion of the Purchase Price for investment for Seller’s
\nown accounts and not with a view to or for offer or sale in connection with any
\ndistribution thereof. Seller understands that the shares of Buyer Common Stock
\ndelivered pursuant to this Agreement will not have been registered under the
\nSecurities Act of 1933, as amended (the “Securities Act”) or any applicable
\nstate securities laws by reason of a specific exemption or exception from the
\nregistration requirements thereof which depend upon, among other things, the
\naccuracy of Seller’s representations and warranties in this Section. Seller
\nunderstands that, until such time as a registration statement covering the
\nresale of such shares of Buyer Common Stock is effective under the Securities
\nAct, or such shares may otherwise be freely traded by Seller without
\nregistration under the Securities Act, each stock certificate evidencing such
\nshares may bear a legend substantially to the effect that the shares represented
\nby such certificate have not been registered under the Securities Act or any
\napplicable state securities laws and may be offered and sold only if so
\nregistered or upon delivery to Buyer of an opinion of counsel that an exemption
\nor exception from such registration is applicable.<\/p>\n
(b) Seller acknowledges receipt, either directly or through
\nthe Representative, of all information requested from Buyer and considered by
\nSeller to be necessary or appropriate for deciding whether to acquire the shares
\nof Buyer Common Stock to be delivered pursuant to this Agreement, including,
\nwithout limitation, the Buyer SEC Reports referred to in Section 4.9. Seller is
\nan “accredited investor” within the meaning of Rule 501(a) under the Securities
\nAct or has such knowledge and experience in financial and business matters that
\nSeller is capable of evaluating the merits and risks of, and Seller is able to
\nbear the economic risk of, acquiring such shares of Buyer Common Stock. Seller
\nhas had the opportunity to ask questions and receive answers regarding the terms
\nand conditions of the acquisition of Buyer Common Stock pursuant to this
\nAgreement.<\/p>\n
(c) Seller does not currently own, beneficially or of record,
\nany shares of Buyer Common Stock.<\/p>\n
24
\n 30<\/p>\n
3.3 AUTHORITY OF CORPORATIONS; NO CONFLICTS.<\/p>\n
(a) The Corporation has been duly incorporated and is validly
\nexisting in good standing under the laws of its state of incorporation. The
\nCorporation has the right, power and authority to enter into this Agreement and
\nany ancillary agreements hereto and perform its obligations under this Agreement
\nand any ancillary agreements hereto.<\/p>\n
(b) The Corporation is not a party to, subject to or bound by
\nany Law or Order, and no Action is pending against the Corporation or, to such
\nCorporation’s knowledge, threatened, that would prevent the execution, delivery
\nor performance of this Agreement by the Corporation.<\/p>\n
(c) This Agreement has been duly authorized by all necessary
\ncorporate action on the part of the Corporation, has been executed and delivered
\nby the Corporation and is a valid and binding obligation of the Corporation,
\nenforceable against the Corporation in accordance with its terms, except as may
\nbe limited by bankruptcy, insolvency, reorganization, moratorium and other
\nsimilar laws limiting creditors’ rights generally and equitable principles.<\/p>\n
(d) Neither the execution and delivery of this Agreement, nor
\nthe consummation of the transactions contemplated hereby, by the Corporation
\nviolates or will violate or results or will result in a breach of any of the
\nterms and provisions of, or constitutes or will constitute a default under, or
\nresults or will result in any augmentation or acceleration of rights, benefits
\nor obligations of any party under, any Contract to which the Corporation is a
\nparty or is bound or which applies to the Stock, Member Interests, or
\nPartnership Interests being sold, or any Order applicable to the Corporation or
\nto the Stock, Member Interests, or Partnership Interests being sold.<\/p>\n
(e) The Corporation does not currently own, beneficially or of
\nrecord, any shares of Buyer Common Stock.<\/p>\n
ARTICLE IV<\/p>\n
REPRESENTATIONS AND WARRANTIES OF BUYER<\/p>\n
Except as otherwise indicated on the Buyer’s Disclosure
\nSchedule as applying to a particular Section in this Article IV, Buyer
\nrepresents, warrants and agrees as follows:<\/p>\n
4.1 ORGANIZATION AND RELATED MATTERS.<\/p>\n
Buyer is a corporation duly organized, validly existing and in
\ngood standing under the laws of the State of Delaware. Buyer has all necessary
\ncorporate power and authority to carry on its business as now being conducted.
\nBuyer has the necessary corporate power and authority to execute, deliver and
\nperform this Agreement.<\/p>\n
25
\n 31<\/p>\n
4.2 AUTHORIZATION.<\/p>\n
The execution, delivery and performance of this Agreement by
\nBuyer have been duly and validly authorized by the Board of Directors of Buyer
\nand by all other necessary corporate action on the part of Buyer. This Agreement
\nhas been duly executed and delivered by Buyer and constitutes the legal, valid
\nand binding obligation of Buyer, enforceable against Buyer in accordance with
\nits terms except as may be limited by bankruptcy, insolvency, reorganization,
\nmoratorium and other similar laws relating to or limiting creditors’ rights
\ngenerally and equitable principles.<\/p>\n
4.3 NO CONFLICTS.<\/p>\n
The execution, delivery and performance of this Agreement by
\nBuyer will not violate the provisions of, or constitute a breach or default
\n(whether upon lapse of time and\/or the occurrence of any act or event or
\notherwise) under (a) the certificate of incorporation or bylaws of Buyer, (b)
\nany Law or Order to which Buyer is subject or (c) any Contract to which Buyer is
\na party that is material to the financial condition, results of operations or
\nconduct of the business of Buyer, provided (as to clauses (b) and (c)
\nrespectively) that the appropriate regulatory approvals set forth on Schedule
\n4.3 are received as contemplated by Section 7. 1 (b). Except as set forth in
\nSchedule 4.3, the execution and delivery of this Agreement by Buyer and the
\nperformance of this Agreement by Buyer will not require a filing or registration
\nwith, or the issuance of any Permit or Approval by, any other third party or
\nGovernmental Entity.<\/p>\n
4.4 NO BROKERS OR FINDERS.<\/p>\n
No agent, broker, finder or investment or commercial banker,
\nor other Person or firms engaged by or acting on behalf of Buyer or its
\nAffiliates in connection with the negotiation, execution or performance of this
\nAgreement or the transactions contemplated by this Agreement, is or will be
\nentitled to any broker’s or finder’s or similar fees or other commissions as a
\nresult of this Agreement or such transactions, except Warburg Dillon Read LLC,
\nas to which Buyer shall have full responsibility and none of the Sellers or the
\nHomebuilding Entities shall have any liability.<\/p>\n
4.5 LEGAL PROCEEDINGS.<\/p>\n
Except as set forth in Schedule 4.5, there is no Order or
\nAction pending or to the knowledge of Buyer, threatened against or affecting
\nBuyer that individually or when aggregated with one or more other Actions has or
\nmight reasonably be expected to have a material adverse effect on Buyer’s
\nability to perform this Agreement.<\/p>\n
4.6 INVESTMENT REPRESENTATION.<\/p>\n
Buyer is acquiring the Stock and Partnership Interests from
\nSellers for Buyer’s own accounts for investment purposes only and not with a
\nview to or for sale in connection with the public distribution thereof. Buyer is
\nknowledgeable and experienced in the purchase of businesses and securities of
\nthe type contemplated by this Agreement and has the capacity to protect its own
\ninterest in connection with the transactions contemplated hereby. Buyer<\/p>\n
26
\n 32<\/p>\n
acknowledges that neither the Shares nor the Partnership Interests have been
\nregistered under the Securities Act of 1933, as amended, or qualified under any
\nstate securities or blue sky laws.<\/p>\n
4.7 FINANCING.<\/p>\n
The Buyer has available sufficient funds to enable it to
\nconsummate the transactions contemplated hereby.<\/p>\n
4.8 CAPITAL STOCK.<\/p>\n
The shares of Buyer Common Stock to be issued as the stock
\nportion of the Purchase Price have been duly authorized by all necessary
\ncorporate action on the part of the Buyer and, when issued pursuant to this
\nAgreement, will be validly issued, fully paid and nonassessable, and such shares
\nwill be issued without any violation of preemptive rights.<\/p>\n
4.9 SEC FILINGS; FINANCIAL STATEMENTS.<\/p>\n
Buyer has delivered to the Sellers, in the form filed with the
\nSEC, (i) its Annual Report to Shareholders and Annual Report on Form 10-K for
\nthe fiscal year ended November 30, 1997, (ii) its Proxy Statement for Annual
\nMeeting of Shareholders on April 2, 1998, (iii) its Quarterly Reports on Form
\n10-Q for the quarters ended February 28, 1998, May 30, 1998, and August 30,
\n1998, (iv) its Current Reports on Form 8-K, dated June 23, 1998 and August 14,
\n1998, and (v) any amendments and supplements to any such reports filed by Buyer
\nwith the SEC (collectively, the “Buyer SEC Reports”). The Buyer SEC Reports did
\nnot at the time they were filed (or if amended or superseded by a filing prior
\nto the date hereof, then on the date of such filing) contain any untrue
\nstatement of a material fact or omit to state a material fact necessary in order
\nto make the statements therein, in the light of the circumstances under which
\nthey were made, not misleading. The consolidated financial statements of Buyer
\nincluded in the Buyer SEC Reports comply as to form in all material respects
\nwith applicable accounting requirements and the published rules and regulations
\nof the SEC with respect thereto, have been prepared in accordance with GAAP
\n(except, in the case of unaudited consolidated quarterly statements, as
\npermitted by Form 10-Q of the SEC) applied on a consistent basis during the
\nperiods involved (except as may be indicated in the notes thereto) and fairly
\npresent the consolidated financial position of Buyer and its consolidated
\nsubsidiaries as of the dates thereof and the consolidated results of their
\noperations and cash flows for the periods then ended (subject, in the case of
\nunaudited quarterly statements, to normal year-end audit adjustments). Neither
\nBuyer nor any of its subsidiaries has any material liability of any nature,
\nwhether accrued, absolute, contingent or otherwise, except liabilities that (i)
\nare reflected or disclosed in the most recent financial statements included in
\nthe Buyer SEC Reports, (ii) were incurred after August 30, 1998 in the ordinary
\ncourse of business, or (iii) are set forth in Schedule 4.5 hereto. Since August
\n30, 1998, there has not been, occurred or arisen any change in or event
\naffecting Buyer or any of its subsidiaries that has or is reasonably expected to
\nhave a material adverse effect on Buyer, except as set forth in Schedule 4.5.<\/p>\n
27
\n 33<\/p>\n
ARTICLE V<\/p>\n
COVENANTS PRIOR TO CLOSING<\/p>\n
5.1 ACCESS.<\/p>\n
Sellers shall cause the Homebuilding Entities to authorize and
\npermit Buyer and its representatives (which term shall be deemed to include its
\nindependent accountants and counsel) to have reasonable access during normal
\nbusiness hours, upon reasonable notice and in such manner as will not
\nunreasonably interfere with the conduct of their respective businesses, to all
\nof their respective properties, books, records, operating instructions and
\nprocedures, Tax Returns and all other information with respect to the
\nHomebuilding Business as Buyer may from time to time reasonably request, and to
\nmake copies of such books, records and other documents and to discuss their
\nrespective businesses with such other Persons, including, without limitation,
\ntheir respective directors, officers, employees, accountants, counsel,
\nsuppliers, customers, and creditors, as Buyer considers necessary or appropriate
\nfor the purposes of familiarizing itself with the Homebuilding Business,
\nobtaining any necessary Approvals of or Permits for the transactions
\ncontemplated by this Agreement and conducting an evaluation of the organization
\nand Homebuilding Business. Without limiting the generality of the foregoing,
\nBuyer shall be entitled to conduct or cause to be conducted (at its expense) on
\nany real property of the Homebuilding Entities such soils and geological tests
\nand environmental inspections, audits and tests (including the taking of soils
\nand ground water samples) and such structural and other physical inspections as
\nBuyer shall deem necessary or useful in connection with the transactions
\ncontemplated by this Agreement. Buyer shall cause any damages resulting from any
\nsuch testing, inspection or audit to be repaired at Buyer’s sole cost, and Buyer
\nagrees to indemnify and hold the Sellers and the Homebuilding Entities harmless
\nfrom any loss, cost, expense or liability incurred by any Seller or Homebuilding
\nEntity relating to or arising out of the conduct of any such tests, inspections
\nor audits. Neither Buyer’s making nor omitting to make any such test,
\ninspection, or audit shall affect the representations and warranties of Sellers
\nor the Corporations or the conditions to Buyer’s obligations hereunder, or
\nSeller’s or the Corporation’s indemnification obligations.<\/p>\n
5.2 MATERIAL ADVERSE CHANGES.<\/p>\n
Sellers will promptly notify Buyer of any event of which such
\nSeller or a Corporation obtains knowledge which has had or is reasonably
\nexpected to have a material adverse effect on the Homebuilding Business or which
\nif known as of the date hereof would have been required to be included on a
\nSchedule to this Agreement. No such notification shall affect the
\nrepresentations or warranties of Sellers or the Corporations or the conditions
\nto Buyer’s obligations hereunder, or Seller’s or the Corporation’s
\nindemnification obligations. Sellers will promptly notify Buyer of any Action
\nthat commences or is threatened on or after the date hereof and before the
\nClosing Date that involves a claim for damages in excess of $50,000 or seeks
\ninjunctive relief, specific performance, or other equitable remedies.<\/p>\n
28
\n 34<\/p>\n
5.3 CONDUCT OF BUSINESS.<\/p>\n
Sellers shall cause the Homebuilding Entities not to take, and
\nwith respect to the Former Partnership Properties the Partnership Sellers shall
\nnot take, any of the following actions without the prior consent in writing of
\nBuyer (which consent shall not be unreasonably withheld, except that Buyer may
\ngive or withhold its consent in its sole discretion with respect to the matters
\nspecified in clauses (f), (h), (i), (k), (l), (m), (n), (s) and (u)):<\/p>\n
(a) conduct the Homebuilding Business in any manner except in
\nthe ordinary course substantially as now conducted; or<\/p>\n
(b) amend, terminate, renew, fail to renew or renegotiate any
\nMaterial Contract or default (or take or omit to take any action that, with or
\nwithout the giving of notice or passage of time, would constitute a default) in
\nany of its obligations under any Material Contract or enter into any new
\nMaterial Contract; or<\/p>\n
(c) terminate, amend or fail to renew any existing insurance
\ncoverage; or<\/p>\n
(d) terminate or fail to renew or preserve any Permits; or<\/p>\n
(e) create, incur, assume or guarantee any long-term debt or
\ncapitalized lease obligation of more than $250,000 in any specific case or
\n$1,000,000 in the aggregate; or<\/p>\n
(f) create, incur, assume or guarantee any long-term debt or
\ncapitalized lease obligation of more than $500,000 in any specific case or
\n$2,000,000 in the aggregate, or assume or guarantee any debt or obligation of
\nany person that is not one of the Homebuilding Entities; or<\/p>\n
(g) make any loan, guaranty or other extension of credit, or
\nenter into any commitment to make any loan, guaranty or other extension of
\ncredit, to or for the benefit of, or enter into any agreement for the
\nacquisition or disposition of property from or to, any director, officer,
\nemployee, stockholder, partner, Corporation or any of their respective
\nAssociates or Affiliates of less than or equal to $500,000 in any specific case
\nor $1,000,000 in the aggregate; or<\/p>\n
(h) make any loan, guaranty or other extension of credit, or
\nenter into any commitment to make any loan, guaranty or other extension of
\ncredit, to or for the benefit of, or enter into any agreement for the
\nacquisition or disposition of property from or to, any director, officer,
\nemployee, stockholder, partner, Corporation or any of their respective
\nAssociates or Affiliates of more than $500,000 in any specific case or
\n$1,000,000 in the aggregate.<\/p>\n
(i) grant any general or uniform increase in the rates of pay
\nor benefits to officers, directors or employees (or a class thereof) or any
\nincrease in salary or benefits of or pay any bonus to any officer, director,
\nemployee or agent, or enter into any new, or amend, supplement, or renew any
\nexisting, employment, collective bargaining, severance, change in control,
\nbonus, profit sharing, deferred compensation, fringe benefit, consultancy, or
\nother employee benefit agreement or plan, or increase or accelerate any benefits
\npayable under any of the foregoing; or<\/p>\n
29
\n 35<\/p>\n
(j) sell, transfer, mortgage, encumber or otherwise dispose of
\nany assets, except (i) for dispositions of property not greater than $250,000 in
\nany specific case or $1,500,000 in the aggregate, (ii) the disposition of
\nExcluded Assets (other than Former Partnership Properties) or (iii) in the
\nordinary course of business consistent with past practice; or<\/p>\n
(k) sell, transfer, mortgage, encumber or otherwise dispose of
\nany assets, except (i) for dispositions of property not greater than $500,000 in
\nany specific case or $3,000,000 in the aggregate, (ii) the disposition of
\nExcluded Assets (other than Former Partnership Properties) or (iii) in the
\nordinary course of business consistent with past practice; or<\/p>\n
(l) issue, sell, redeem or acquire for value, or agree to do
\nso, any debt obligations or Equity Securities of any Homebuilding Entity; or<\/p>\n
(m) split, combine, dividend, distribute or reclassify any
\nshares of the Equity Securities of Management Corp., Branching Tree, the Holding
\nLLCs, Mather, Desert Inn or the Parent Partnerships; or declare, issue, make or
\npay any dividend or other distribution of assets, whether consisting of money,
\nother personal property, real property or other thing of value, to the
\nshareholders of Management Corp. or Branching Tree, the members of the Holding
\nLLCs, Mather or Desert Inn or the partners of the Parent Partnerships, other (i)
\nthan the distribution of the Excluded Assets, (ii) pursuant to those agreements
\nexisting on the date of this Agreement and identified on Schedules 2.3 or 2.4
\nand (iii) cash on hand so long as the Net Worth of the Homebuilding Business of
\nthe Homebuilding Entities as of the Closing Date is not less than $192,849,362;
\nor<\/p>\n
(n) change or amend the charter documents or bylaws of
\nManagement Corp. or Branching Tree or the governing agreements of the Holding
\nLLCs, Mather, Desert Inn or the Parent Partnerships or any of their Subsidiaries
\nor merge, consolidate, transfer substantially all the assets of (other than
\nExcluded Assets), liquidate, or dissolve any of the Homebuilding Entities; or<\/p>\n
(o) make any investment, by purchase, contributions to
\ncapital, property transfers, loan, or otherwise, in any other Person; or<\/p>\n
(p) make any Tax election or make any change in any method or
\nperiod of accounting or in any accounting policy, practice or procedure; or<\/p>\n
(q) introduce any new method of management or operation in
\nrespect of the Homebuilding Business; or<\/p>\n
(r) acquire or agree to acquire any assets the consideration
\nfor which would exceed $250,000 individually or $1,000,000 in the aggregate; or<\/p>\n
(s) acquire or agree to acquire any assets the consideration
\nfor which would exceed $500,000 individually or $2,000,000 in the aggregate; or<\/p>\n
(t) settle or compromise any Action; or<\/p>\n
30
\n 36<\/p>\n
(u) settle or consent to the entry in any Action of any Order
\nthat would have or reasonably be expected to have a material adverse effect on
\nthe Homebuilding Business or the Former Partnership Properties; or<\/p>\n
(v) agree to or make any commitment to take any actions
\nprohibited by this Section 5.3.<\/p>\n
5.4 NOTIFICATION OF CERTAIN MATTERS.<\/p>\n
Each Seller or Corporation shall give prompt written notice to
\nBuyer, and Buyer shall give prompt written notice to Sellers and the
\nCorporations, of (i) the occurrence, or failure to occur, of any event that is
\nreasonably likely to cause any representation or warranty contained in this
\nAgreement to be untrue or inaccurate in any material respect (or with respect to
\nthose representations and warranties that are qualified by reference to
\nmateriality or a material adverse effect, to be untrue or inaccurate in any
\nrespect taking into account such qualification) at any time from the date of
\nthis Agreement to the Closing Date and (ii) any failure of Buyer or Sellers or
\nCorporations, as the case may be, to comply with or satisfy, in any material
\nrespect, any covenant, condition or agreement to be complied with or satisfied
\nby it under this Agreement.<\/p>\n
No such notification shall affect the representations or
\nwarranties of the parties or the conditions to their respective obligations
\nhereunder, or their respective indemnification obligations.<\/p>\n
5.5 PERMITS AND APPROVALS.<\/p>\n
(a) Sellers and Buyer each agree to cooperate and use their
\ncommercially reasonable efforts to obtain (and will promptly prepare all
\nregistrations, filings and applications, requests and notices preliminary to
\nall) Approvals and Permits that may be necessary to consummate the transactions
\ncontemplated by this Agreement.<\/p>\n
(b) To the extent that the Approval of a third party with
\nrespect to any Material Contract is required in connection with the transactions
\ncontemplated by this Agreement, Sellers shall use its commercially reasonable
\nefforts to obtain such Approval prior to the Closing Date and in the event that
\nany such Approval is not obtained (but without limitation on Buyer’s rights
\nunder Section 7.2), Sellers shall cooperate with Buyer to ensure that Buyer
\nobtains the benefits of each such Contract.<\/p>\n
5.6 PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE.<\/p>\n
During the period beginning on the date hereof and ending on
\nthe Closing Date, (a) Sellers will use their commercially reasonable efforts to
\npreserve the Homebuilding Business and to preserve the goodwill of employees,
\ncustomers, suppliers and others having business relations with the Homebuilding
\nEntities and (b) Sellers and Buyer will consult with each other concerning, and
\nSellers will cooperate to keep available to Buyer, the services of the officers
\nand employees of the Homebuilding Entities that Buyer may wish to have any
\nHomebuilding Entity retain.<\/p>\n
31
\n 37<\/p>\n
5.7 GOVERNMENT FILINGS.<\/p>\n
Buyer will make and Sellers will make, and will cause the
\nHomebuilding Entities to make, any and all filings required under the
\nHart-Scott-Rodino Act. Sellers and Buyer shall furnish each other such necessary
\ninformation and reasonable assistance as the other may reasonably request in
\nconnection with its preparation of necessary filings or submissions under the
\nprovisions of such law, and shall provide each other a reasonable opportunity to
\nreview, prior to filing, any filing with a Governmental Entity related to this
\nAgreement. Sellers and Buyer will supply to each other copies of all
\ncorrespondence, filings or communications, including file memoranda evidencing
\ntelephonic conferences, by such party or its affiliates with any Governmental
\nEntity or members of its staff, with respect to the transactions contemplated by
\nthis Agreement and any related or contemplated transactions, except for
\ndocuments filed pursuant to Item 4(c) of the Hart-Scott Rodino Notification and
\nReport Form or communications regarding the same.<\/p>\n
5.8 ELIMINATION OF INTERCOMPANY AND AFFILIATE LIABILITIES.<\/p>\n
No later than the Closing Date, Sellers shall purchase, cause
\nto be repaid or (with respect to guarantees) assume liability for any and all
\nloans or other extensions of credit made or guaranteed by any Homebuilding
\nEntity, or to which a Former Partnership Property is subject, to or for the
\nbenefit of a Seller or any of such Seller’s Associates. At the Closing Date,
\nneither Buyer nor any Homebuilding Entity shall have, nor shall any Former
\nPartnership Property be subject to, any continuing commitment, obligation or
\nliability of any kind with respect to any Seller or any Associates of any
\nSeller, except as set forth in Schedule 5.8.<\/p>\n
5.9 REPRESENTATIVE.<\/p>\n
Each Seller and Corporation hereby appoints John M. Goodman as
\nrepresentative (the “Representative”) to represent such Seller or Corporation in
\nconnection with the transactions contemplated by this Agreement, and to take any
\nand all action, and to receive any and all notices, on Seller’s or Corporation’s
\nbehalf hereunder that may be taken or received by Seller or Corporation under
\nthe terms hereof. Without giving notice to the Sellers or the Corporations, the
\nRepresentative shall have full and irrevocable authority on behalf of the
\nSellers and the Corporations to (i) deal with Buyer, (ii) accept and give
\nnotices and other communications relating to this Agreement, (iii) settle any
\ndisputes relating to this Agreement, (iv) waive any condition to the obligations
\nof the Sellers or Corporations included in this Agreement, (v) execute any
\ndocument or instrument that the Representative may deem necessary or desirable
\nin the exercise of the authority granted under this Section, and (vi) act in
\nconnection with all matters arising out of, based upon, or in connection with,
\nthis Agreement and the transactions contemplated hereby. Each Seller and
\nCorporation understands and agrees that the Representative has been appointed as
\nthe Representative by each of the other Sellers and Corporations. Buyer shall be
\nentitled to rely on the advice, information and decisions of the Representative
\nevidenced by a writing signed by him without any obligation independently to
\nverify, authenticate or seek the confirmation or approval of the
\nRepresentative’s advice, information or decisions or any other facts from
\nSellers or the Corporations or any other Person. Any certificate or other
\ndocument to be delivered by Sellers or the Corporations at the Closing <\/p>\n
32
\n 38<\/p>\n
may be executed and delivered by the Representative on behalf of all Sellers and
\nCorporations and shall constitute a reaffirmation of any representations herein
\nas of the Closing by such Seller or Corporation unless he, she or it otherwise
\nnotifies Buyer in writing on or prior to the Closing of any exceptions thereto.<\/p>\n
5.10 EXCHANGE LISTING; REGISTRATION RIGHTS.<\/p>\n
Buyer will use its best efforts to cause the shares of Buyer
\nCommon Stock comprising the stock portion of the Purchase Price to be authorized
\nfor listing on the New York Stock Exchange, upon notice of issuance, prior to
\nthe Closing Date. On the Closing Date, Buyer will enter into an agreement in
\nsubstantially the form of Exhibit E providing for registration rights upon the
\nterms and conditions set forth therein (the “Registration Rights Agreement”).<\/p>\n
5.11 SHAREHOLDERS AGREEMENT.<\/p>\n
On the Closing Date, Buyer and Sellers shall enter into a
\nshareholders agreement in substantially the form of Exhibit F hereto (the
\n“Shareholder Agreement”).<\/p>\n
5.12 COST SHARING AGREEMENTS AND OPTION AGREEMENT.<\/p>\n
On the Closing Date, Buyer and Sellers (or their designee(s))
\nshall enter into cost sharing agreements with respect to the Highland\/Lytle
\nCreek and Terra Vista projects in substantially the forms of Exhibit G and H,
\nrespectively, hereto (collectively, the “Cost Sharing Agreements”), and an
\noption agreement with respect to the Sierra Lakes project in substantially the
\nform of Exhibit I hereto (the “Option Agreement”).<\/p>\n
5.13 EMPLOYEES.<\/p>\n
The parties agree to consult in good faith with each other
\nprior to the Closing and prior to soliciting Homebuilding Entities’ employees to
\ndetermine which employees of the Homebuilding Entities will remain with the
\nHomebuilding Business of the Homebuilding Entities and which employees of the
\nHomebuilding Entities will become employees of the non-Homebuilding Business of
\nSellers. Sellers shall provide to Buyer such information regarding the employees
\nof the Homebuilding Entities as Buyer may reasonably request. The parties agree
\nto consult in good faith with each other prior to the Closing to determine which
\nemployees, if any, of the Homebuilding Entities need to be loaned on a
\nshort-term basis between them and the reasonable expense charges for any loaned
\nemployees.<\/p>\n
33
\n 39<\/p>\n
ARTICLE VI<\/p>\n
ADDITIONAL CONTINUING COVENANTS<\/p>\n
6.1 NONCOMPETITION.<\/p>\n
(a) Restrictions on Competitive Activities. Subject to the
\nprovisions of Section 6.10, each Seller and Corporation agrees that after the
\nClosing, Buyer and the Homebuilding Entities shall be entitled to the goodwill
\nand going concern value of the Homebuilding Business and to protect and preserve
\nthe same to the maximum extent permitted by law. For these and other reasons and
\nas an inducement to Buyer to enter into this Agreement, each Seller and
\nCorporation, other than John M. Goodman, agrees that for a period of four years
\nafter the Closing Date or one year after termination of that Seller’s employment
\nor consulting agreement with Buyer or any of the Homebuilding Entities,
\nwhichever is later, and in the case of John M. Goodman, for a period of two
\nyears after the Closing Date, such Seller or Corporation will not, in the States
\nof California or Nevada, directly or indirectly, for its own benefit or as agent
\nfor another carry on or participate in the ownership, management or control of,
\nor be employed by, or consult for, or serve as a director of, or otherwise
\nrender services to, the business of constructing or selling single family homes
\nof any business entity.<\/p>\n
(b) Exceptions. Nothing contained herein shall limit the right
\nof a Seller or Corporation as an investor to hold and make investments in
\nsecurities of any corporation or limited partnership that is registered on a
\nnational securities exchange or admitted to trading privileges thereon or
\nactively traded in a generally recognized over-the-counter market, provided such
\nSeller’s or Corporation’s equity interest therein does not exceed 5% of the
\noutstanding shares or interests in such corporation or partnership.<\/p>\n
(c) Nonsolicitation. During the period of one year after the
\nClosing Date, Sellers, Corporations and their respective affiliates (excluding
\nthe Homebuilding Entities after the Closing Date) shall refrain from soliciting
\nfor employment, directly or indirectly, any then employees of the Homebuilding
\nEntities. This prohibition shall not extend to employing any such person who
\ncontacts Sellers, the Corporations or their respective affiliates on his or her
\nown initiative without any direct or indirect solicitation or encouragement from
\nany Seller, Corporation or its affiliates or employees (it being understood that
\nplacing a general advertisement does not constitute solicitation).<\/p>\n
(d) Special Remedies and Enforcement. Each Seller or
\nCorporation recognizes and agrees that a breach by such Seller or Corporation of
\nany of the covenants set forth in this Section 6.1 could cause irreparable harm
\nto Buyer, that Buyer’s remedies at law in the event of such breach would be
\ninadequate, and that, accordingly, in the event of such breach a restraining
\norder or injunction or both may be issued against such Seller or Corporation, in
\naddition to any other rights and remedies which are available to Buyer. If this
\nSection 6.1 is more restrictive than permitted by the Laws of the jurisdiction
\nin which Buyer seeks enforcement hereof, this Section 6.1 shall be limited to
\nthe extent required to permit enforcement under such Laws. Without limiting the
\ngenerality of the foregoing, the parties intend that the covenants <\/p>\n
34
\n 40<\/p>\n
contained in the preceding portions of this Section 6.1 shall be construed as a
\nseries of separate covenants, one for each state. Except for geographic
\ncoverage, each such separate covenant shall be deemed identical in terms. If, in
\nany judicial proceeding, a court shall refuse to enforce any of the separate
\ncovenants deemed included in this Section 6.1, then such unenforceable covenant
\nshall be deemed eliminated from these provisions for the purpose of those
\nproceedings to the extent necessary to permit the remaining separate covenants
\nto be enforced.<\/p>\n
6.2 NON-DISCLOSURE OF PROPRIETARY DATA.<\/p>\n
Each Seller and Corporation agrees that such Seller or
\nCorporation will not, at any time, make use of, divulge or otherwise disclose,
\ndirectly or indirectly, any trade secret or other proprietary data concerning
\nthe business or policies of any Homebuilding Entity as they relate to the
\nHomebuilding Business, other than form documents used by any Homebuilding
\nEntity, or of Buyer obtained in connection with the negotiation, execution, or
\nperformance of this Agreement. In addition, each Seller and Corporation agrees
\nnot to make use of, divulge or otherwise disclose, directly or indirectly, to
\npersons other than Buyer, any confidential information concerning the business
\nor policies of any Homebuilding Entity as they relate to the Homebuilding
\nBusiness which may have been learned in any such capacity or of Buyer which may
\nhave been learned in connection with the negotiation, execution, or performance
\nof this Agreement. The Seller’s and Corporation’s obligations under this Section
\nwith respect to any trade secret, other proprietary data, or confidential
\ninformation of Buyer shall survive the termination of this Agreement if this
\nAgreement is terminated prior to the Closing.<\/p>\n
6.3 TAX RETURNS.<\/p>\n
(a) The Sellers shall cause to be prepared and timely filed
\n(or provided to Buyer for execution and filing, if applicable) when due (taking
\ninto account all extensions properly obtained) all income and franchise Tax
\nReturns of the Homebuilding Entities for taxable periods ending on or before the
\nClosing Date, and all other Tax Returns required to be filed by or on behalf of
\nsuch entities on or before the Closing Date. All Tax Returns described in this
\nSection 6.3(a) shall be prepared and filed in a manner consistent with past
\npractice and, on such Tax Returns, no position shall be taken, election made or
\nmethod adopted without Buyer’s written consent (which shall not be unreasonably
\nwithheld) that is inconsistent with positions taken, elections made or methods
\nused in preparing and filing similar Tax Returns in prior periods (including,
\nbut not limited to, positions, elections or methods which would have the effect
\nof deferring income to periods after the Closing Date).<\/p>\n
(b) Buyer shall cause to be prepared and timely filed all Tax
\nReturns of the Homebuilding Entities that are not described in Section 6.3(a)
\nabove. If any such Tax Return covers a period beginning before the Closing Date,
\nSellers shall have the right to review and approve (which approval shall not be
\nunreasonably withheld) such Tax Return before it is filed if it could affect the
\nSellers’ or Shareholders’ liability for Taxes to any taxing authority or their
\nindemnification obligations to Buyer under this Agreement. Any Tax Return
\ndescribed in the preceding sentence shall be provided to the Sellers not less
\nthan 14 days prior to the proposed filing date together with any underlying
\ninformation or records requested by the Sellers to assist their review.<\/p>\n
35
\n 41<\/p>\n
6.4 TAX COOPERATION.<\/p>\n
(a) After the Closing, the Sellers, the Corporations, the
\nHolding LLCs and the Buyer shall, and shall cause their respective Affiliates
\nto, cooperate fully with each other in the preparation and filing of all Tax
\nReturns and any Tax investigation, audit or other proceeding respecting the
\nHomebuilding Business (a “Tax Proceeding”) and shall provide, or cause to be
\nprovided, any records and other information in their possession or control or in
\nthe control of their agents reasonably requested by such other party in
\nconnection therewith as well as access to, and the cooperation of, their
\nrespective auditors. Buyer shall notify Sellers in writing promptly upon receipt
\nby Buyer or any Affiliate of any notice of any pending or threatened audits or
\nassessments relating to Taxes with respect to any Homebuilding Entity other than
\nTaxes as to which Sellers or the Shareholders have no indemnification obligation
\nor other liability relating to Taxes. Sellers shall have the right to control
\nthe handling and disposition of such audit and any administrative or court
\nproceeding relating thereto (and to employ counsel of their choice at their
\nexpense) to the extent that such audit or proceeding might result in increased
\nTax liabilities of the Sellers or the Shareholders for the period covered by the
\nTax Proceeding or an increase in their indemnification obligations to Buyer
\nunder this Agreement; provided, however, that Buyer may monitor the Tax
\nProceeding. Sellers shall not agree to any settlement concerning Taxes of any
\nHomebuilding Entity for any taxable period which would result in an increase in
\nTaxes of Buyer or any Homebuilding Entity for any taxable period ending after
\nthe Closing Date, without the prior written consent of the Buyer (which consent
\nshall not be unreasonably withheld). The Buyer and the Sellers shall bear their
\nrespective costs and expenses in connection with any Tax Proceeding. Any
\ninformation obtained pursuant to this Section 6.4 or pursuant to any other
\nSection hereof providing for the sharing of information or the review of any Tax
\nReturn or other information relating to Taxes shall be subject to Section 10.9.<\/p>\n
(b) At Buyer’s election, made not less than 60 days before any
\nsuch election must be made, (i) the Management Corp. Sellers and Branching Tree
\nSellers, jointly with Buyer, shall make timely and irrevocable elections under
\nSection 338(h)(10) of the Code and similar elections under any applicable state
\nor local Tax laws for Management Corp. and Branching Tree (the “Section
\n338(h)(10) Elections”), and (ii) the Sellers, Corporations, Holding LLCs and
\ntheir Affiliates shall make, or cause to be made, timely and irrevocable
\nelections under Section 754 of the Code and similar elections under any
\napplicable state or local Tax laws for any or all of Mather, Desert Inn, or any
\nSubsidiaries of Parent Partnerships, Mather or Desert Inn that are partnerships
\nor limited liability companies (collectively, the “Section 754 Elections” and
\ncollectively with the Section 338(h)(10) Elections, the “Tax Elections”). No
\nelections under Section 754 of the Code effective for a tax year beginning in
\n1998 shall be made on or after October 20, 1998 for any entities, other than the
\nParent Partnerships or the Partnership Sellers, that are or were utilized to
\nremove Excluded Assets from the Homebuilding Entities. If the Tax Elections are
\nmade, Buyer, Sellers, the Corporations, the Holding LLCs, the Homebuilding
\nEntities, and each of their Affiliates, shall report the transactions
\ncontemplated herein consistently with the Tax Elections and shall take no
\nposition contrary thereto unless and to the extent required to do so pursuant to
\na final determination of liability in respect of a Tax that, under applicable
\nlaw, is not subject to further appeal, review, or modification through
\nproceedings or otherwise); provided, however, that the parties shall treat, for
\nfederal and state <\/p>\n
36
\n 42<\/p>\n
income and franchise tax purposes, the purchase of the Holding LLC member
\ninterest and Parent Partnership partnership interests as taxable purchases, from
\nthe Partnership Sellers, of the assets owned by the Parent Partnerships. To the
\nextent possible, Buyer, Sellers, the Corporations, the Holding LLCs, the
\nHomebuilding Entities, and each of their Affiliates, as applicable, shall
\nexecute at the Closing any and all documents, statements, and other forms that
\nare required to be submitted to any Taxing authority in connection with the Tax
\nElections (the “Tax Election Forms”). If any Tax Election Forms are not executed
\nat the Closing, Buyer, Sellers, and the Homebuilding Entities, as applicable,
\nshall prepare and complete each such Tax Election Form no later than 30 days
\nbefore the date such Tax Election Form is required to be filed, shall cause such
\nTax Election Forms to be duly executed by their respective authorized persons,
\nand shall timely file such Tax Election Forms in accordance with applicable Tax
\nlaws.<\/p>\n
(c) Buyer and Sellers agree to use their best efforts to agree
\nupon a schedule and supporting sub-allocation schedules, in substantially the
\nform of (but without regard to the specific numbers on) Schedule 6.4(c) hereto
\n(collectively the “Allocation Agreement”), and Sellers and Buyer agree to cause
\neach of the Homebuilding Entities to agree to the Allocation Agreement insofar
\nas the Allocation Agreement addresses them, (i) to allocate the Purchase Price
\nallocated to the Management Corp. Stock and the liabilities of Management Corp.
\n(and other relevant items) to the assets of Management Corp. and the Purchase
\nPrice allocated to the Branching Tree Stock and liabilities of Branching Tree
\n(and other relevant items) to the assets of Branching Tree, in both cases for
\nall applicable Tax purposes, including the Section 338(h)(10) Elections, (ii) to
\nmake and allocate the basis adjustments to the assets of Mather and the assets
\nof Desert Inn and its Subsidiary, and (iii) to allocate the Purchase Price
\nallocated to each of the other Homebuilding Entities and their Subsidiaries,
\ntogether with the liabilities (and other relevant items) of each other
\nHomebuilding Entity and its Subsidiaries, among the assets of each such
\nHomebuilding Entity and its Subsidiaries, in each case for all applicable Tax
\npurposes. Sellers shall initially prepare the schedules setting forth the
\nallocations described above and submit the proposed allocations to Buyer within
\nthe later of (x) 30 days after the date of delivery to Buyer of the 1998 audited
\nfinancial statements referred to in Section 6.8 hereof, and (y) 30 days after
\nthe final determination of the adjustment to the Purchase Price pursuant to
\nSection 1.6 hereof, but in no event later than 120 days after the Closing Date.
\nIf, within 30 days after Sellers’ submission, Buyer has not objected in writing
\nto such allocation, specifying in reasonable detail the nature and amount of the
\ndisagreement, Sellers’ proposed allocation shall become the Allocation
\nAgreement. If Buyer objects, then unless Buyer and Sellers resolve such
\ndisagreement within 10 days after delivery of Buyer’s notice of disagreement,
\nthe disagreement shall be resolved by an accounting firm chosen as stated in
\nSection 1.6. Such accounting firm shall resolve such disagreement within 30 days
\nof submission of the disagreement to it. The determination of such accounting
\nfirm shall be final and binding on Buyer and Sellers (absent manifest error in
\ncalculations) and the fees and expenses of such accounting firm shall be borne
\nequally by Sellers, on the one hand, and Buyer, on the other hand.
\nNotwithstanding the foregoing, Buyer and Sellers hereby agree that the Purchase
\nPrice shall be allocated on the Allocation Agreement among the Homebuilding
\nEntities, in a manner consistent with the schedule described in the last
\nsentence of Section 1.8, and the portion of the Purchase Price so allocated to a
\nHomebuilding Entity shall be further allocated among the assets of such
\nHomebuilding Entity, in a manner that allocates with respect to the total
\nPurchase Price <\/p>\n
37
\n 43<\/p>\n
(A) sixty-two million dollars ($62,000,000) of the Basis Increase (defined
\nbelow) to real property inventory, in such manner as the Sellers shall
\nreasonably determine, provided at least sixty-five percent (65%) of such
\nsixty-two million dollars ($62,000,000) shall be allocated to real property
\ninventory located in California, and (B) the remainder of the Basis Increase to
\ngoodwill. “Basis Increase” means the aggregate net increase to the “baseline”
\ntax basis (as reflected on Schedule 6.4(c)) of the assets owned by the
\nHomebuilding Entities on the Closing Date resulting from the purchase
\ntransactions described in this Agreement, the Tax Elections, and other
\ntransactions involving the Homebuilding Entities and their Affiliates occurring
\non or after October 20, 1998 and on or prior to the Closing Date.<\/p>\n
6.5 OTHER COOPERATION.<\/p>\n
After the Closing, the Buyer will afford the Sellers, and
\ntheir respective accountants, counsel and other representatives, reasonable
\naccess during normal business hours to the books and records of the Homebuilding
\nEntities for the periods prior to the Closing. Sellers, or their respective
\nrepresentatives may, at such Seller’s own expense, make copies of such books and
\nrecords.<\/p>\n
6.6 EMPLOYEES AND EMPLOYEE BENEFITS.<\/p>\n
Buyer shall provide, or cause the Homebuilding Entities to
\nprovide, employee benefits to the Homebuilding Entities employees who are
\nretained after the Closing Date that are at least as favorable to such employees
\nin the aggregate as the benefits provided by the Homebuilding Entities to their
\nemployees as of the date of this Agreement.<\/p>\n
6.7 LEWIS NAME AND MARK LICENSE.<\/p>\n
Upon the Closing, Buyer, Branching Tree and Sellers will enter
\ninto an agreement in substantially the form of Exhibit J hereto (the “License
\nAgreement”). Nothing in this Agreement shall prohibit Sellers or their
\naffiliates from using the name “Lewis” alone or in combination with any of the
\nfollowing words: Investment, Industrial, Commercial, Retail, Apartment
\nCommunities, Retirement, Asset Management, Family Asset Management, Operating,
\nHolding, Family Holdings and any name consisting of initials, and in each case
\nsuch names may include the words “Company,” “Inc.,” “LLC,” or similar words.<\/p>\n
6.8 FISCAL 1998 AUDITED FINANCIAL STATEMENTS.<\/p>\n
As soon as practicable after the Closing, and in any event
\nwithin 60 days following the Closing Date, Sellers shall cause to be delivered
\nto Buyer a combined balance sheet for the Homebuilding Business of the
\nHomebuilding Entities as of December 31, 1998 and related combined statements of
\noperations, equity and cash flows of the Homebuilding Business of the
\nHomebuilding Entities for the year then ended, all examined by Ernst & Young LLP
\n(or another independent public accounting firm selected by mutual agreement of
\nthe Sellers and Buyer) whose audit report thereon shall be included with such
\nstatements, prepared in conformity with GAAP applied on a basis consistent with
\nthe audited financial statements referred to in Section 7.2(g). Buyer shall
\ncooperate fully with Sellers and shall provide Sellers with access to <\/p>\n
38
\n 44<\/p>\n
the books and records of the Homebuilding Entities and such other assistance as
\nSellers reasonably request (including, without limitation, assignment of Buyer’s
\nor Homebuilding Entities’ personnel to the project). Buyer will reimburse
\nSellers upon request 50% of all reasonable out-of-pocket costs and expenses
\nactually incurred by Sellers in the preparation of such statements.<\/p>\n
6.9 TENANT LISTS.<\/p>\n
At the Closing, Sellers shall deliver to Buyer a list of the
\nthen current tenants of apartment buildings owned by Sellers or their Affiliates
\nwho are entitled to participate in Sellers or their Affiliates “Rent to Own”
\nprogram. For so long as both Buyer and Sellers, in their respective sole
\ndiscretion, determine to continue to participate in the “Rent to Own” program,
\nSellers will provide to Buyer at least semiannually a list of tenants of
\napartment buildings owned by Sellers or their Affiliates who are entitled to
\nparticipate in such program.<\/p>\n
6.10 BUYER’S RIGHT OF FIRST OFFER.<\/p>\n
(a) Right of First Offer. Restricted Party agrees that during
\nthe period from the Closing Date to the fourth anniversary of the Closing Date
\n(the “Right of First Offer Period”), the Restricted Party shall not, and the
\nRestricted Party shall cause any Controlled Entity not to, offer to sell or
\nsell, or propose to enter into any joint venture with respect to, any Covered
\nProperties without first offering such Covered Properties for sale or joint
\nventure to Buyer pursuant to the procedures described below (the “Right of First
\nOffer”). Notwithstanding the foregoing, neither the Restricted Party nor the
\nControlled Entity shall be required to offer any Covered Properties to Buyer
\nhereunder if such Covered Properties (i) are being transferred to another
\nControlled Entity or to any other Seller, or (ii) if such Covered Properties
\nconsists of 20 or fewer lots (provided that not more than 40 lots may be
\nexcluded from the Right of First Offer pursuant to this clause (ii) during any
\ncalendar year) or (iii) the project in which the Covered Lots is located
\nconsists of 20 or fewer lots. For the purposes of this Section 6.10, (A)
\n“Restricted Party” means the Seller which is developing the Covered Property in
\nquestion; (B) “Covered Properties” means any for sale residential lots that are
\ndeveloped by a Restricted Party or any Controlled Entity in California or
\nNevada, whether for attached or detached housing, other than lots to be sold for
\n$300,000 or more or to a governmental entity; and (C) “Controlled Entity” means
\nany entity in which direct or indirect beneficial ownership (as described in
\nRule 13d-3 under the Securities Exchange Act of 1934) of voting securities
\nrepresents at least 51% of the outstanding voting power of a Person is held by
\none or more Restricted Parties. In the event that a Restricted Party or a
\nControlled Entity is developing a mixed use project, only the lots included
\ntherein that would constitute Covered Properties as defined above shall be
\ndeemed Covered Properties.<\/p>\n
(b) Offer. Prior to offering for sale or joint venture any
\nCovered Properties, the Restricted Party shall (or the Restricted Party shall
\ncause the Controlled Entity to) provide written notice to Buyer describing such
\nCovered Properties (the “Offered Properties”) and stating the lot prices or
\njoint venture terms, whether such Offered Properties are being offered as
\nfinished lots, mapped lots or in another entitlement state, and other material
\nterms at which the <\/p>\n
39
\n 45<\/p>\n
Restricted Party (or the Controlled Entity) offers to sell or joint venture the
\nOffered Properties to Buyer (the “Offer”).<\/p>\n
(c) Evaluation Notice. Within ten (10) days following receipt
\nof the Initial Offer, Buyer shall notify the Restricted Party in writing whether
\nor not Buyer intends to evaluate the Offered Properties (an “Evaluation
\nNotice”). If the Evaluation Notice indicates that Buyer does not wish to
\nevaluate the Offered Properties or if Buyer fails to deliver an Evaluation
\nNotice to the Restricted Party within such ten (10) day period, the Restricted
\nParty (or the Controlled Entity) shall be free to negotiate and conclude a sale
\nor joint venture, as specified in the Offer, of the Offered Properties with
\nother Persons for a period of one (1) year following receipt by the Buyer of the
\nOffer. If the Evaluation Notice is received by the Restricted Party within such
\nten (10) day period and it indicates that Buyer wishes to evaluate the Offered
\nProperties, then for thirty (30) days following receipt by the Restricted Party
\nof the Evaluation Notice, Buyer shall have the right to evaluate the Offered
\nProperties (the “Evaluation Period”) and the remainder of this Section 6.10
\nshall apply.<\/p>\n
(d) Certain Information. During the first ten (10) days of the
\nEvaluation Period, the Restricted Party shall, or shall cause the Controlled
\nEntity to, promptly provide Buyer with such documents and information concerning
\nthe Offered Properties as Buyer shall reasonably request to the extent such
\ndocuments and information are possessed by or reasonably available (without cost
\nor expense) to the Restricted Party and the Controlled Entity. The type of
\ninformation to be provided shall include the square footage minimums applicable
\nto such lots and other restrictions (including deed restrictions, if applicable)
\nrelating to such lots. Neither the Restricted Party nor the Controlled Entity
\nmakes or shall be deemed to make any representation or warranty as to the
\naccuracy or completeness of such documents and information. Buyer will maintain
\nthe confidentiality of such documents and information, provided that this will
\nnot prevent disclosure by Buyer to the extent that such disclosure is required
\nby law or court order.<\/p>\n
(e) Acceptance; Rejection; Matching. Prior to the end of the
\nEvaluation Period, Buyer shall either accept or reject the Offer. If Buyer
\naccepts the Offer, the Restricted Party and Buyer shall use their, and the
\nRestricted Party shall cause the Controlled Entity to use its, good faith
\nefforts to conclude the sale or joint venture, as the case may be, of such
\nOffered Properties on the terms contained in the Offer as expeditiously as
\npracticable. If Buyer rejects the Offer, the Restricted Party (or the Controlled
\nParty) shall be free to negotiate with, and sell or joint venture, as specified
\nin the Offer, the Offered Properties to, other Persons provided that:<\/p>\n
(i) the Restricted Party may not (or the Restricted
\n Party shall cause the Controlled Entity not to) accept any offer to
\n purchase or joint venture, as the case may be, the Offered Properties
\n from any other Person during the Right of First Offer Period without
\n first re-offering the Offered Properties on the same terms to Buyer if
\n (a) the other offer contains a closing sales price for the Offered
\n Properties that is less than the closing sales price contained in the
\n Offer or, if the Offer relates to a joint venture, contains terms in
\n the aggregate less favorable to the Restricted Party (or the Controlled
\n Entity), (b) the Restricted Party (or the Controlled Entity) changes
\n the entitlement state of the Offered Properties, or (c) the other offer
\n is for the purchase of the Offered Properties and the Offer was for a
\n joint venture of the Offered Properties, or vice versa. For this
\n purpose, if <\/p>\n
40
\n 46<\/p>\n
the price contained in either the Offer or in the other offer is
\n payable over time in whole or in part (the “financed portion”), then
\n the present value of the financed portion shall be calculated using an
\n 8% discount rate, and such present value shall be deemed to be included
\n in the “price” for comparison purposes; and<\/p>\n
(ii) the Restricted Party shall be required to give
\n (or the Restricted Party shall cause the Controlled Entity to give) to
\n Buyer ten (10) days to match any offer described in Section 6.10(e)(i)
\n above.<\/p>\n
(f) Reoffer in Certain Circumstance. Subject to the terms of
\nSection 6.10(g), the Restricted Party shall be required to (and the Restricted
\nParty shall cause the Controlled Entity to) offer Buyer another Evaluation
\nPeriod in accordance with this Section 6.10 with respect to any Offered
\nProperties which the Restricted Party or a Controlled Entity, as the case may
\nbe, is continuing to offer for sale or propose to joint venture if such Offered
\nProperties have not been sold or joint ventured by the later of one (1) year
\nafter the expiration of (i) the previous Evaluation Period with respect to such
\nOffered Properties or (ii) if applicable, to such Offered Properties, the ten
\n(10) day match period described in Section 6.10(e)(ii).<\/p>\n
(g) Termination of Right of First Offer. In the event of a
\nbreach or default by Buyer under (i) an agreement for purchase and sale or joint
\nventure for any of the Offered Properties or (ii) any obligations or
\nrestrictions imposed by the documents of conveyance of any Offered Properties to
\nBuyer (the Offered Properties described in (i) or (ii) being the “Subject
\nOffered Properties”) and such breach or default is not cured within any
\napplicable cure period provided in the applicable agreement or document and
\nafter any notice required by any such agreement or document has been given, the
\nprovisions of this Section 6.10 shall automatically terminate and be of no
\nfurther force and effect with respect to all Subject Offered Properties and with
\nrespect to all other Covered Properties located in the project(s) in which the
\nSubject Offered Properties are located.<\/p>\n
(h) No Obligation to Sell. It is understood that neither the
\nRestricted Party nor any Controlled Entity has an obligation to market or sell
\nany Covered Properties (provided that the foregoing shall not relieve the
\nRestricted Party from complying with this Section 6.10 if it decides to offer
\nfor sale any Covered Properties) or to accept any offer made by Buyer.<\/p>\n
(i) Sierra Lakes Adjacent Property. Without Buyer’s consent in
\nits sole discretion, Sellers will not enter into any joint venture, partnership,
\nor similar agreement with a third party with respect to the approximately
\n135-acre property adjacent to the Sierra Lakes property, if such agreement would
\nprevent Sellers from offering such property to Buyer in accordance with this
\nSection 6.10.<\/p>\n
6.11 WELLS FARGO LOANS.<\/p>\n
At the Closing, Buyer may elect to assume or pay in full the
\nWells Fargo Loans. If the Wells Fargo Loans are repaid in full at the Closing,
\nBuyer shall assist Sellers in causing all guarantees and pledges by Sellers,
\nCorporations, Shareholders or their Affiliates related to the Wells Fargo Loans
\nto be released in full. If the Wells Fargo Loans are not repaid in full at the<\/p>\n
41
\n 47<\/p>\n
Closing, Buyer shall have assumed all guarantees of Sellers, Corporations and
\nShareholders (and caused any pledges to be released in full) with respect to the
\nWells Fargo Loans by instruments reasonably acceptable to Sellers, Corporations
\nand Shareholders that fully and completely release each Seller, Corporation or
\nShareholder from any liability under such guarantees and pledges.<\/p>\n
ARTICLE VII<\/p>\n
CONDITIONS OF PURCHASE<\/p>\n
7.1 GENERAL CONDITIONS.<\/p>\n
The obligations of the parties to effect the Closing shall be
\nsubject to the following conditions unless waived in writing by all parties:<\/p>\n
(a) No Orders, Legal Proceedings. No Law or Order shall have
\nbeen enacted, entered, issued, promulgated or enforced by any Governmental
\nEntity, nor shall any Action by a Governmental Entity have been instituted and
\nremain pending at what would otherwise be the Closing Date, which prohibits or
\nrestricts the transactions contemplated by this Agreement.<\/p>\n
(b) Approvals. All Permits and Approvals required to be
\nobtained from any Governmental Entity shall have been received or obtained on or
\nprior to the Closing Date and any applicable waiting period under the
\nHart-Scott-Rodino Act shall have expired or been terminated.<\/p>\n
(c) Removal and Inclusion of Assets and Liabilities. The
\nExcluded Assets shall have been distributed and the Excluded Liabilities shall
\nhave been assumed by Sellers, and the Included Assets and Included Liabilities
\nshall have been transferred to and assumed by the Homebuilding Entities, all in
\nform and substance reasonably satisfactory to Sellers and Buyer, without the
\nimposition of any tax or other adverse tax consequences to the Homebuilding
\nEntities; provided, however, that if Sellers are unable to distribute any of the
\nExcluded Assets or assume the Excluded Liabilities or transfer the Included
\nAssets and Included Liabilities prior to the Closing Date, Buyer will, and will
\ncause the Homebuilding Entities to, cooperate with Sellers after the Closing to
\nensure that any such transfers and assumptions are effected as soon as
\npracticable.<\/p>\n
(d) Execution and Delivery of Agreements. Each of the Cost
\nSharing Agreements, License Agreement, Option Agreement, Registration Rights
\nAgreement, Shareholders Agreement, the Consulting and Noncompetition Agreement
\nbetween Buyer and John M. Goodman, in the form of Exhibit O and the
\nRepresentation, Warranty and Indemnity Agreement in the form of Exhibit P, shall
\nhave been executed and delivered by the parties thereto and the employment
\nagreements, dated the date of this Agreement, and executed by Buyer or a
\nHomebuilding Entity and the persons named on Schedule 7.1(d) shall be in full
\nforce and effect.<\/p>\n
42
\n 48<\/p>\n
7.2 CONDITIONS TO OBLIGATIONS OF BUYER.<\/p>\n
The obligations of Buyer to effect the Closing shall be
\nsubject to the following conditions except to the extent waived in writing by
\nBuyer:<\/p>\n
(a) Representations and Warranties and Covenants of Sellers
\nand Corporations. The representations and warranties of Sellers and the
\nCorporations herein contained (as qualified by matters set forth as exceptions
\nthereto in the Disclosure Schedule of Sellers) shall be true in all material
\nrespects (except for such representations and warranties as are qualified by
\ntheir terms by reference to materiality, a material adverse change or a material
\nadverse effect, which representations and warranties as so qualified shall be
\ntrue in all respects) at the Closing Date with the same effect as though made at
\nsuch time; Sellers and the Corporations shall have performed all obligations and
\ncomplied with all covenants and conditions required by this Agreement to be
\nperformed or complied with by them at or prior to the Closing Date (except for
\nsuch failures to perform as have not had and are not reasonably expected to
\nhave, individually or in the aggregate, a material adverse effect with respect
\nto the Homebuilding Entities and the Former Partnership Properties, considered
\nas a whole, or to adversely affect the ability of Sellers or the Corporations to
\nconsummate the transactions contemplated by this Agreement); and Sellers and the
\nCorporations shall have delivered to Buyer a certificate of Sellers and the
\nCorporations in form and substance satisfactory to Buyer, dated the Closing
\nDate, and signed by the Representative, to such effect.<\/p>\n
(b) Opinion of Counsel. Buyer shall receive at the Closing
\nfrom O’Melveny & Myers LLP and Kenneth P. Corhan, Esq., General Counsel to
\nManagement Corp., opinions dated the Closing Date, in form and substance
\nsubstantially as set forth in Exhibits K and L, respectively.<\/p>\n
(c) Consents. Sellers shall have obtained and provided to
\nBuyer the Approvals of third parties set forth on Schedule 2.10 in form and
\nsubstance reasonably acceptable to Buyer.<\/p>\n
(d) Resignation of Directors and Certain Officers. The
\ndirectors and officers of Management Corp., Branching Tree, the Holding LLCs,
\nMather and Desert Inn listed in a letter to be delivered by Buyer to Sellers not
\nless than 3 days prior to the Closing Date, shall have submitted their
\nresignations in writing to Management Corp., Branching Tree, the Holding LLCs,
\nMather, and Desert Inn, as the case may be. Such resignations shall be effective
\nas of the Closing.<\/p>\n
(e) Delivery of Stock, Member Interests and Partnership
\nInterests and Other Deliveries. All Sellers shall have delivered for sale to
\nBuyer on or before the Closing, stock certificates representing all shares of
\nStock as contemplated hereby and Bills of Sale representing all Member Interests
\nand Partnership Interests as contemplated hereby, and such other customary
\nclosing documents as Buyer may reasonably request for the consummation of the
\ntransactions contemplated hereby.<\/p>\n
43
\n 49<\/p>\n
(f) Release from Obligations. Buyer and each of the
\nHomebuilding Entities shall have been released from any liability with respect
\nto the obligations identified in Schedule 7.2(f) by instruments reasonably
\nacceptable to Buyer.<\/p>\n
(g) Audited Financial Statements. Sellers shall have delivered
\nto Buyer audited combined balance sheets for the Homebuilding Business of the
\nHomebuilding Entities as of December 31, 1996 and 1997, and related audited
\ncombined statements of operations, equity, and cash flows of the Homebuilding
\nBusiness of the Homebuilding Entities for the years ended December 31, 1996 and
\n1997, along with the Auditor’s audit report thereon (collectively, the “Audited
\nHomebuilding Financial Statements”), prepared in conformity with GAAP applied on
\na consistent basis for the periods reflected therein, and such Audited
\nHomebuilding Financial Statements shall not reflect any material adverse change
\nin the financial position or results of operations of the Homebuilding Entities
\nas of or for the year ended December 31, 1997 from the financial position and
\nresults of operations of the Homebuilding Entities reflected in the Homebuilding
\nLine of Business Financial Information as of and for the year ended December 31,
\n1997.<\/p>\n
7.3 CONDITIONS TO OBLIGATIONS OF SELLERS.<\/p>\n
The obligations of Sellers to effect the Closing shall be
\nsubject to the following conditions, except to the extent waived in writing by
\nSellers:<\/p>\n
(a) Representations and Warranties and Covenants of Buyer. The
\nrepresentations and warranties of Buyer herein contained (as qualified by
\nmatters set forth as exceptions thereto in the Disclosure Schedule of Buyer)
\nshall be true in all material respects (except for such representations and
\nwarranties as are qualified by their terms by reference to materiality, a
\nmaterial adverse change, or a material adverse effect, which representations and
\nwarranties as so qualified shall be true in all respects) at the Closing Date
\nwith the same effect as though made at such time; Buyer shall have in performed
\nall obligations and complied with all covenants and conditions required by this
\nAgreement to be performed or complied with by it at or prior to the Closing Date
\n(except for such failures to perform as have not had and are not reasonably
\nexpected to have, individually or in the aggregate, a material adverse effect
\nwith respect to Buyer or to adversely affect the ability of Buyer to consummate
\nthe transactions contemplated by this Agreement); and Buyer shall have delivered
\nto Sellers and the Corporations a certificate of Buyer in form and substance
\nsatisfactory to Sellers and the Corporations, dated the Closing Date and signed
\nby its chief executive officer and chief financial officer, to such effect.<\/p>\n
(b) Consents. Buyer shall have obtained all Approvals of third
\nparties set forth on Schedule 4.3 in form and substance reasonably acceptable to
\nSellers.<\/p>\n
(c) Opinion of Counsel. Sellers and the Corporations shall
\nreceive at the Closing from Munger, Tolles & Olson LLP and Barton P. Pachino,
\nSenior Vice President, General Counsel of Buyer, opinions dated the Closing
\nDate, in form and substance substantially as set forth in Exhibits M and N,
\nrespectively.<\/p>\n
44
\n 50<\/p>\n
(d) Assumption of Guarantees; Other Deliveries. Buyer shall
\nhave assumed the guarantees identified in Schedule 7.3(d) by instruments
\nreasonably acceptable to Sellers that fully and completely release each Seller,
\nCorporation and Shareholder from any liability under said guarantees, and shall
\nhave delivered to Sellers such other customary closing documents as Sellers may
\nreasonably request for the consummation of the transactions contemplated hereby.<\/p>\n
ARTICLE VIII<\/p>\n
TERMINATION OF OBLIGATIONS; SURVIVAL<\/p>\n
8.1 TERMINATION OF AGREEMENT.<\/p>\n
Anything herein to the contrary notwithstanding, this
\nAgreement and the transactions contemplated by this Agreement shall terminate
\nupon written notice by Buyer or Sellers if the Closing does not occur on or
\nbefore the close of business on February 15, 1999 and otherwise may be
\nterminated at any time before the Closing as follows and in no other manner:<\/p>\n
(a) Mutual Consent. By mutual consent in writing of Buyer and
\nSellers.<\/p>\n
(b) Conditions to Buyer’s Performance Not Met. By Buyer by
\nwritten notice to Sellers if any event occurs or condition exists which would
\nrender impossible the satisfaction of one or more conditions to the obligations
\nof Buyer to consummate the transactions contemplated by this Agreement as set
\nforth in Section 7.1 or 7.2.<\/p>\n
(c) Conditions to Sellers’ Performance Not Met. By Sellers by
\nwritten notice to Buyer if any event occurs or condition exists which would
\nrender impossible the satisfaction of one or more conditions to the obligation
\nof Seller to consummate the transactions contemplated by this Agreement as set
\nforth in Section 7.1 or 7.3.<\/p>\n
(d) Material Breach. By Buyer or Sellers if there has been a
\nmisrepresentation or other breach by the other party in its representations,
\nwarranties, or covenants set forth in or pursuant to this Agreement sufficient
\nto result in a material adverse change; provided, however, that if such breach
\nis susceptible to cure, the breaching party shall have ten business days after
\nreceipt of notice from the other party of its intention to terminate this
\nAgreement if such breach continues in which to cure such breach.<\/p>\n
8.2 EFFECT OF TERMINATION.<\/p>\n
In the event that this Agreement shall be terminated pursuant
\nto Section 8.1, all further obligations of the parties under this Agreement
\nshall terminate without further liability of any party to another; provided that
\nthe obligations of the parties contained in Section 6.2, Section 10.9 and
\nSection 10.14 shall survive any such termination. A termination under Section
\n8.1 shall not relieve any party of any liability for a breach of, or for any
\nmisrepresentation under, this Agreement, or be deemed to constitute a waiver of
\nany available remedy (including specific performance if available) for any such
\nbreach or misrepresentation.<\/p>\n
45
\n 51<\/p>\n
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.<\/p>\n
The representations and warranties contained in or made
\npursuant to this Agreement shall survive the Closing and shall remain in full
\nforce and effect until March 31, 2001, except that (i) the representations and
\nwarranties in Sections 2.2, 2.3, 2.4, 2.5(d), and 2.20 shall remain in full
\nforce and effect until March 31, 2002 and (ii) the representation and warranty
\nin the second sentence of Section 2.8(a) shall terminate upon the Closing. The
\nparties acknowledge and agree that the only representations and warranties
\nregarding product or construction warranties, construction defects and product
\ndefects are the representations and warranties contained in Section 2.8(c) and
\nshall not be deemed to be covered by Section 2.5(d).<\/p>\n
ARTICLE IX<\/p>\n
INDEMNIFICATION<\/p>\n
9.1 OBLIGATIONS OF SELLERS AND CORPORATION.<\/p>\n
Each Seller and Corporation, jointly and severally, agrees to
\nindemnify and hold harmless Buyer (including with respect to claims for
\nindemnification by its officers, directors and agents) and, after the Closing,
\nthe Homebuilding Entities, from and against any and all Losses of such an
\nIndemnified Party as a result of, or based upon or arising from, (i) any breach
\nof any of the representations or warranties made by Sellers and the Corporations
\nin or pursuant to this Agreement (other than the second sentence of Section
\n2.8(a) and Section 2.21) or any nonperformance of any of the covenants or
\nagreements of Sellers and the Corporations hereunder, (ii) the litigation
\nidentified on Schedule 9.1, (iii) the severance payments referred to in Section
\n2.16(a) (v), (iv) any Excluded Assets or Excluded Liabilities (including without
\nlimitation any non-Homebuilding Business conducted by the Homebuilding Entities
\nprior to the Closing Date and any non-Homebuilding Business conducted by
\nentities in the Lewis group of companies other than the Homebuilding Entities at
\nany time), or (v) any breach of the representations and warranties made by
\nSellers and the Corporations in or pursuant to, or any nonperformance of any of
\nthe covenants or agreements of Sellers and the Corporations under, Section 2.21.<\/p>\n
9.2 OBLIGATIONS OF BUYER.<\/p>\n
Buyer agrees to indemnify and hold harmless Sellers and the
\nCorporations (including with respect to claims for indemnification by its
\nofficers, directors and agents) and Shareholders from and against any Losses of
\nsuch an Indemnified Party as a result of, or based upon or arising from, (i) any
\nbreach of any of the representations or warranties made by Buyer in or pursuant
\nto this Agreement or any nonperformance of any of the covenants or agreement of
\nBuyer hereunder, or (ii) the Included Liabilities and the Homebuilding Business
\nof the Homebuilding Entities (including, without limitation, all litigation
\nexisting on the Closing Date or instituted thereafter relating to the
\nHomebuilding Business of the Homebuilding Entities, except for litigation
\nreferred to in Schedule 9.1).<\/p>\n
46
\n 52<\/p>\n
9.3 PROCEDURE.<\/p>\n
Except as otherwise specifically provided in Section 6.4:<\/p>\n
(a) Notice. Any party seeking indemnification with respect to
\nany Loss shall give notice to the Indemnifying Party on or before the applicable
\ndate specified in Section 9.4.<\/p>\n
(b) Defense. If any claim, demand or liability is asserted by
\nany third party against any Indemnified Party, the Indemnifying Party shall have
\nthe right, if requested by the Indemnifying Party, and shall upon the written
\nrequest of the Indemnified Party, defend any actions or proceedings brought
\nagainst the Indemnified Party in respect of matters embraced by the indemnity.
\nIn any such action or proceeding, the Indemnified Party shall have the right to
\nretain its own counsel, but the fees and expenses of such counsel shall be at
\nits own expense unless (i) the Indemnifying Party and the Indemnified Party
\nmutually agree to the retention of such counsel or (ii) the named parties to any
\nsuch suit, action or proceeding (including any impleaded parties) include both
\nthe Indemnifying Party and the Indemnified Party, and in the reasonable judgment
\nof the Indemnified Party, representation of the Indemnifying Party and the
\nIndemnified Party by the same counsel would be inadvisable due to potential
\nconflicts of interests between them. The parties shall cooperate in the defense
\nof all third party claims which may give rise to Indemnifiable Claims hereunder.
\nIn connection with the defense of any claim, each party shall make available to
\nthe party controlling such defense, any books, records or other documents within
\nits control that are reasonably requested in the course of or necessary or
\nappropriate for such defense. Neither the Indemnifying Party nor the Indemnified
\nParty (a “Settling Party”) will, without the written consent of the other, (i)
\nsettle or compromise any third party claim or consent to the entry of any
\njudgment with respect to a third party claim that does not include as an
\nunconditional term thereof the delivery by the third party claimant to the other
\nof a written release from all liability in respect of such third party claim or
\n(ii) settle or compromise any third party claim in any manner or consent to the
\nentry of any judgment or order that may adversely affect the other, except for
\nor as a result of money damages or other money payments for which the
\nIndemnifying Party has acknowledged in writing its obligation and ability to
\nindemnify the Indemnified Party in full.<\/p>\n
(c) Calculation of Loss. The amount of any Loss for which
\nindemnification is provided under Section 9.1 or 9.2 shall be net of any
\ninsurance proceeds received by the Indemnified Party. If such insurance proceeds
\nare received after payment by the Indemnifying Party of any amount otherwise
\nrequired to be paid to an Indemnified Party pursuant to Section 9.1 or 9.2, the
\nIndemnified Party shall repay to the Indemnifying Party promptly after such
\nreceipt any amount the Indemnifying Party would not have had to pay pursuant to
\nSection 9.1 or 9.2 had such receipt occurred at the time of such payment.<\/p>\n
(d) Tax Treatment of Indemnification Payments; Reduction for
\nTax Benefits. Any payment under this Article IX shall be treated by the parties
\nas an adjustment to the Purchase Price. Any payment under Section 9.1 otherwise
\ndue and payable hereunder shall be decreased to the extent of any net reduction
\nin Taxes payable by the Buyer and\/or any affiliate thereof resulting from the
\nLoss (whether such reduction is realized with respect to the year in <\/p>\n
47
\n 53
\nwhich the Loss occurs or with respect to an earlier or later year), such net
\nreduction to be determined at an assumed marginal tax rate equal to 40%.<\/p>\n
9.4 SURVIVAL.<\/p>\n
This indemnification shall survive the Closing and shall
\nremain in effect until March 31, 2001, except that this indemnification shall
\nremain in effect until March 31, 2002 with respect to the representations and
\nwarranties in Sections 2.2, 2.3, 2.4, 2.5(d), and 2.20 and until the expiration
\naccording to its terms of any covenant herein contemplating performance for a
\nlonger period. Any matter as to which a claim has been asserted by notice to the
\nother party that is pending or unresolved at March 31, 2001 or 2002, as
\napplicable, shall continue to be covered by this Article IX until such matter is
\nfinally terminated or otherwise resolved by the parties under this Agreement and
\nany amounts payable hereunder are finally determined and paid.<\/p>\n
9.5 LIMITATION OF REMEDIES.<\/p>\n
The remedies provided in this Article IX shall constitute the
\nsole and exclusive remedy with respect to matters set forth in this Article IX.
\nThe indemnification obligations of Sellers and Corporations set forth in clauses
\n(ii), (iii), (iv) and (v) of Section 9.1 and the indemnification obligations of
\nBuyer set forth in Section 9.2(ii) shall be unlimited as to time or amount. With
\nrespect to the indemnification obligations of Sellers and Corporations set forth
\nin Section 9.1(i) and the indemnification obligations of Buyer set forth in
\nSection 9.2(i), neither Buyer or Sellers and the Corporations shall be obligated
\nto indemnify the Indemnified Parties until the aggregate amount of Losses for
\nwhich indemnity would otherwise be available is in excess of $750,000, in which
\nevent the Indemnifying Party shall be obligated to indemnify for Losses in
\nexcess of such amount; provided, however, that Sellers and Corporations, in the
\naggregate, and Buyer shall be obligated to indemnify for Losses up to $25
\nmillion and, for Losses in excess of $25 million and less than or equal to $51.5
\nmillion, one-half of such Losses, it being understood that neither Sellers and
\nCorporations, in the aggregate, nor Buyer shall have any obligation to indemnify
\nwith respect to Losses in excess of $51.5 million.<\/p>\n
ARTICLE X<\/p>\n
GENERAL<\/p>\n
10.1 AMENDMENTS; WAIVERS.<\/p>\n
This Agreement and any schedule or exhibit attached hereto may
\nbe amended only by agreement in writing of all parties. No waiver of any
\nprovision nor consent to any exception to the terms of this Agreement shall be
\neffective unless in writing and signed by the party to be bound and then only to
\nthe specific purpose, extent and instance so provided.<\/p>\n
48
\n 54<\/p>\n
10.2 SCHEDULES, EXHIBITS, INTEGRATION.<\/p>\n
Each schedule and exhibit delivered pursuant to the terms of
\nthis Agreement shall be in writing and shall constitute a part of this
\nAgreement, although schedules need not be attached to each copy of this
\nAgreement. This Agreement, together with such schedules and exhibits,
\nconstitutes the entire agreement among the parties pertaining to the subject
\nmatter hereof. This Agreement amends and restates in its entirety that certain
\nPurchase Agreement, dated October 20, 1998, among Buyer and the sellers named
\ntherein as contemplated by and for the parties’ convenience as stated in Section
\n2 of that certain Amendment to Purchase Agreement dated the date of this
\nAgreement.<\/p>\n
10.3 EFFORTS; FURTHER ASSURANCES.<\/p>\n
Each party will use its commercially reasonable efforts to
\ncause all conditions to its obligations hereunder to be timely satisfied and to
\nperform and fulfill all obligations on its part to be performed and fulfilled
\nunder this Agreement, to the end that the transactions contemplated by this
\nAgreement shall be effected substantially in accordance with its terms as soon
\nas reasonably practicable. The parties shall cooperate with each other in such
\nactions and in securing requisite Approvals. Each party shall execute and
\ndeliver both before and after the Closing such further certificates, agreements
\nand other documents and take such other actions as the other party may
\nreasonably request to consummate or implement the transactions contemplated
\nhereby or to evidence such events or matters.<\/p>\n
10.4 GOVERNING LAW.<\/p>\n
This Agreement, the legal relations between the parties and
\nany Action, whether contractual or non-contractual, instituted by any party with
\nrespect to matters arising under or growing out of or in connection with or in
\nrespect of this Agreement, including but not limited to the negotiation,
\nexecution, interpretation, coverage, scope, performance, breach, termination,
\nvalidity, or enforceability of this Agreement, shall be governed by and
\nconstrued in accordance with the laws of the State of California applicable to
\ncontracts made and performed in such State and without regard to conflicts of
\nlaw doctrines.<\/p>\n
10.5 NO ASSIGNMENT.<\/p>\n
Neither this Agreement nor any rights or obligations under it
\nare assignable except that (i) Buyer may assign its rights hereunder (including
\nbut not limited to its rights under Article IX) to any Affiliates of Buyer, in
\nwhich event Buyer shall remain liable to Sellers and the Corporations for the
\npayment of the Purchase Price and other obligations of Buyer hereunder
\nnotwithstanding a permitted assignment, and (ii) Sellers may assign their rights
\nhereunder to any Affiliates of Sellers, in which event Sellers shall remain
\nliable to Buyer for the delivery of the Stock, Partnership Interests and Member
\nInterests and other obligations of Sellers hereunder notwithstanding a permitted
\nassignment.<\/p>\n
49
\n 55<\/p>\n
10.6 HEADINGS.<\/p>\n
The descriptive headings of the Articles, Sections and
\nsubsections of this Agreement are for convenience only and do not constitute a
\npart of this Agreement.<\/p>\n
10.7 COUNTERPARTS.<\/p>\n
This Agreement may be executed in any number of identical
\ncounterparts, each of which when executed and delivered shall be an original,
\nbut all such counterparts shall constitute but one and the same instrument. Any
\nsignature page of this instrument may be detached from any counterpart without
\nimpairing the legal effect of any signatures thereof, and may be attached to
\nanother counterpart, identical in form thereto, but having attached to it one or
\nmore additional signature pages. Delivery by any party or its respective
\nrepresentatives of telecopied (counterpart) signature pages shall be as binding
\nan execution and delivery of this Agreement by such party as if the other party
\nhad received the actual physical copy of the entire Agreement with an ink
\nsignature from such party.<\/p>\n
10.8 PUBLICITY AND REPORTS.<\/p>\n
Sellers, Corporations and Buyer shall coordinate all publicity
\nrelating to the transactions contemplated by this Agreement and no party shall
\nissue any press release, publicity statement or other public notice relating to
\nthis Agreement, or the transactions contemplated by this Agreement, without
\nconsulting with the other party except to the extent that a particular action is
\nrequired by applicable law or rule of or listing agreement with a securities
\nexchange on which such party’s securities are listed for trading or quotation.<\/p>\n
10.9 CONFIDENTIALITY.<\/p>\n
All information disclosed by any party (or its
\nrepresentatives) whether before or after the date hereof, in connection with the
\ntransactions contemplated by, or the discussions and negotiations preceding,
\nthis Agreement to any other party (or its representatives) shall be kept
\nconfidential by such other party and its representatives and shall not be used
\nby any such Persons other than as contemplated by this Agreement, except to the
\nextent that such information (i) was known by the recipient when received, (ii)
\nit is or hereafter becomes lawfully obtainable from other sources, (iii) is
\nnecessary or appropriate to disclose to a Governmental Entity having
\njurisdiction over the parties, (iv) as may otherwise be required by law or (v)
\nto the extent such duty as to confidentiality is waived in writing by the other
\nparty; provided, however, that following the Closing Date nothing in this
\nsection shall apply to or restrict the use of information by Buyer or the
\nHomebuilding Entities in their businesses. If this Agreement is terminated in
\naccordance with its terms, each party shall use all reasonable efforts to return
\nupon written request from the other party all documents (and reproductions
\nthereof) received by it or its representatives from such other party (and, in
\nthe case of reproductions, all such reproductions made by the receiving party)
\nthat include information not within the exceptions contained in the first
\nsentence of this Section 10.9, unless the recipients provide assurances
\nreasonably satisfactory to the requesting party that such documents have been
\ndestroyed.<\/p>\n
50
\n 56<\/p>\n
10.10 ALTERNATIVE DISPUTE RESOLUTION.<\/p>\n
(a) Negotiation. In the event of any dispute or disagreement
\namong Sellers, the Corporations and Buyer as to the interpretation of any
\nprovision of this Agreement or any other agreement or instrument delivered in
\nconnection with this Agreement, or the performance of obligations hereunder or
\nthereunder, the matter, upon written request of either party, shall be referred
\nto representatives of the parties for decision, each party being represented by
\na senior executive officer of the party or a controlling affiliate (a “Dispute
\nRepresentative”). The Dispute Representatives shall promptly meet in a good
\nfaith effort to resolve the dispute. If the Dispute Representatives do not agree
\nupon a decision within thirty (30) calendar days after reference of the matter
\nto them, Sellers, the Corporations and Buyer shall be free to exercise the
\nremedies available to them under subsection (b).<\/p>\n
(b) Arbitration. Any controversy, dispute or claim (a “Claim”)
\narising out of or relating in any way to this Agreement or any other agreement
\nor instrument delivered in connection with this Agreement, or the transactions
\narising hereunder or thereunder that cannot be resolved by negotiation pursuant
\nto subsection (a) shall be settled exclusively by a binding arbitration
\n(“Arbitration”), conducted by a single arbitrator (the “Arbitrator”) chosen by
\nthe parties as described below. Any party may initiate the Arbitration by
\nwritten notice to the other and to the Arbitration Tribunal (as defined below).
\nThe date on which the notice is given is called the “Arbitration Initiation
\nDate.” The fees and expenses of the Arbitration Tribunal and the Arbitrator
\nshall be shared equally by the parties and advanced by them from time to time as
\nrequired; provided, however, that at the conclusion of the Arbitration, the
\nArbitrator may award costs and expenses (including the costs of the Arbitration
\npreviously advanced and the fees and expenses of attorneys, accountants and
\nother experts) to the prevailing party. Except as expressly modified herein, the
\nArbitration shall be conducted in accordance with the provisions of Section 1280
\net seq. of the California Code of Civil Procedure or their successor sections
\n(“CCP”), and shall constitute the exclusive remedy for the determination of any
\nClaim, including whether the Claim is subject to arbitration. The Arbitration
\nshall be conducted under the procedures of the Arbitration Tribunal, except as
\nmodified herein. The Arbitration Tribunal shall be the Los Angeles Office of
\nJAMS\/ENDISPUTE (“JAMS”), unless the parties to the dispute cannot agree on a
\nJAMS arbitrator, in which case the Arbitration Tribunal shall be the Los Angeles
\nOffice of the American Arbitration Association (“AAA”). The Arbitrator shall be
\na retired judge or other arbitrator employed by JAMS selected by mutual
\nagreement of the parties to the dispute, and if they cannot so agree within 30
\ndays after the Arbitration Initiation Date, then the Arbitrator shall be
\nselected from the Large and Complex Case Project (“LCCP”) panel of the AAA, by
\nmutual agreement of the parties to the dispute. If the parties to the dispute
\ncannot agree on an Arbitrator within 60 days after the Arbitration Initiation
\nDate, the Arbitrator shall be selected by the AAA, from its LCCP panel, through
\nsuch procedures as the AAA regularly follows. In all events, the Arbitrator must
\nhave had not less than 15 years experience as a practitioner or arbitrator of
\ncomplex business transactions. If for any reason the AAA does not so act, any
\nparty to the dispute may apply to the Superior Court in and for Los Angeles
\nCounty, California, for the appointment of a single arbitrator. No
\npre-arbitration discovery shall be permitted, except that the Arbitrator shall
\nhave the power in his or her sole discretion, on application by either party, to
\norder pre-arbitration examination solely of those witnesses and documents that
\nthe other party <\/p>\n
51
\n 57<\/p>\n
intends to introduce in its case-in-chief at the arbitration hearing. Prior to
\nthe commencement of arbitration hearings, the Arbitrator shall have the power,
\nin his or her discretion, upon either party’s motion but not on his or her own
\ninitiative, to order the parties to engage in pre-arbitration mediation for a
\nperiod not exceeding 30 days before a mediator mutually acceptable to the
\nparties. The Arbitrator shall try any and all issues of law or fact and be
\nprepared to make the award within 90 days after the close of evidence in the
\nArbitration. When prepared to make the award, the Arbitrator shall first so
\ninform the parties, who shall have 10 days to attempt to resolve the matter by a
\nbinding agreement between them. If the parties so resolve the matter, the
\nArbitrator shall not make any award. If the parties do not so resolve the
\nmatter, the Arbitrator shall make the award on the eleventh day following his
\nnotice of being prepared to make the award. The Arbitrator’s award shall dispose
\nof all of the claims that are the subject of the Arbitration and shall follow
\nCalifornia law and precedent, and shall include written statements of fact and
\nconclusions of law. The Arbitrator shall be empowered to (i) enter equitable as
\nwell as legal relief, (ii) provide all temporary and\/or provisional remedies,
\nand (iii) enter binding equitable orders. The award rendered by the Arbitrator
\nshall be final and not subject to judicial review, and judgment thereon may be
\nentered in any court of competent jurisdiction.<\/p>\n
10.11 PARTIES IN INTEREST.<\/p>\n
This Agreement shall be binding upon and inure to the benefit
\nof each party, and nothing in this Agreement, express or implied, is intended to
\nconfer upon any other person any rights or remedies of any nature whatsoever
\nunder or by reason of this Agreement except for Sections 6.6, 9.1 and 10.5
\n(which are intended to be for the benefit of the persons provided for therein
\nand may be enforced by such persons).<\/p>\n
10.12 KNOWLEDGE CONVENTION.<\/p>\n
Whenever any statement herein or in any schedule, exhibit,
\ncertificate or other documents delivered to any party pursuant to this Agreement
\nis made “to Sellers’ knowledge” or words of similar intent or effect, such
\nstatement shall be deemed to mean the actual conscious knowledge of (i) any
\nSeller who is an individual, (ii) the Shareholders, for any Seller or
\nCorporation that is a corporation or (iii) any Seller after inquiry of Kenneth
\nP. Corhan, Leon C. Swails and Leah S. Bryant as to the subject matter.<\/p>\n
10.13 NOTICES.<\/p>\n
Any notice or other communication hereunder must be given in
\nwriting and delivered in person or sent by telecopy, by a nationally-recognized
\novernight courier service or by certified or registered mail, postage prepaid,
\nreceipt requested, addressed as follows:<\/p>\n
52
\n 58<\/p>\n
IF TO BUYER, ADDRESSED TO:<\/p>\n
Kaufman and Broad Home Corporation
\n 10990 Wilshire Boulevard
\n Los Angeles, California 90024
\n Attention: Michael F. Henn
\n Chief Financial Officer
\n Barton P. Pachino
\n General Counsel
\n Fax No.: 310-231-4280<\/p>\n
with a copy to<\/p>\n
Munger, Tolles & Olson LLP
\n 355 South Grand Avenue
\n Los Angeles, California 90071
\n Attention: R. Gregory Morgan, Esq.
\n Fax No.: 213-687-3702<\/p>\n
IF TO SELLERS OR CORPORATIONS, ADDRESSED TO:<\/p>\n
John M. Goodman
\n Lewis Operating Corp.
\n 11 56 N. Mountain Ave.
\n Upland, CA 91785
\n Fax No.: (909) 912-6770<\/p>\n
WITH A COPY TO:<\/p>\n
O’Melveny & Myers LLP
\n 400 S. Hope Street
\n Los Angeles, California 90071
\n Attention: Richard A. Boehmer, Esq.
\n Fax: No.: (213) 430-6407<\/p>\n
or to such other address or to such other person as any party shall have last
\ndesignated by such notice to the other party. Each such notice or other
\ncommunication shall be effective (i) if given by telecommunication, when
\ntransmitted to the applicable number so specified in (or pursuant to) this
\nSection 10.13 and an appropriate answer back is received, (ii) if given by
\novernight courier, one business day following delivery by sender to such
\novernight courier, (iii) if given by mail, three days after such communication
\nis deposited in the mails with first class postage prepaid, addressed as
\naforesaid or (iv) if given by any other means, when actually received at such
\naddress.<\/p>\n
53
\n 59<\/p>\n
10.14 EXPENSES.<\/p>\n
Except as set forth in Sections 10.10 and 10.16, Sellers,
\nCorporations and Buyer shall each pay their own expenses incident to the
\nnegotiation, preparation and performance of this Agreement and the transactions
\ncontemplated hereby, including but not limited to the fees, expenses and
\ndisbursements of their respective investment bankers, accountants and counsel.
\nAny such expenses of the Homebuilding Entities, or any expenses paid by the
\nHomebuilding Entities on behalf of Sellers or Corporations, shall be paid by
\nSellers or Corporations prior to or concurrently with the Closing.<\/p>\n
10.15 REMEDIES; WAIVER.<\/p>\n
To the extent permitted by Law, all rights and remedies
\nexisting under this Agreement are cumulative to and not exclusive of, any rights
\nor remedies otherwise available under applicable Law. No failure on the part of
\nany party to exercise or delay in exercising any right hereunder shall be deemed
\na waiver thereof, nor shall any single or partial exercise preclude any further
\nor other exercise of such or any other right.<\/p>\n
10.16 ATTORNEY’S FEES.<\/p>\n
In the event of any Action by any party arising under or out
\nof, in connection with or in respect of, this Agreement or the transactions
\ncontemplated hereby, the prevailing party shall be entitled to reasonable
\nattorney’s fees, costs and expenses incurred in such Action. Attorney’s fees
\nincurred in enforcing any judgement in respect of this Agreement are recoverable
\nas a separate item. The parties intend that the preceding sentence be severable
\nfrom the other provisions of this Agreement, survive any judgment and, to the
\nmaximum extent permitted by law, not be deemed merged into such judgment.<\/p>\n
10.17 REPRESENTATION BY COUNSEL; INTERPRETATION.<\/p>\n
Sellers, Corporations and Buyer each acknowledge that each
\nparty to this Agreement has been represented by counsel in connection with this
\nAgreement and the transactions contemplated by this Agreement. Accordingly, any
\nrule of Law, including but not limited to Section 1654 of the California Civil
\nCode, or any legal decision that would require interpretation of any claimed
\nambiguities in this Agreement against the party that drafted it has no
\napplication and is expressly waived. The provisions of this Agreement shall be
\ninterpreted in a reasonable manner to effect the intent of Buyer, Sellers and
\nCorporations.<\/p>\n
10.18 SEVERABILITY.<\/p>\n
If any provision of this Agreement is determined to be
\ninvalid, illegal or unenforceable by any Governmental Entity, the remaining
\nprovisions of this Agreement shall remain in full force and effect provided that
\nthe economic and legal substance of the transactions contemplated is not
\naffected in any manner materially adverse to any party. In event of any such
\ndetermination, the parties agree to negotiate in good faith to modify this
\nAgreement to fulfill as closely as possible the original intents and purposes
\nhereof. To the extent permitted by Law, the <\/p>\n
54
\n 60<\/p>\n
parties hereby to the same extent waive any provision of Law that renders any
\nprovision hereof prohibited or unenforceable in any respect.<\/p>\n
55
\n 61<\/p>\n
IN WITNESS WHEREOF, each of the parties hereto has caused this
\nAgreement to be executed by its duly authorized officers.<\/p>\n
Dated: January 7, 1999 BUYER<\/p>\n
KAUFMAN AND BROAD HOME CORPORATION<\/p>\n
By: \/s\/ MICHAEL F. HENN
\n —————————————–
\n Its: Senior Vice President & Chief
\n Financial Officer<\/p>\n
SELLERS<\/p>\n
Ralph M. Lewis
\n By: \/s\/ ROBERT E. LEWIS
\n ——————————————–
\n Robert E. Lewis, his attorney-in-fact<\/p>\n
\/s\/ ROBERT E. LEWIS ON BEHALF
\n OF GOLDY S. LEWIS
\n ——————————————–
\n Goldy S. Lewis<\/p>\n
\/s\/ RICHARD A. LEWIS
\n ——————————————–
\n Richard A. Lewis<\/p>\n
\/s\/ ROBERT E. LEWIS
\n ——————————————–
\n Robert E. Lewis<\/p>\n
\/s\/ ROGER G. LEWIS
\n ——————————————–
\n Roger G. Lewis<\/p>\n
\/s\/ RANDALL W. LEWIS
\n ——————————————–
\n Randall W. Lewis<\/p>\n
\/s\/ JOHN M. GOODMAN
\n ——————————————–
\n John M. Goodman<\/p>\n
S-1
\n 62<\/p>\n
COLLINE ENTERPRISES, INC.<\/p>\n
By: \/s\/ RICHARD A. LEWIS
\n —————————————-
\n Name: Richard A. Lewis
\n Title: President<\/p>\n
TERRAIN ENTERPRISES, INC.<\/p>\n
By: \/s\/ ROBERT E. LEWIS
\n —————————————-
\n Name: Robert E. Lewis
\n Title: President<\/p>\n
MARMOT ENTERPRISES, INC.<\/p>\n
By: \/s\/ ROGER G. LEWIS
\n —————————————-
\n Name: Roger G. Lewis
\n Title: President<\/p>\n
GITAN ENTERPRISES, INC.<\/p>\n
By: \/s\/ RANDALL W. LEWIS
\n —————————————-
\n Name: Randall W. Lewis
\n Title: President<\/p>\n
TOPSPIN ENTERPRISES, INC.<\/p>\n
By: \/s\/ JOHN M. GOODMAN
\n —————————————-
\n Name: John M. Goodman
\n Title: President<\/p>\n
S-2
\n 63<\/p>\n
LDC PLATTE, LLC<\/p>\n
By: Lewis Holding Company, a Delaware
\n limited liability company, its member<\/p>\n
By: Forehand Development Corp., a
\n California corporation,
\n its member<\/p>\n
By \/s\/ JOHN M. GOODMAN
\n ————————–
\n John M. Goodman,
\n its Authorized Agent<\/p>\n
LHC PLATTE, LLC<\/p>\n
By: Lewis Holding Company, a Delaware
\n limited liability company, its member<\/p>\n
By: Forehand Development Corp., a
\n California corporation, its
\n member<\/p>\n
By \/s\/ JOHN M. GOODMAN
\n —————————
\n John M. Goodman,
\n its Authorized Agent<\/p>\n
LHE PLATTE, LLC<\/p>\n
By: Lewis Holding Company, a Delaware
\n limited liability company, its member<\/p>\n
By: Forehand Development Corp., a
\n California corporation, its
\n member<\/p>\n
By \/s\/ JOHN M. GOODMAN
\n ————————–
\n John M. Goodman,
\n its Authorized Agent<\/p>\n
S-3
\n 64<\/p>\n
LHN PLATTE, LLC<\/p>\n
By: Lewis Holding Company, a Delaware
\n limited liability company, its member<\/p>\n
By: Forehand Development Corp., a
\n California corporation, its
\n member<\/p>\n
By \/s\/ JOHN M. GOODMAN
\n ————————-
\n John M. Goodman,
\n its Authorized Agent<\/p>\n
LP PLATTE, LLC<\/p>\n
By: Lewis Holding Company, a Delaware
\n limited liability company, its member<\/p>\n
By: Forehand Development Corp., a
\n California corporation, its
\n member<\/p>\n
By \/s\/ JOHN M. GOODMAN
\n —————————
\n John M. Goodman,
\n its Authorized Agent<\/p>\n
CORPORATIONS<\/p>\n
ROSEBUD CONSTRUCTION, INC.<\/p>\n
By \/s\/ RICHARD A. LEWIS
\n —————————————
\n Name: Richard A. Lewis
\n Title: President<\/p>\n
WESTERN SUPPLY CORP.<\/p>\n
By \/s\/ RICHARD A. LEWIS
\n —————————————
\n Name: Richard A. Lewis
\n Title: President<\/p>\n
S-4
\n 65<\/p>\n
KIMMEL ENTERPRISES, INC.<\/p>\n
By \/s\/ ROBERT E. LEWIS
\n ————————————–
\n Name: Robert E. Lewis
\n Title: President<\/p>\n
REPUBLIC SALES CO., INC.<\/p>\n
By \/s\/ RANDALL W. LEWIS
\n ————————————–
\n Name: Randall W. Lewis
\n Title: President<\/p>\n
PARKSIDE CONSTRUCTION CO., INC.<\/p>\n
By \/s\/ ROBERT E. LEWIS
\n ————————————–
\n Name: Robert E. Lewis
\n Title: President<\/p>\n
REGAL CONSTRUCTION CO., INC.<\/p>\n
By \/s\/ RANDALL W. LEWIS
\n ————————————–
\n Name: Randall W. Lewis
\n Title: President<\/p>\n
FOREHAND DEVELOPMENT CORP.<\/p>\n
By \/s\/ JOHN M. GOODMAN
\n ————————————–
\n Name: John M. Goodman
\n Title: President<\/p>\n
REVERS ENTERPRISES, INC.<\/p>\n
By \/s\/ RANDALL W. LEWIS
\n ————————————–
\n Name: Randall W. Lewis
\n Title: President<\/p>\n
S-5
\n 66<\/p>\n
EMPIRE BUILDING CORP.<\/p>\n
By \/s\/ ROBERT E. LEWIS
\n ————————————–
\n Name: Robert E. Lewis
\n Title: President<\/p>\n
ROSEMONT OF NEVADA, INC.<\/p>\n
By \/s\/ ROBERT E. LEWIS
\n ————————————–
\n Name: Robert E. Lewis
\n Title: President<\/p>\n
LARKWOOD DEVELOPMENT OF
\n NEVADA, INC.<\/p>\n
By \/s\/ RICHARD A. LEWIS
\n ————————————–
\n Name Richard A. Lewis
\n Title: President<\/p>\n
FLAGSTONE DEVELOPMENT OF
\n NEVADA, INC.<\/p>\n
By \/s\/ RICHARD A. LEWIS
\n —————————————
\n Name: Richard A. Lewis
\n Title: President<\/p>\n
S-6
\n 67<\/p>\n
CRESTVIEW CONSTRUCTION OF
\n NEVADA, INC.<\/p>\n
By \/s\/ ROBERT E. LEWIS
\n ————————————-
\n Name: Robert E. Lewis
\n Title: President<\/p>\n
CORONET CONSTRUCTION OF
\n NEVADA, INC.<\/p>\n
By \/s\/ RANDALL W. LEWIS
\n ————————————-
\n Name: Randall W. Lewis
\n Title: President<\/p>\n
BACKHAND DEVELOPMENT CORP.<\/p>\n
By \/s\/ JOHN M. GOODMAN
\n ————————————-
\n Name: John M. Goodman
\n Title: President<\/p>\n
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