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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN HOMESTAR CORPORATION,
NATIONWIDE N.C. HOMES, INC.,
N.C. MOBILE HOME CORP.
AND
XXXXXX X. XXXXX
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TABLE OF CONTENTS
Page
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SECTION 1. The Merger
1.1 Merger of the Company into AHC Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 Articles of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.3 Articles of Incorporation of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.4 Bylaws of the Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.5 Directors of the Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.6 Officers of the Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.7 Cancellation of Company Common Stock; Merger Consideration . . . . . . . . . . . . . . . . . . . . . -2-
1.8 Exchange of Certificates Representing Shares of Company Stock . . . . . . . . . . . . . . . . . . . -3-
1.9 Subsequent Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
1.10 Non-Taxable Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
1.11 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Section 2. Representations and Warranties of the Company and the Shareholder
2.1 Corporate Existence; Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
2.2 Power and Authority for Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.3 Permits, Licenses and Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.4 Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.6 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.7 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.8 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.9 Title to and Encumbrances on Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.10 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.11 Intellectual Property Rights; Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.12 Directors and Officers; Payroll Information; Employees . . . . . . . . . . . . . . . . . . . . . . . -8-
2.13 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
2.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
2.15 Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
2.16 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.18 Commissions and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.19 Liabilities; Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
2.20 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
2.21 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
2.22 Adverse Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
2.23 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
2.24 No Untrue Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
2.25 Accredited Investor Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -00-
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0.00 Xxxxxxxxxxxxx xxx Xxxxxxxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
2.27 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
2.28 Banking Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
2.29 Ownership Interests of Interested Persons; Competitors . . . . . . . . . . . . . . . . . . . . . . -14-
2.30 Investments; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
2.31 Economic Risk; Sophistication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
Section 3. Representations and Warranties of AHC and AHC Sub
3.1 Corporate Existence: Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
3.2 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
3.3 Commissions and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
3.4 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Section 4. Covenants of the Company and the Shareholder
4.1 Consummation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
4.2 Business Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
4.3 Access and Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
4.4 Approvals of Third Parties and Permits and Consents . . . . . . . . . . . . . . . . . . . . . . . -16-
4.5 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
4.6 Funding of Accrued Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
4.7 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
4.8 Distributions and Repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
4.9 Requirements to Effect Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
4.10 Voting of Shares; Irrevocable Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
4.11 Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
4.12 Real Property Lease with Shareholder or Related Entities . . . . . . . . . . . . . . . . . . . . . -17-
4.13 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
4.14 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
Section 5. Covenants of AHC and AHC Sub
5.1 Consummation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
5.2 Approvals of Third Parties and Permits and Consents . . . . . . . . . . . . . . . . . . . . . . . -18-
5.3 Listing Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
5.4 Access and Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
Section 6. AHC and AHC Sub Conditions Precedent
6.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
6.2 Covenants and Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
6.3 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
6.4 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
6.5 Due Diligence Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
6.6 Approval by the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
6.7 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
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6.8 Closing Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
6.9 Debt and Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
6.10 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
6.11 EBT Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
6.12 Delivery of Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
6.13 Schedule of Indemnifiable Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
6.14 Allocation of Environmental Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
Section 7. The Company's and the Shareholder's Conditions Precedent
7.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
7.2 Covenants and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
7.3 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
7.4 Closing Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
7.5 EBT Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
7.6 Delivery of Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
7.7 Schedule 9.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
7.8 Allocation of Environmental Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
Section 8. Closing Deliveries
8.1 Deliveries of the Company and the Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
8.2 Deliveries of AHC and AHC Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
Section 9. Nature and Survival of Representations and Warranties; Indemnification
9.1 Nature and Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
9.2 Indemnification by AHC and AHC Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
9.3 Indemnification by the Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
9.4 Indemnification Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
9.5 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
9.6 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
Section 10. Termination
Section 11. Nondisclosure of Confidential Information
Section 12. Miscellaneous
12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
12.2 Further Assurances; Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
12.3 Each Party to Bear Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
12.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
12.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
12.7 Integration of Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
12.8 Entire Agreement/Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
12.9 Binding Effect/Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
12.10 No Rule of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
12.11 Costs of Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
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12.12 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
12.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
12.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement"), made and executed as
of the 1st day of April, 1997, is by and among American Homestar Corporation, a
Texas corporation ("AHC"); Nationwide N.C. Homes, Inc., a Texas corporation
("AHC Sub") and a wholly-owned subsidiary of AHC; N.C. Mobile Home Corp., a
North Carolina corporation (the "Company"), and Xxxxxx X. Xxxxx, an individual
resident of the State of North Carolina and the sole shareholder of the Company
(the "Shareholder").
WITNESSETH:
WHEREAS, the Company operates a manufactured home retailing business
in North Carolina and Virginia;
WHEREAS, the Shareholder is the sole shareholder of the Company;
WHEREAS, AHC Sub is a wholly-owned subsidiary of AHC formed in
anticipation of the transactions contemplated in this Agreement; and
WHEREAS, the Boards of Directors of each of the Company, AHC and AHC
Sub have determined that a business combination between the parties is in the
best interests of their respective companies and shareholders and accordingly
have agreed to effect the Merger (hereinafter defined) upon the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
SECTION 1. THE MERGER.
The Merger of the Company with and into AHC Sub (the "Closing") shall
occur on the 1st day of June, 1997 (the "Closing Date"), unless another date is
mutually agreed upon in writing by the parties hereto, shall be based on the
respective representations, warranties and agreements of the parties hereto,
and shall be subject to the terms and conditions herein stated.
1.1 MERGER OF THE COMPANY INTO AHC SUB. On the Closing Date, the
Company shall be merged with and into AHC Sub in accordance with this Agreement
and the separate corporate existence of the Company shall thereupon cease (the
"Merger"). AHC Sub shall be the surviving corporation in the Merger (in such
capacity, hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Texas and the separate
corporate existence of Surviving Corporation with all its rights, privileges,
powers, immunities, purposes and franchises shall continue unaffected by the
Merger, except as set forth herein. The Merger shall have the effects
specified in the Texas Business Corporation Act ("TBCA") and in the North
Carolina Business Corporation Act ("NCBCA").
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1.2 ARTICLES OF MERGER. If all conditions to the Merger set forth
herein have been fulfilled or waived in accordance herewith and this Agreement
shall not have been terminated pursuant to the terms hereof, the parties hereto
shall cause to be properly executed and filed on the Closing Date Articles of
Merger meeting the requirements of the TBCA and the NCBCA. The Merger shall
become effective on the Closing Date.
1.3 ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. Effective
on the Closing Date, the Articles of Incorporation of AHC Sub shall be the
Articles of Incorporation of the Surviving Corporation.
1.4 BYLAWS OF THE SURVIVING CORPORATION. The Bylaws of AHC Sub on
the Closing Date shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with their terms.
1.5 DIRECTORS OF THE SURVIVING CORPORATION. The persons who are
directors of AHC Sub immediately prior to the Closing Date shall, from and
after the Closing Date, be the directors of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
1.6 OFFICERS OF THE SURVIVING CORPORATION. The persons who are
officers of AHC Sub immediately prior to the Closing Date shall, from and after
the Closing Date, be the officers of the Surviving Corporation and shall hold
their same respective office(s) until their earlier death, resignation or
removal.
1.7 CANCELLATION OF COMPANY COMMON STOCK; MERGER CONSIDERATION.
The manner of converting shares of the Company in the Merger shall be as
follows:
(a) As a result of the Merger and without any action on
the part of the holder thereof, all shares of the Company's common stock (the
"Company Stock") issued and outstanding on the Closing Date shall cease to be
outstanding and shall be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such shares of Company Stock
shall thereafter cease to have any rights with respect to such shares of
Company Stock, except the right to receive, without interest, a pro rata
portion, based on the number of shares of Company Stock owned by each of the
Company's shareholders on the Closing Date, of the Merger Consideration (as
hereinafter defined). As used in this Agreement, the term "Merger
Consideration" shall mean (a) a number of shares of AHC common stock, par
value $0.05 per share ("AHC Common Stock"), equal to the quotient of $2,000,000
divided by the greater of (i) the average closing price of AHC Common Stock on
the Nasdaq National Market (as reported in the Wall Street Journal) on the 10
trading days prior to the public announcement of the Merger or (ii) $17.00 per
share; (b) an amount of cash equal to One Million Dollars ($1,000,000) (the
"Cash Consideration"); and (c) a Promissory Note of AHC in the form set forth
in Exhibit A attached hereto in the principal amount of One Million Five
Hundred Thousand Dollars ($1,500,000) (the "Note"); provided,
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however, that the Merger Consideration shall be subject to adjustment as
provided in Sections 1.7(b) and 9.3 below.
(b) If the Company's earnings before taxes ("EBT") for
the twelve month period beginning on September 1, 1995 and ending on August 31,
1996 (the "EBT Period") is less than $1,244,677 (the "EBT Target Amount"), then
the principal amount of the Note, and, thereafter as necessary, the Cash
Consideration, shall be offset and reduced by $3.00 for each whole $1.00 sum
that the actual EBT during the EBT Period is below the EBT Target Amount. The
difference between $1,244,677 and the actual EBT for the EBT Period is referred
to herein as the "EBT Deficit". EBT shall be determined by AHC in accordance
with generally accepted accounting principles ("GAAP"), consistently applied.
(c) (i) If the Company's EBT for the twelve month period
beginning on September 1, 1996, and ending on August 31, 1997 (the "2nd EBT
Period") is less than $1,165,200 less the EBT Deficit (the "2nd EBT Target
Amount"), then the principal amount of the Note and the shares of AHC Common
Stock delivered hereunder (based on the calculation in Section 1.7(a) above)
shall be offset and reduced on a 56% to 44% basis, respectively, by $3.00 for
each $1.00 sum that the actual EBT during the 2nd EBT Period is below the 2nd
EBT Target Amount; provided, however, that the maximum offset and reduction
under this Section 1.7(c)(i) shall be $1,000,000. If AHC and Shareholder
cannot agree on the appropriate adjustment by October 31, 1997, then such issue
shall be submitted to binding arbitration in Atlanta, Georgia, pursuant to the
Commercial Rules of the American Arbitration Association, the decision of which
arbitrators shall be final and binding on AHC and the Shareholder.
(ii) AHC Sub shall at all times after the Closing
and through the end of the 2nd EBT Period operate its business in a
commercially reasonable manner. Following the Closing and through the end of
the 2nd EBT Period (A) AHC Sub shall own and operate the business formally
conducted by the Company in substantially the same manner as it was operated by
the Company prior to the Closing; (B) subject to the foregoing and provided
that AHC Sub shall not undertake any fundamental changes having a negative
impact on EBT during the 2nd EBT Period, if AHC Sub makes material changes in
operating its business in the ordinary course of business, then AHC Sub and the
Shareholder shall agree on the methodology for allocating the financial impact
of such changes; and (C) charges in the nature of "corporate overhead",
"corporate expense allocation" or inter-company charges or other expenses which
would not have been incurred by the Company (or in excess of amounts which
would have been incurred) had the sale and change of control of the Company not
occurred, shall not be included in computing EBT.
1.8 EXCHANGE OF CERTIFICATES REPRESENTING SHARES OF COMPANY STOCK.
The Shareholder shall deliver to AHC on the Closing Date the certificates
representing Company Stock owned by him, duly endorsed in blank by the
Shareholder, or accompanied by blank stock powers. Upon such delivery, the
Shareholder shall be entitled to receive in exchange therefor the Merger
Consideration.
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1.9 SUBSEQUENT ACTIONS. If, at any time after the Closing Date,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, and to effect the cancellation of all outstanding
shares of Company Stock in return for the consideration set forth in this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of the Company and
the Shareholder or otherwise, to carry out all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of the
Company or otherwise, all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement.
1.10 NON-TAXABLE TRANSACTION. It is intended that for federal
income tax purposes that the Merger shall qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). Following the Closing, AHC and the Shareholder agree to not
undertake any action which would cause or result in the Merger not qualifying
for such treatment, which actions shall be attached at Closing as Schedule 1.10
(which shall include a two-year holding period on the AHC Common Stock issued
to the Shareholder).
1.11 ESCROW AGREEMENT. On the Closing Date, Shareholder and AHC
Sub agree to enter into an escrow agreement, in form and substance reasonably
acceptable to such parties, pursuant to which Shareholder shall place into
escrow with a mutually acceptable escrow agent, the AHC Common Stock delivered
hereunder for purposes of possible reduction as provided in Section 1.7(c)
above and Section 12.3 below.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDER.
The Company and the Shareholder, jointly and severally, hereby
represent and warrant to AHC and AHC Sub as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of North Carolina. The Company has all necessary corporate
powers to own all of its assets and to carry on its business as such business
is now being conducted. Except as set forth in Schedule 2.1, the Company does
not own stock in or control, directly or indirectly, any other corporation,
association or business organization, nor is the Company a party to any joint
venture or partnership. The Shareholder is the sole shareholder of the Company
and owns all outstanding shares of capital stock of the Company free of all
security interests, claims, encumbrances and liens. Each share of Company
common stock has been legally and validly issued and fully paid and
nonassessable. There are no outstanding (a) bonds, debentures, notes or other
obligations the holders of which have the right to vote with the shareholders
of the Company on any matter, (b)
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securities of the Company convertible into equity interests in the Company, or
(c) commitments, options, rights or warrants to issue any such equity interests
in the Company, to issue securities of the Company convertible into such equity
interests, or to redeem any securities of the Company. No shares of capital
stock of the Company have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Company's shareholders. The Company is qualified to do business in the State
of Virginia, but is not required to qualify to do business as a foreign
corporation in any other state or jurisdiction by reason of its business,
properties or activities in or relating to such other state or jurisdiction.
The Company does not have any assets, employees or offices in any state other
than North Carolina and Virginia.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. The Company has the
corporate power to execute, deliver and perform this Agreement and all
agreements and other documents executed and delivered by it pursuant to this
Agreement or to be executed and delivered on the Closing Date, and has taken
all action required by law, its Articles of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. The Shareholder has the legal capacity
to enter into and perform this Agreement and the other documents, instruments
and agreements to be executed and delivered in connection herewith. The
Company has obtained the approval of its shareholders necessary to the
consummation of the transactions contemplated herein. This Agreement and all
documents, instruments and agreements executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by the Company and the Shareholder, as appropriate, and constitute or
will constitute the legal, valid and binding obligations of the Company and the
Shareholder, enforceable against the Company and the Shareholder in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. The execution and delivery of this
Agreement, and the documents, instruments and agreements executed and delivered
pursuant to this Agreement or to be executed and delivered on the Closing Date,
do not, and, subject to the receipt of consents described on Schedule 2.5
below, the consummation of the actions contemplated hereby will not, violate
any provision of the Articles of Incorporation or Bylaws of the Company or any
provisions of, or result in the acceleration of, or loss of any right in, to or
under, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the Company
or the Shareholder is a party or by which the Company or the Shareholder is
bound, or violate any material restrictions of any kind to which the Company is
subject, or result in any lien or encumbrance on any of the Company's assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental
authorizations and approvals required to be maintained by the Company, the
Shareholder and each employee of the Company have been duly obtained and are in
full force and effect and are described on Schedule 2.3. There are no
proceedings pending or, to the knowledge of the Company and the Shareholder,
threatened, which may result in the revocation, cancellation or suspension, or
any adverse modification, of any thereof.
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2.4 CORPORATE RECORDS. True and correct copies of the Articles of
Incorporation, Bylaws and minutes of the Company and all amendments thereto of
the Company have been delivered to AHC. The minute books of the Company
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the Board of Directors and shareholders of the Company
since its formation. The books of account of the Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of the Company have been properly recorded in such
books.
2.5 CONSENTS. Except as set forth on Schedule 2.5, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the documents, instruments and
agreements contemplated hereby on the part of the Company or the Shareholder.
2.6 FINANCIAL INFORMATION. The Company has heretofore furnished
AHC with copies of the audited balance sheet for the twelve-months ended August
31, 1995, and the audited balance sheet and related audited statements of
income, retained earnings and cash flows for the twelve-months ended August 31,
1996, including the notes thereto, and an unaudited balance sheet ("Balance
Sheet") and income statement as of February 28, 1997 ("Balance Sheet Date")
(the financial statements described in this sentence are hereinafter referred
to as the "Financial Statements"). All the Financial Statements have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated, reflect all liabilities
of the Company, including all contingent liabilities of the Company, as of
their respective dates, present fairly the financial position of the Company as
of such dates and the results of operations and cash flows for the period or
periods reflected therein.
2.7 LEASES.
(a) Schedule 2.7(a) attached hereto sets forth a list of
all leases pursuant to which the Company leases, as lessor or lessee, real
property used in operating the business of the Company or otherwise. All such
leases listed on Schedule 2.7(a) are valid and enforceable in accordance with
their respective terms, and there is not under any such lease any existing
default by the Company, as lessor or lessee, or any condition or event of which
the Company or the Shareholder has knowledge which with notice or lapse of
time, or both, would constitute a default, in respect of which the Company has
not taken adequate steps to cure such default or to prevent a default from
occurring. Schedule 2.7(a) also indicates whether or not the office at such
leased facility is owned or leased by the Company, and if owned by the Company,
the year, model number and the type (single wide/double wide) of office.
(b) Schedule 2.7(b) attached hereto sets forth a list of
all leases pursuant to which the Company leases, as lessor or lessee, personal
property used in operating the business of the Company or otherwise. All such
leases listed on Schedule 2.7(b) are valid and enforceable in accordance with
their respective terms, and there is not under any such lease any existing
default by the Company, as lessor or lessee, or any condition or event of which
the Company or
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the Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default, in respect of which the Company has not taken
adequate steps to cure such default or to prevent a default from occurring.
2.8 CONDITION OF ASSETS. All of the Assets are in good condition
and repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and the Company and the Shareholder
have no knowledge of any latent defects therein.
2.9 TITLE TO AND ENCUMBRANCES ON PROPERTY. A description of all
interests in real and personal property owned by the Company is set forth on
Schedule 2.9(a). The Company has good, valid and marketable title to all of
its personal and real property, free and clear of any liens, claims, charges,
exceptions or encumbrances, except for those, if any, which are set forth in
Schedule 2.9(a) attached hereto. The real and personal property described on
Schedule 2.9(a) and Schedule 2.7 constitute the only real and personal property
used in the conduct of the Company's business. Except as provided in Schedule
2.9(b), upon consummation of the transactions contemplated hereby, such
interest in real and personal property shall be free and clear of all liens,
security interests, claims and encumbrances and evidence of such releases of
liens and claims shall be provided to AHC Sub on the Closing Date.
2.10 INVENTORIES. All inventories of the Company used in the
conduct of its business are reflected on the Balance Sheet in accordance with
generally accepted accounting principles consistently applied. Set forth on
Schedule 2.10(a) is a listing of new and used homes (by brand, model and single
wide/double wide) for each home on the Company's retail sales lots as of
February 28, 1997. The items of the Company's inventory have been acquired in
the ordinary course of its business, are adequate for the reasonable
requirements of its business, and, to the best knowledge of the Company and the
Shareholder, may be used for their intended purposes. All of the inventory
owned or used by the Company is in good, current, standard and merchantable
condition and is not obsolete or defective, except for used house inventory
described in Schedule 2.10(b).
2.11 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on
Schedule 2.11, the Company has no right, title or interest in or to patents,
patent rights, corporate names, assumed names, manufacturing processes, trade
names, trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items and such items are the
only such items necessary for the conduct of its business. Set forth in
Schedule 2.11 is a listing of all names of all predecessor companies of the
Company, including the names of any entities from whom the Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on Schedule 2.11, the Company is not a licensee in respect
of any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets or
similar items and no such licenses are necessary for the conduct of its
business. No claim is pending or has been made to the effect that the present
or past operations of the Company infringe upon or conflict with the asserted
rights of others to any patents, patent rights, manufacturing processes, trade
names, trademarks, service marks, inventions, licenses, specialized treatment
protocols, copyrights, formulas, know-how and
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trade secrets. The Company has the sole and exclusive right to use all such
proprietary rights without infringing or violating the rights of any third
parties and no consents of any third parties are required for the use thereof
by the Surviving Corporation.
2.12 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set
forth on Schedule 2.12 attached hereto is a true and complete list, as of the
date of this Agreement of: (a) the name of each director and officer of the
Company and the offices held by each, (b) the most recent payroll report of the
Company, showing all current employees of the Company and their current levels
of compensation, (c) promised increases in compensation of employees of the
Company that have not yet been effected, (d) oral or written employment
agreements or independent contractor agreements (and all amendments thereto) to
which the Company is a party, copies of which have been delivered to AHC, and
(e) all employee manuals, materials, policies, procedures and work-related
rules, copies of which have been delivered to AHC. There are no promised
increases in compensation of employees of the Company that have not yet been
effected. The Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices. The
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against the
Company, and the Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.13 LEGAL PROCEEDINGS. Except as set forth in Schedule 2.13,
neither the Company nor the Shareholder nor outstanding shares of the Company's
stock nor any of the Company's assets is subject to any pending, nor does the
Company or the Shareholder have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting the Company, the Shareholder, the outstanding shares
of the Company's stock, any of the assets of the Company, the operations,
business or prospects of the Company or the transactions contemplated by this
Agreement, and, to the knowledge of the Company and the Shareholder, no basis
for any such action exists, nor is there any legal impediment of which the
Company or the Shareholder have knowledge to the continued operation of its
business in the ordinary course, subject to consents set forth on Schedule 2.5.
2.14 CONTRACTS. The Company has delivered to AHC true copies of
all written, and disclosed to AHC Sub all oral, outstanding contracts,
obligations and commitments of the Company ("Contracts"), all of which are
listed or incorporated by reference on Schedule 2.7 (in the case of leases) and
Schedule 2.14 (in the case of Contracts other than leases) attached hereto.
Except as otherwise indicated on such Schedules, all of such Contracts are
valid, binding and enforceable in accordance with their terms and are in full
force and effect, and no defenses, offsets or counterclaims have been asserted
or may be made by any party thereto. Except as indicated on such Schedules,
there is not under any such Contract any existing default by the Company, or
any condition or event of which the Company or the Shareholder has knowledge
which with notice or lapse of time, or both, would constitute a default. The
Company and the Shareholder have no knowledge of any default by any other party
to such Contracts. Neither the Company nor the Shareholder have received
notice of the intention of any party to any Contract to cancel or terminate any
Contract and have no reason to believe that any amendment or change to any
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Contract is contemplated by any party thereto. Other than those contracts,
obligations and commitments of the Company listed on Schedules 2.7 and 2.14,
the Company is not a party to any material written or oral agreement contract,
lease or arrangement, including any:
(a) Contract related to the assets of the Company not
made in the ordinary course of business other than this Agreement;
(b) Employment, consulting or compensation agreement or
arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether
as lessor or lessee;
(e) Deed, xxxx of sale or other document evidencing an
interest in or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or
equipment (i) which is in excess of the requirements of its business now booked
or for normal operating inventories, or (ii) which is not terminable upon
notice of thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Company of a particular product or
service;
(h) Loan agreement or other contract for money borrowed
or lent or to be borrowed or lent to another;
(i) Installment sales contracts between the Company and
any customer;
(j) Contracts containing non-competition covenants; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $5,000 or that terminate or can only be
terminated by the Company on more than 30 days after the date hereof.
2.15 SUBSEQUENT EVENTS. Except as set forth on Schedule 2.15, the
Company has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability
(absolute, accrued, contingent or otherwise) or entered into any contract,
lease, license or commitment, except in connection with the performance of this
Agreement, other than in the ordinary course of business;
(b) Discharged or satisfied any material lien or
encumbrance, or paid or satisfied any material obligation or liability
(absolute, accrued, contingent or otherwise) other than
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(i) liabilities shown or reflected on the Balance Sheet or (ii) liabilities
incurred since the Balance Sheet Date in the ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any
person or entity other than in the ordinary course of business;
(e) Lost or terminated any employee, customer or supplier
that has, individually or in the aggregate, a material adverse effect on its
business;
(f) Increased or established any reserve for taxes or any
other liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of the Company since the Balance
Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge
or other encumbrance any of the assets of the Company, tangible or intangible;
(h) Sold or contracted to sell or transferred or
contracted to transfer any of the assets used in the conduct of the Company's
business or cancelled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent
with past practices, granted any increase in the rates of pay of employees,
consultants or agents, or by means of any bonus or pension plan, contract or
other commitment, increased the compensation of any officer, employee,
consultant or agent;
(j) Authorized or incurred any capital expenditures in
excess of Ten Thousand and No/100 Dollars ($10,000.00);
(k) Except for this Agreement and any other agreement
executed and delivered pursuant to this Agreement, entered into any material
transaction other than in the ordinary course of business or permitted
hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds
or other securities;
(m) Experienced damage, destruction or loss (whether or
not covered by insurance) materially and adversely affecting any of its
properties, assets or business, or experienced any other material adverse
change in its financial condition, assets, prospects, liabilities or business;
(n) Declared or paid a distribution, payment or dividend
of any kind on the capital stock of the Company;
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(o) Repurchased, approved any repurchase or agreed to
repurchase any of the Company's capital stock; or
(p) Suffered any material adverse change in the business
of the Company or to the assets of the Company.
2.16 ACCOUNTS RECEIVABLE. Schedule 2.16 contains a true and
accurate list of all accounts and notes receivable of the Company at the
Balance Sheet Date. The Company maintains its accounting records in sufficient
detail to substantiate the accounts receivable reflected on the Balance Sheet
and has given and will give to AHC Sub full and complete access to those
records, including the right to make copies therefrom. Since the Balance Sheet
Date, the Company has not changed any principle or practice with respect to the
recordation of accounts receivable or the calculation of reserves therefor, or
any material collection, discount or write-off policy or procedure.
2.17 TAXES. Except as set forth on Schedule 2.17, the Company has
filed all tax returns required to be filed by it, and made all payments of
taxes, including any interest, penalty or addition thereto, required to be made
by it, with respect to income taxes, real and personal property taxes, sales
taxes, use taxes, employment taxes, excise taxes and other taxes due and
payable on or before the date of this Agreement. All such tax returns are
complete and accurate in all respects and properly reflect the relevant taxes
for the periods covered thereby. The Company has no tax liability, except for
real and personal property taxes for the current period not yet due and payable
and sales, use, employment and similar taxes for periods as to which such taxes
have not yet become due and payable. The unpaid taxes of the Company did not,
as of the Balance Sheet Date, exceed the reserve for taxes (rather than any
reserve for deferred taxes established to reflect timing differences between
book and income tax income) set forth on the face of the Balance Sheet (rather
than in any notes thereto), as adjusted for the passage of time through the
Closing Date (in accordance with the past custom and practice of the Company).
The Company and the Shareholder have not received any notice that any tax
deficiency or delinquency has been asserted against the Company. There are no
audits relating to taxes of the Company threatened, pending or in process. The
Company is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of the Company. The Company has withheld and paid all taxes required by
law to have been withheld and paid by it. Neither the Company nor any
predecessor of the Company is or has been a party to any tax allocation or
sharing agreement or a member of an affiliated group of corporations filing a
consolidated federal income tax return. The Company has delivered to AHC
correct and complete copies of the Company's three most recently filed annual
state and federal income tax returns, together with all examination reports and
statements of deficiencies assessed against or agreed to by the Company during
the three calendar year period preceding the date of this Agreement. The
Company has neither made any payments, is obligated to make any payments, or is
a party to any agreement that under any circumstance could obligate it to make
any payments that will not be deductible under Section 280G of the Internal
Revenue Code of 1986, as amended.
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2.18 COMMISSIONS AND FEES. Except as described in Schedule 2.18,
there are no claims for brokerage commissions or finder's or similar fees in
connection with the transactions contemplated by this Agreement which may be
now or hereafter asserted against AHC, AHC Sub, the Company or the Shareholder
resulting from any action taken by the Company or the Shareholder or their
respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, the Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have occurred as of the
Closing Date, any liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, other than
those incurred in the ordinary course of business. The Company and the
Shareholder do not know, or have reasonable grounds to know, of any basis for
the assertion against the Company as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against
on the Balance Sheet, or of any claim or liability of any nature arising since
that date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of the Company (including
without limitation, indebtedness for borrowed money, guaranties and capital
lease obligations) is described on Schedule 2.19 attached hereto.
2.20 INSURANCE POLICIES. The Company, the Shareholder and each
employee of the Company carries property, liability, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and will
remain duly in force through the Closing Date. All such policies are described
in Schedule 2.20 attached hereto and true and correct copies have been
delivered to AHC. Neither the Company nor the Shareholder have received notice
or other communication from the issuer of any such insurance policy cancelling
or amending such policy or threatening to do so. Neither the Company, nor the
Shareholder nor any employee of the Company has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule 2.21
attached hereto, the Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program, agreement,
policy, commitment, contract or arrangement (whether or not set forth in a
written document); (b) any pension, profit-sharing, retirement or other plan,
program or arrangement; or (c) any other employee benefit plan, fund or
program, including, but not limited to, those described in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All
such plans listed on Schedule 2.21 (individually "Company Plan," and
collectively "Company Plans") have been operated and administered in all
material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code of
1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the
Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of
1967, as amended, and the related rules and regulations adopted by those
federal agencies responsible for the administration of such laws. No act or
failure to act by the Company has resulted in a "prohibited transaction" (as
defined in ERISA) with respect to the Company Plans.
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No "reportable event" (as defined in ERISA) has occurred with respect to any of
the Company Plans. The Company has not previously made, is not currently
making, and is not obligated in any way to make, any contributions to any
multiemployer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980. With respect to each Company Plan, either (i) the
value of plan assets (including commitments under insurance contracts) is at
least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all as
of the Closing Date.
2.22 ADVERSE AGREEMENTS. The Company is not, and will not be as of
the Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of the Company.
2.23 COMPLIANCE WITH LAWS. Except as set forth on Schedule 2.23,
the Company, the Shareholder and Company's employees have complied with all
applicable laws, rules, regulations and licensing requirements, including,
without limitation, the Federal Environmental Protection Act, the Occupational
Safety and Health Act, the Americans with Disabilities Act and any
environmental laws, and there exist no violations by the Company, the
Shareholder or any employee of the Company of any federal, state or local law
or regulation. Neither the Company nor the Shareholder have received any
notice of a violation of any federal, state and local laws, regulations and
ordinances relating to the operations of the business and assets of the Company
and no notice of any pending inspection or violation of any such law,
regulation or ordinance has been received by the Company or the Shareholder.
2.24 NO UNTRUE REPRESENTATIONS. No representation or warranty by
the Company or the Shareholder in this Agreement, and no Schedule or
certificate issued or executed by, or information furnished by, officers or
directors of the Company or the Shareholder and furnished or to be furnished to
AHC Sub or AHC pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to make
the statements or facts contained therein not misleading.
2.25 ACCREDITED INVESTOR STATUS. The Shareholder is an "accredited
investor" as defined in Rule 501(a) under the Securities Act of 1933, as
amended (the "Securities Act").
2.26 DISTRIBUTIONS AND REPURCHASES. Except as set forth in
Schedule 2.26, no distribution, payment or dividend of any kind has been
declared or paid by the Company on any of its capital stock since August 31,
1996. No repurchase of any of the Company's capital stock has been approved,
effected or is pending, or is contemplated by the Board of Directors of the
Company.
2.27 SUPPLIERS. Set forth in Schedule 2.27 is a complete and
accurate list of the five (5) largest suppliers of the Company in terms of
dollar volume of transactions for each of the last two
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fiscal years and the current fiscal year to date, showing, with respect to
each, the name, address and aggregate purchases from such supplier in the
number of single-wide and double-wide homes purchased in each such period.
2.28 BANKING RELATIONS. Set forth in Schedule 2.28 is a complete
and accurate list of all arrangements that the Company has with any bank or
other financial institution, indicating with respect to each relationship the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
2.29 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS.
Except as set forth on Schedule 2.29, no officer, employee, director or
shareholder of the Company, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier or competitor of the
Company or any organization that has a material contract or arrangement with
the Company. Except as set forth on Schedule 2.29, neither the Company, nor
any of its directors, officers, employees, consultants or the Shareholder nor
any affiliate of such person is, or within the last three years was, a party to
any contract, lease, agreement or arrangement, including, but not limited to,
any joint venture or consulting agreement with any person or entity which is in
a position to make or influence referrals of business to, or otherwise generate
business for, the Company or to provide services, lease space, lease equipment
or engage in any other venture or activity with the Company.
2.30 INVESTMENTS; COMPLIANCE WITH LAW. The AHC Common Stock to be
acquired by the Shareholder pursuant to this Agreement is being acquired solely
for his own account, for investment purposes only and with no present intention
of distributing, selling or otherwise disposing of it in connection with a
distribution.
2.31 ECONOMIC RISK; SOPHISTICATION. The Shareholder is able to
bear the economic risk of an investment in AHC Common Stock acquired pursuant
to this Agreement and can afford to sustain a total loss of such investment and
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment and
therefore has the capacity to protect his own interests in connection with the
acquisition of the AHC Common Stock. The Shareholder has had an adequate
opportunity to ask questions and receive answers from the officers of AHC
concerning any and all matters relating to the Company. The Shareholder has
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to his satisfaction.
2.32 RESTRICTIONS ON AHC STOCK. The Shareholder acknowledges that
the AHC Common Stock to be acquired by the Shareholder are unregistered and may
not be sold or transferred in the absence of registration under the Securities
Act and applicable state securities Act and applicable state securities laws,
unless an exemption exists therefor; and the certificates representing such
shares shall be legended accordingly.
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SECTION 3. REPRESENTATIONS AND WARRANTIES OF AHC AND AHC SUB.
AHC and AHC Sub hereby represent and warrant to the Company and the
Shareholder as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. AHC and AHC Sub are
corporations duly organized and existing and in good standing under the laws of
the State of Texas.
3.2 POWER AND AUTHORITY. Each of AHC and AHC Sub has corporate
power to execute, deliver and perform this Agreement and all documents,
instruments and agreements executed and delivered by it pursuant to this
Agreement, and has taken all actions required by law, its Articles of
Incorporation, its Bylaws or otherwise, to authorize the execution, delivery
and performance of this Agreement and such related documents, instruments and
agreements. The execution and delivery of this Agreement and the documents,
instruments and agreements related hereto executed and delivered pursuant to or
in connection with this Agreement do not and, subject to the receipt of
consents to assignments of leases and other contracts where required and the
receipt of regulatory approvals where required, the consummation of the
transactions contemplated hereby will not, violate any provision of the
Articles of Incorporation or Bylaws of either AHC Sub or AHC or any provisions
of, or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement instrument, order, arbitration award, judgment or decree to
which AHC Sub or AHC is a party or by which either of them is bound, or violate
any restrictions of any kind to which AHC Sub or AHC is subject.
3.3 COMMISSIONS AND FEES. AHC and AHC Sub have not incurred any
obligation for any finder's, broker's or agent's fees in connection with the
transactions contemplated hereby.
3.4 CAPITAL STOCK. All of the outstanding shares of the common
stock of AHC Sub are or will be as of the Closing Date validly issued, fully
paid and nonassessable and are or will be as of the Closing Date owned
indirectly by AHC, free and clear of all liens, claims and encumbrances. The
issuance and delivery by AHC of shares of the AH Common Stock in connection
with the Merger will be as of the Closing Date duly and validly authorized by
all necessary corporate action on the part of AHC. The shares of AHC common
stock to be issued in connection with the Merger, when issued in accordance
with the terms of this Agreement, will be validly issued, fully paid and
nonassessable.
SECTION 4. COVENANTS OF THE COMPANY AND THE SHAREHOLDER.
The Company and the Shareholder, jointly and severally, agree that
between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT. The Company and the Shareholder
shall each use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
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4.2 BUSINESS OPERATIONS. The Company and the Shareholder shall
operate the Company's business in the ordinary course. The Company shall not
enter into any lease, contract, indebtedness, commitment, purchase or sale or
acquire or dispose of any asset except in the ordinary course of business. The
Company and the Shareholder shall use their best efforts to preserve the
business and assets of the Company intact and shall not take any action that
would have an adverse effect on the business or assets of the Company; provided
that the Company may continue to operate in the ordinary course of business.
The Company and the Shareholder shall use their best efforts to preserve intact
the relationships with, customers, suppliers and others having significant
business relations with the Company. The Company shall collect its receivables
and pay its trade payables in the ordinary course of business. The Company
shall not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. The Company and the Shareholder shall
permit AHC and AHC Sub and their authorized representatives access to, and make
available for inspection, all of the assets and business of the Company and all
of its assets, including employees, customers and suppliers and permit AHC, AHC
Sub and their authorized representatives to inspect and make copies of all
documents, records and information with respect to the business or assets of
the Company as AHC, AHC Sub or their representatives may request. The Company
and the Shareholder shall promptly notify AHC in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of
time or both, could become a default, under any contract, commitment or
obligation to which the Company is a party, and (b) any adverse change in the
Company's business, financial condition or the conditions of its assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. The
Company and the Shareholder shall use their best efforts to secure all
necessary approvals and consents of third parties to the consummation of the
transactions contemplated hereby, including consents described on Schedule 2.5
and to renegotiate each real estate lease described on Schedule 2.5 with such
terms and conditions as are acceptable to AHC.
4.5 ACQUISITION PROPOSALS The Company and the Shareholder shall
not, and shall use their best efforts to cause the Company's employees, agents
and representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer, including without limitation, any proposal or offer to the Shareholder,
with respect to a merger, acquisition, consolidation or similar transaction
involving, or the purchase of all or any significant portion of the assets or
any equity securities of the Company or engage in any negotiations concerning,
or provide any confidential information or data to, or have any discussions
with, any person relating to such proposal or offer, and the Company and the
Shareholder will immediately cease any such activities, discussions or
negotiations heretofore conducted with respect to any of the foregoing. The
Company and the Shareholder shall immediately notify AHC Sub if any such
inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. The Company hereby
covenants and agrees that it will take whatever steps are necessary to pay or
fund completely for any accrued benefits, where applicable, or vested accrued
benefits for which the Company or any entity might
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have any liability whatsoever arising from any salary, wage, benefit, bonus,
insurance, employment tax or similar liability of the Company to any employee
or other person or entity (including, without limitation, any Company Plan and
any liability under employment contracts with the Company) allocable to
services performed prior to the Closing Date.
4.7 EMPLOYEE MATTERS. The Company shall not, without the prior
written approval of AHC or AHC Sub, except as required by law, increase the
cash compensation of the Shareholder or any other employee or an independent
contractor of the Company, adopt, amend or terminate any compensation plan,
employment agreement, independent contractor agreement, employee policies and
procedures or employee benefit plan, take any action that could deplete the
assets of any employee benefit, or fail to pay any premium or contribution due
or file any report with respect to any employee benefit plan, or take any other
actions with respect to its employees or employee matters which might have an
adverse effect upon the Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind will be declared or paid by the Company on its capital
stock, nor will any repurchase of any of the Company's capital stock be
approved or effected.
4.9 REQUIREMENTS TO EFFECT MERGER. The Company and the
Shareholder shall use their best efforts to take, or cause to be taken, all
actions necessary to effect the Merger under applicable law, including without
limitation the filing with the appropriate government officials of all
necessary documents in form approved by counsel for the parties to this
Agreement.
4.10 VOTING OF SHARES; IRREVOCABLE PROXY. The Shareholder agree
that until the earlier of the Closing Date or the termination of this
Agreement, the Shareholder shall vote all shares of Company common stock owned
by him at any meeting of the shareholders of the Company or take action by
written consent for adoption of this Agreement, as hereby amended, and in favor
of the Merger and any other transactions contemplated by this Agreement, and
against any action, omission or agreement which would impede or interfere with,
or have the effect of discouraging, the Merger.
4.11 ACCOUNTING AND TAX MATTERS. The Company will not change in
any material respect the accounting methods or practices followed by the
Company (including any material change in any assumption underlying, or any
method of calculating, any bad debt, contingency or other reserve), except as
may be required by generally accepted accounting principles. The Company will
not make any material tax election except in the ordinary course of business
consistent with past practice, change any material tax election already made,
adopt any tax accounting method except in the ordinary course of business
consistent with past practice, change any tax accounting method, enter into any
closing agreement, settle any tax claim or assessment or consent to any tax
claim or assessment or any waiver of the statute of limitations for any such
claim or assessment. The Company will duly, accurately and timely (without
regard to any extensions of time) file all returns, information statements and
other documents relating to taxes
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of the Company required to be filed by it, and pay all taxes required to be
paid by it, on or before the Closing Date.
4.12 REAL PROPERTY LEASE WITH SHAREHOLDER OR RELATED ENTITIES.
With respect to any real property leased by the Company from the Shareholder,
or any affiliate or related entity of the Company or the Shareholder, the
Company shall enter into a new lease (the "Lease"), such Lease to contain terms
and provisions satisfactory to AHC, including without limitation: (i) a lease
rate equal to the fair market value lease rate, as agreed to by AHC, (ii) a
right of first refusal to acquire such property upon any proposed sale thereof,
and (iii) such other provisions to be acceptable to AHC.
4.13 LICENSES AND PERMITS. The Shareholder shall use its best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, statute, rule, regulation or ordinance, or otherwise
necessary or desirable to consummate the transactions contemplated hereby.
4.14 EMPLOYMENT AGREEMENT. Shareholder shall have agreed to
become an employee of AHC as of the Closing Date on the terms and conditions
set forth in the Employment Agreement attached hereto as Exhibit B.
SECTION 5. COVENANTS OF AHC AND AHC SUB.
AHC and AHC Sub, jointly and severally, agree that between the date
hereof and the Closing Date:
5.1 CONSUMMATION OF AGREEMENT. AHC and AHC Sub shall use their
best efforts to cause the consummation of the transactions contemplated hereby
in accordance with their terms and provisions. AHC and AHC Sub will use their
best efforts to take, or cause to be taken, all actions necessary to effect the
Merger under applicable law, including without limitation the filing with the
appropriate government officials all necessary documents in form approved by
counsel for the parties to this Agreement.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. AHC and
AHC Sub shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby.
5.3 LISTING APPLICATION. AHC shall prepare and submit to the
Nasdaq National Market a listing application covering the Stock Consideration
and shall use its best efforts to obtain approval for the listing of the Stock
Consideration upon official notice of issuance.
5.4 ACCESS AND NOTICE. AHC and AHC Sub shall permit the
Shareholder and its authorized representatives reasonable access to, and make
available for inspection, all of the assets and business of AHC and AHC Sub and
permit Shareholder and its authorized representatives to inspect and make
copies of all documents, records and information with respect to the business
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or assets of AHC and AHC Sub as Shareholder or its representatives may request.
AHC shall promptly notify Shareholder in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of time
or both, could become a default, under any contract, commitment or obligation
to which AHC or AHC Sub is a party, and (b) any adverse change in AHC's or AHC
Sub's business, financial condition or the conditions of its assets.
SECTION 6. AHC AND AHC SUB CONDITIONS PRECEDENT.
The obligations of AHC and AHC Sub hereunder are subject to the
fulfillment at or prior to the Closing Date of each of the following
conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and the Shareholder contained herein shall have been
true and correct in all respects when initially made and shall be true and
correct in all respects as of the Closing Date.
6.2 COVENANTS AND CONDITIONS. The Company and the Shareholder
shall have performed and complied in all material respects with all covenants
and conditions required by this Agreement to be performed and complied with by
the Company and the Shareholder prior to the Closing Date.
6.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
6.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of the Company shall have occurred since the Balance Sheet Date,
and the Company shall have furnished to AHC interim monthly financial
statements for each month (excluding May) ended on or prior to the Closing
Date.
6.5 DUE DILIGENCE REVIEW. By the Closing Date, AHC and AHC Sub
shall have completed a due diligence review of the business, operations and
financial statements of the Company, the results of which shall be satisfactory
to AHC and AHC Sub in their sole discretion.
6.6 APPROVAL BY THE BOARD OF DIRECTORS This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of AHC or a committee thereof.
6.7 CONSENTS AND APPROVALS. The Company and the Shareholder shall
have obtained all necessary government and other third-party approvals and
consents.
6.8 CLOSING DELIVERIES. AHC Sub shall have received all
documents, duly executed in form satisfactory to AHC Sub and its counsel,
referred to in Section 8.1.
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6.9 DEBT AND RECEIVABLES. There shall be no indebtedness,
receivables or payables between the Company and its shareholders or affiliates
and the Company shall not have any liabilities, including indebtedness,
guaranties and capital leases, that are not approved by AHC.
6.10 LEASES. All real estate leases to which the Company is a
party or under which the Company has any obligation whatsoever shall have been
reviewed by, and shall be acceptable to AHC in all respects.
6.11 EBT CALCULATION. The Company and AHC shall have agreed on the
actual EBT for the EBT Period.
6.12 DELIVERY OF SCHEDULES. The parties acknowledge and agree that
this Agreement has been executed and delivered without attaching the Schedules
referred herein. Any schedules to this Agreement delivered by the Company or
Shareholder to AHC after the date hereof but prior to the Closing shall be in
form and substance acceptable to AHC and its counsel. Such schedules, when
approved, shall be attached to and become part of, this Agreement.
6.13 SCHEDULE OF INDEMNIFIABLE ITEMS. The Shareholder and AHC
shall have agreed, based upon the Schedules, on a schedule of indemnifiable
items, if any, which Schedule shall be attached hereto as Schedule 9.3.
6.14 ALLOCATION OF ENVIRONMENTAL COSTS. Except as provided in
Section 12.3, AHC and the Shareholder shall have agreed on the allocation of
costs and expenses for any investigation, testing, clean-up or remediation work
on, or permits required for, the properties owned or leased by the Company or
any affiliate thereof.
SECTION 7. THE COMPANY'S AND THE SHAREHOLDER'S CONDITIONS PRECEDENT.
The respective obligations of the Company and the Shareholder
hereunder are subject to fulfillment at or prior to the Closing Date of each of
the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of AHC and AHC Sub contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. AHC and AHC Sub shall have
performed and complied in all material respects with all covenants and
conditions required by this Agreement to be performed and complied with by AHC
and AHC Sub prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
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7.4 CLOSING DELIVERIES. The Company shall have received all
documents, duly executed in form satisfactory to the Company and its counsel,
referred to in Section 8.2.
7.5 EBT CALCULATION. The Company and AHC shall have agreed on the
actual EBT for the EBT Period.
7.6 DELIVERY OF SCHEDULES. The Schedules to be delivered by the
Company pursuant to Section 6.12 above shall be acceptable to the Company.
7.7 SCHEDULE 9.3. Schedule 9.3, as described in Section 6.13
above, shall be acceptable to the Shareholder.
7.8 ALLOCATION OF ENVIRONMENTAL COSTS. AHC and the Shareholder
shall have agreed on the allocation of costs and expenses for any
investigation, testing, clean-up or remediation work on, or permits required
for, the properties owned or leased by the Company or any affiliate thereof.
SECTION 8. CLOSING DELIVERIES.
8.1 DELIVERIES OF THE COMPANY AND THE SHAREHOLDER. At or prior to
the Closing, the Company and the Shareholder shall deliver to AHC the
following, all of which shall be in a form satisfactory to counsel to AHC and
AHC Sub:
(a) a copy of the resolutions of the Board of Directors
of the Company authorizing the execution, delivery and performance of this
Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(b) certificates of the President of the Company and of
the Shareholder, dated as of the Closing Date, (i) as to the truth and
correctness of the representations and warranties of the Company and the
Shareholder contained herein; (ii) as to the performance of and compliance by
the Company and the Shareholder with all covenants contained herein; and (iii)
certifying that all conditions precedent of the Company and the Shareholder to
the Closing have been satisfied;
(c) a certificate of the Secretary of the Company
certifying as to the incumbency of the directors and officers of the Company
and as to the signatures of such directors and officers who have executed
documents delivered at the Closing on behalf of the Company;
(d) a certificate, dated within 10 days of the Closing
Date, of the Secretary of the State of North Carolina establishing that the
Company is in existence and is in good standing to transact business in its
state of incorporation;
(e) an opinion of counsel to the Company and the
Shareholder, in form and substance reasonably satisfactory to AHC and its
counsel;
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(f) non-foreign affidavits executed by the Company and
the Shareholder;
(g) all authorizations, consents, approvals, permits and
licenses referred to in Sections 2.3 and 2.5; and
(h) the resignations of the directors and officers of the
Company as requested by AHC Sub;
(i) a Shareholder Release in the form attached hereto as
Exhibit C executed by the Shareholder;
(j) an Employment Agreement in the form attached hereto
as Exhibit B executed by the Shareholder; and
(k) such other instruments and documents as reasonably
requested by AHC or AHC Sub to carry out and effect the purpose and intent of
this Agreement.
8.2 DELIVERIES OF AHC AND AHC SUB. At or prior to the Closing,
AHC and AHC Sub shall deliver to the Company the following, all of which shall
be in a form satisfactory to counsel to the Company and the Shareholder, as
applicable:
(a) the Merger Consideration;
(b) a copy of the resolutions of the Board of Directors
of AHC and AHC Sub (or a committee thereof) authorizing the execution, delivery
and performance of this Agreement and all related documents and agreements each
certified by the Secretary as being true and correct copies of the original
thereof;
(c) certificates of the President of AHC and AHC Sub,
dated as of the Closing Date, (i) as to the truth and correctness of the
representations and warranties of AHC and AHC Sub contained herein; (ii) as to
the performance of and compliance by AHC and AHC Sub with all covenants
contained herein; and (iii) certifying that all conditions precedent of AHC and
AHC Sub to the Closing have been satisfied;
(d) a certificate of the Secretary of AHC and AHC Sub
certifying as to the incumbency of the directors and officers of AHC and AHC
Sub and as to the signatures of such directors and officers who have executed
documents delivered at the Closing on behalf of AHC and AHC Sub;
(e) certificates, dated within 10 days of the Closing
Date, of the Secretary of the State of Texas establishing that AHC and AHC Sub
are in existence and are in good standing to transact business in the Xxxxx xx
Xxxxx xxx xxx Xxxxx xx Xxxxx Xxxxxxxx;
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(f) an opinion of counsel to AHC and AHC Sub, in form and
substance reasonably satisfactory to the Company and its counsel; and
(g) such other instruments and documents as reasonably
requested by the Company or Shareholder to carry out and effect the purpose and
intent of this Agreement.
SECTION 9. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
9.1 NATURE AND SURVIVAL. All statements contained in this
Agreement or in any Exhibit or Schedule attached hereto, any document,
instrument and agreement executed pursuant hereto, and any certificate executed
and delivered by any party pursuant to the terms of this Agreement, shall
constitute representations and warranties of the Company and the Shareholder,
jointly and severally, or of AHC and AHC Sub, jointly and severally, as the
case may be. All such representations and warranties, all representations and
warranties expressly labeled as such in this Agreement and the indemnification
event described in item (iii) of Sectio 9.3 below (the "Event") shall survive
the date of this Agreement and the Closing Date for a period of three (3) years
following the Closing Date, except that the tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties or the Event against any party after the
date on which such survival period shall terminate. No party shall be entitled
to claim indemnity from any other party pursuant to Sections 9.2 or 9.3 hereof,
unless such party has timely given the notice required in Sections 9.2, 9.3 or
9.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect to
which the notices required by Section 9.2, 9.3 or 9.4, as applicable, are not
timely provided.
9.2 INDEMNIFICATION BY AHC AND AHC SUB. AHC and AHC Sub, jointly
and severally (for purposes of this Section 9.2, "Indemnitor"), shall indemnify
and hold the Shareholder and his agents and employees (each of the foregoing,
including the Shareholder, for purposes of this Section 9.2, an "Indemnified
Person"), harmless from and against any and all liabilities, losses, damages,
actions, suits, costs, deficiencies and expenses (including, but not limited
to, reasonable fees and disbursements of counsel through appeal) (collectively,
"Damages"), (i) arising from or by reason of or resulting from any breach by
Indemnitor of any representation, warranty, agreement or covenant contained in
this Agreement (including the Schedules and Exhibits hereto) and each document,
certificate or other instrument furnished or to be furnished by Indemnitor
hereunder, (ii) from and after the Closing Date, arising from or by reason of
or resulting from Indemnitor's management and conduct of the ownership of the
Company (excluding actions taken by the Shareholder as an employee of the
Surviving Corporation) that no claim shall be made for Damages under this
Section 9.2 until, and such claims may be made only to the extent that, the
dollar amount of all such Damages shall exceed in the aggregate $50,000; and
provided further, however, indemnification for Damages under this Section 9.2
shall not exceed the aggregate amount of the Merger Consideration. In
connection with Indemnitor's obligation to indemnify for expenses, Indemnitor
shall reimburse each
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Indemnified Person for all such expenses as they are incurred by such
Indemnified Person, provided that such Indemnified Person agrees in writing to
refund all such reimbursed expenses if and to the extent that it is finally
judicially determined that such Indemnified Person is not entitled to
indemnification hereunder.
9.3 INDEMNIFICATION BY THE SHAREHOLDER. The Shareholder (for
purposes of this Section 9.3, "Indemnitor"), shall indemnify and hold AHC, AHC
Sub and their respective officers, directors, shareholders, agents and
employees (each of the foregoing for purposes of this Section 9.3, an
"Indemnified Person"), harmless from and against any and all Damages (i)
arising from or by reason of or resulting from any breach by Indemnitor of any
representation, warranty, agreement or covenant contained in this Agreement
(including the Schedules and Exhibits hereto) and each document, certificate or
other instrument furnished or to be furnished by Indemnitor hereunder, (ii) any
claims whatsoever by Shareholder's father, Xxxxxx X. Xxxxx, or any other person
asserting that it owns an equity interest, or has a contingent arrangement with
respect to acquiring an equity interest, the Company, including, without
limitation, any claims under or in any way arising out of that certain Stock
Purchase Agreement dated August 29, 1995, by and between Xxxxxx X. Xxxxx and
Shareholder, (iii) any liabilities, contingent or otherwise (known or unknown
and asserted or unasserted) arising out of transactions effected or events
occurring on or prior to the Closing Date, except as set forth in the Balance
Sheet or incurred in the ordinary course of business since the Balance Sheet
Date and except if disclosed on a Schedule hereto (unless set forth on Schedule
9.3); and (iv) the matters described on Schedule 9.3; provided, however that
except for a claim relating to (ii) above or tax or environmental matters, no
claim shall be made for Damages under this Section 9.3 until, and such claims
may be made only to the extent that, the dollar amount of all such Damages
shall exceed in the aggregate $50,000; and provided further, however,
indemnification for Damages under this Section 9.3 shall not exceed the
aggregate amount of the Merger Consideration. In connection with Indemnitor's
obligation to indemnify for expenses, any Indemnified Person shall be entitled
to offset the amount of any Damages against the unpaid balance of the Note,
upon written notice to Indemnitor of the amount and cause of such Damages, and
the unpaid principal amount of the Note shall be reduced by the amount of such
Damages, provided, that such Indemnified Person agrees in writing to refund all
such offset expenses if and to the extent that it is finally judicially
determined that such Indemnified Person is not entitled to indemnification
hereunder. In the event that the balance of the Note at such time is
insufficient to cover the full amount of such Damages, Indemnitor shall
reimburse each Indemnified Person for any remaining unoffset Damages as they
may be incurred by such Indemnified Person, provided, that such Indemnified
Person agrees in writing to refund all such reimbursed expenses if and to the
extent that it is finally judicially determined that such Indemnified Person is
not entitled to indemnification hereunder.
9.4 INDEMNIFICATION PROCEDURE. The respective obligations and
liabilities of the Shareholder, AHC and AHC Sub (the "indemnifying party") to
the other (the "party to be indemnified") under Sections 9.2 and 9.3 with
respect to claims resulting from the assertion of liability by third parties
shall be subject to the following additional terms and conditions:
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(a) Within 20 days (or such earlier time as might be required to
avoid prejudicing the indemnifying party's position) after receipt of notice of
commencement of any action evidenced by service of process or other legal
pleading, the party to be indemnified shall give the indemnifying party written
notice thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing and at its own expense;
provided that the party to be indemnified may participate in the defense with
counsel of its own choice, the fees and expenses of which counsel shall be paid
by the party to be indemnified unless (i) the indemnifying party has agreed to
pay such fees and expenses, (ii) the indemnifying party has failed to assume
the defense of such action or (iii) the named parties to any such action
(including any impleaded parties) include both the indemnifying party and the
party to be indemnified and the party to be indemnified has been advised by
counsel that there may be one or more legal defenses available to it that are
different from or additional to those available to the indemnifying party (in
which case, if the party to be indemnified informs the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action on behalf of the party to be indemnified, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for the party to be indemnified, which
firm shall be designated in writing by the party to be indemnified). The
failure to promptly deliver a notice of an indemnity claim hereunder shall not
relieve the indemnifying party of its obligations to the indemnified party with
respect to such claim except to the extent that the resulting delay is
materially prejudicial to the defense of such claim.
(b) In the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the 10th day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the
account and risk of the indemnifying party and at the indemnifying party's
expense, subject to the right of the indemnifying party to assume the defense
of such claims at any time prior to settlement, compromise or final
determination thereof.
(c) Notwithstanding the foregoing, the indemnifying party shall
not settle any claim without the consent of the party to be indemnified unless
such settlement involves only the payment of money and the claimant provides to
the party to be indemnified a release from all liability in respect of such
claim. If the settlement of the claim involves more than the payment of money,
the indemnifying party shall not settle the claim without the prior consent of
the party to be indemnified. The party to be indemnified and the indemnifying
party will each cooperate with all reasonable requests of the other.
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9.5 CERTAIN TAX MATTERS.
(a) AHC shall prepare and file or cause to be prepared
and filed any tax returns, statements and reports ("Tax Returns") of Surviving
Corporation covering taxable periods ending on or before the Closing Date which
have not been filed on or before the Closing Date. The Shareholder shall
within fifteen (15) days after payment thereof and receipt of notice of such
payment, reimburse, indemnify and hold harmless AHC and the Surviving
Corporation for all taxes, and all related interest, penalties and additions to
tax ("Taxes"), with respect to taxable periods of the Company ending on or
before the Closing Date, except as accrued on the Balance Sheet.
(b) AHC shall prepare and file or cause to be prepared
and filed any Tax Returns of Surviving Corporation covering taxable periods
which begin before the Closing Date and end after the Closing Date ("Straddle
Periods"). The Shareholder shall within fifteen (15) days after payment thereof
and notice of such payment, reimburse, indemnify and hold harmless AHC and the
Surviving Corporation for all Taxes for any Straddle Period, to the extent
related to the portion of the Straddle Period ending on the Closing Date,
except as accrued on the Balance Sheet. For such purposes, the portion of any
Tax attributable to the portions of a Straddle Period ending on the Closing
Date and beginning after the Closing Date shall be determined by apportioning
the Tax for the entire Straddle Period among such periods based on the number
of days in each such period, provided that, in the case of Taxes based upon or
related to income or receipts, such portion shall be the amount of Tax which
would have been due if the relevant Straddle Period ended on the Closing Date.
Any credits relating to a Straddle Period shall be taken into account as though
the relevant Straddle Period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practices of the Company.
(c) The Company, the Shareholder, AHC, Surviving
Corporation and AHC Sub shall reasonably cooperate with each other in
connection with the filing of Tax Returns pursuant to this Section 9.5(c) and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the provision of copies, at the requesting party's
expense, of records and information relevant to any such Tax Return or
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.
9.6 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by the Company or the Shareholder giving
rise to indemnification under Section 9.3 or Section 9.5 hereof, AHC, Surviving
Corporation or AHC Sub shall be entitled to offset the amount of damages
incurred by it as a result of such breach of warranty, representation, covenant
or agreement against any amounts payable by AHC, AHC Sub or Surviving
Corporation, excluding amounts payable under the Employment Agreement attached
hereto as Exhibit B.
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SECTION 10. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by AHC or AHC Sub if any representation or
warranty of the Company or the Shareholder contained in this Agreement or in
any certificate or other document executed and delivered by the Company or the
Shareholder pursuant to this Agreement is or becomes untrue or breached in any
material respect or if the Company or the Shareholder fails to comply in any
material respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(c) at any time by the Company or the Shareholder if any
representation or warranty of AHC or AHC Sub contained in this Agreement or in
any certificate or other document executed and delivered by AHC or AHC Sub
pursuant to this Agreement is or becomes untrue in any material respect or AHC
or AHC Sub fails to comply in any material respect with any covenant or
agreement contained herein and such misrepresentation, noncompliance or breach
is not cured, waived or eliminated within twenty (20) days of written notice
thereof; or
(d) by AHC, AHC Sub, the Company or the Shareholder if the merger
contemplated hereby shall not have been consummated by July 30, 1997.
SECTION 11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Each party hereto
recognizes and acknowledges that he had in the past, currently has, and in the
future may possibly have, access to certain confidential information of the
other parties hereto that is valuable, special and unique assets of such other
parties respective businesses. Each party hereto agrees that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally through
no fault of the disclosing party, (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), the disclosing party
shall, if possible, give prior written notice thereof to the other parties
hereto, and provide such other parties hereto with the opportunity to contest
such disclosure, (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, or (iv) the disclosing party is the sole and exclusive owner
of such confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by any
party of the provisions of this Section 11, the other parties shall be entitled
to an injunction restraining such disclosing party from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting any non-disclosing party from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. The
obligations of the parties under this Section 11 shall survive the termination
of this Agreement.
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SECTION 12. MISCELLANEOUS.
12.1 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery,
by facsimile or overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to AHC: If to AHC Sub:
American Homestar Corporation Nationwide N.C. Homes, Inc.
0000 X. Xxxxx Xxxx., Xxxxx 000 0000 Xxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxx 00000-0000 Xxxxxx Xxxx, Xxxxx 00000
Attn: Xxxxxxxx X. Xxxxxx Attn: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
with a copy of each notice directed to AHC Sub or AHC to:
Xxxxxxx X. Xxxxxxx
Xxxxxxx & Xxxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
If to the Company or the Shareholder:
N.C. Mobile Home Corp.
0000 Xxxxx xx Xxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
W. Xxxxxx Xxxxxxxx
Nicholls & Xxxxxxxx, P.A.
X.X. Xxx 00000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile: (000) 000-0000
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
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12.2 FURTHER ASSURANCES; ACCOUNTS RECEIVABLE. Each party hereby
agrees to perform any further acts and to execute and deliver any documents
which may be reasonably necessary to carry out the provisions of this
Agreement. Shareholder shall assist AHC and Surviving Corporation in
collecting the accounts receivable of the Company acquired by AHC and AHC Sub
in connection with this transaction and in the event that the Shareholder shall
receive the proceeds of any such accounts receivable, shall immediately forward
such amounts to Surviving Corporation.
12.3 EACH PARTY TO BEAR COSTS. All Expenses (as defined below)
incurred by AHC and AHC Sub will be borne solely and entirely by AHC and all
Expenses incurred by the Company and the Shareholder will be borne jointly and
severally by the Company and the Shareholder; it being agreed that at the
Closing all Expenses of the Company shall be paid by the Company, but a
corresponding reduction will be paid on a 56% to 44% basis by a reduction in
the Note, on the one hand, and a reduction in the number of shares of AHC
Common Stock issued at the Closing (for purposes of which the number of shares
of AHC Common Stock deliverable at Closing will be reduced at a deemed price of
equal to the greater of (i) the average closing price of AHC Common Stock on
the Nasdaq National Market (as reported in the Wall Street Journal) on the 10
trading days prior to the public announcement of the Merger or (ii) $17.00 per
share, on the other hand, unless at Closing the Shareholder tender such amounts
in cash. "Expenses" as used in this Agreement will include all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, experts, investment bankers, advisors and consultants to a party
and its affiliates, regulatory fees and finder's fees) incurred by a party or
on its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and all other matters
related to the consummation of the transactions contemplated by this Agreement;
provided, however, that one-half ( 1/2) of any costs or expenses for any phase
I environmental testing shall be paid one-half by the Company and one-half by
AHC as incurred and such one-half paid by the Company shall be deemed Expenses
of the Company and subject to payment by the Shareholder as provided above.
12.4 PUBLIC DISCLOSURES. Each party shall keep this Agreement and
its terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior knowledge and consent of the other parties hereto;
provided that the foregoing shall not prohibit any disclosure (i) by press
release, filing or otherwise that is required by law (including, without
limitation, federal securities laws), regulation or court or administrative
order, (ii) to advisors, financiers or lenders of any party or to any party's
directors, officers, employees and representatives involved in the transactions
contemplated herein or (iii) by Purchaser in connection with obtaining
financing for the transactions contemplated by this Agreement and conducting an
examination of the operations and assets of the Corporation.
12.5 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLIED
WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
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12.6 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
12.7 INTEGRATION OF SCHEDULES AND EXHIBITS. All Schedules and
Exhibits attached to this Agreement are integral parts of this Agreement as if
fully set forth herein, and all statements appearing therein shall be deemed
disclosed for all purposes and not only in connection with the specific
representation in which they are explicitly referenced.
12.8 ENTIRE AGREEMENT/AMENDMENT. This instrument, including all
Schedules and Exhibits attached hereto, contains the entire agreement of the
parties and supersedes any and all prior or contemporaneous agreements between
the parties, written or oral, with respect to the transactions contemplated
hereby.
12.9 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding
on, and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that AHC Sub, Surviving Corporation and AHC may assign its
rights and obligations hereunder to an affiliate and to their lender or
lenders.
12.10 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by AHC Sub, and that all parties have read and
negotiated the language used in this Agreement. The parties agree that,
because all parties participated in negotiating and drafting this Agreement, no
rule of construction shall apply to this Agreement which construes ambiguous
language in favor of or against any party by reason of that party's role in
drafting this Agreement.
12.11 COSTS OF ENFORCEMENT. In the event that AHC Sub, Surviving
Corporation or AHC, on the one hand, or the Company or the Shareholder, on the
other hand, files suit in any court against any other party to enforce the
terms of this Agreement against the other party or to obtain performance by it
hereunder, the prevailing party will be entitled to recover all reasonable
costs, including reasonable attorneys' fees, from the other party as part of
any judgment in such suit. The term "prevailing party" shall mean the party in
whose favor final judgment after appeal (if any) is rendered with respect to
the claims asserted in the Complaint.
12.12 AMENDMENTS; WAIVERS. This Agreement may be amended, modified
or supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
12.13 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof;
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and the remaining provisions hereof shall remain in full force and effect. In
lieu of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
12.14 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMERICAN HOMESTAR CORPORATION
By: /s/ XXXXXXXX X. XXXXXX
-----------------------------
Its: President
----------------------------
NATIONWIDE N.C. HOMES, INC.
By: /s/ F. F. XXXXXX
-----------------------------
Its: President
----------------------------
N.C. MOBILE HOME CORP.
By: /s/ XXXXXX X. XXXXX
-----------------------------
Its: President
----------------------------
/s/ XXXXXX X. XXXXX
-----------------------------
Xxxxxx X. Xxxxx
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INDEX TO EXHIBITS AND SCHEDULES
Exhibit Description
------- -----------
A Promissory Note
B Employment Agreement
C Shareholder Release
Schedule
--------
2.1 Corporate Existence; Good Standing
2.3 Permits and Licenses
2.5 Consents
2.6 Financial Statements
2.7 Leases
2.9 Real and Personal Property; Encumbrances
2.11 Patents and Trademarks; Names
2.12 Directors and Officers; Payroll Information
2.14 Contracts (other than Leases)
2.15 Subsequent Events
2.16 Accounts Receivable
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.28 Distributions and Repurchases
39
2.29 Suppliers
2.30 Banking Relations
2.31 Ownership Interests in Interested Persons;
Competitors
2.32 Payors
