EXHIBIT 10.1
EXECUTION COPY
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WESTFIELD HOMES USA, INC.
STOCK PURCHASE AGREEMENT
among
THE SHAREHOLDERS OF
WESTFIELD HOMES USA, INC.
WF ACQUISITION, INC.
and
STANDARD PACIFIC CORP.
Dated as of AUGUST 8, 2002
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.................................................................................. 1
ARTICLE II STOCK PURCHASE.............................................................................. 10
2.1 Sale and Delivery.......................................................................... 10
2.2 Closing Payment............................................................................ 10
2.3 Post-Closing Adjustment to the Cash Payment................................................ 11
2.4 January 2003 Payment....................................................................... 12
2.5 Earnout.................................................................................... 12
2.6 Dispute Resolution of Calculations of Purchase Price....................................... 15
2.7 Closing.................................................................................... 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS.............................................. 17
3.1 Ownership of the Shares.................................................................... 17
3.2 Authorization, Validity, and Effect of Agreements.......................................... 17
3.3 No Brokers................................................................................. 17
3.4 Investment Purpose......................................................................... 18
3.5 Access to Information...................................................................... 18
3.6 Xxxxxxxx Children Trusts................................................................... 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS AS TO THE COMPANY AND ITS SUBSIDIARIES....... 20
4.1 Existence; Good Standing................................................................... 20
4.2 Capitalization............................................................................. 20
4.3 Acquired Companies and Other Interests..................................................... 20
4.4 Material Contracts; No Violation........................................................... 22
4.5 Financial Statements; No Undisclosed Liabilities; Projections............................. 25
4.6 No Violations; Consents.................................................................... 26
4.7 Compliance; Permits; Litigation............................................................ 26
4.8 Absence of Certain Changes................................................................. 27
4.9 Taxes...................................................................................... 28
4.10 Certain Employee Plans..................................................................... 30
4.11 Labor Matters.............................................................................. 32
4.12 Environmental Matters...................................................................... 33
4.13 Related Party Transactions................................................................. 34
4.14 Restrictions on Business Activities........................................................ 34
4.15 Real Property.............................................................................. 35
4.16 Intellectual Property...................................................................... 39
4.17 Other Assets............................................................................... 39
4.18 Insurance.................................................................................. 40
4.19 Warranties................................................................................. 41
4.20 Suppliers and Subcontractors............................................................... 41
4.21 HSR Matters................................................................................ 42
4.22 Corporate Dividend......................................................................... 42
4.23 Disclosure................................................................................. 42
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...................................................... 42
5.1 Existence; Good Standing; Corporate Authority.............................................. 42
5.2 Authorization, Validity, and Effect of Agreements.......................................... 43
5.3 No Violation............................................................................... 43
5.4 No Brokers................................................................................. 43
5.5 Funds...................................................................................... 43
5.6 Investment Purpose......................................................................... 43
5.7 Access to Information...................................................................... 44
5.8 SEC Filings................................................................................ 44
5.9 Disclosure................................................................................. 44
ARTICLE VI COVENANTS................................................................................... 45
6.1 Conduct of Business........................................................................ 45
6.2 Further Action............................................................................. 47
6.3 Access to Information; Confidentiality..................................................... 48
6.4 Publicity.................................................................................. 49
6.5 Expenses................................................................................... 49
6.6 Employee Benefits.......................................................................... 49
6.7 Third Party Offers......................................................................... 50
6.8 Restrictive Covenants...................................................................... 51
6.9 Directors.................................................................................. 53
6.10 Securities Restrictions.................................................................... 53
6.11 Warranty Indemnification................................................................... 55
6.12 Insurance Rights and Indemnification....................................................... 56
6.13 Sellers' Representative.................................................................... 56
6.14 Use of "Westfield Homes" Trade Xxxx........................................................ 57\\
6.15 Payment of Debt of Related Parties......................................................... 57
6.16 Release.................................................................................... 57
6.17 Villa Xxxx Property........................................................................ 59
ARTICLE VII SURVIVAL; INDEMNIFICATION.................................................................. 59
7.1 Survival of Representations and Warranties................................................. 59
7.2 Indemnification............................................................................ 59
7.3 Time Limitations........................................................................... 60
7.4 Other Limitations.......................................................................... 60
7.5 Set-Off.................................................................................... 62
7.6 Procedures Relating to Indemnification Involving Third Party Claims........................ 63
7.7 Other Claims............................................................................... 64
7.8 Sole and Exclusive Remedy.................................................................. 64
ARTICLE VIII TAX MATTERS............................................................................... 65
8.1 Section 338(h)(10) Elections............................................................... 65
8.2 Indemnification Obligations With Respect to Taxes.......................................... 66
8.3 Tax Returns and Payment Responsibility..................................................... 68
8.4 Contest Provisions......................................................................... 69
8.5 Assistance and Cooperation................................................................. 69
8.6 Retention of Records....................................................................... 70
8.7 Other Provisions........................................................................... 70
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ARTICLE IX CONDITIONS.................................................................................. 70
9.1 Conditions to Each Party's Obligation to Effect the Stock Purchase......................... 70
9.2 Conditions to Obligations of Buyer and Standard Pacific.................................... 70
9.3 Conditions to Obligations of the Sellers................................................... 72
ARTICLE X TERMINATION.................................................................................. 73
10.1 Termination by Mutual Consent.............................................................. 73
10.2 Termination by Either Buyer or Sellers..................................................... 73
10.3 Termination by Sellers..................................................................... 73
10.4 Termination by Buyer....................................................................... 74
10.5 Effect of Termination...................................................................... 74
ARTICLE XI MISCELLANEOUS............................................................................... 74
11.1 Entire Agreement; Assignment............................................................... 74
11.2 Validity................................................................................... 75
11.3 Notices.................................................................................... 75
11.4 Governing Law.............................................................................. 76
11.5 Construction............................................................................... 76
11.6 Counterparts............................................................................... 76
11.7 Parties In Interest........................................................................ 77
11.8 Waiver..................................................................................... 77
11.9 Amendments................................................................................. 77
11.10 Further Assurances......................................................................... 77
11.11 Cumulative Remedies........................................................................ 77
11.12 Arbitration................................................................................ 77
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EXHIBITS
Exhibit A Form of Investor Questionnaire
Exhibit B Form of License Agreement
Exhibit C-1 Form of Employment Agreement of Xxxxx Xxxxxxxx with the Company
Exhibit C-2 Form of Employment Agreement of Xxxxx Xxxxx with the Company
Exhibit C-3 Form of Employment Agreement of Xxxxxx Xxxxxx, Xxxx Xxxxxxxxxxxxxx and
Xxxxxx Xxxxx with a Subsidiary of the Company
Exhibit D-1 Form of Opinion of Bricklemyer, Smolker & Bolves, P.A., Counsel to the Sellers
Exhibit D-2 Form of Opinion of Xxxx, Xxxx & Xxxxxxxxx, P.A., Counsel to the Sellers
Exhibit D-3 Form of Opinion of Xxxxxxx Xxxxxxxxx, Counsel to the Sellers
Exhibit D-4 Form of Opinion of Ungaretti & Xxxxxx, Counsel to the Sellers
Exhibit E Form of Opinion of Counsel to Buyer
SCHEDULES
Schedule 2.2(a)(i) Estimated Balance Sheet Net Book Value
Schedule 2.2(a)(ii) Consideration Per Seller
Schedule 2.2(a)(iii) Company Indebtedness
SELLERS' DISCLOSURE SCHEDULE
Section 3.1 Ownership of Shares
Section 3.3 Sellers' Broker
Section 4.3(a) Subsidiaries
Section 4.3(d) Convertible Debt
Section 4.4(a) Material Contracts
Section 4.4(b) Contracts with Seller Affiliates
Section 4.4(c) Contract Defaults
Section 4.4(e) Consents and Approvals
Section 4.5(a) Financial Statements
Section 4.5(c) Undisclosed Liabilities
Section 4.5(d) Acquired Companies' Debt
Section 4.7(b) Acquired Companies' Permits
Section 4.7(c) Acquired Companies' Litigation
Section 4.7(d) Acquired Companies' Initiated Litigation
Section 4.8 Absence of Certain Changes
Section 4.9(i) Foreign Tax Jurisdictions
Section 4.10(a) Company Benefit Plans
Section 4.10(c) Company Benefits Relating to Retired or Former Employees
Section 4.10(f) Change in Control Arrangements
Section 4.11(b)(i) Employees
Section 4.11(b)(ii) Independent Contractors
Section 4.11(c) Paychex Agreements
Section 4.12 Environmental Matters
Section 4.13 Related Party Contracts
Section 4.15(a) Real Property Owned by the Acquired Companies
Section 4.15(e) Real Estate Projects
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Section 4.15(f) Real Property Subject to Repurchase
Section 4.15(g) Backlog of Home Sales on Each Project
Section 4.16 Intellectual Property
Section 4.17 Liens Against Assets of the Acquired Companies
Section 4.18(a) Insurance
Section 4.18(b) Risk Sharing Contracts
Section 4.18(c) Sufficiency of Insurance Policies
Section 4.18(d) Material Open Insurance Claims
Section 4.20 Suppliers/Subcontractor Terminations
Section 8.1(b) Allocation Agreement
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), is dated as of August
8, 2002, by and among Standard Pacific Corp., a Delaware corporation ("Standard
Pacific"), WF Acquisition, Inc., a Delaware corporation and wholly owned
subsidiary of Standard Pacific ("Buyer"), and the shareholders of Westfield
Homes USA, Inc., a Florida corporation (the "Company") named on the signature
page hereto (collectively, the "Sellers").
WHEREAS, the Sellers collectively own all of the issued and outstanding
shares (the "Shares") of common stock, $.01 par value per share, of the Company
("Company Common Stock").
WHEREAS, subject to the terms and conditions of this Agreement, the
Sellers have agreed to sell the Shares to Buyer, and Buyer has agreed to
purchase the Shares from the Sellers (the "Stock Purchase"), in exchange for the
consideration set forth in this Agreement; and
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Stock Purchase, and
also to prescribe various conditions to such transaction.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and for
other good and valuable consideration, intending to be legally bound, the
Sellers, Buyer and Standard Pacific hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"2001 Balance Sheet" is defined in Section 4.5(a).
"Acquired Companies" means the Company, and each of its Subsidiaries
(other than the Excluded Company), and the predecessors of such Persons.
"Affiliate", as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
Contract or otherwise.
"Agreement" is defined in the introductory paragraph of this Agreement.
"Allocation Agreement" is defined in Section 8.1(b).
"Annual Statements" is defined in Section 4.5(a).
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"Balance Sheet Date" means July 31, 2002.
"Balance Sheet Date Financial Statements" is defined in Section 2.3(a)
(i).
"Balance Sheet Date Net Book Value" is defined in Section 2.3(a)(ii).
"Business" means the business of the Acquired Companies developing
residential real estate and constructing single family homes and multi-family
residential units, and related and ancillary businesses, including mortgage
financing and title services. Without limiting the generality of the foregoing,
the definition of Business shall include, without limitation, any business of
the type or types conducted by the Acquired Companies at any time during the two
year period preceding the Closing Date or under development by the Acquired
Companies on the date hereof or the Closing Date and the Business conducted by
the Acquired Companies or their successors or assigns for the duration of the
Covenant Not to Compete.
"Business Day" means any day other than a day on which banks in the
State of Florida are authorized or required to close or the national securities
exchanges in the United States are closed.
"Business Plan" is defined in Section 4.5(e).
"Buyer Gross Up Amount" is defined in Section 8.1(d).
"Buyer Indemnified Parties" is defined in Section 7.2(a).
"Buyer" is defined in the introductory paragraph of this Agreement.
"Cap" shall mean $12,000,000.
"Capital Stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other equity ownership
interests entitling the holder thereof to vote with respect to matters involving
the issuer thereof or to share proportionately in its profits.
"Cash Payment" is defined in Section 2.2(a)(i).
"Xxxxxxxxx Xxxxxxxx Trust" is defined in Section 3.6(a).
"Change in Control" shall mean the occurrence of any of the following:
(a) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) or group of persons acting in concert (other than
Standard Pacific or any Subsidiary thereof or any employee benefit plan of
Standard Pacific or any Subsidiary thereof, or any underwriter in connection
with a firm commitment public offering of Standard Pacific's Capital Stock)
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 of the
Exchange Act, except that a person shall also be deemed the beneficial owner of
all securities which such person may have a right to acquire, whether or not
such right is presently exercisable), directly or indirectly, of securities of
Standard Pacific representing 50% or more of
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the combined voting power of Standard Pacific's then outstanding securities
ordinarily having the right to vote in the election of directors ("voting
stock");
(b) there shall be consummated any merger, consolidation
(including a series of mergers or consolidations), or any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of
all, or substantially all, of the consolidated assets of Standard Pacific
(meaning assets representing 50% or more of the consolidated net tangible assets
of Standard Pacific, measured over Standard Pacific's prior four full fiscal
quarters at the time of measurement), or any other similar business combination
or transaction, but excluding any business combination or transaction which
would result in the voting stock of Standard Pacific immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting stock of the surviving entity) more than 50% of the combined voting
power of the voting stock of Standard Pacific (or such surviving entity)
outstanding immediately after giving effect to such business combination or
transaction; or
(c) the adoption of any plan for the liquidation or
dissolution of Standard Pacific, other than in connection with a reorganization
or similar transaction in which the holders of the voting stock of Standard
Pacific immediately prior to such transaction continue to represent more than
50% of the combined voting power of the surviving entity immediately after
giving effect to such transaction.
"Claims" is defined in Section 6.16.
"Closing" and "Closing Date" are defined in Section 2.7(a).
"Closing Payment" is defined in Section 2.2(a)(ii).
"Code" means the Internal Revenue Code of 1986, as amended (or any
successor thereto).
"Company" is defined in the first recital of this Agreement.
"Company Benefit Plans" means each of the following which is sponsored,
maintained or contributed to by the Acquired Companies for the benefit of the
current or former employees, officers or directors of any of the Acquired
Companies, or has been so sponsored, maintained or contributed to within six
years prior to the Closing Date: (i) each "employee benefit plan," as such term
is defined in Section 3(3) of ERISA (including, but not limited to, employee
benefit plans, such as foreign plans, which are not subject to the provisions of
ERISA), and (ii) each stock option plan, bonus plan or arrangement, incentive
award plan or arrangement, change in control or severance pay plan, policy, or
agreement, deferred compensation agreement or arrangement, or supplemental
income arrangement, and each other employee benefit plan, program or practice
which is not described in clause (i) of this sentence; provided, however, that
such term shall not include collective bargaining agreements, employment
agreements or consulting agreements.
"Company Common Stock" is defined in the first recital of this
Agreement.
"Company Indebtedness" is defined in Section 2.2(a)(iii).
3
"Company Permits" is defined in Section 4.7(b).
"Company Pre-Tax Income" shall mean, with respect to any measurement
period, the consolidated net income (or loss) of the Company and its
Subsidiaries, prior to federal and state income taxes, for such measurement
period calculated in accordance with the standards, principles, practices and
policies used by Buyer in connection with financial statements and in accordance
with GAAP; provided, however, that the calculation of Company Pre-Tax Income
shall be adjusted to exclude the impact of any purchase accounting adjustments
relating to Buyer's acquisition of the Acquired Companies, including any
write-up or write-down of assets resulting from such purchase accounting.
"Competing Business" is defined in Section 4.13(ii).
"Confidentiality Agreement" is defined in Section 10.5.
"Contracts" shall mean all contracts, agreements, and other instruments
and understandings of any kind, including, without limitation, change in control
or severance agreements, deferred compensation agreements and employment
agreements, and all amendments, supplements, modifications, extensions or
renewals in respect of the foregoing, in each case, whether written or oral.
"Corporate Dividend" is defined in Section 4.22.
"Costs" is defined in Section 11.4.
"Covenant Not to Compete" is defined in Section 6.8(b).
"Credit Agreement" means that certain Second Amended and Restated
Master Loan Agreement, dated as of September 28, 2001, by and among the Company,
Westfield Homes of Florida, Inc., Westfield Development Corporation, Westfield
Homes of Illinois, Inc., Westfield Homes of North Carolina, Inc., Westfield
Homes of Southwest Florida, Inc. and Bank of America, N.A.
"Damages" is defined in Section 7.2(a).
"Debt" means, as to any Person, (i) any indebtedness of such Person,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or other similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing capitalized lease obligations, (ii) any balance deferred and unpaid
of the purchase price of any property, (iii) all indebtedness of others secured
by a Lien on any asset of such Person (whether or not such indebtedness is
assumed by such Person) and, (iv) to the extent not otherwise included by
clauses (i) through (iii), any guaranty by such Person of any indebtedness of
any other Person.
"Differing Party" is defined in Section 2.6.
"Division Presidents" is defined in Section 6.8(g).
4
"Earnout Acceptance Notice" is defined in Section 2.5(b).
"Earnout Objection Notice" is defined in Section 2.5(b).
"Earnout Payment" is defined in Section 2.5(a).
"Xxxxxxxxx Xxxxxxxx Trust" is defined in Section 3.6(a).
"employee" means employees and other persons filling similar functions,
including leased employees of the Acquired Companies pursuant to that certain
Client Service Agreement dated August 1, 1997, between Paychex and the Company.
"Employee Sellers" means Xxxxx Xxxxxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxxx,
Xxxx Xxxxxxxxxxxxxx and Xxxxxx Xxxxx.
"Employment Agreements" is defined in Section 6.8(g).
"Entitlements" is defined in Section 4.15(e)(iii).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq., the Toxic Substances
Control Act, 15 U.S.C. 2601 et seq., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. 136 et seq., the Clean Air Act, 42 U.S.C. 7401 et
seq., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. 1251
et seq., the Safe Drinking Water Act, 42 U.S.C. 300f et seq., the Occupational
Safety and Health Act, 29 U.S.C. 641 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. 1801 et seq., as any of the above statutes have
been or may be amended from time to time, all rules and regulations promulgated
pursuant to any of the above statutes, and any other foreign, federal, state or
local law, statute, ordinance, permit, order, decree, rule or regulation or
other directive related to or governing Environmental Matters as the same have
been or may be amended from time to time, including any common law cause of
action providing any right or remedy with respect to Environmental Matters, and
all applicable decisions, orders, and decrees of any Governmental Entity
relating to Environmental Matters.
"Environmental Matters" means all matters involving pollution, wetlands
and other natural resources, protection of the environment, noise, human health,
and occupational health and safety.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (or any successor thereto).
"Estimated Balance Sheet Date Net Book Value" is defined in Section
2.2(a)(i).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Claims " is defined in Section 7.4(c).
5
"Excluded Company" means Westfield Homes of Illinois, Inc., an Illinois
corporation (including, Westfield Development Corporation of Illinois, an
Illinois corporation, Westfield Homes of Texas, Inc., a Texas corporation and
Westfield Homes of Illinois Venture No. 1, Inc., an Illinois corporation each of
which was merged into Westfield Homes of Illinois, Inc. effective as of August
7, 2002).
"Fill Dirt" is defined in Section 6.17.
"Fill Dirt License Agreement" is defined in Section 6.17.
"Financial Statements" is defined in Section 4.5(a).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time and applied on a consistent basis throughout the
periods involved.
"Xxxxxxxx Children Sellers" means the following Sellers: Xxxxxxx
Xxxxxxxx, the Xxxxx X. Xxxxxxxx Irrevocable Trust for Xxxxxxxxx Xxxxxxxx, dated
May 16, 1988 and the Xxxxx X. Xxxxxxxx Irrevocable Trust for Xxxxxxxxx Xxxxxxxx,
dated May 16, 1988.
"Governmental Entity" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing which has or claims to have competent jurisdiction over the
relevant Persons or its business, property, assets or operations.
"Gross Up Amount" is defined in Section 8.1(d).
"Hazardous Materials" means any substance or material that is defined
under the Environmental Laws as a "hazardous substance," "regulated substance,"
"pollutant," "contaminant," "hazardous waste," "extremely hazardous substance,"
"toxic substance," or "hazardous material," or that is otherwise defined in or
regulated under the Environmental Laws, including, without limitation,
petroleum, asbestos-containing materials, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials, and radon.
"Insurance Policies" is defined in Section 4.18(a).
"Intellectual Property" is defined in Section 4.16(a).
"Interim Statements" is defined in Section 4.5(a).
"January 2003 Payment" is defined in Section 2.4.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, whether or
6
not the same is required to be accrued on the financial statements of such
Person and whether or not the same is disclosed on any schedule to this
Agreement.
"License Agreement" means the agreement attached hereto as Exhibit B.
"Lien" or "Liens" means all liens (including judgment and mechanics'
liens, regardless of whether liquidated), mortgages, assessments, security
interests, easements, claims, pledges, trusts (constructive or otherwise), deeds
of trust, option or other charges, title defects or objections, encumbrances,
restrictions or other Contracts having the same effect as any of the foregoing.
"Material Adverse Effect" means with respect to any Person a material
adverse effect on or change in (i) the business, operations, assets,
Liabilities, condition (financial or otherwise), results of operations or
prospects of such Person, taken as a whole with its Subsidiaries, or (ii) the
ability of such Person to consummate the transactions contemplated hereby.
"Material Contracts" is defined in Section 4.4(c).
"Maximum Warranty Amount" is defined in Section 6.11(b).
"Net Book Value Acceptance Notice" is defined in Section 2.3(b).
"Net Book Value Objection Notice" is defined in Section 2.3(b).
"Objection Notice" is defined in Section 2.6
"Order" is defined in Section 9.1(b).
"Paychex" means Paychex Business Solutions, Inc.
"Paychex Agreement" means the Client Service Agreement between Paychex
and the Company, dated as of August 1, 1997.
"Payoff Amounts" is defined in Section 2.2(a)(iii).
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, joint venture, association, organization or other
entity or group (which term shall include a "group" as such term is defined in
Section 13(d)(3) of the Exchange Act) or Governmental Entity.
"Projects" is defined in Section 4.15(e)(i).
"Pro Rata Portion" for each Seller is as set forth in Schedule
2.2(a)(ii) under the heading "Pro Rata Portion".
"Purchase Price" means the sum of (i) the Closing Payment (as adjusted
by the Post-Closing Adjustment set forth in Section 2.3), plus (ii) the January
2003 Payment, plus (iii) the Earnout.
7
"Release" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the soil, surface waters, groundwaters, land, stream sediments,
surface or subsurface strata, ambient air, or any other environmental medium.
"Released Parties" is defined in Section 6.16.
"Reserve Amount " means $50,000.
"Restrictive Covenants" is defined in Section 6.8(e).
"SEC" means the United States Securities and Exchange Commission.
"Section 338(h)(10)" is defined in Section 8.1.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Gross Up Amount" is defined in Section 8.1(d).
"Sellers" is defined in the introductory paragraph of this Agreement.
"Sellers' Disclosure Schedule" is defined in the introductory paragraph
of Article III.
"Sellers' Representative" is defined in Section 6.13.
"Shareholder Agreements" means collectively the Stockholder Agreement,
the Employment Agreement between the Company and Xxxxxx Xxxxxx, dated December
31, 2001, the Employment Agreement between the Company and Xxxx Xxxxxxxxxxxxxx,
dated January 1, 2002, the Employment Separation, General Release, and Stock
Purchase Agreement among Xxxx Xxxxxxxx, the Company, Westfield Homes of
Southwest Florida, Inc., Westfield Homes SW Florida Venture No. 1, Inc.,
Westfield Homes of Texas, Inc. and Xxxxx Xxxxxxxx, dated July 20, 2000, the Buy
Out Agreement among Xxxxx Xxxxxxx, Westfield Development Corporation of
Illinois, the Company, Xxxxx Xxxxxxxx and Xxxxx Xxxxxx, dated July 31, 1998 and
all amendments to such agreements .
"Shares" is defined in the first recital of this Agreement.
"Standard Pacific" is defined in the introductory paragraph of this
Agreement.
"Standard Pacific Common Stock" means the common stock of Standard
Pacific, $0.01 par value per share.
"Standard Pacific Securities" means all of the securities of Standard
Pacific to be paid to the Sellers or their transferees hereunder, including the
Standard Pacific Common Stock.
"Stock Payment" is defined in Section 2.2(a)(ii).
"Stock Purchase" is defined in the second recital of this Agreement.
8
"Stockholder Agreement" means the Stockholder Agreement, dated July 1,
1997, among the Company and each of the shareholders of the Company, as amended.
"Straddle Periods" is defined in Section 8.2(a)(ii).
"Subject Companies" means the Company and all current and former
Subsidiaries of the Company, including the Excluded Company, and the
predecessors of such Persons.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any
corporation, limited liability company, partnership, joint venture or other
entity of which such Person (either alone or through or together with any other
subsidiary), owns, directly or indirectly, securities or other interests the
holders of which are generally entitled to at least 50% of the vote for the
election of the board of directors or other similar governing body of such
corporation or other legal entity, or otherwise having the power to direct the
business and policies of that Person.
"Tail Policy" is defined in Section 6.11(b).
"Tax" or "Taxes" means (A) all federal, state, local, foreign, and
other net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs duties or other taxes, fees, assessments or charges of
any kind whatsoever, together with any interest and any penalties, additions to
tax or additional amounts with respect thereto, (B) any Liability for payment of
amounts described in clause (A) whether as a result of transferee Liability,
joint and several liability for being a member of an affiliated, consolidated,
combined or unitary group for any period, or otherwise through operation of law,
and (C) any Liability for the payment of amounts described in clauses (A) or (B)
as a result of any tax sharing, tax indemnity or tax allocation agreement or any
other express or implied Contract to indemnify any other Person.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Acquisition" is defined in Section 6.7(b).
"Third Party Claim" is defined in Section 7.6(a).
"Trade Xxxx" is defined in Section 6.14(a).
"Transaction Documents" is defined in Section 3.2.
"Trusts" is defined in Section 3.6(a).
"Unrelated Accounting Firm" is defined in Section 2.6.
"Villa Xxxx Property" means that certain vacant land located in the
northwest corner of the Villa Xxxx project, Hillsborough County, Florida.
9
"Warranty Claim" means any claim based upon any theory of product
liability, construction defect, builder's liability or express or implied
warranty which is related to the development of a Project or the development,
construction or sale of any home.
"Warranty Threshold" is defined in Section 6.11(a).
"Xxxxx Fargo Agreement" means the Operating Agreement of Limited
Liability Company, dated as of February 17, 2000, between Norwest Ventures LLC
and the Company.
"Westfield Development" means Westfield Development Corporation, a
Florida corporation and wholly owned Subsidiary of the Company.
ARTICLE II
STOCK PURCHASE
2.1 Sale and Delivery. At the Closing, on the terms and subject
to the conditions set forth herein, the Sellers shall sell and deliver to Buyer
the Shares free and clear of all Liens, and Buyer shall purchase and accept the
Shares from the Sellers.
2.2 Closing Payment.
(a) At the Closing, Standard Pacific shall:
(i) cause Buyer to pay by wire transfer of
immediately available funds $21,805,000, plus (or minus if negative)
(A) the estimated book value of the assets less liabilities of the
Company and its Subsidiaries (other than the Excluded Company) on the
Balance Sheet Date, as set forth on Schedule 2.2(a)(i) (the "Estimated
Balance Sheet Date Net Book Value"), less (B) $25,000,000
(collectively, the "Cash Payment");
(ii) issue an aggregate of 459,559 shares of
Standard Pacific Common Stock to the Sellers as set forth on Schedule
2.2(a)(ii) (the "Stock Payment" and, collectively with the Cash
Payment, the "Closing Payment"); and
(iii) cause Buyer to satisfy (or cause the Acquired
Companies to satisfy) the Debt of the Acquired Companies set forth on
Schedule 2.2(a)(iii) (the "Company Indebtedness") by paying the amounts
set forth in payoff letters for the Company Indebtedness, including any
applicable per diem amounts specified therein (the "Payoff Amounts").
Notwithstanding anything contained in this Section 2.2(a)(iii), the
Acquired Companies shall pay all penalty interest, prepayment
penalties, exit fees or other penalties due as a result of the
prepayment of the Company Indebtedness. The payment of such amount will
be reflected in the Balance Sheet Date Financial Statements and will
have the effect of decreasing the Estimated Balance Sheet Date Net Book
Value and the Balance Sheet Date Net Book Value.
(b) At the Closing, (i) each Seller's Pro Rata Portion of
the Cash Payment, as set forth on Schedule 2.2(a)(ii) (less such Seller's Pro
Rata Portion of the Reserve Amount), shall be delivered to such Seller by wire
transfer, and (ii) the Reserve Amount shall be delivered to the Sellers'
Representative by wire transfer. Each Seller and the Sellers' Representative
shall
10
designate in writing to Buyer at least three days prior to the Closing the
account to which such wire transfer payment shall be made. Each of the Sellers
hereby authorizes the Sellers' Representative to disburse any or all of the
Reserve Amount to satisfy the costs and expenses (including fees of attorneys,
accountants and brokers or finders) of the Sellers and the Acquired Companies
incurred in connection with this Agreement, the other Transaction Documents and
the transactions contemplated hereby and thereby. Any portion of the Reserve
Amount not so disbursed by the Sellers' Representative on the first anniversary
of the Closing Date shall be promptly thereafter disbursed by the Sellers'
Representative to the Sellers in their Pro Rata Portion.
(c) No fractional shares of Standard Pacific Common Stock
shall be issued. If a Seller would otherwise be entitled to a fractional share,
in lieu of the issuance of such fractional share, a cash amount equal to the
product of such fraction and $32.64 shall be added to the Cash Payment to be
made to such Seller.
2.3 Post-Closing Adjustment to the Cash Payment.
(a) Within 90 days following the Closing, Buyer shall
prepare and deliver to the Sellers' Representative:
(i) a consolidated balance sheet of the Company and
its Subsidiaries (other than the Excluded Company) as of the Balance
Sheet Date (the "Balance Sheet Date Financial Statements"); and
(ii) Buyer's calculation of the book value of the
assets less liabilities of the Acquired Companies as shown on the
Balance Sheet Date Financial Statements (the "Balance Sheet Date Net
Book Value").
The Balance Sheet Date Financial Statements, the Estimated Balance
Sheet Date Net Book Value and the Balance Sheet Date Net Book Value shall be
prepared in conformity with GAAP, and consistent with the practices and policies
of the Company in preparing its consolidated financial statements for the fiscal
year ended December 31, 2001. For purposes of calculating the Estimated Balance
Sheet Date Net Book Value and the Balance Sheet Date Net Book Value, such
calculation shall not take into account the impact of, (A) the repayment of the
Company Indebtedness by Buyer or Standard Pacific at the Closing (other than the
impact of penalty interest, prepayment penalties, exit fees or other penalties
which shall be included in such calculations as set forth in Section
2.2(a)(iii)), or (B) any purchase accounting adjustments relating to Buyer's
acquisition of the Acquired Companies, including any write-up or write-down of
assets resulting from such purchase accounting.
(b) Within 30 days following Buyer's notification to the
Sellers' Representative of its calculation of the Balance Sheet Date Net Book
Value, the Sellers' Representative shall deliver to Buyer a notice of objection
signed by the Sellers' Representative (a "Net Book Value Objection Notice") or a
notice of acceptance signed by the Sellers' Representative (a "Net Book Value
Acceptance Notice") with respect to Buyer's calculation of the Balance Sheet
Date Net Book Value. Buyer shall provide the Sellers' Representative and its
accountant and other representatives, upon reasonable advance notice, access to
such books and
11
records of the Acquired Companies relating to the calculation of the Balance
Sheet Date Net Book Value as may be reasonably requested by the Sellers'
Representative.
(c) Buyer's calculation of the Balance Sheet Date Net
Book Value shall be final and binding on the parties if a Net Book Value
Acceptance Notice is delivered to Buyer or if no Net Book Value Objection Notice
is delivered to Buyer within the 30-day period required by Section 2.3(b). Any
Net Book Value Objection Notice shall specify the items disputed, shall describe
the reasons for the objection thereof, shall state the amount in dispute and
shall state Sellers' calculation of the Balance Sheet Date Net Book Value. If a
Net Book Value Objection Notice is delivered, the potential dispute shall be
resolved as set forth in Section 2.6.
(d) If the Sellers' Representative delivers to Buyer the
Net Book Value Acceptance Notice referred to in Section 2.3(b) or the Sellers
fail to deliver a Net Book Value Objection Notice within the 30 day period
required by Section 2.3(b), an amount equal to the Balance Sheet Date Net Book
Value minus the Estimated Balance Sheet Date Net Book Value shall be paid (i) by
Buyer to the Sellers, in their Pro Rata Portion, if such amount is positive, and
(ii) by the Sellers, in their Pro Rata Portion, to Buyer, if such amount is
negative, within five Business Days after the delivery of such Net Book Value
Acceptance Notice or the expiration of such 30 day period, as the case may be.
Alternatively, if the Sellers' Representative delivers to Buyer the Net Book
Value Objection Notice, within five Business Days after such delivery, the owing
parties shall pay the undisputed portion, if any, of the amount owed and, within
five Business Days after the resolution of any dispute by the parties or the
Unrelated Accounting Firm relating to the Net Book Value Objection Notice, the
owing parties shall pay the remainder owed, if any. Any payment pursuant to this
Section 2.3 shall be made in immediately available funds.
2.4 January 2003 Payment. On or before January 15, 2003, Standard
Pacific shall cause Buyer to pay by wire transfer of immediately available funds
an aggregate of $7,000,000, which shall be paid to the Sellers as set forth on
Schedule 2.2(a)(ii) under the heading "January 2003 Payment" (the "January 2003
Payment").
2.5 Earnout.
(a) Standard Pacific shall cause Buyer to pay to each
Seller its Pro Rata Portion of an aggregate amount equal to 15% of the positive
Company Pre-Tax Income for the period from the Balance Sheet Date through
December 31, 2002, and each of the three years ending December 31, 2003, 2004
and 2005 (each an "Earnout Payment" and collectively, the "Earnout"). If the
amount of Company Pre-Tax Income generated is negative with respect to any
period, such negative amount shall be carried forward to the following year and
such negative amount shall be deducted from the Company Pre-Tax Income for
purposes of calculating the Earnout Payment for such following year. In
addition, to the extent necessary, such negative amounts shall be carried
forward for successive periods in which the Earnout is paid until offset by
positive Company Pre-Tax Income.
(b) Not later than 10 days after the audit committee of
the Board of Director's of Standard Pacific approves Standard Pacific's year-end
financial statements for the periods in respect of which Earnout Payments may be
due, Buyer shall prepare and deliver to the Sellers'
12
Representative Buyer's calculation of the Earnout Payment for the immediately
preceding fiscal year. Within 20 days following Buyer's notification to the
Sellers' Representative of its calculation of the applicable Earnout Payment,
the Sellers' Representative shall deliver to Buyer a notice of objection signed
by the Sellers' Representative (an "Earnout Objection Notice") or a notice of
acceptance signed by the Sellers' Representative (an "Earnout Acceptance
Notice") with respect to the calculation of the Earnout Payment. Buyer shall
provide the Sellers' Representative and its accountant and other
representatives, upon reasonable advance notice, access to the books and records
of the Acquired Companies relating to the calculation of the Earnout Payment as
may be reasonably requested by the Sellers' Representative. Buyer's calculation
of each Earnout Payment shall be final and binding on the parties if an Earnout
Acceptance Notice is delivered to Buyer or if no Earnout Objection Notice is
delivered to Buyer within such 20 day period. Any Earnout Objection Notice shall
specify the items disputed, shall describe the reasons for the objection
thereof, shall state the amount in dispute and shall state the Sellers'
calculation of the Earnout Payment. If an Earnout Objection Notice is delivered,
the potential dispute shall be resolved as set forth in Section 2.6.
(c) If the Sellers' Representative delivers to Buyer the
Earnout Acceptance Notice referred to in Section 2.5(b) or the Sellers'
Representative fails to deliver an Earnout Objection Notice within the 20 day
period required by Section 2.5(b) with respect to any Earnout Payment, Buyer
shall pay to the Sellers their Pro Rata Portion of any amounts which Buyer's
calculation shall indicate to be owed to the Sellers within five Business Days
after the delivery of such Earnout Acceptance Notice or the expiration of such
20 day period, as the case may be. Alternatively, if the Sellers' Representative
delivers to Buyer the Earnout Objection Notice referred to in Section 2.5(b),
within five Business Days after such delivery, Buyer shall pay the Sellers their
Pro Rata Portion of the undisputed portion, if any, of the amount owed and,
within five Business Days after the resolution of any dispute by the parties or
the Unrelated Accounting Firm relating to the Earnout Objection Notice, Buyer
shall pay the Sellers their Pro Rata portion of the remainder owed, if any. Any
payment pursuant to this Section 2.5 shall be considered an adjustment to the
Purchase Price, and shall be made in immediately available funds. The applicable
Pro Rata Portion of the payment shall be delivered to each Seller by wire
transfer to the account designated in writing by such Seller to Buyer at least
three days prior to such payment. If Buyer has not delivered its calculation of
the Earnout Payment for any applicable fiscal year to the Sellers'
Representative by January 31 of the following fiscal year, Buyer shall be
obligated to pay simple interest on the Earnout Payment at the rate of 8% per
annum calculated beginning on February 1 of such following fiscal year and
ending on the day Buyer's calculation is delivered.
(d) From the Closing Date until January 1, 2006 (or until
the payment in full of the Earnout, if earlier), Standard Pacific:
(i) shall not, without the prior written consent of
the Sellers' Representative, commingle the business of the Company and
its Subsidiaries with any other division of Standard Pacific; provided,
however, that the Sellers acknowledge and agree that (A) Standard
Pacific may in good faith (and not for the intended purpose of avoiding
or limiting its obligations with respect to the Earnout Payments under
this Section 2.5) elect to consolidate certain management, corporate or
administrative functions across two or more divisions, and that if it
does so, it will reasonably allocate
13
the overhead cost of such functions across the participating divisions;
(B) Standard Pacific may restructure the business of the Company and
its Subsidiaries into any number of separate entities so long as such
restructuring does not result in the commingling of the business of the
Company and its Subsidiaries with any other division of Standard
Pacific (all references to the Company and its Subsidiaries in this
Section 2.5(d) includes the business of the Company and its
Subsidiaries restructured as described in this Section 2.5(d)(i)), and
(C) Standard Pacific will sweep cash out of the Company and its
Subsidiaries in the manner that Standard Pacific sweeps cash from
Standard Pacific's other divisions (such swept cash to be treated as a
non-interest bearing intercompany receivable of the Company and its
Subsidiaries in the same manner as Standard Pacific's other divisions);
(ii) shall not, without the prior written consent of
the Sellers' Representative, burden the Company and its Subsidiaries
with debt incurred on behalf of the operations of Standard Pacific,
other than the operations of the Company and its Subsidiaries;
provided, however, that the Sellers acknowledge and agree that (A) the
Company and its Subsidiaries may be guarantors of various obligations
of Standard Pacific; (B) general corporate overhead will be allocated
to the Company and its Subsidiaries in the same manner as such overhead
is allocated to Standard Pacific's other divisions from time to time,
provided that such general corporate overhead allocation shall not be
less than 1.00% nor greater than 1.30% of the aggregate revenues of the
Company and its Subsidiaries; (C) the cost of insurance will be
allocated to the Company and its Subsidiaries in the same manner as it
is allocated to Standard Pacific's other divisions based on claims
history, product type, volume and other relevant factors; and (D)
intercompany interest will be charged on qualified assets (as described
in SFAS 34 "Capitalization of Interest"), stale inventory, investments
in joint ventures and on such other assets as Standard Pacific may
charge its other divisions from time to time;
(iii) shall provide to the Company an amount of
capital reasonably necessary to accomplish the Business Plan; provided,
however, that the Sellers acknowledge and agree that the Business Plan
may be revised in such a manner so as to result in a reduction in the
amount of capital reasonably necessary to accomplish the revised
Business Plan either, (A) by the mutual agreement of Standard Pacific
and the Sellers' Representative, or (B) by Standard Pacific, acting
alone, to reflect then current market conditions and actual operating
results of the Company and its Subsidiaries if the Company and its
Subsidiaries fail to meet or exceed budgeted Company Pre-Tax Income as
set forth in the Business Plan for any particular year, provided that
Standard Pacific will consult in good faith with the Sellers'
Representative prior to taking any such action and in developing any
revised Business Plan; and
(iv) shall not, without the prior written consent of
the Sellers' Representative, begin any "start-up" home building
operations outside of the corporate structure of the Company and its
Subsidiaries in any area located in South West Florida (i.e. the
counties of Citrus, Hernando, Pasco, Polk, Hillsborough, Pinnellas,
Manatee, Sarasota, Charlotte, Xxx and Xxxxxxx), North Carolina or South
Carolina; provided however, that Standard Pacific and its Affiliates
may acquire additional homebuilding businesses (by purchase of assets
or stock, by merger or otherwise) which operate in the
14
foregoing markets; but in such event, Standard Pacific shall
not, without the consent of the Sellers' Representative, (A) commingle
any assets, liabilities or operations of the acquired businesses with
that of the Company and its Subsidiaries, (B) permit any such
acquisitions to diminish the capital available to the Company and its
Subsidiaries pursuant to subsection (iii) above, or (C) permit any such
acquired businesses to use the same trade name as then used by the
Company or its Subsidiaries in such overlapping market.
(e) In the event of a Change of Control of Standard
Pacific, payment of the Earnout Payment for each period that has not been
completed shall be accelerated and the discounted amount shall be paid in full
to the Sellers, as set forth in this Section 2.5(e), upon consummation of the
Change of Control transaction. For purposes of calculating the Earnout Payments
to be paid upon a Change in Control, the Earnout Payment for each period which
has not been completed on the date of consummation of the Change in Control
transaction shall equal 15% of the projected Company Pre-Tax Income for each
such period, as set forth in Standard Pacific's then current business plan of
the Company and its Subsidiaries for such periods (less any negative amounts
carried forward to such periods pursuant to Section 2.5(a)). Such amount shall
be discounted to its present value on the date of the consummation of the Change
of Control payment based on a discount rate of 8%, and assuming each Earnout
Payment for each such period would be made on January 31 of the next succeeding
year.
(f) In the event that the employment of Xxxxx Xxxxxxxx is
terminated by Buyer or the Acquired Companies without Cause or by Xxxxx Xxxxxxxx
for Good Reason (each, as defined in the Employment Agreement of Xxxxx Xxxxxxxx
attached hereto as Exhibit C-1), the aggregate Earnout Payment to be paid to the
Sellers for each period that has not yet been completed as of the date of such
termination shall equal (regardless of the actual results of operations of the
Company and its Subsidiaries) 15% of the positive budgeted Company Pre-Tax
Income for each such period, as set forth in the Business Plan for such period
(less any negative amounts carried forward to such period pursuant to Section
2.5(a)). Each such Earnout Payment shall be paid by Buyer to the Sellers not
later than January 31 of the year following the period with respect to which
such Earnout Payment is due.
(g) Neither the Earnout nor any interest therein shall be
transferable by any Seller in any manner other than by will or the laws of
descent or distribution, provided however, it shall not be a violation of this
Section 2.5(g) if the Xxxxxxxx Children Sellers transfer their interests in the
Earnout to Xxxxx Xxxxxxxx pursuant to the so-called Section 4(1 1/2) exemption
or other exemption from federal securities law, provided that the transfer is in
compliance with all requirements of such exemption and other applicable
securities laws, and written notice of any such transfer is delivered to
Standard Pacific no later than December 31, 2002. The Earnout will be payable
even if the Employee Sellers are not employed by the Company or its
Subsidiaries.
2.6 Dispute Resolution of Calculations of Purchase Price. If a Net
Book Value Objection Notice or an Earnout Objection Notice (each, an "Objection
Notice") is given, the Sellers' Representative and Buyer shall consult with each
other with respect to the objection. If Buyer and the Sellers' Representative
are unable to reach agreement within 15 days after an Objection Notice has been
given, any unresolved disputed items shall be promptly referred to KPMG LLP,
provided however, if such firm is unavailable or if either of the parties has
used the
15
services of KPMG LLP at any time in the six month period prior to the date the
Objection Notice is given, then the unresolved items shall be promptly referred
to such other nationally recognized accounting firm mutually agreed to by Buyer
and the Sellers' Representative (KPMG LLP, or such other firm, the "Unrelated
Accounting Firm"). The Unrelated Accounting Firm shall be directed to render a
written report on the unresolved disputed issues as promptly as practicable (but
in no event later than 45 days following submission of the matter to the
Unrelated Accounting Firm) and to resolve only those issues of dispute set forth
in the Objection Notice. The resolution of the dispute by the Unrelated
Accounting Firm shall be final and binding on the parties for purposes of
determining the amounts owed by the parties hereunder with respect to such
dispute. The fees and expenses of the Unrelated Accounting Firm shall be borne
equally between the Sellers on the one hand, and Buyer on the other hand;
provided, however, that if the Balance Sheet Date Net Book Value or Earnout
Payment, as applicable, calculated by one of the parties (the "Differing Party")
differs from the final determination of the Unrelated Accounting Firm by more
than 20% to the detriment of such Differing Party, then such Differing Party
shall be responsible for the payment of all of the fees and expenses of the
Unrelated Accounting Firm.
2.7 Closing.
(a) The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Xxxxxx, Xxxx &
Xxxxxxxx LLP, 0 Xxxx Xxxxx, Xxxxxx, Xxxxxxxxxx 00000 at 10:00 a.m. (local time)
on the second Business Day after the last of the conditions to Closing set forth
in Sections 9.2 and 9.3 have been satisfied or waived by the party or parties
entitled to waive the same or such other date and time as to which Buyer and the
Sellers' Representative may agree in writing (the "Closing Date").
(b) At the Closing:
(i) each Seller shall deliver, or cause to be
delivered, to Buyer, against payment by Buyer to each Seller of such
Seller's Pro Rata Portion of the Closing Payment:
(A) the stock certificate or certificates
representing the Shares owned by the Seller set forth on
Schedule 2.2(a)(ii), duly endorsed for transfer, or
accompanied by duly executed assignments separate from the
certificate, and any other documentation reasonably requested
by Buyer to transfer the Shares in the stock records of the
Company, transferring to Buyer full and exclusive ownership of
the Shares, free and clear of all Liens; and
(B) all other documents, certificates and
other instruments required to be delivered, or caused to be
delivered, by each Seller pursuant hereto.
(ii) Buyer shall deliver, or cause to be delivered,
to each Seller, against delivery of the certificate or certificates
representing the Shares of such Seller (properly endorsed for transfer
or accompanied by proper assignments):
(A) the Seller's Pro Rata Portion of the Cash
Payment, as set forth in Schedule 2.2(a)(ii);
16
(B) a stock certificate issued in the name
of such Seller representing such Seller's Pro Rata Portion of
the Stock Payment, as set forth on Schedule 2.2(a)(ii), and
cash in lieu of any fractional shares; and
(C) all of the documents, certificates and
other instruments required to be delivered, or caused to be
delivered, by Buyer pursuant hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as set forth in the disclosure schedule delivered by the Sellers
to Buyer at or prior to the execution hereof that is arranged in Sections
corresponding to the numbered and lettered Sections contained in this Agreement
(the "Sellers' Disclosure Schedule"), the Sellers (other than the Xxxxxxxx
Children Sellers), jointly and severally, and each of the Xxxxxxxx Children
Sellers, severally but not jointly, represent and warrant to Standard Pacific
and Buyer, as of the date of this Agreement and as of the Closing Date, as
follows:
3.1 Ownership of the Shares. Each Seller is the sole record and
beneficial owner of the shares of Company Common Stock set forth next to such
Seller's name in Section 3.1 of the Sellers' Disclosure Schedule, free and clear
of all Liens. Such shares of Company Common Stock are duly registered in the
name of such Seller on the stock register records of the Company. The Sellers
have been the only shareholders of the Company since January 1, 2001. Upon
delivery to Buyer at the Closing of the certificates representing the Shares,
Buyer will own the Shares, free and clear of any Liens, and will receive good
and marketable title to the Shares. The stock certificates evidencing the Shares
were not issued directly or indirectly in respect of any stock certificates
issued in replacement of any lost, damaged, mutilated or destroyed stock
certificates evidencing any shares of Capital Stock of the Company or any of its
predecessors. The Shares represent all of the issued and outstanding Capital
Stock of the Company. The Pro Rata Portion set forth next to each Seller's name
in Section 3.1 of the Sellers' Disclosure Schedule represents each Seller's sole
interest in the Capital Stock of the Company. Except for the Stockholder
Agreement and this Agreement, the Shares are not subject to any voting trust or
stockholder agreement or other similar Contract, including any such Contract
restricting or otherwise relating to the voting, dividend rights or disposition
of the Shares.
3.2 Authorization, Validity, and Effect of Agreements. Each of the
Sellers has all requisite power and authority to execute and deliver this
Agreement and all agreements and documents contemplated herein (collectively,
the "Transaction Documents") to be executed and delivered by such Seller and to
consummate the transactions contemplated hereby and thereby. This Agreement has
been duly executed and delivered by each Seller and constitutes, and the
Transaction Documents to be executed by each Seller (when executed and delivered
pursuant hereto) will constitute, the valid and legally binding obligations of
each of the Sellers, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, moratorium, or other similar laws
relating to creditors' rights and general principles of equity, whether at
equity or law.
3.3 No Brokers. Except as disclosed in Section 3.3 of the Sellers'
Disclosure Schedule, no broker, finder or similar agent has been employed by or
acted on behalf of, directly
17
or indirectly, any of the Sellers, or any of their Affiliates (including the
Acquired Companies) in connection with this Agreement or the other Transaction
Documents or the transactions contemplated hereby or thereby. None of the
Sellers nor any of their Affiliates (including the Acquired Companies) has
entered into any arrangement or other Contract of any kind with any Person, or
taken any other actions, which would obligate Standard Pacific, Buyer, the
Company or any of their respective Subsidiaries to pay any brokerage commission,
finder's fee or any similar compensation in connection with this Agreement, the
other Transaction Documents or the transactions contemplated hereby or thereby.
3.4 Investment Purpose.
(a) Each Seller (other than the Xxxxxxxx Children
Sellers) is an "accredited investor," as such term is defined in Regulation D of
the Securities Act. Each Seller will acquire the Standard Pacific Securities for
its own account and not with a view to a sale or distribution thereof in
violation of any securities laws, and has completed, executed and delivered to
Buyer an Investor Questionnaire substantially in the form of Exhibit A.
(b) Each Seller acknowledges and agrees:
(i) that the offer and sale of the Standard Pacific
Securities has not been registered under applicable securities laws,
the Standard Pacific Securities will be subject to restrictions on
transfer under such securities laws and such Seller will not sell or
distribute any of the Standard Pacific Securities in violation of any
securities laws;
(ii) the Sellers will be contractually prohibited
from transferring any of the Standard Pacific Common Stock for a period
of one year following the Closing Date in accordance with Section 6.10;
and
(iii) that such Seller has the present intention of
holding the Standard Pacific Securities for investment purposes.
(c) Standard Pacific and Buyer acknowledge and agree that
nothing in this Section 3.4 is intended to prohibit or limit the Sellers'
ability to transfer shares of Standard Pacific Common Stock in compliance with
Section 6.10 of this Agreement and Rule 144 promulgated under the Securities
Act.
3.5 Access to Information.
(a) Each Seller acknowledges and agrees that:
(i) during the course of the negotiation of this
Agreement, such Seller reviewed or has been afforded the opportunity to
review all information provided to it by Standard Pacific, Buyer and
their representatives, and has had the opportunity to ask questions of
and receive answers to its satisfaction from representatives of
Standard Pacific and Buyer concerning Standard Pacific, Buyer and the
Standard Pacific Common Stock, and to obtain certain additional
information reasonably requested by such Seller;
18
(ii) it has relied solely on the representations of
Standard Pacific and Buyer made in Article V of this Agreement and the
Transaction Documents and not on any other representations made by or
on behalf of Standard Pacific or Buyer; and
(iii) either personally or with his or her purchaser
representative (as defined in Rule 501(h) promulgated under the
Securities Act) such Seller has expertise in evaluating and investing
in private placement transactions of securities of companies similar to
Standard Pacific and has such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and
risks of the prospective investment in the Standard Pacific Common
Stock.
(b) The foregoing shall not be deemed to affect the
representations and warranties and indemnities made by Standard Pacific and
Buyer hereunder. Notwithstanding any "due diligence" investigations made by the
Sellers, no information shall be deemed to have been disclosed for purposes of
the representations and warranties made in Article V by Standard Pacific and
Buyer unless contained in the Disclosure Schedule of Buyer and Standard Pacific.
3.6 Xxxxxxxx Children Trusts.
(a) The Xxxxx X. Xxxxxxxx Irrevocable Trust for Xxxxxxxxx
Xxxxxxxx under Declaration of Trust dated May 16, 1988 (the "Xxxxxxxxx Xxxxxxxx
Trust"), is presently in full force and effect and has not been amended. The
Xxxxx X. Xxxxxxxx Irrevocable Trust for Xxxxxxxxx Xxxxxxxx under Declaration of
Trust dated May 16, 1988 (the "Xxxxxxxxx Xxxxxxxx Trust"), is presently in full
force and effect and has not been amended. A true, correct and complete copy of
each of the Xxxxxxxxx Xxxxxxxx Trust and the Xxxxxxxxx Xxxxxxxx Trust
(collectively, the "Trusts") has been previously provided to Standard Pacific.
(b) Xxxxxx Xxxxxxxx is the duly appointed and presently
acting sole Trustee of each of the Trusts. Xxxxxx Xxxxxxxx, as Trustee, is
qualified and has the power to act and is properly exercising his powers under
each of the Trusts in connection with the following matters: (i) the sale of the
Shares owned by each of the Trusts to Buyer as contemplated by this Agreement
(all pursuant to the general power of the Trustee to sell property held in each
of the Trusts); and (ii) the execution and delivery of this Agreement and
consummation of the transactions contemplated hereby.
(c) Neither of the Trusts has been revoked, modified, or
amended in any manner, and neither Trust will be revoked modified or amended in
any manner on or prior to the Closing Date.
(d) This Agreement has been duly executed and delivered
by Xxxxxx Xxxxxxxx, as sole trustee of each of the Trusts.
(e) The sale of the Shares pursuant to the terms of this
Agreement, the compliance by the Trustee, on behalf of each of the Trusts, with
the other provisions of this Agreement and the other Transaction Documents and
the consummation of the other transactions contemplated by this Agreement and
the other Transaction Documents do not conflict with, result in a breach or
violation of any terms and provisions of or constitute a default under either
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Trust or any indenture, mortgage, deed of trust, lease, agreement, instrument or
other Contract to which either Trust is a party or by which either Trust or any
of its property is bound, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any arbitrator having
jurisdiction over either Trust.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AS TO THE COMPANY AND ITS SUBSIDIARIES
Except as set forth in the Sellers' Disclosure Schedule, the Sellers
(other than the Xxxxxxxx Children Sellers), jointly and severally, and each of
the Xxxxxxxx Children Sellers, severally, but not jointly, represent and warrant
to Standard Pacific and Buyer, as of the date of this Agreement and as of the
Closing Date, as follows:
4.1 Existence; Good Standing. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Florida.
The Company is not, and is not required to be, licensed or qualified to do
business as a foreign corporation under the laws of any other state of the
United States. The Company has all requisite corporate power and authority to
own, operate and lease its properties and assets and carry on its business as
now conducted. The copies of the Company's articles of incorporation and by-laws
previously delivered to or made available to Buyer are true, correct and
complete.
4.2 Capitalization.
(a) The authorized Capital Stock of the Company consists
of, and at all times since inception has consisted solely of 20,000,000 shares
of Company Common Stock. There are 7,040.1471 shares of Company Common Stock
issued and outstanding. Except for the Shares, there are no outstanding shares
of Company Common Stock or other Capital Stock, or securities or other interests
exercisable or exchangeable for or convertible into Capital Stock.
(b) All issued and outstanding Capital Stock of the
Company is duly authorized, validly issued, fully paid and nonassessable, and
none of such Capital Stock has been issued in violation of or is subject to any
option, call, right of first refusal, preemptive, subscription or similar right.
Except as set forth in Section 4.3(d) of the Sellers' Disclosure Schedule, there
are no, and there have never been any, options, warrants, calls, subscriptions,
convertible securities, convertible debt or other rights or other Contracts
which obligate the Company to issue, or the Company or any of the Sellers to
transfer or sell, any Capital Stock of the Company or any securities exercisable
or exchangeable for, or convertible into, such Capital Stock.
4.3 Acquired Companies and Other Interests.
(a) Section 4.3(a) of the Sellers' Disclosure Schedule
sets forth a list of all of the Company's directly and indirectly owned
Subsidiaries together with (i) the jurisdiction of organization, (ii) for each
Acquired Company, (A) that is a corporation, the amount of its authorized
Capital Stock, the amount of its outstanding Capital Stock and the record and
beneficial owners of its outstanding Capital Stock, and (B) that is a limited
liability company, the names and interests of the members thereof. Except as set
forth in Section 4.3(a) of the Sellers'
20
Disclosure Schedule, the Company owns directly or indirectly all of the
outstanding Capital Stock of each of the other Acquired Companies, and such
interests are held free and clear of all Liens. Except for the Persons listed in
Section 4.3(a) of the Sellers' Disclosure Schedule, the Company does not hold
and has never held directly or indirectly any Capital Stock of any other Person.
(b) Each of the Acquired Companies is a corporation duly
incorporated, or a limited liability company duly formed, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
formation. Each of the Acquired Companies is duly licensed or qualified to do
business and is in good standing under the laws of each other state in the
United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed or in good standing would not have a Material Adverse
Effect on such Acquired Company. Each of the Acquired Companies has all
requisite power and authority to own, operate and lease its properties and
assets and carry on its business as now conducted. The copies of the articles of
incorporation and by-laws or other governing documents of the Acquired Companies
previously delivered to or made available to Buyer are true, correct and
complete.
(c) All of the outstanding Capital Stock of each Acquired
Company is duly authorized, validly issued, fully paid and nonassessable, and
none of such Capital Stock has been issued in violation of or is subject to any
option, call, right of first refusal, preemptive, subscription or similar right.
The outstanding Capital Stock of each of the Acquired Companies has been issued
in compliance with all applicable securities laws.
(d) Except as set forth in Section 4.3(d) of the Sellers'
Disclosure Schedule, there are no, and there have never been any, options,
warrants, calls, subscriptions, convertible securities, convertible debt or
other rights or other Contracts which obligate any Acquired Company to issue,
transfer or sell any Capital Stock of such Acquired Company or any securities
exercisable or exchangeable for, or convertible into, such Capital Stock.
(e) None of the Acquired Companies has, and none of the
Acquired Companies has ever had, any outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or which are
convertible into or exercisable or exchangeable for securities having the right
to vote) with its shareholders or members on any matter and there are no, and
have never been any, equity equivalent interests in the ownership or earnings of
any of the Acquired Companies. There are no obligations, contingent or
otherwise, of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of the Capital Stock of the Acquired Companies or to make
any investment (in the form of a loan, capital contribution or otherwise) in any
Person.
(f) None of the Acquired Companies is in default or
breach (and no event has occurred which with notice or lapse of time or both,
would constitute a breach or default) of any terms or provision of its articles
of incorporation or by-laws (or other similar constituent documents).
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4.4 Material Contracts; No Violation.
(a) Except as set forth in Section 4.4(a) of the Sellers'
Disclosure Schedule, none of the Acquired Companies is a party to nor are any of
their respective assets or businesses bound by any:
(i) real property purchase, sale or option
Contract, other than Contracts for sales of completed homes to
individual homebuyers in the ordinary course of business;
(ii) Contract with any Governmental Entity,
including development agreements, that have aggregate future Liability
or anticipated receipts in excess of $250,000 (other than Contracts for
the payment of impact fees pursuant to impact fee schedules);
(iii) performance bond in an amount in excess of
$250,000;
(iv) Contract relating to community development
districts;
(v) Contract not entered into in the ordinary
course of business;
(vi) employment Contract (including any severance
pay or change in control agreement);
(vii) employee collective bargaining agreement or
other Contract with any labor union;
(viii) covenant not to compete or other Contract
restricting the conduct of business of any of the Acquired Companies;
(ix) Contract with any Seller or any Affiliate of
any Seller or any current or former officer or director thereof or any
immediate family member of any of the foregoing;
(x) any Contract with any former shareholder, or
any current or former officer, director or employee of any Acquired
Company (other than advances to employees not in excess of $10,000 and
employment Contracts covered by clause (vi) above), or any immediate
family member of any of the foregoing;
(xi) lease, sublease or similar Contract with any
Person under which (A) any Acquired Company is a lessor or sublessor
of, or makes available for use to any Person (other than the Acquired
Companies), (1) any real property of the Acquired Companies, or (2) any
portion of any premises otherwise occupied by any Acquired Company, or
(B) any Acquired Company is a lessee or sublessee of, or holds or uses
any real property owned by any other Person (other than the Acquired
Companies);
(xii) lease, sublease or similar Contract with any
Person under which (A) any Acquired Company is a lessee or sublessee
of, or holds or uses, any machinery,
22
equipment, vehicle or other tangible personal property owned by any
Person (other than the Acquired Companies and except personal property
leases and installment and conditional sales agreements having annual
payments of less than $100,000), or (B) any Acquired Company is a
lessor or sublessor of, or makes available for use by any Person (other
than the Acquired Companies), any tangible personal property owned or
leased by any Acquired Company, in any such case which has a future
Liability or receivable, as the case may be, in excess of $100,000;
(xiii) Contract (A) for the future purchase of
materials, supplies or equipment for the construction of homes (1) with
a future Liability in excess of $1,000,000, or (2) which obligates any
Acquired Company to use the services of the supplier of such materials,
supplies or equipment for future projects that have not yet been bid,
or (B) with a subcontractor with a Liability in excess of $1,000,000;
(xiv) management, consulting, financial advisory or
other similar type of Contract with Liability in excess of $25,000
(other than Contracts for architectural, geotechnical, land planners,
design and engineering and other similar services, in each case
relating to a single project);
(xv) license, option or other Contract relating in
whole or in part to the Intellectual Property set forth in Section 4.16
of the Sellers' Disclosure Schedule;
(xvi) Contract under which any Acquired Company has
borrowed any money from, or issued any note, bond, debenture or other
evidence of Debt or reimbursement obligation to, any Person or any
other note, bond, debenture or other evidence of Debt issued to any
Person, in any such case which individually is in excess of $50,000;
(xvii) Contract (including so-called take-or-pay or
keep-well agreements) under which (A) any Person has directly or
indirectly guaranteed Debt or other obligations of any Acquired
Company, or (B) any Acquired Company has directly or indirectly
guaranteed or directly or indirectly assumed Debt or other obligations
of any Person (in each case other than endorsements for the purpose of
collection in the ordinary course of business), in any such case which
individually is in excess of $50,000;
(xviii) Contract under which any Acquired Company
has, directly or indirectly, made any advance, loan or extension of
credit, in any such case which individually is in excess of $50,000;
(xix) Contract which contemplates the granting of a
security interest in any property of any Acquired Company, which
security interest (A) secures any Debt for borrowed money in excess of
$50,000, (B) secures any obligation in excess of $50,000 to pay the
deferred purchase price of stock or assets acquired by any Acquired
Company, or (C) secures any obligation of, or is held by, any Seller or
any Affiliate of any Seller;
(xx) Contract providing for indemnification of any
Person with respect to Liabilities relating to any current or former
business of any Acquired Company or any of their respective Affiliates
or any predecessor of such Persons;
23
(xxi) power of attorney (other than powers of
attorney entered into in the ordinary course of business);
(xxii) tax sharing or tax allocation agreement;
(xxiii)joint venture or partnership agreement or
similar Contract; or
(xxiv) any other Contract that is material to the
Acquired Companies, taken as a whole, not otherwise listed in Section
4.4(a) of the Sellers' Disclosure Schedule.
(b) Section 4.4(b) of the Sellers' Disclosure Schedule
sets forth a list of each Contract between (i) any of the Sellers, the Excluded
Company or their respective Affiliates (other than the Acquired Companies) on
the one hand, and (ii) any officer, director or employee of the Acquired
Companies on the other hand.
(c) Except as set forth in Section 4.4(c) of the Sellers'
Disclosure Schedule, (i) all Contracts listed in Section 4.4(a) to the Sellers'
Disclosure (collectively, the "Material Contracts") are valid, binding and in
full force and effect and are enforceable by the Company, or the other Acquired
Company party to the Contract, in accordance with their terms, subject to
applicable bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other similar laws relating to creditors' rights and general
principles of equity, whether at equity or at law, (ii) each Seller and the
Acquired Companies have performed all material obligations required to be
performed by them to date under the Material Contracts and they are not (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any material respect thereunder, and (iii) to the knowledge of the Sellers
and the Acquired Companies, no other party to any of the Material Contracts is
(with or without the lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder. A copy of each Material Contract
has been made available to Buyer, and such copies are true, complete and
correct.
(d) Neither the execution and delivery by the Sellers of
this Agreement and the other Transaction Documents, nor the consummation by
Sellers of the transactions contemplated herein or therein in accordance with
the terms hereof or thereof, will violate, or conflict with, or result in a
breach of any provision of, or constitute a material default (or an event which,
with notice or lapse of time or both, would constitute a breach or default)
under, or result in the termination or in a right of termination or cancellation
of, or accelerate the performance required by, or result in the triggering of
any payment obligations under, or result in the creation of any Lien upon any of
the material properties of any Seller (including the Shares), the Company or any
Subsidiary of the Company, or result in being declared void, voidable, or
without further binding effect, any of the terms, conditions or provisions of
any Material Contract.
(e) Except as set forth on Section 4.4(e) of the Sellers'
Disclosure Schedule, no notice to or consent or approval of any party to a
Material Contract is required in connection with the execution, delivery and
performance of this Agreement, the other Transaction Documents or the
consummation of the transactions contemplated hereby and thereby.
24
(f) The Sellers have provided Buyer with true, complete
and accurate copies of the standard form home sales contracts and master
subcontractor contracts currently used by the Acquired Companies. The foregoing
standard form contracts are generally used by the Acquired Companies in the
ordinary course of their respective businesses to sell homes and secure
subcontractor services. There have not been any material deviations from such
standard form contracts, and none of the Acquired Companies, nor any of their
respective salespersons, employees and agents is authorized to make such
deviations.
4.5 Financial Statements; No Undisclosed Liabilities; Projections.
(a) Section 4.5(a) of the Sellers' Disclosure Schedule
sets forth true and complete copies of the consolidated and consolidating
balance sheets and related consolidated and consolidating statements of
operations, retained earnings and cash flows for the Company and its
Subsidiaries for the years ended December 31, 2000 and 2001, in each case
audited by the independent public accountants of the Company whose reports are
attached thereto (the "Annual Statements") and the balance sheets and related
statements of operations for the six month period ended June 30, 2001 and 2002
and any financial statements delivered pursuant to Section 6.2(c) (collectively,
the "Interim Statements" and, together with the Annual Statements, the
"Financial Statements"). The December 31, 2001 balance sheet is referred to
herein as the "2001 Balance Sheet."
(b) Each of the Financial Statements (i) has been
prepared based on the books and records of the Company and its Subsidiaries in
accordance with GAAP, subject in the case of the Interim Statements to normal,
recurring year-end adjustments (which will not, individually or in the aggregate
be material), and the Company's normal accounting practices, consistent with
past practice and with each other, and present fairly the consolidated financial
condition, consolidated results of operations and consolidated statements of
cash flow of the Company and its Subsidiaries as of the dates or for the periods
indicated; (ii) contains and reflects all necessary adjustments, accruals,
provisions and allowances for a fair presentation of the financial condition and
the results of operations of the Company and its Subsidiaries for the periods
covered by the Financial Statements, subject in the case of the Interim
Statements to normal, recurring year-end adjustments (which will not,
individually or in the aggregate be material); and (iii) contain and reflect
adequate reserves for all reasonably anticipated losses and costs and expenses.
No financial statements of any Person other than the Company and its
Subsidiaries are required by GAAP to be included in the Financial Statements.
The Financial Statements do not contain any material items of a special or
nonrecurring nature, except as expressly stated therein.
(c) Except as set forth in Section 4.5(c) of the Sellers'
Disclosure Schedule, there are no Liabilities of the Company and its
Subsidiaries other than: (i) Liabilities accrued on the 2001 Balance Sheet; (ii)
Liabilities specifically disclosed and identified as such in the schedules of
this Agreement; and (iii) Liabilities incurred since the date of the 2001
Balance Sheet that have been incurred in the ordinary course of business of the
Company and its Subsidiaries and that do not, and will not, individually or in
the aggregate, have a Material Adverse Effect on the Acquired Companies.
(d) The Debt as disclosed in Section 4.5(d) of the
Sellers' Disclosure Schedule represents all of the Debt of the Acquired
Companies that will be outstanding as of the Closing
25
Date. None of the Acquired Companies has any Liabilities to any Seller or any of
their respective Affiliates (including the Excluded Company) other than
obligations arising under Contracts disclosed in Section 4.4(a)(ix) of the
Sellers' Disclosure Schedule.
(e) The business plan of the Acquired Companies (covering
actual and projected financial results, as applicable, for calendar years 2001
through 2005) provided by the Sellers to Buyer (the "Business Plan"), is a true,
accurate and complete copy of the five-year business plan for the Acquired
Companies. The Business Plan was prepared consistent with the accounting
principles and practices used in preparing the Financial Statements and prior
business plans (if any). The Business Plan was prepared in good faith and using
reasonable assumptions based on the knowledge of the Sellers and the Acquired
Companies at the time of preparation. Nothing has come to the attention of any
of the Sellers or the Acquired Companies that would cause such assumptions or
the projections to differ materially. It as acknowledged by Buyer and Standard
Pacific that actual results may differ materially from the projections.
4.6 No Violations; Consents.
(a) The execution and delivery by the Sellers of this
Agreement, and the other Transaction Documents and the consummation of the
transactions contemplated herein or therein in accordance with the terms hereof
or thereof will not:
(i) conflict with or result in a breach of any
provisions of the articles of incorporation or by-laws (or other
similar constituent documents) of any of the Acquired Companies; or
(ii) violate any judgment, order or decree, or
statute, law, ordinance, rule or regulation applicable to any of the
Sellers or the Acquired Companies, or their respective properties or
assets.
(b) No consent, approval or authorization of, or
declaration, filing, notice or registration with, any Governmental Entity or any
other Person is required to be made by or with respect to any Seller or the
Acquired Companies in connection with the execution, delivery and performance of
this Agreement and the other Transaction Documents or the consummation of the
transactions contemplated hereby or thereby, or conduct by the Acquired
Companies of their respective businesses following the Closing as conducted on
the date hereof, other than those that may be required solely by reason of
Buyer's participation in the transactions contemplated hereby.
4.7 Compliance; Permits; Litigation.
(a) Each of the Acquired Companies is and at all times
has been in material compliance with, all laws, ordinances, governmental rules
and regulations to which they or any of their respective properties or assets is
subject and all non-governmental restrictions as to property or asset use. None
of the Acquired Companies is party or subject to or in default under any
judgment, order, injunction or decree of any Governmental Entity or arbitration
tribunal applicable to it or any of its respective properties, assets,
operations or business.
26
(b) Each of the Acquired Companies has obtained all
licenses, permits, easements, variances, exemptions, consents, certificates,
orders, approvals and other authorizations (collectively, the "Company Permits")
and have taken all actions required by applicable law or regulations of any
Governmental Entity in connection with its respective business as now conducted
(or to the extent such actions are currently required, in connection with the
business reasonably anticipated to be conducted over the next six months),
except where the failure to obtain any such Company Permit or to take any such
action, individually or in the aggregate, does not and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Companies. Each
Acquired Company is in material compliance with the terms of the Company
Permits. Section 4.7(b) of the Sellers' Disclosure Schedule sets forth a list of
the material Company Permits (other than permits relating to individual homes).
No material Company Permit will be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement, the other Transaction Documents or the consummation of the
transactions contemplated hereby or thereby.
(c) Section 4.7(c) of the Sellers' Disclosure Schedule
sets forth a list and description of all pending or, to the knowledge of the
Sellers and the Acquired Companies threatened, lawsuits, arbitrations,
proceedings, investigations or other claims against the Acquired Companies or
any of their respective properties, assets, operations or businesses. To the
knowledge of the Sellers and the Acquired Companies, no event has occurred or
circumstance exists that may give rise to or serve as the basis for the
commencement of any such lawsuit, arbitration, proceeding, investigation or
other claim.
(d) Except as set forth in Section 4.7(d) of the Sellers'
Disclosure Schedule, there is no lawsuit, arbitration, proceedings,
investigations or other claim by any Acquired Company pending against any other
Person.
4.8 Absence of Certain Changes. Except as disclosed in Section 4.8
of the Sellers' Disclosure Schedule, since December 31, 2001 each Acquired
Company has conducted its business only in the ordinary course of such business
consistent with past practice and there has not been:
(i) any event or events which, individually or in
the aggregate, have or would reasonably be expected to have a Material
Adverse Effect on the Acquired Companies;
(ii) any declaration, setting aside or payment of
any dividend (other than the Corporate Dividend and cash distributions
in the amount of $3,390,000 which were necessary to fund Tax
Liabilities of the Sellers as a result of ownership of the Shares) or
other distribution with respect to the Capital Stock of any Acquired
Company or any redemption or repurchase of any such Capital Stock, or
any other payment of any kind to any Seller or any Affiliate of any
Seller (other than to other Acquired Companies), except for payments of
salary and bonus to the Employee Sellers in the ordinary course of
business consistent with past practice in their capacity as employees
of the Acquired Companies;
27
(iii) any material change in the accounting
principles, practices or methods of any Acquired Company;
(iv) any increase in the salaries or other
compensation payable to any officer, director or employee of any
Acquired Company (except for normal increases for employees in the
ordinary course of business consistent with past practice) or any
increase in, or addition to, other benefits to which such officer,
director or employee may be entitled (except as required by the terms
of plans as in effect on the date of this Agreement and which are
listed on Section 4.10(a) of the Sellers' Disclosure Schedule or as
required by law);
(v) any incurrence or assumption by any Acquired
Company of Debt, other than borrowings prior to the date of this
Agreement incurred in the ordinary course of business and consistent
with past practice under the Credit Agreement, and related guarantees,
with total outstanding amounts as of the date of this Agreement of not
more than $46,500,000;
(vi) any material adverse change, or to the
knowledge of the Sellers and the Acquired Companies any threat of a
material adverse change, in the relations of any Acquired Company with,
or any loss or threat of loss, of any of the important suppliers or
customers or key employees of the Acquired Companies;
(vii) any termination, cancellation, amendment or
waiver of any material Contract or other right material to any Acquired
Company; or
(viii) any material damage, destruction or loss,
whether or not covered by insurance, adversely affecting the
properties, assets, business or prospects, or any deterioration in the
operating condition or other impairment in the value of the assets of
any Acquired Company which would, individually or in the aggregate, be
material to the Acquired Companies.
4.9 Taxes.
(a) All Tax Returns that were required to be filed with
respect to any of the Acquired Companies have been accurately prepared and
timely filed. All such Tax Returns are true, correct, and complete in all
material respects and such Tax Returns contain all disclosures and other items
required to avoid additional Taxes or other adverse Tax consequences. The
Acquired Companies have at all times complied with applicable laws pertaining to
Taxes, including, without limitation, all applicable laws relating to record
retention.
(b) Each of the Acquired Companies has timely paid all
Taxes that have become due or payable (without regard to whether or not such
Taxes are shown on any Tax Return) and has adequately provided in the Financial
Statements (in accordance with GAAP) for all Taxes that have accrued but are not
yet due or payable.
(c) No claim has been made by any taxing authority in any
jurisdiction where any Acquired Company does not file Tax Returns that such
Acquired Company is or may be
28
subject to Tax by that jurisdiction. No extensions or waivers of statutes of
limitations with respect to any Tax Returns have been given by or requested from
any Acquired Company.
(d) No Acquired Company is a party to any action,
proceeding or audit relating to Taxes by any taxing authority for which any
Acquired Company or Buyer could be held liable, there is no pending and, to the
knowledge of the Sellers, the Company and its Subsidiaries, threatened, action,
proceeding or audit by any taxing authority. All deficiencies asserted or
assessments made against any Acquired Company as a result of any examinations by
any taxing authority have been fully paid. No issue has been raised in any such
examination, audit, or other proceeding which by application of the same or
similar principles, reasonably could be expected to result in a proposed
deficiency in Taxes of any other Acquired Company or for the Acquired Companies
for any other period.
(e) There are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Acquired Companies. None
of the assets of the Acquired Companies (i) is property that is required to be
treated as being owned by any other Person pursuant to the so-called "safe
harbor lease" provisions of former Section 168(f)(8) of the Code; (ii) directly
or indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code; or (iii) is "tax-exempt use property" within the meaning of
Section 168(h) of the Code.
(f) No Acquired Company is a party to or bound by any
closing agreement, offer in compromise, or other agreement with any taxing
authority that could affect Taxes for which the Acquired Companies or Buyer may
be liable.
(g) No Acquired Company has been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, or a member of a combined, consolidated or unitary group for state, local
or foreign Tax purposes.
(h) No Acquired Company is a party to any plan or other
Contract that has resulted or would result, separately or in the aggregate, in
connection with this Agreement, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
(i) Section 4.9(i) of the Sellers' Disclosure Schedule
sets forth (i) all foreign jurisdictions in which any Acquired Company is
subject to Tax, is engaged in business or has a permanent establishment, and
(ii) all elections pursuant to Treas. Reg. Section 301.7701-3 that have been
made by business entities in which any Acquired Company owns an equity interest.
(j) No Acquired Company has been a "distributing
corporation" or a "controlled corporation" in connection with a distribution
described in Section 355 of the Code.
(k) No Acquired Company has filed a consent under Section
341 of the Code.
(l) Each Acquired Company, other than Westfield Home
Mortgage LLC, filed a timely and complete election to be taxed as an "S"
corporation pursuant to Sections 1361, et seq., of the Code commencing with its
first taxable year. At all times since such date, and through the Closing Date,
each Acquired Company, other than Westfield Home Mortgage LLC, has continued to
qualify as an "S" corporation for federal and state income tax purposes. No
29
Acquired Company has ever been a "C" corporation and has never engaged in the
acquisition of any assets from a "C" corporation in a carryover basis
transaction. No Acquired Company has paid compensation to any shareholder which
may be deemed to be "excessive" compensation for income tax purposes. The
Shareholder Agreements were not entered into by the relevant parties to such
agreements for the purpose of circumventing the one class of stock requirement
of an "S" corporation. Since the date of the election by the Company to be taxed
as an "S" corporation, all shareholders of the Company have been valid "S"
corporation shareholders as described in Section 1361 of the Code.
4.10 Certain Employee Plans.
(a) (i) Each Company Benefit Plan complies, and has been
administered, in all material respects in accordance with its governing
documents and all applicable requirements of law, and (ii) no "prohibited
transaction" (as such term is defined in Section 406 of ERISA and Section 4975
of the Code) or termination has occurred with respect to any Company Benefit
Plan which under either circumstance presents a risk of material Liability by
the Acquired Companies to any Governmental Entity or other Person, including a
Company Benefit Plan. The Company Benefit Plans are listed on Section 4.10(a) of
the Sellers' Disclosure Schedule and copies or descriptions of all material
Company Benefit Plans have previously been provided to Buyer. There has also
been furnished to Buyer, with respect to each Company Benefit Plan required to
file such report and description, the most recent three annual Form 5500
filings, including attachments, and the summary plan description.
(b) Each Company Benefit Plan intended to qualify under
Section 401(a) of the Code is so qualified and a determination letter has been
issued by the IRS with respect to the qualification of such Company Benefit Plan
and no circumstances exist which would adversely affect such qualification. A
copy of each determination letter referred to in the preceding sentence has
previously been furnished to Buyer. As to any Company Benefit Plan intended to
be qualified under Section 401(a) of the Code, there has been no termination or
partial termination of the Company Benefit Plan within the meaning of Section
411(d)(3) of the Code. There is no trust funding a Company Benefit Plan which is
intended to be exempt from federal income taxation pursuant to Section 501(c)(9)
of the Code. No Company Benefit Plan is subject to Title IV of ERISA or is
subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code.
(c) Except as required by applicable law or as set forth
on Section 4.10(c) of the Sellers' Disclosure Schedule, none of the Acquired
Companies provides any health, welfare or life insurance benefits to any of its
former or retired employees.
(d) (i) Each Acquired Company has in all material
aspects performed all obligations, whether arising by operation of law
or by Contract, required to be performed by it in connection with the
Company Benefit Plans;
(ii) there have been no defaults or violations by
any other party to the Company Benefit Plans; and
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(iii) there are no actions, suits, or claims pending
(other than routine claims for benefits) or threatened against, or with
respect to, any of the Company Benefit Plans or their assets, which
under any of the circumstances present a risk of material Liability to
any Acquired Company to any Governmental Entity or other Person,
including a Company Benefit Plan. There is no matter pending (other
than routine qualification determination filings) with respect to any
of the Company Benefit Plans before any Governmental Entity. All
contributions required to be made to the Company Benefit Plans pursuant
to their terms and the provisions of ERISA, the Code, or any other
applicable law have been timely made.
(e) No act, omission or transaction has occurred which
would result in imposition on any Acquired Company of (i) breach of fiduciary
duty liability damages under Xxxxxxxx 000 xx XXXXX, (xx) a civil penalty
assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA, or
(iii) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code. With
respect to any employee benefit plan, within the meaning of Section 3(3) of
ERISA, which is not listed on Section 4.10(a) of the Sellers' Disclosure
Schedule but which is sponsored, maintained, or contributed to, or has been
sponsored, maintained, or contributed to within six years prior to the Closing
Date, by any corporation, trade, business, or other Person under common control
with any of the Acquired Companies, within the meaning of Section 414(b), (c),
(m) or (o) of the Code or Section 4001 of ERISA, (A) no withdrawal liability,
within the meaning of Section 4201 of ERISA, has been incurred, which withdrawal
liability has not been satisfied, (B) no Liability to the Pension Benefit
Guaranty Corporation has been incurred by any such Person, which Liability has
not been satisfied, (C) no accumulated funding deficiency, whether or not
waived, within the meaning of Section 302 of ERISA or Section 412 of the Code
has been incurred, and (D) all contributions (including installments) to such
plan required by Section 302 of ERISA and Section 412 of the Code have been
timely made.
(f) Except as disclosed in Section 4.10(f) of the
Sellers' Disclosure Schedule, the execution and delivery of this Agreement and
the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby will not (i) require any Acquired Company to
make a larger contribution to, or pay greater benefits or provide other rights
under, any Contract or Company Benefit Plan than it otherwise would, whether or
not some other subsequent action or event would be required to cause such
payment or provision to be triggered, or (ii) create or give rise to any
additional vested rights or service credits under any Contract or Company
Benefit Plan. Except as otherwise set forth on Section 4.10(f) of the Sellers'
Disclosure Schedule, no Acquired Company is a party to any Contract, nor has any
Acquired Company established any other policy or practice, requiring it to make
a payment or provide any other form of compensation or benefit to any person
performing services for any Acquired Company upon termination of such services
which would not be payable or provided in the absence of the consummation of the
transactions contemplated by this Agreement.
(g) In connection with the consummation of the
transactions contemplated by this Agreement, no payments of money or other
property, acceleration of benefits, or provisions of other rights have or will
be made under any Company Benefit Plan, agreement or under any other Contract
that would result in imposition of the sanctions imposed under Sections 280G and
4999 of the Code, whether or not some other subsequent action or event would be
required to cause such payment, acceleration, or provision to be triggered.
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(h) Each employee has been correctly classified for
purposes of each Company Benefit Plan as an eligible or ineligible employee and
any retroactive re-classification will not affect any employee's benefit under
any Company Benefit Plan.
4.11 Labor Matters.
(a) No Acquired Company is a party to, or bound by, any
collective bargaining agreement or Contract with a labor union or labor
organization. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Sellers and the Acquired Companies,
threatened against any Acquired Company or relating to its business. To the
knowledge of the Sellers and the Acquired Companies, there are no organizational
efforts with respect to the formation of a collective bargaining unit presently
being made or threatened involving employees of any Acquired Company. There are
no controversies pending or, to the knowledge of the Sellers and the Acquired
Companies, threatened between any Acquired Company and any of its employees,
which, individually or in the aggregate, would have a Material Adverse Effect on
the Acquired Companies. None of the Sellers, nor the Acquired Companies has
received notice of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of the Acquired Companies.
(b) Section 4.11(b)(i) of the Sellers' Disclosure
Schedule sets forth a complete and accurate list of all employees of the
Acquired Companies, including, the Person employing such employee, and whether
or not such employee is exempt or non-exempt. Section 4.11(b)(ii) of the
Sellers' Disclosure Schedule sets forth a complete and accurate list of all
independent contractors of the Acquired Companies that work at any office of the
Acquired Companies (other than construction sites), including the Acquired
Entity retaining such independent contractor.
(c) Except for agreements with Paychex listed on Section
4.11(c) of the Sellers' Disclosure Schedule, to the knowledge of the Acquired
Companies and the Sellers, no employee or director of any Acquired Company is a
party to, or is otherwise bound by, any Contract, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person that in any way adversely affects or will affect
(i) the performance of his or her duties as an employee or director of such
Acquired Company, or (ii) the ability of any Acquired Company to conduct its
business, including any such Contract with any Seller or their Affiliates (other
than the Acquired Companies). No key employee of any Acquired Company has
threatened to terminate his or her employment with such Acquired Company, as a
result of the transaction contemplated hereby or otherwise.
(d) Each Acquired Company has in place all material
employee policies required by applicable law, and there have been no material
violations of any such employee policies. No charges have been filed claiming
employment discrimination or unfair labor practices against or involving any
Acquired Company or against Paychex by any employee or former employee of the
Acquired Companies, and to the knowledge of the Sellers and the Acquired
Companies, no such charges are threatened. To the knowledge of the Sellers and
the Acquired Companies, Paychex has at all times been in material compliance
with all laws, ordinances, governmental rules and regulations to which it is
subject in connection with the employment and leasing of the employees of the
Acquired Companies.
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4.12 Environmental Matters. The Sellers have made available to
Buyer all environmental assessments and reports relating to environmental
conditions with respect to all real property owned, leased or under Contract to
purchase by the Subject Companies which are in the possession of any Seller, or
the Subject Companies or any of their agents. Except as set forth on Section
4.12 of the Sellers' Disclosure Schedule:
(i) each Subject Company has been and currently is
in material compliance with all applicable Environmental Laws;
(ii) with regard to the properties currently or
formerly owned or operated by any of the Subject Companies (including
soils, groundwater, surface water, buildings, or other structures),
during the period of ownership or operation by such Subject Company, or
any Affiliate of any Seller or any of the Subject Companies there was
and has been no Release of any Hazardous Materials, in any amount or
concentration (x) that could threaten human health or welfare, (y) that
exceeds any applicable standard promulgated, enacted, or issued by any
Governmental Entity, or (z) that could result in any Liability under
the Environmental Laws;
(iii) with regard to the properties currently or
formerly owned or operated by any of the Subject Companies (including
soils, groundwater, surface water, buildings, or other structures),
prior to the period of ownership or operation by the Subject Company,
or any Affiliate of any Seller or any of the Subject Companies, to the
knowledge of the Sellers and the Subject Companies, there was no
Release of any Hazardous Materials, in any amount or concentration (x)
that could threaten human health or welfare, (y) that exceeds any
applicable standard promulgated, enacted or issued by any Governmental
Entity, or (z) that could result in any Liability under the
Environmental Laws;
(iv) no Subject Company has disposed or arranged to
dispose of any Hazardous Materials on any third party property which
could result in any Liability under the Environmental Laws;
(v) none of the Subject Companies or the Sellers
has received any notices, demand letters, complaints, claims or
requests for information from any Governmental Entity or any other
Person indicating that a Subject Company may be in violation of, or
liable under, any Environmental Law;
(vi) none of the Subject Companies or their
respective properties are subject to any order or decree of any
Governmental Entity or any Contract with any Government Entity arising
under any Environmental Law, or is a party to any indemnity or other
Contract with any third party which could result in any Liability under
any Environmental Law;
(vii) to the knowledge of the Sellers and the
Subject Companies, there are no circumstances, conditions, or
activities involving any Subject Company that could result in any
Liability under any Environmental Law or in any restriction pursuant to
any
33
Environmental Law on the ownership, use, or transfer of any property
now owned by the Subject Companies;
(viii) to the knowledge of Sellers and the Subject
Companies, no properties currently owned by any Subject Company contain
any underground storage tank, asbestos containing material, lead based
products (including paint), or polychlorinated biphenyls; and
(ix) none of the properties currently owned or
operated by the Subject Companies are subject to any Liens imposed by
any Governmental Entity in connection with the presence on or off such
property of any Hazardous Materials.
4.13 Related Party Transactions. Except as set forth in Section
4.13 of the Sellers' Disclosure Schedule, none of the Sellers, any Excluded
Company, any officer or director of the Subject Companies, or any Affiliate or
any immediate family member of any of the foregoing Persons:
(i) has, or at any time since the first day of the
next to last completed fiscal year of the Company has had, any interest
in any property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the businesses of the Acquired
Companies;
(ii) is, or at any time since the first day of the
next to last completed fiscal year of the Company has owned (of record
or as a beneficial owner), an equity interest or any other financial or
profit interest in, a Person that has (A) had business dealings or a
material financial interest in any transaction with any Acquired
Company, or (B) engaged in competition with any Acquired Company with
respect to any line of the products or services of any Acquired Company
(a "Competing Business") in any market presently served by any Acquired
Company, except for ownership (of record or as a beneficial owner) of
less than one percent of the outstanding capital stock of any Competing
Business that is publicly traded on any national or foreign stock
exchange, the Nasdaq Stock Market or the over-the-counter market; or
(iii) is a party to any Contract with, or has any
claim or right against, any Acquired Company.
4.14 Restrictions on Business Activities.
(a) There is no judgment, injunction, order, decree,
statute, ordinance, rule, regulation, moratorium, or other action by a
Governmental Entity, pending before a Governmental Entity or, to the knowledge
of the Sellers and the Acquired Companies, being considered by a Governmental
Entity, which has or would have the effect of restricting the conduct of
business of any of the Acquired Companies.
(b) None of the Sellers, the Acquired Companies, any
Affiliate of the Sellers, nor any director, officer, agent, employee, consultant
or contractor of any of such Persons, has directly or indirectly: (i) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in
34
money, property, or services that is illegal or violates any policy of the
Acquired Companies, including any policy established by Paychex applicable to
the employees of the Acquired Companies as set forth in the Employee Manual of
the Acquired Companies (A) to obtain favorable treatment in securing business,
(B) to pay for favorable treatment for business secured, (C) to obtain special
concessions or for special concessions already obtained, for or in respect of
any Subject Company or any Affiliate of the Subject Companies, or (D) in
violation of any applicable law; or (ii) established or maintained any fund or
asset that has not been recorded in the books and records of the Acquired
Companies.
4.15 Real Property.
(a) Section 4.15(a) of the Sellers' Disclosure Schedule
lists all real property owned or leased by any of the Acquired Companies, the
locations of real property leased by any of the Acquired Companies, and all real
property that the Acquired Companies have the right or obligation to purchase.
Each of the Acquired Companies has good, marketable and indefeasible title in
fee simple, or as to optioned property or property subject to a purchase
contract, has the right to acquire good, marketable and indefeasible title in
fee simple (or as to leased property, has good and valid title to the leasehold
estate), to the real property purported to be owned, optioned, under contract or
leased by it in Section 4.15(a) of the Sellers' Disclosure Schedule, free and
clear of all Liens, except Liens for Taxes and assessments not yet due and
payable, Liens relating to the indebtedness described in Section 4.5(d) of the
Sellers' Disclosure Schedule, and such Liens or other imperfections of title as
do not or will not, individually or in the aggregate, materially interfere with
the present use or intended use by the Acquired Company or materially affect the
value or marketability of the property affected thereby.
(b) None of the Acquired Companies has been given, nor
have any of them received, any notice that a breach or an event of default
exists, and no condition or event has occurred that with the giving of notice,
the lapse of time, or both would constitute a breach or event of default, by any
of the Acquired Companies, or, to the knowledge of the Sellers and the Acquired
Companies, any other Person, with respect to any covenants, conditions, deeds,
deeds of trust, rights-of-way, easements, mortgages, restrictions, surveys,
title insurance policies, or other Contracts granting, constituting or
evidencing a conveyance by or to any of the Acquired Companies of title to or an
interest in or otherwise affecting the real property or the ownership thereof
which, individually or in the aggregate, is material to the ownership, use or
development of such parcel of real property by the Acquired Companies. No
condemnation, eminent domain, or similar proceeding exists, is pending, or to
the knowledge of the Sellers and the Acquired Companies is threatened, with
respect to, or that could affect, any real property owned, leased, optioned, or
under contract by the Acquired Companies. No developer-related charges or
assessments by proffers to any Government Entity or any other Person for public
improvements or otherwise made against any of the real property that is
developed by the Acquired Companies are unpaid or incomplete (other than those
reflected on the Interim Financial Statements or incurred since the date of such
statements in the ordinary course of business consistent with past practices,
and other than standard development agreements such as impact fee and water and
sewer connection fee agreements paid on a per unit basis at the time of applying
for a building permit or certificate of occupancy), except for charges or
assessments that would not, individually or in the aggregate, materially
interfere with the present use or intended use by the
35
Acquired Company or materially affect the value or marketability of the property
affected thereby.
(c) Except to the extent that any of the following
matters would not have a material adverse effect on any Project considered
individually, or all of the Projects considered in the aggregate: (i) the real
property of the Acquired Companies to be used for homebuilding and any
improvements located thereon conform in all respects to the appropriate
Governmental Entity's standards; (ii) there is no impediment to the development
of (or to approval for the development of) undeveloped real property in the
manner in which the Company currently anticipates building thereon, nor are
there any moratoriums on such development; (iii) the developed real property of
the Acquired Companies has access to streets, and is serviced, in all respects,
by all utilities, water and other services, as is necessary to construct homes
on such property, and such utilities, water and other services are adequate for
the current and intended use of such property; and (iv) the undeveloped real
property of the Acquired Companies has access to streets, and such real property
is serviced, in all respects, by all utilities, water and other services, as is
necessary for the development thereof or such utilities, water and other
services are or will, upon completion of agreements currently in effect with
respect thereto, be available, in all respects, to such property.
(d) There are no material encroachments on the real
property owned, leased, under contract or optioned by the Acquired Companies,
nor any material encroachments by improvements on such real property onto any
easements or any adjoining property or which would otherwise conflict with the
property rights of any other Person.
(e) Except as set forth in Section 4.15(e) of the
Sellers' Disclosure Schedule:
(i) No Acquired Company has developed, constructed
or otherwise participated and does not currently have a Contract to
purchase to develop, construct or otherwise participate in any real
estate projects other than the projects identified in Section 4.15(a)
or (e) of the Sellers' Disclosure Schedule (collectively, the
"Projects"). Section 4.15(e) of the Sellers' Disclosure Schedule
includes as of the most recent practicable date the total number of
units developed and under development, and the total units remaining
unsold.
(ii) All work performed by the Acquired Companies
or by subcontractors on behalf of the Acquired Companies on or in any
of the properties involved in the Projects has been or shall be
performed in substantial accordance with the plans and specifications
approved by all Governmental Entities (including VA and FHA, as
applicable), in compliance with all applicable laws, ordinances, and
regulations, and in a good and workmanlike manner, free from any defect
or Lien, other than inchoate mechanics' liens for amounts not yet due.
Each property involved in the Projects complies in all material
respects with all laws, including, without limitation, applicable
zoning, land use, subdivision, parking, traffic and fire safety laws
and building codes, and none of the Acquired Companies has received any
notice from any Governmental Entity as to any violation of any law. The
Acquired Companies have complied with all such laws in all material
respects.
36
(iii) All approvals, consents, licenses, permits,
waivers or other authorizations of any Governmental Entity necessary or
appropriate for the development and construction of the Projects
(collectively, the "Entitlements"), except for those Entitlements
which, if not obtained, would not have a material adverse effect on any
Project considered individually, or all of the Projects considered in
the aggregate, and any Contracts (for example, and not in limitation,
proffers and subdivision improvement agreements) executed in connection
therewith, are in full force and effect, are enforceable in accordance
with applicable law and no party thereto is in default thereunder. None
of the Acquired Companies, nor to the knowledge of the Sellers and the
Acquired Companies, the fee owner, if the Acquired Companies are not
the fee owner of any property involved in any of the Projects, is in
default under, and none of the Sellers or the Acquired Companies has
received any notice that any event has occurred which with the giving
of notice or the passage of time, or both, would constitute a default
under any Entitlements, transaction, covenant, condition, restriction,
easement, encumbrance or other Contract pertaining to the property
involved in any Project. All subdivision improvement bonds and other
sureties or assurances relating in any way to any such property and
required by any applicable Governmental Entity or pursuant to any
Entitlements have been posted and are being maintained in accordance
with the requirements of such applicable Governmental Entities or
Entitlements and no claim has been made thereunder or thereto.
(iv) (A) No Acquired Company is obligated to pay
nor is any Acquired Company otherwise subject to any monetary
charges, assessments or fees imposed by any Governmental
Entity or quasi-governmental entity (such as special
districts, improvement districts or the like) in connection
with receipt by the Acquired Companies of the Entitlements or
otherwise relating to the development or improvement of the
Projects.
(B) Except for obligations contained in the
Contracts listed in Section 4.4(a) of the Sellers' Disclosure
Schedule, none of the Acquired Companies has any development
or improvement obligations with respect to the Projects.
(v) None of the Acquired Companies (or to
knowledge of the Sellers and the Acquired Companies, the fee owner, if
the Acquired Companies are not the fee owner) has made any oral or,
except for the Entitlements, written commitments or representations to,
or understandings or Contracts with, any Person or any adjoining
property owner which would in any way be binding on the Acquired
Companies and would interfere with the Acquired Companies' ability to
develop and improve any of the properties involved in the Projects with
residential developments in accordance with the Entitlements.
(vi) To the knowledge of the Sellers and the
Acquired Companies, no platted lot involved in the Projects is located
in an area designated as having special flood hazards or designated as
a wetland by the Army Corps of Engineers, except to the extent that any
such designation would not interfere with the Acquired Companies'
ability to develop such Project in accordance with the Business Plan.
No property involved in the
37
Projects is located in an area that is designated, or in the process of
being designated, as a critical habitat for any threatened or
endangered species under the Endangered Species Act of 1973, as
amended, or designated under any other law for the preservation of
fish, wildlife, plants, insects, forests or wetlands, or for the
preservation of any historical or archeological site under the National
Historic Preservation Act of 1979, as amended, or designated under any
other law, that would limit, impair, delay or prohibit the construction
and development of the Project in accordance with the existing or
proposed plans therefor.
(vii) None of the Sellers or the Acquired Companies
has received any notice from its insurance carriers of any defects or
inadequacies in any of the properties involved in the Projects, or any
portion thereof, which would adversely affect the insurability of any
properties or the cost of any such insurance. There are no pending
insurance claims with respect to any portion of any such properties.
(viii) There are no soil conditions that would
require construction of foundations different than those customarily
built in residential projects in the areas in which the Projects are
located, nor, to the knowledge of the Sellers and the Acquired
Companies, are there any seismic safety problems relating to any of the
properties involved in the Projects, any recent seismic activity
affecting any such properties or any active fault bisecting, underlying
or adjacent to any such properties. Each of the Acquired Companies and
their respective contractors have installed foundations appropriate and
customary for the applicable soil conditions.
(ix) All work performed with respect to the
Projects has been approved by holders of security interests in the
Projects to the extent required by the applicable Contracts.
(x) Other than in connection with its sales of
homes to buyers in the ordinary course of business, none of the
Acquired Companies has assigned to any third party any of its
respective development or other rights with respect to the properties
involved in the Projects.
(f) Except as set forth on Section 4.15(f) of the
Sellers' Disclosure Schedule, since December 31, 2001 no real property owned by
the Acquired Companies has become subject to repurchase by any Person, whether
as a result of the failure of the Acquired Companies or any other Person to
begin construction thereon or to complete construction thereon within the time
period required or otherwise.
(g) The backlog of home sales of each of the Projects as
of the date of the Interim Statements is set forth in Section 4.15(g) of the
Sellers' Disclosure Schedule. All of the home purchase Contracts representing
the backlog of home sales set forth on Section 4.15(g) of the Sellers'
Disclosure Schedule have been incurred in the ordinary course of business. None
of the Sellers or the Acquired Companies is aware of any reason that the
cancellation rates for such backlog would be expected to exceed those
experienced by the Acquired Companies during the period covered by the Financial
Statements.
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4.16 Intellectual Property.
(a) Section 4.16(a) of the Sellers' Disclosure Schedule
sets forth a true and complete list of all patents, trademarks, trade names,
service marks, internet domain names and copyrights and applications for
registration of any of the foregoing, technology, know-how, computer software
programs or applications, and tangible or intangible intellectual property and
proprietary rights, whether or not subject to statutory registration or
protection (collectively, "Intellectual Property"), owned, used, filed by or
licensed to any of the Acquired Companies, in each case which are, individually
or in the aggregate, material to the financial condition, operating results,
assets or operations of the Acquired Companies. Except as set forth in Section
4.16(a) of the Sellers' Disclosure Schedule, the Acquired Companies own, free
and clear of any and all Liens, or are licensed or otherwise possess legally
enforceable rights to use, without payment to any other Person, all Intellectual
Property that is used in the business of the Acquired Companies as currently
conducted, except where the failure to own, be licensed or to possess such
rights would not have, individually or in the aggregate, a Material Adverse
Effect on the Acquired Companies, and the consummation of the transactions
contemplated hereby will not conflict with, alter or impair any such rights.
(b) To the knowledge of the Sellers and the Acquired
Companies, the conduct of the business of the Acquired Companies does not
conflict with the valid Intellectual Property rights of others and there are no
conflicts with or infringements of any of the Intellectual Property of the
Acquired Companies by any other Person. Except as set forth on Section 4.16(b)
of the Sellers' Disclosure Schedule, no other Person has any rights in or right
to use any of the Intellectual Property owned by any of the Acquired Companies.
4.17 Other Assets.
(a) Except as set forth in Section 4.17 of the Sellers'
Disclosure Schedule, the Acquired Companies own beneficially and of record, and
have good and valid title to, all material assets reflected on the 2001 Balance
Sheet or thereafter acquired (except those sold or otherwise disposed of since
December 31, 2001 in the ordinary course of business consistent with past
practice and not in violation of this Agreement), in each case free and clear of
all Liens except:
(i) such Liens as are set forth in Section 4.17 of
the Sellers' Disclosure Schedule;
(ii) mechanics', carriers', workmen's, repairmen's
or other like Liens arising or incurred in the ordinary course of
business, Liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the
ordinary course of business and Liens for Taxes or assessments which
are not due and payable or which may thereafter be paid without
penalty;
(iii) Liens which secure debt that is reflected as a
Liability on the 2001 Balance Sheet or the existence of which is
expressly indicated in the notes thereto; and
(iv) other imperfections of title or encumbrances,
if any, which, do not, individually or in the aggregate, materially
impair the assets or the intended use thereof.
39
(b) All the material tangible personal property of the
Acquired Companies has been maintained in accordance with the past practice of
the Acquired Companies and generally accepted industry practice and is in good
operating condition and repair, ordinary wear and tear excepted. The assets
owned or leased by the Acquired Companies include all of the properties and
other assets necessary for the Acquired Companies to conduct their respective
businesses in the manner currently conducted.
(c) All of the books and records of the Acquired
Companies (including without limitation, the financial records) are true,
complete and accurate in all material respects and have been maintained in
accordance with sound business practices. True, complete and accurate copies of
such records have been made available to Buyer.
4.18 Insurance.
(a) Section 4.18(a) of the Sellers' Disclosure Schedule
contains a true and complete list of all liability, property, workers'
compensation, directors' and officers' liability and other insurance policies in
effect at any time since January 1, 1998 (except in the case of liability
insurance, which shall be listed from June 1, 1994) that insure or did insure
the business, operations or employees of the Acquired Companies or affect or
relate to the ownership, use or operation of any of the assets (both past and
present) of the Acquired Companies, whether issued to the Acquired Companies or
to any other Person for the benefit of the Acquired Companies (the "Insurance
Policies"). For each Insurance Policy, Section 4.18(a) of the Sellers'
Disclosure Schedule lists (i) the names and addresses of the insurers, (ii) the
names of the Persons to whom such policies have been issued (including
additional insureds), (iii) the expiration dates thereof, (iv) whether the
policies are currently in effect, (v) the annual premiums and payment terms
thereof, (vi) whether it is a "claims made" or an "occurrence" policy, (vii) any
self insured retention or deductible, (viii) the aggregate limit of the policy
and the currently available limit, and (ix) a brief description of the interests
insured thereby. The Sellers have provided Buyer with true, accurate and
complete copies of each Insurance Policy.
(b) Section 4.18(b) of the Sellers' Disclosure Schedule
lists any Contract, other than a policy of insurance, for the transfer or
sharing of any risk by the Acquired Companies in a manner similar to an
insurance policy, and all obligations of the Acquired Companies to third parties
with respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) Except as set forth in Section 4.18(c) of the
Sellers' Disclosure Schedule, (i) the insurance coverage provided by any of the
Insurance Policies will not terminate or lapse by reason of the transactions
contemplated by this Agreement and the other Transaction Documents, (ii) the
Insurance Policies were placed (at the time of placement and as of the date
hereof) with insurers who are financially sound and reputable and, in light of
the respective business, operations and assets of the Acquired Companies, are or
were in amounts and have or had coverages that are reasonable and customary for
Persons engaged in such businesses and operations and having such assets; (iii)
none of the Sellers, the Acquired Companies, nor the Person to whom such policy
has been issued has received notice that any insurer under any Insurance Policy
is denying liability with respect to a claim thereunder or defending under a
reservation of rights clause, or, to the knowledge of the Sellers and the
Acquired Companies,
40
indicated any intent to do so or not to renew any such policy; (iv) the
Insurance Policies are sufficient for compliance with all applicable laws and
Contracts to which the Acquired Companies are a party or by which they are
bound; and do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of the Acquired Companies, (v) no side
agreements or other Contracts exist that alter the terms of the Insurance
Policies, and (vi) none of the liability Insurance Policies contain any mold,
soils, attached product, completed operations or construction defects exclusions
from coverage.
(d) Each current Insurance Policy is valid and binding
and in full force and effect, no premiums due thereunder have not been paid and
none of the Acquired Companies, the Sellers, nor the Person to whom such policy
has been issued has received any notice of cancellation or termination in
respect of any such policy or is in default thereunder. Section 4.18(d) of the
Sellers' Disclosure Schedule contains a listing of all material open claims made
or otherwise asserted by the Acquired Companies against any Insurance Policy.
All material claims under the Insurance Policies have been filed in a timely
fashion. To the knowledge of the Sellers and the Acquired Companies, the
activities and operations of the Acquired Companies have been conducted in a
manner so as to conform in all material respects to all applicable provisions of
the Insurance Policies. None of the Acquired Companies has failed to disclose
any fact to the insurance companies or failed to take any other action, the
consequences of which non-disclosure or failure to take action would render any
Insurance Policy void, or voidable, or suspend, impair or defeat in whole or in
part such insurance coverage. None of the Sellers nor the Acquired Companies has
received (A) any refusal of coverage from any insurer from which the Acquired
Companies sought coverage, (B) any notice that a defense will be afforded with
reservation of rights, or (C) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
4.19 Warranties. The Sellers have delivered to Buyer complete and
accurate copies of all written warranties and guaranties by the Acquired
Companies currently in effect with respect to their respective products. There
have not been any material deviations from such warranties and guaranties, and
none of the Acquired Companies, nor any of their respective salespersons,
employees and agents is authorized to undertake obligations to any customer or
to other third parties in excess of such warranties or guaranties. None of the
Acquired Companies, nor any of their respective salespersons, employees and
agents has made any oral warranty or guaranty with respect to the products of
the Acquired Companies. The reserve for warranty and guaranty costs included in
the 2001 Balance Sheet and the Interim Statements sets forth the reasonable
judgment of management of the Acquired Companies of the estimate of the
aggregate Liability of the Acquired Companies in respect of warranty and
guaranty obligations.
4.20 Suppliers and Subcontractors. The documents and information
supplied by the Sellers, the Acquired Companies and any of their respective
representatives in connection with this Agreement with respect to relationships
and volumes of business done with the significant suppliers and subcontractors
of the Acquired Companies are accurate in all material respects. Except as set
forth in Section 4.20 of the Sellers' Disclosure Schedule, during the last 12
months, none of the Acquired Companies has received any notices of termination
or threats of
41
termination from any of the five largest suppliers or ten largest subcontractors
for the Acquired Companies, taken as a whole.
4.21 HSR Matters. The fair market value of the "non-exempt assets"
of the Acquired Companies within the meaning of the regulations under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as amended (16 C.F.R.
801.10, 802.2 and 802.4) is less than $50 million.
4.22 Corporate Dividend. The Company has declared and paid a
dividend on the Shares to the Sellers in their Pro Rata Portion of all interests
in the Excluded Company held by the Acquired Companies (the "Corporate
Dividend"), and such Corporate Dividend was made in compliance with all
applicable laws.
4.23 Disclosure. No representation or warranty of the Sellers
contained in this Agreement, and no statement contained in any document,
certificate or schedule furnished or to be furnished by or on behalf of the
Sellers or the Acquired Companies to Standard Pacific, Buyer or any of their
representatives, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary to fully and fairly
provide the information required to be provided in any such document,
certificate or schedule. The descriptions set forth in the Sellers' Disclosure
Schedule are accurate descriptions of the matters disclosed therein. Copies of
all documents heretofore or hereafter delivered or made available by the Sellers
or any of the Acquired Companies to Standard Pacific and Buyer and their
representatives pursuant hereto were or will be complete and accurate records of
such documents.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer and Standard Pacific, jointly and severally represent and warrant
to the Sellers, as of the date of this Agreement and as of the Closing Date, as
follows:
5.1 Existence; Good Standing; Corporate Authority. Buyer and
Standard Pacific are corporations duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. Buyer and Standard
Pacific are duly licensed or qualified to do business as foreign corporations
and are in good standing under the laws of any other state of the United States
in which the character of the properties owned or leased by them therein or in
which the transaction of their business makes such qualification necessary,
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect on Standard Pacific. Buyer and Standard Pacific have all
requisite corporate power and authority to own, operate and lease their
properties and carry on their businesses as now conducted. Neither Buyer nor
Standard Pacific is in violation of any order or decree of any Governmental
Entity, or any law, ordinance, or regulation to which Buyer, Standard Pacific or
any of their respective properties or assets is subject, except where such
violation, individually or in the aggregate, has not and would not reasonably be
expected to have a Material Adverse Effect on Standard Pacific.
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5.2 Authorization, Validity, and Effect of Agreements. Each of
Buyer and Standard Pacific has the requisite corporate power and authority to
execute and deliver this Agreement and the other Transaction Documents to be
executed by it. The consummation by Buyer and Standard Pacific of the
transactions contemplated herein and therein has been duly authorized by all
requisite corporate action on the part of Standard Pacific and Buyer. This
Agreement constitutes, and the other Transaction Documents to be executed by
Buyer and Standard Pacific (when executed and delivered pursuant hereto for
value received) will constitute, the valid and legally binding obligations of
Buyer and Standard Pacific, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization or other similar laws relating to creditors' rights
and general principles of equity, whether at equity or at law.
5.3 No Violation. Neither the execution and delivery by Buyer or
Standard Pacific of this Agreement, nor the consummation by Buyer or Standard
Pacific of the transactions contemplated herein in accordance with the terms
hereof, will:
(i) conflict with or result in a breach of any
provisions of the certificate of incorporation or by-laws of Buyer or
Standard Pacific;
(ii) violate, or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result
in the creation of any Lien upon any of the material properties of
Buyer or Standard Pacific under, or result in being declared void,
voidable, or without further binding effect, any of the terms,
conditions or provisions of any material Contract to which Buyer or
Standard Pacific is a party, or by which Buyer or Standard Pacific or
any of their respective properties is bound or affected; or
(iii) require any material consent, approval or
authorization of, or declaration, filing or registration with, any
Governmental Entity or other Person (assuming the accuracy of the
Sellers' representations set forth in Sections 3.4 and 4.23).
5.4 No Brokers. Neither Buyer nor Standard Pacific has entered
into any Contract with any Person, or taken any other action, which may result
in the obligation of any other party to this Agreement to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
5.5 Funds. Buyer will have at the Closing Date the funds necessary
to consummate the Stock Purchase on a timely basis in accordance with this
Agreement.
5.6 Investment Purpose. Buyer is an "accredited investor," as such
term is defined in Regulation D of the Securities Act and will acquire the
Shares for its own account and not with a view to a sale or distribution thereof
in violation of any securities laws and will not sell or distribute any of the
Shares in violation of any securities laws. Buyer has the present intention of
holding the Shares for investment purposes.
43
5.7 Access to Information.
(a) During the course of the negotiation of this
Agreement, Buyer and Standard Pacific reviewed or have been afforded the
opportunity to review all information provided to it by the Sellers and have had
the opportunity to ask questions of and receive answers to their satisfaction
from representatives of the Sellers concerning the Acquired Companies and the
Shares, and to obtain certain additional information reasonably requested by
them.
(b) Standard Pacific and Buyer have relied solely on the
representations of the Sellers made in Articles III and IV of this Agreement and
in the Transaction Documents and not on any other representations made by or on
behalf of the Sellers.
(c) Standard Pacific has expertise in evaluating and
investing in private placement transactions of securities of companies similar
to the Acquired Companies and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
prospective investment in the Shares.
(d) The foregoing shall not be deemed to affect the
representations and warranties and indemnities made by the Sellers hereunder.
Notwithstanding any "due diligence" investigations made by Buyer or Standard
Pacific, no information shall be deemed to have been disclosed for purposes of
the representations and warranties made by the Sellers in Articles III and IV
unless contained in the Sellers' Disclosure Schedule.
5.8 SEC Filings. Since December 31, 1999, Standard Pacific has
timely filed all reports and registration statements and other documents
required to be filed with the SEC under the rules and regulations of the SEC and
all such reports and registration statements or other documents have complied in
all material respects, as of their respective filing dates and effective dates,
as the case may be, with all the applicable requirements of the Securities Act
and the Exchange Act. As of the respective filing and effective dates, none of
such reports or registration statements or other documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
5.9 Disclosure. No representation or warranty of the Buyer or
Standard Pacific contained in this Agreement, and no statement contained in any
document, certificate or schedule furnished or to be furnished by or on behalf
of Buyer or Standard Pacific to Sellers or any of their representatives pursuant
to this Agreement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary to fully and fairly
provide the information required to be provided in any such document,
certificate or schedule. The descriptions set forth in the Buyer Disclosure
Schedule are accurate descriptions of the matters disclosed therein. Copies of
all documents heretofore or hereafter delivered or made available by Buyer and
Standard Pacific to the Sellers and their representatives pursuant hereto were
or will be complete and accurate records of such documents.
44
ARTICLE VI
COVENANTS
6.1 Conduct of Business. Except as (i) expressly contemplated in
this Agreement, or (ii) as expressly agreed to in writing by Buyer, during the
period from the Balance Sheet Date to the earlier of the termination of this
Agreement or the Closing Date, the Sellers (other than the Xxxxxxxx Children
Sellers) shall use their best efforts to cause the Acquired Companies:
(a) to conduct their respective operations according to
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted;
(b) to preserve intact their respective business
organization and goodwill, keep available the services of their respective
officers and employees and maintain satisfactory relationships with their
customers, suppliers and other Persons having business relationships with them;
(c) to confer on a weekly basis with one or more
representatives of Standard Pacific and Buyer, including to report operational
matters of materiality and any proposals of the Acquired Companies to engage in
material transactions, and to provide such other information as Standard Pacific
or Buyer may reasonably request;
(d) not to amend the organizational documents of the
Acquired Companies;
(e) to notify Buyer within three business days of (i) any
material change in the condition (financial or otherwise) of the business,
properties, assets, Liabilities, prospects of any of the Acquired Companies or
the normal course of their respective businesses or in the operation of the
properties of the Acquired Companies, (ii) any material litigation or material
complaints, investigations or hearings of any Governmental Entity (or
communications indicating that the same may be contemplated) against any
Acquired Company or involving the business, operations or properties of any
Acquired Company; or (iii) the breach in any material respect of any
representation or warranty or covenant contained herein;
(f) to deliver to Buyer within five business days any
material report, statement, schedule or correspondence filed or submitted by the
Acquired Companies to, or received by the Acquired Companies from, any
Governmental Entity;
(g) not to (i) issue any Capital Stock, effect any stock
split or combination, reclassify its Capital Stock or otherwise change its
capitalization as it existed on the Balance Sheet Date, (ii) grant, confer or
award any option, warrant, conversion right or other right to acquire any of its
Capital Stock, (iii) increase any compensation or benefits or enter into or
amend any employment, severance, termination or similar Contract with any of its
present or future employees, officers or directors, except for normal increases
in compensation and benefits to employees consistent with past practice and the
payment of cash bonuses to employees pursuant to and consistent with existing
plans or programs, (iv) adopt any new employee benefit plan (including any stock
option, stock benefit or stock purchase plan) or amend any existing employee
benefit plan in any material respect, except for changes which may be required
by applicable law, or (v) increase the amount, or expand the scope, of any
indemnification currently provided for employees, officers or directors;
45
(h) not to (i) declare, set aside or pay any dividend or
make any other distribution or payment with respect to any of its Capital Stock
(other than the Corporate Dividend); or (ii) directly or indirectly redeem,
purchase or otherwise acquire any of its Capital Stock or that of any of the
other Acquired Companies, or make any commitment for any such action;
(i) not to sell, lease or otherwise dispose of any
assets, or enter into any commitment to do so; provided that (A) the sale of
completed homes to individual homebuyers by the Acquired Companies in the
ordinary the course of business, and (B) the sale of lots pursuant to existing
Contracts listed in Section 4.4(a)(i) of Sellers' Disclosure Schedule, shall not
be a violation of this clause (i);
(j) not to (i) incur or assume any long-term or
short-term Debt or issue any Debt securities, including without limitation, any
Debt that Buyer shall payoff at the Closing; (ii) assume, guaranty, endorse or
otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any other Person; (iii) modify
in any manner adverse to any of the Acquired Companies any outstanding Debt or
obligation of the Acquired Companies; (iv) pledge or otherwise encumber the
Capital Stock of any of the Acquired Companies; or (v) mortgage or pledge any of
its material assets, tangible or intangible, or create or suffer to create any
Lien of any kind in respect to such asset except in the ordinary course of
business consistent with past practices;
(k) not to change any of its accounting principles or
practices, except as requested by Standard Pacific or Buyer or otherwise
required pursuant to GAAP;
(l) not, without the prior consent of Standard Pacific or
Buyer (which will not be unreasonably withheld) to:
(i) acquire (by merger, consolidation or
acquisition of stock or assets) any Person or division thereof or any
Capital Stock therein;
(ii) enter into any Contract which would be
required to be listed on Section 4.4(a) of the Sellers' Disclosure
Schedule, or amend any Material Contract;
(iii) authorize any new capital expenditure or
expenditures (except in the ordinary course of business consistent with
past practice or pursuant to Contracts listed in Section 4.4(a) of the
Sellers' Disclosure Schedule) which, individually, is in excess of
$250,000 or, in the aggregate, are in excess of $500,000 for the
Acquired Companies, as a whole; or
(iv) enter into any Contract to purchase any real
property;
(m) not to pay, discharge or satisfy any Liabilities,
other than the payment, discharge or satisfaction in the ordinary course of
business of Liabilities reflected, reserved against or disclosed in the Interim
Financial Statements or incurred in the ordinary course of business thereafter
consistent with past practice;
46
(n) not to settle or compromise any pending or threatened
suit, action or claim, except settlements or compromises in the ordinary course
of business with respect to immaterial claims by individual homeowners not yet
the subject of pending litigation;
(o) not to make any material Tax election (other than in
a manner consistent with prior practices of the Acquired Companies), file any
Tax Return (other than Tax Returns due), settle or compromise any material Tax
liability (other than Taxes due) or agree to an extension of a statute of
limitations with respect to any material amount of Tax (other than extensions
for filing Tax Returns), except to the extent the amount of any such Tax,
settlement or compromise has been reserved for in the Interim Financial
Statements; provided, Standard Pacific and Buyer shall not unreasonably withhold
or delay consent as to such matters;
(p) not to loan or advance any amount to, or sell,
transfer or lease any of its assets to, or enter into any Contract or other
transaction with, or otherwise make any payments to any Seller, the Excluded
Company (other than the repayment by the Acquired Companies of Debt to the
Excluded Company reflected on the Balance Sheet Date Financial Statements), or
any of their respective Affiliates or (with the exception of payments of salary
in the ordinary course, consistent with past practice, in their capacity as
employees of the Acquired Companies) any officer or director thereof;
(q) not to, nor permit the fee owner to, if the Acquired
Companies are not the fee owner, make or enter into any commitment,
representation, understanding or Contract with any Person or adjoining property
owner which would in any way be binding on the Acquired Companies and could
interfere with the Acquired Companies' ability to develop and improve any of the
properties involved in the Projects with residential developments in accordance
with the Entitlements pertaining to such Projects;
(r) not to take any action that would knowingly result in
a breach of any representation, warranty or covenant of the Sellers contained in
this Agreement; and
(s) not to take any action or fail to take any reasonable
action, or agree in writing or otherwise to take any actions having the same or
similar effect, or being of the same or similar nature, as any of the actions
described in Sections 6.1(a) through (r).
Each of the Sellers represents and warrants to Buyer and
Standard Pacific that no actions or events have occurred that would violate
Sections 6.1(a) through (s) since the Balance Sheet Date.
6.2 Further Action.
(a) Upon the terms and subject to the conditions of this
Agreement, the Sellers, on the one hand, and Buyer and Standard Pacific, on the
other hand, shall use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated in this Agreement, to obtain in a timely manner all
material waivers, consents and approvals, and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied in
all material respects all conditions precedent to its obligations under this
Agreement.
47
(b) From the date of this Agreement until the termination
of this Agreement or the Closing Date, no party shall take any action which
would (i) materially adversely affect the ability of any party to this Agreement
to obtain any consents, approvals, or authorizations required for the
transactions contemplated herein, (ii) breach in any material respect any
representation or warranty contained herein, or (iii) materially adversely
affect the ability of any party to perform its covenants and agreements under
this Agreement.
(c) With respect to each calendar month ending prior to
the earlier of termination of this Agreement or the Closing Date, including the
month of July 2002, the Sellers shall provide to Buyer, within 30 days following
the end of each such calendar month, true and complete copies of the unaudited
consolidated balance sheet of the Acquired Companies as at the end of each such
month and the related unaudited consolidated income statement and cash flow
statement for the month then ended, which financial statements shall be prepared
in the same manner as the 2001 Balance Sheet and in compliance with Section 4.5.
(d) In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each party shall use its respective reasonable efforts to take or cause to be
taken all such necessary or desirable action. Without limiting the foregoing,
Standard Pacific shall cause Buyer to fulfill its covenants, agreement and
obligations hereunder.
6.3 Access to Information; Confidentiality.
(a) From the date hereof until the termination of this
Agreement or the Closing Date, upon reasonable notice and subject to applicable
laws, the Sellers shall cause the Acquired Companies to afford Standard Pacific,
Buyer and their accountants, counsel, and other representatives, during normal
business hours, access to all of the properties and assets, books, Contracts,
and records of the Subject Companies reasonably requested by Buyer. Buyer and
Standard Pacific shall, and shall cause their respective advisors and
representatives to:
(i) conduct its investigation in such a manner
that will not unreasonably interfere with the normal operations,
customers or employee relations of the Subject Companies, and
(ii) treat as confidential in accordance the
terms of the Confidentiality Agreement all such information obtained
hereunder or in connection herewith and not otherwise known to them
prior to disclosure hereunder.
(b) From the date hereof until the termination of this
Agreement or the Closing Date, each party shall furnish promptly to the other a
copy of all filings made by such party or its Affiliates with any Governmental
Entity in connection with the transactions contemplated in this Agreement and
all written communications received from such Governmental Entities related
thereto.
(c) The Sellers shall, and shall cause their respective
advisors and representatives (including the Sellers' Representative) to, treat
as confidential in accordance the terms of the Confidentiality Agreement all
information obtained hereunder or in connection
48
herewith and not otherwise known to them prior to disclosure hereunder, and each
of the Sellers hereby agrees to comply with the terms thereof as if a party
thereto.
(d) Each party shall promptly notify the other parties
orally and in writing if such party becomes aware of:
(i) (A) the material inaccuracy at any time of any
representation or warranty contained in this Agreement of such party;
or (B) the breach of any covenant or agreement under this Agreement of
such party or the inability of such party to comply with or satisfy in
any material respect any covenant, condition or agreement under this
Agreement; provided, however, that no such notification shall affect
the representations, warranties, covenants or agreements of any party
or the conditions to the obligations of any party hereunder; and
(ii) any notice or other communication from any
third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated in this
Agreement or the other Transaction Documents.
6.4 Publicity. The initial press release relating to this
Agreement shall be in the form heretofore approved by the parties hereto, and
thereafter until the Closing Date the Sellers, the Acquired Companies, Standard
Pacific and Buyer shall, subject to their respective legal obligations
(including requirements of stock exchanges and other similar Governmental
Entities), consult with each other, and use reasonable efforts to agree upon the
text of any press release, before issuing any such press release or otherwise
making public statements with respect to the transactions contemplated hereby
and in making any filings with any Governmental Entity or with any national
securities exchange with respect thereto.
6.5 Expenses. Except as set forth herein, all costs and expenses
(including fees of attorneys, accountants and brokers or finders) incurred or in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, provided however if the Stock
Purchase is consummated, the Sellers shall pay all costs and expenses (including
fees of attorneys, accountants and brokers or finders) of the Sellers and the
Company incurred in connection with this Agreement and the transactions
contemplated hereby.
6.6 Employee Benefits.
(a) Until December 31, 2005, the continuing employees of
the Acquired Companies shall be entitled to employee benefits that are
substantially equivalent to those provided to, at the option of Standard
Pacific, either of the following: (i) such employees as of the Closing Date by
the Acquired Companies or (ii) similarly situated employees of Standard Pacific.
Such benefits shall be provided though Company Benefit Plans, Standard Pacific
benefit plans, Buyer benefit plans, or a combination of the foregoing, as
determined by Standard Pacific after consultation with the Company. Following
the Closing, Standard Pacific shall cause Standard Pacific or Buyer to recognize
the years of service of each continuing employee of the Acquired Companies with
the Acquired Companies prior to the Closing Date for determining the level of
benefits to be provided under applicable vacation plans and policies and for
eligibility and vesting determinations under any applicable 401(k) plan. For
purposes of this Section 6.6 ,
49
"continuing employee of the Acquired Companies" means an employee of the
Acquired Companies as of the Closing Date.
(b) Nothing contained in this Section 6.6 is intended to
confer upon any employee of the Acquired Companies any right to continued
employment or any right to wages or benefits at any time after the Closing Date.
(c) Standard Pacific, on behalf of the Acquired
Companies, currently intends to enter into a mutually acceptable new agreement
with Paychex that provides for the administration by Paychex of the wages,
incentive compensation and benefits of the continuing employees from the Closing
Date through December 31, 2002.
6.7 Third Party Offers.
(a) From and after the date of this Agreement until the
earlier of the Closing or termination of this Agreement, each of the Sellers,
the Acquired Companies, and their Affiliates and their respective officers,
directors, employees, representatives (including, without limitation, any
investment banker, attorney or accountant) and agents shall immediately cease
any discussions or negotiations with any parties with respect to any Third Party
Acquisition, and none of the Sellers, the Acquired Companies nor any of their
Affiliates shall, nor shall any Seller authorize or permit any of its Affiliates
or their respective officers, directors, employees, representatives (including,
without limitation, any investment banker, attorney or accountant) or agents to,
directly or indirectly, encourage, solicit, participate in or initiate any
inquiries, discussions or negotiations with or provide any information or access
to any Person concerning any potential Third Party Acquisition or that may
reasonably be expected to lead to any Third Party Acquisition or attempted Third
Party Acquisition, or otherwise facilitate any effort or attempt to make or
implement a Third Party Acquisition. The Sellers shall promptly communicate to
Buyer the existence or occurrence and the terms of any potential Third Party
Acquisition or contact related to any potential Third Party Acquisition that the
Sellers, the Acquired Companies or any of their respective Affiliates, or their
respective officers, directors, employees, representatives or agents, receive in
respect of such a proposed transaction, and the identity of the Person from whom
such proposal or contact was received.
(b) "Third Party Acquisition" means the acquisition by a
Person or group, other than Buyer or any Affiliate of Buyer, of more than 10%,
in a single transaction or series of transactions, of the Capital Stock or the
assets of any of the Acquired Companies, or any interest therein, whether by
sale or other disposition of Capital Stock, sale, lease or other disposition of
assets (other than assets solely held and used by the Excluded Company), merger
or otherwise, or any other transaction that would interfere with the Stock
Purchase.
(c) The Sellers represent and warrant to Standard Pacific
and Buyer that each of the Sellers, the Acquired Companies, and their respective
Affiliates, officers, directors, and employees, and to the knowledge of Sellers
and the Acquired Companies, the representatives (including, without limitation,
any investment banker, attorney or accountant) and agents of the Sellers and the
Acquired Companies, have terminated any and all existing discussions with third
parties relating to a Third Party Acquisition. The Sellers and the Acquired
Companies have
50
instructed all of their respective representatives or agents to terminate all
discussions relating to a Third Party Acquisition.
6.8 Restrictive Covenants.
(a) The Sellers recognize that the covenants of the
Employee Sellers contained in this Section 6.8 are an essential part of this
Agreement and that but for the agreement of each Employee Seller to comply with
such covenants Buyer and Standard Pacific would not enter into this Agreement.
The Sellers acknowledge and agree that the covenants set forth in this Section
6.8 are necessary to protect the legitimate business interests of the business
acquired by Buyer, including without limitation, goodwill, and that irreparable
harm and damage will be done to Buyer and Standard Pacific if any Employee
Seller competes with Buyer in any way prohibited by such covenants. In addition,
the Sellers acknowledge that the Purchase Price is consideration for
professional relationships and marketplace reputation developed by the Acquired
Companies and the Sellers and such covenants are necessary for Buyer and
Standard Pacific to receive the full benefit of this Agreement.
(b) After the Closing, each Employee Seller shall not
individually, or in concert, directly or indirectly:
(i) engage or become interested in, as owner,
employee, partner, through equity ownership (not including up to a 1%
passive equity interest in a public company), investment of capital,
lending of money or property, rendering of services, including as a
director, or otherwise, either alone or in association with others, any
business competitive with the Business;
(ii) take any action intended to advance an
interest of any competitor of the Business, or encourage any other
Person to take such action; or
(iii) take any material action intended to cause
any customer or prospective customer of the Acquired Companies to use
the services or purchase the products of any competitor of the
Business.
The covenants of the Employee Sellers set forth in this
Section 6.8(b) are referred to herein as the "Covenant Not to Compete".
This Covenant Not to Compete shall cover all of the counties
and other political subdivisions of the states of Florida, North Carolina and
South Carolina and the District of Columbia. This Covenant Not to Compete shall
bind each Employee Seller for the four year period immediately following the
Closing Date, provided however, that if, after the Closing, the employment of
any Employee Seller is terminated by Buyer or the Acquired Companies without
Cause (as defined in the Employee Seller's Employment Agreement) or, in the case
of Xxxxx Xxxxxxxx, without Cause or for Cause pursuant to Section 5(b)(ix) of
his Employment Agreement, then after termination of such Employee Seller's
employment with Buyer or the Acquired Companies, such Employee Seller shall no
longer be subject to the covenants contained in Sections 6.8(b)(i) and (ii). The
parties hereto agree that the duration and area for which the Covenant Not to
Compete set forth in this Section 6.8(b) is to be effective are reasonable.
51
Each of the Employee Sellers hereby acknowledges and agrees
that the benefit of this Covenant Not to Compete may be assigned by Buyer to any
Subsidiary of Standard Pacific in connection with any corporate restructuring or
reorganization of any of the Acquired Companies, without the further consent of
such Employee Seller.
(c) For four years following the Closing Date, each of
the Employee Sellers shall not, and shall cause their Affiliates not to,
directly or indirectly, divert or attempt to divert or take advantage of or
attempt to take advantage of any actual or potential business or opportunities
of Buyer or its Affiliates of which any of the Employee Sellers become aware
which relate to the Business, or any part thereof and which are located in any
county or any other political subdivision of the states of Florida, North
Carolina and South Carolina or the District of Columbia.
(d) Except in the performance of his or her duties as an
employee of the Acquired Companies, for a period of four years from the Closing
Date, each of the Employee Sellers shall not, and each Employee Seller shall
cause each of its Affiliates under its control not to, directly or indirectly:
(i) perform any action, activity or course of
conduct consisting of or encouraging the following: (A) soliciting,
recruiting or hiring any employees of Buyer or the Acquired Companies;
(B) soliciting or encouraging any employee of Buyer or the Acquired
Companies to leave the employment of Buyer or the Acquired Companies;
and (C) disclosing or furnishing to anyone any confidential information
relating to Buyer or the Acquired Companies or otherwise using such
confidential information for the Employee Seller's own benefit or the
benefit of any other Person (other than Buyer or the Acquired
Companies); or
(ii) solicit or encourage any contractor,
subcontractor or other supplier of Buyer or the Acquired Companies to
terminate or adversely alter in any material respect any relationship
such supplier may have with any of the Acquired Companies, Buyer or any
Affiliate of Buyer or any of their successors.
(e) The covenants set forth in this Section 6.8 are in
addition to and not by way of limitation of any other duties the Employee
Sellers may have to Buyer or its Affiliates. The Employee Sellers acknowledge
that the covenants contained in this Section 6.8 impose a reasonable restraint
on the Employee Sellers in light of the activities and business of the Acquired
Companies and future plans of Buyer. The Employee Sellers acknowledge that if
they violate any of the covenants contained in this Section 6.8 (collectively,
the "Restrictive Covenants"), it will be difficult to determine the resulting
damages to Buyer and, in addition to any other remedies Buyer may have, Buyer
shall be entitled to temporary injunctive relief and permanent injunctive relief
without the necessity of proving actual damages. Each Seller shall be solely
liable for a breach by such Seller of the covenants contained in this Section
6.8, and such liability shall not be joint. The non-prevailing party or parties
shall be severally liable to pay all costs, including reasonable attorneys' fees
and expenses, that the prevailing party or parties may incur in enforcing or
defending, to any extent, any of the Restrictive Covenants, whether or not
litigation is actually commenced and including litigation of any appeal. Buyer
may elect to seek one or more remedies at its discretion on a case by case
basis. Failure to seek any or all remedies in one case shall not restrict Buyer
from
52
seeking any remedies in another situation. Such action by Buyer shall not
constitute a waiver of any of its rights.
(f) Each of the Restrictive Covenants will be read and
interpreted with every reasonable inference given to its enforceability.
However, if any term, provision or condition of the Restrictive Covenants is
held by a court or arbitrator to be invalid, void or unenforceable, the
remainder of the provisions thereof shall remain in full force and effect and
shall in no way be affected, impaired or invalidated. If a court or arbitrator
should determine any of the Restrictive Covenants are unenforceable because of
over-breadth, then the court or arbitrator shall modify such covenant so as to
make it enforceable to the fullest extent the court or arbitrator deems
reasonable and enforceable under the prevailing circumstances. The Covenant Not
to Compete shall be deemed to be a series of separate covenants, one for each
and every county or other political subdivision of the states of Florida, North
Carolina and South Carolina and the District of Columbia, where the Covenant Not
to Compete is intended to be effective. Any violation of the provisions of this
Section 6.8 shall automatically toll and suspend the four year period set forth
in Section 6.8 for the duration of such violations.
(g) Nothing contained in this Section 6.8 is intended to
confer upon any Employee Seller any right to continued employment or any right
to wages or benefits at any time after the Closing Date. Each Employee Seller
expressly acknowledges that such Employee Seller's employment with the Acquired
Companies will be governed by the terms of his employment agreement, which
agreement shall be with the Company substantially in the form of Exhibit C-1 for
Xxxxx Xxxxxxxx and substantially in the form of Exhibit C-2 for Xxxxx Xxxxx, and
with a Subsidiary of the Company substantially in the form of Exhibit C-3 for
Xxxxxx Xxxxxx, Xxxx Xxxxxxxxxxxxxx and Xxxxxx Xxxxx (collectively, the "Division
Presidents"), and with such compensation as is set forth in those certain
letters dated August 2, 2002 from Standard Pacific to each of the Employee
Sellers regarding "Proposed Employment Agreements " (collectively, the
"Employment Agreements"). Termination of the employment with the Acquired
Companies of any or all of the Employee Sellers will in no way diminish Buyer's
obligations to make any Earnout Payment calculated pursuant to Sections 2.5(a)
and (f).
6.9 Directors. Effective as of the Closing Date, the Sellers shall
cause Xxxxx Xxxxxxxx and Xxxxx Xxxxx to each resign from the position of
director with all Acquired Companies for which they are a member of the of the
Board of Directors.
6.10 Securities Restrictions.
(a) For a period commencing on the Closing Date and
continuing through the close of trading on the date that is the first
anniversary of the Closing Date, none of the Sellers shall, without the prior
written consent of Standard Pacific (which consent may be withheld in Standard
Pacific's sole discretion), (i) directly or indirectly, sell, offer, contract or
grant any option to sell (including without limitation any short sale), pledge,
transfer, establish an open "put equivalent position" within the meaning of Rule
16a-1(h) under the Exchange Act, or otherwise dispose of any Standard Pacific
Common Stock acquired by the Sellers in connection with this Agreement, or (ii)
enter into any swap or other agreement that transfers, in whole or in part, any
of the economic consequences of ownership of any Standard Pacific Common Stock
acquired by the Sellers in connection with this Agreement (whether any such
transaction
53
described in clause (i) or (ii) above is to be settled by delivery of Standard
Pacific Common Stock, other securities, cash or otherwise), or publicly announce
its intention to do any of the foregoing, provided, however, (A) Xxxxx Xxxxxxxx
or Xxxxx Xxxxx may, if their employment with the Acquired Companies is
terminated, or (B) the Division Presidents may, whether or not employed by the
Acquired Companies, enter into "hedging" transactions designed to lessen the
economic risk of such Employee Seller's continued ownership of such shares, in
each case, to the extent permitted by applicable securities laws. The Sellers
acknowledge and consent to the entry of stop transfer instructions with Standard
Pacific's transfer agent and registrar against the transfer of shares of
Standard Pacific Common Stock held by each Seller except in compliance with the
foregoing restrictions.
(b) In addition to the contractual restrictions on
transfer set forth in Section 6.10(a), the Standard Pacific Common Stock (or
interests therein) held by the Sellers cannot be offered, sold or transferred
unless such Standard Pacific Common Stock is registered and qualified under the
Securities Act and applicable state securities laws or exemptions from such
registration and qualification requirements are available, or such registration
and qualification requirements are inapplicable, as reflected in an opinion of
counsel to any transferring Seller in form and substance reasonably satisfactory
to Standard Pacific. In the absence of an effective registration statement
covering the Standard Pacific Common Stock or an available exemption from
registration under the Securities Act, the Standard Pacific Common Stock must be
held indefinitely, and may not be sold pursuant to Rule 144 promulgated under
the Securities Act unless all of the conditions of that rule are met. The
Sellers acknowledge that they do not have any right to demand registration of
any offer or sale of the Standard Pacific Common Stock held by them, or to
participate in any registered offering of Standard Pacific Common Stock
undertaken by Standard Pacific.
(c) The certificates issued to the Sellers representing
the Standard Pacific Common Stock will bear a legend to the effect set forth
below, and appropriate stop transfer instructions against the Standard Pacific
Common Stock will be placed with any transfer agent of Standard Pacific to
ensure compliance with the restrictions set forth herein.
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT
BE SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR UNLESS STANDARD PACIFIC CORP. HAS RECEIVED AN OPINION OF COUNSEL TO THE
HOLDER OF THE SHARES OR OTHER EVIDENCE, SATISFACTORY TO STANDARD PACIFIC CORP.
AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. IN ADDITION, THE
TRANSFER, SALE, ASSIGNMENT, PLEDGE, MORTGAGE, HYPOTHECATION, ENCUMBRANCE, GIFT
OR OTHER DISPOSITION OF THE SHARES REPRESENTED HEREBY IS RESTRICTED BY AN
AGREEMENT, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF STANDARD
PACIFIC CORP."
Upon delivery by a Seller to Standard Pacific of documentation
reasonably satisfactory to Standard Pacific that all of the conditions of Rule
144 promulgated under the Securities Act have been met with respect to a
transfer of shares of Standard Pacific Common
54
Stock bearing such legend, and that such transfer is in compliance with this
Section 6.10, Standard Pacific shall deliver to its transfer agent instructions
authorizing such transfer and removal of such legend.
6.11 Warranty Indemnification.
(a) For a period of five years following the Closing
Date, the Sellers (other than the Xxxxxxxx Children Sellers) shall jointly and
severally, and the Xxxxxxxx Children Sellers shall severally, indemnify, defend
and hold harmless Standard Pacific, Buyer and their Affiliates (including the
Acquired Companies) from any Liability incurred by such Persons as a result of
any Warranty Claims that relate to real property developed or homes that close
escrow on or before the Closing Date, to the extent that such Liabilities exceed
the sum of (i) the warranty reserve for the Acquired Companies on the Balance
Sheet Date Financial Statements (prepared in conformity with GAAP, and
consistent with the practices and policies of the Company in preparing the 2001
Balance Sheet), and (ii) $550,000 (the "Warranty Threshold"), subject to the
Maximum Warranty Amount. The indemnity described in the immediately preceding
sentence shall include, without limitation, all costs and out-of-pocket expenses
(including legal and expert fees) and a reasonable allocation of labor costs for
persons performing or directly overseeing the work Buyer deems reasonably
necessary to address such Warranty Claims. The Sellers acknowledge that the
Maximum Warranty Amount is in addition to all insurance proceeds, meaning that
the Sellers shall be obligated to pay, up to the Maximum Warranty Amount, all
Warranty Claims that are not paid by insurance and that exceed the Warranty
Threshold. The obligation of the Sellers under this Section 6.11 shall terminate
on the fifth anniversary of the Closing Date, except to the extent that Buyer
notifies the Sellers' Representative in writing of a claim pursuant to this
Section 6.11 on or before such date specifying the factual basis of such claim
in reasonable detail to the extent then known by Buyer. The Sellers shall be
obligated to promptly pay to Buyer the amount of all Warranty Claims in excess
of the Warranty Threshold irrespective of whether such amounts may be
potentially covered by insurance. If an amount initially paid by the Sellers
with respect to a Warranty Claim is later reimbursed to Buyer by applicable
insurance policies of the Acquired Companies in effect at the time of the
Closing (including the Tail Policy) or prior thereto, Standard Pacific shall
cause Buyer to promptly reimburse Sellers for such payment (after deduction of
all out-of-pocket expenses relating to seeking such payment) and the reimbursed
payment will not count against the Maximum Warranty Amount or the limitations to
the Sellers' liability set forth in Section 7.4(c). During the five year period
referred to herein (or if earlier, until the limitations to the Sellers'
liability set forth in Section 7.4(c) have been met), (A) if at any time the
Sellers' Representative no longer serves as an officer of the Company, Standard
Pacific shall cause Buyer to provide written notice to the Sellers'
Representative of all Warranty Claims reasonably expected to result in
settlement or repair expenses in excess of $25,000; (B) Buyer shall take
reasonable actions to defend all Warranty Claims and to seek timely recovery
with respect to such claims under applicable insurance policies of the Acquired
Companies in effect at the time of the Closing (including the Tail Policy) or
prior thereto; and (C) the Sellers, at their sole expense, shall have the right
to participate in the defense of all Warranty Claims; provided, however, that
Buyer shall have the sole right to control the defense and settlement of each
such Warranty Claim.
55
(b) The aggregate maximum out-of-pocket liability of the
Sellers for Warranty Claims (the "Maximum Warranty Amount"), shall equal
$6,500,000, provided, however, that such amount shall be reduced to $5,000,000
if the Acquired Companies prior to the Closing Date, or the Sellers within 90
days after the Closing Date, purchase an insurance policy covering all Warranty
Claims that relate to real property developed or homes sold or constructed by
the Acquired Companies prior to the Closing Date, which in light of the
operations of the Acquired Companies prior to the Closing Date, is in an amount
and with coverages, deductibles and other terms that are reasonable and
customary for entities engaged in such operations, including an aggregate loss
limit of not less than $5,000,000 (the "Tail Policy"). The named insureds under
the Tail Policy shall be the Acquired Companies, Buyer and Standard Pacific. If
purchased by the Acquired Companies, the cost of the Tail Policy shall be borne
by the Acquired Companies and such cost will be reflected in the Balance Sheet
Date Financial Statements and will have the effect of decreasing the Balance
Sheet Date Net Book Value by the full amount of such payment. If purchased by
the Sellers, the cost of the Tail Policy shall be borne by the Sellers.
6.12 Insurance Rights and Indemnification. The Sellers shall use
their best efforts to cause Buyer and the Acquired Companies to be named as
additional insureds as of the Closing (in form reasonably acceptable to Buyer)
on all insurance policies of the Sellers or their respective Affiliates that
cover any Liabilities of the Acquired Companies arising with respect to acts or
omissions on or prior to the Closing Date, except to the extent such Liabilities
are retained by the Sellers pursuant to Section 7.2(a). In the event that the
Sellers are unable to add Buyer and the Acquired Companies as additional
insureds pursuant to this Section 6.12, the Sellers shall afford the benefits of
the insurance rights to Buyer and the Acquired Companies with respect to such
Liabilities.
6.13 Sellers' Representative. The Sellers shall at all times
maintain a representative (the "Sellers' Representative") for purposes of taking
certain actions and giving certain consents on behalf of the Sellers as
specified herein. Each Seller hereby appoints Xxxxx Xxxxxxxx as the Sellers'
Representative, provided however, if Xxxxx Xxxxxxxx dies, is incapacitated or
unavailable to act, Xxxxxx Xxxxxx is hereby authorized to take all actions as
the Sellers' Representative, and provided further if Xxxxxx Xxxxxx dies, is
incapacitated or unavailable to act, then Xxxxx Xxxxx is hereby authorized to
take all actions as the Sellers' Representative hereunder. The Sellers, each
having voting power in proportion to such Seller's Pro Rata Portion, may elect
one or more replacements to the Sellers' Representatives appointed hereunder by
majority vote of such interests, provided that Buyer is notified in writing
thereof (including written agreement by such replacement to serve as Sellers'
Representative as set forth herein). Each of the Sellers acknowledge that
actions taken, consents given and representations made by the Sellers'
Representative on behalf of the Sellers pursuant hereto shall be binding upon
the Sellers. This appointment and grant of power and authority by each Seller is
coupled with an interest and is irrevocable and shall not be terminated by any
act of the Seller or by operation of law, whether by the death or incapacity of
the Seller or by the occurrence of any other event. The Sellers' Representative
is authorized by the Sellers to take any action on behalf of the Sellers to
facilitate or administer the transactions contemplated hereby, including without
limitation, amending this Agreement, and executing such other documents or
instruments as the Sellers' Representative deems appropriate.
56
6.14 Use of "Westfield Homes" Trade Xxxx.
(a) For so long as the Sellers own the Excluded Company,
Buyer shall license the use of the service xxxx "Westfield Homes" (the "Trade
Xxxx") to the Excluded Company pursuant to the License Agreement, to be entered
into between the Company and the Excluded Company.
(b) If the Acquired Companies, Buyer and Standard Pacific
and each of their respective Affiliates, successors and assigns have completely
abandoned the use of the Trade Xxxx in all jurisdictions for a period of 24
months, then, provided that Xxxxx Xxxxxxxx is no longer an employee of the
Acquired Companies (and their respective successors) and the covenants of Xxxxx
Xxxxxxxx set forth in Section 6.8 have expired, Standard Pacific shall, and
shall cause its Affiliates to, upon written request of Xxxxx Xxxxxxxx to
Standard Pacific, and to the extent of their respective rights in the Trade Xxxx
at such time, license to Xxxxx Xxxxxxxx the right to use the Trade Xxxx in any
jurisdiction requested by Xxxxx Xxxxxxxx, other than the States of Florida,
North Carolina and South Carolina and any other jurisdiction where the Trade
Xxxx has been used at any time after the Closing Date by the Acquired Companies,
Buyer or Standard Pacific or any of their respective Affiliates, successors or
assigns. Such license agreement shall be in form and substance reasonably
satisfactory to Buyer. The licensor shall not be required to make any
representations as to the ownership, validity, enforceability or scope of the
Trade Xxxx in the license agreement.
(c) Except as set forth in this Section 6.14, the Sellers
shall not, and shall cause their Affiliates, including the Excluded Company, not
to use the Trade Xxxx or any xxxx confusingly similar to the Trade Xxxx in any
jurisdiction at any time.
6.15 Payment of Debt of Related Parties.
(a) Prior to the Closing, the Sellers will cause all Debt
owed to any Acquired Company by any of the Sellers or any of their Affiliates
(including the Excluded Company, but excluding the other Acquired Companies) to
be paid in full.
(b) Prior to the Closing, the Sellers shall cause the
Excluded Company to satisfy in full all Debt incurred by the Excluded Company
under the Credit Agreement and any other Contract pursuant to which any of the
Acquired Companies is a guarantor or otherwise obligated.
6.16 Release. In consideration of the payments of the Purchase
Price by Buyer to the Sellers, each Seller hereby gives the following general
release effective as of the Closing Date.
(a) Each Seller on behalf of himself or herself and his
or her agents, successors and assigns, hereby irrevocably and unconditionally
releases, acquits and forever discharges each of the Acquired Companies, Buyer
and their respective Affiliates and their respective partners, shareholders,
directors, officers and agents, and respective successors and assigns
(collectively, the "Released Parties"), to the extent not prohibited by
applicable law, from any and all charges, complaints, claims, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits,
rights, demands, remedies, costs, losses, debts, expenses and fees, of every
type, kind, nature, description or character, whether known or
57
unknown, suspected or unsuspected, liquidated or unliquidated, including those
arising out of or in connection with the Seller's employment with any of the
Acquired Companies and any equity or other interests the Seller may have or
claim to have in the Company (the "Claims"). Each Seller represents that he or
she has not heretofore assigned or transferred or purported to have assigned or
transferred to any Person any Claims released, acquitted and forever discharged
herein. This general release shall not affect any rights that the Seller may
have which arise solely under this Agreement, including payment of the Purchase
Price, or that arise after the Closing Date.
(b) Each Seller acknowledges and agrees that the releases
made herein constitute final and complete releases of the Released Parties with
respect to all Claims. Seller expressly acknowledges and agrees that this
general release is intended to include in its effect, without limitation, all
Claims which Seller does not know or suspect to exist in his or her favor at the
time hereof, and this general release contemplates the extinguishment of any and
all such Claims. In this regard, Seller expressly waives the provisions of
Section 1542 of the California Civil Code, which state:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR.
Furthermore, each Seller hereby expressly waives and
relinquishes any rights and benefits he or she may have under other statutes or
common law principles of similar effect. Each Seller understands that the facts
under which he or she gives this full and complete release and discharge of the
Released Parties may hereafter prove to be different than now known or believed
by him or her and Seller hereby accepts and assumes the risk thereof and agrees
that his or her full and complete release and discharge of the Released Parties
shall remain effective in all respects and not be subject to termination,
rescission or modification by reason of any such difference in facts.
(c) Each Seller represents that he or she has not filed
with any Governmental Entity any complaint, charge or lawsuit against any of the
Released Parties involving any Claims released herein, and that, except as
otherwise permitted by law, he or she will not do so at any time hereafter.
(d) Each Seller represents and acknowledges that in
executing this general release he or she does not rely and has not relied upon
any representation or statement not set forth herein made by any of the Released
Parties or by any of the Released Parties' agents, representatives or attorneys
with regard to the subject matter, basis or effect of this general release or
otherwise.
(e) Without limiting the foregoing, each Seller agrees
that he or she will not, directly or indirectly, (i) bring or cause to be
brought, or encourage or participate in the prosecution of, any action,
proceeding or suit seeking recovery by or on behalf of any Person from any
Released Party of any amount in respect of, or Damages with respect to, any of
the Claims, or (ii) defend any action, proceeding or suit in whole or in part on
the grounds that any
58
or all of the terms or provisions of this Section 6.16 are illegal, invalid, not
binding, unenforceable or against public policy.
6.17 Villa Xxxx Property. Following the Closing Date, the Employee
Sellers shall use their best efforts to cause Westfield Development to sell, by
September 30, 2002, the fill dirt located at the Villa Xxxx Property (the "Fill
Dirt"), pursuant to a purchase and license agreement reasonably satisfactory to
Westfield Development and Buyer (the "Fill Dirt License Agreement"), for not
less than $250,000. If the Fill Dirt License Agreement is not entered into by
Westfield Development on or before September 30, 0000, Xxxxx Xxxxxxxx shall
enter into the Fill Dirt License Agreement and purchase the Fill Dirt from
Westfield Development on October 1, 2002, for $250,000 in cash. If the Fill Dirt
License Agreement is entered into by Westfield Development on or before
September 30, 2002, for less than $250,000, concurrent with the execution of the
Fill Dirt License Agreement, Xxxxx Xxxxxxxx shall pay to Westfield Development
the difference between the price paid under the Fill Dirt License Agreement for
the Fill Dirt and $250,000. Notwithstanding the foregoing, for purposes of (a)
the Balance Sheet Date Financial Statements, the current zero valuation of the
Fill Dirt as reflected on the Financial Statements will remain unchanged, and
(b) the Earnout, the Company Pre-Tax Income shall not include any net income of
the Company and its Subsidiaries arising under the Fill Dirt License Agreement
or from any payments by Xxxxx Xxxxxxxx to Westfield Development under this
Section 6.17.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall survive for two
years following the Closing Date. Notwithstanding the foregoing, the
representations and warranties set forth in Sections 3.1, 3.3, 4.2, 4.3, 4.9,
4.10, 4.12, 4.13 and 5.4 shall survive for the applicable statute of limitations
period.
7.2 Indemnification.
(a) Each of the Sellers (other than the Xxxxxxxx Children
Sellers) shall, jointly and severally, and the Xxxxxxxx Children Sellers shall
severally, indemnify Standard Pacific, Buyer, their Affiliates (including the
Acquired Companies following the Closing) and each of their respective officers,
directors, employees, stockholders, agents and representatives (the "Buyer
Indemnified Parties") against and hold them harmless from any loss, Liability,
diminution in value, claim, damage or expense (including reasonable legal fees
and expenses) (collectively "Damages") suffered or incurred by any such
indemnified party to the extent arising from (i) any breach of any
representation or warranty of the Sellers contained in this Agreement or any of
the other Transaction Documents (without giving effect to any supplement to the
Sellers' Disclosure Schedule disclosing inaccuracies in the representations and
warranties as of the date of this Agreement); (ii) any breach of any covenant of
the Sellers contained in this Agreement (provided however, that each Seller
shall be solely liable for a breach by such Seller of the covenants contained in
Section 6.8, and such liability shall not be joint); (iii) the business and
operations of any business owned or operated by any of the Sellers or any of
their Affiliates (other than the Acquired Companies, but including the Excluded
Company) whether before or after the Closing Date; (iv) any Warranty Claims
relating to homes sold by the Acquired
59
Companies on or prior to the Closing Date, to the extent such Damages exceed the
Warranty Threshold and subject to the Maximum Warranty Amount; (v) any Damages
relating to or arising from the sale of assets of Westfield Homes of Illinois,
Inc. pursuant to that certain Asset Purchase Agreement between Westfield Homes
of Illinois, Inc. and DRH Cambridge Homes, Inc., dated September 19, 2001; (vi)
any Damages relating to ERISA or the Code arising from the relationship prior to
the Closing Date of the Acquired Companies with Paychex, including under the
Paychex Agreement; and (vii) any Damages relating to or arising from easements
granted by any of the Acquired Companies in connection with development of the
Villa Xxxx projects located in Sarasota County, Florida. The express written
waiver by Buyer and Standard Pacific of any condition set forth in Section 9.2
based on the inaccuracy of any representation or warranty, or on the
nonperformance of or noncompliance with any covenant or obligation, will not
preclude any right of Buyer or Standard Pacific or any other indemnified Person
to indemnification, payment of Damages, or other remedy based on such
representation, warranty, covenant, and obligation.
(b) Buyer and Standard Pacific shall, jointly and
severally, indemnify the Sellers and their Affiliates and each of their
respective officers, directors, employees, stockholders, agents and
representatives against and hold them harmless from any Damages suffered or
incurred by any such indemnified party to the extent arising from (i) any breach
of any representation or warranty of Standard Pacific or Buyer contained in this
Agreement or any of the other Transaction Documents (without giving effect to
any supplement to Buyer's Disclosure Schedule); and (ii) any breach of any
covenant of Standard Pacific or Buyer contained in this Agreement. The express
written waiver by the Sellers of any condition set forth in Section 9.3 based on
the inaccuracy of any representation or warranty, or on the nonperformance of or
noncompliance with any covenant or obligation, will not preclude any right of
the Sellers to indemnification, payment of Damages, or other remedy based on
such representation, warranty, covenant, and obligation.
7.3 Time Limitations. Neither the Buyer and Standard Pacific, nor
the Sellers will have any liability (for indemnification or otherwise) with
respect to any representation or warranty contained in this Agreement, other
than those in Sections 3.1, 3.3, 4.2, 4.3, 4.9, 4.10, 4.12, 4.13 and 5.4, unless
on or before the date that is two years following the Closing Date, the party
seeking indemnification notifies the party or parties from which it is seeking
indemnification in writing of a claim for Damages specifying the factual basis
of that claim in reasonable detail to the extent then known by such party.
Subject to Sections 7.4(c) and (d), a claim with respect to Section 3.1, 3.3,
4.2, 4.3, 4.9, 4.10, 4.12, 4.13 and 5.4 may be made at any time prior to 90 days
after the expiration of the applicable statute of limitations period.
7.4 Other Limitations.
(a) The Sellers shall have no liability (for
indemnification or otherwise) with respect to the matters described in Section
7.2(a)(i) (except for matters arising under Section 3.3 or Section 4.10 to which
the threshold described in this Section 7.4(a) shall be inapplicable) until the
total of all Damages with respect to such matters exceeds $250,000 (it being
agreed and acknowledged by the parties that for purposes of determining whether
the foregoing $250,000 threshold has been exceeded in the aggregate, the
representations and warranties of the Sellers contained herein shall not be
deemed qualified by any references herein to materiality generally
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or to whether any such breach results or may result in a Material Adverse Effect
on the Acquired Companies), and then only for the amount by which such Damages
exceed $250,000.
(b) Buyer and Standard Pacific will have no liability
(for indemnification or otherwise) with respect to the matters described in
Section 7.2(b)(i) until the total of all Damages with respect to such matters
exceeds $250,000 (it being agreed and acknowledged by the parties that for
purposes of determining whether the foregoing $250,000 threshold has been
exceeded in the aggregate, the representations and warranties of Buyer and
Standard Pacific contained herein shall not be deemed qualified by any
references herein to materiality generally or to whether any such breach results
or may result in a Material Adverse Effect on Buyer or Standard Pacific), and
then only for the amount by which such Damages exceed $250,000.
(c) (i) In no event will the Sellers' liability (for
indemnification or otherwise) with respect to the matters in Section
7.2(a)(i) and (iv) exceed, in the aggregate, the Cap, provided,
however,
(A) the Sellers' liability for claims or
causes of action arising from fraud or arising from the
representations and warranties contained in Sections 3.1, 3.2,
3.6, 4.2, 4.3 and 4.9 shall not be subject to the Cap
(collectively, with fraud, the "Excluded Claims");
(B) the Sellers' aggregate liability for
claims or causes of action arising from Warranty Claims that
relate to real property developed or homes that close escrow
on or before the Closing Date shall not exceed the Maximum
Warranty Amount (subject to the Warranty Threshold);
(C) the Sellers' aggregate liability for
claims from or causes of action arising from the
representations and warranties contained in Sections 3.4, 3.5,
4.1, 4.5(e), 4.6, 4.8, 4.11, 4.14, 4.16, 4.17, 4.18, 4.19,
4.20 and 4.21 shall not exceed $6,000,000;
(D) after the third anniversary of the
Closing Date, the Sellers' aggregate liability for all claims
under Section 7.2(a)(i) and (iv) arising after such date,
other than the Excluded Claims, shall not exceed (1)
$6,000,000 less (2) all indemnification payments made by the
Sellers for claims or causes of action arising under Section
7.2(a)(i) and (iv) from the Closing Date through the third
anniversary of the Closing Date (and if such sum is negative,
then the Sellers shall have no further liability for such
claims, other than the Excluded Claims); and
(E) from and after the fifth anniversary of
the Closing Date, the Sellers shall have no further liability
for claims under Section 7.2(a)(i) and (iv) arising after such
date, other than for the Excluded Claims which shall survive.
(ii) For purposes of this Section 7.4(c), a claim shall be
deemed to have arisen on the date Buyer or Standard Pacific provide
notice to the indemnifying party of such claim for Damages specifying
the factual basis of such claim in reasonable detail to the extent then
known by Buyer and Standard Pacific.
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(iii) If the Sellers indemnify Buyer or a Subsidiary of
Buyer for Damages which Buyer or any of its Subsidiaries subsequently
reimburse to the Sellers, such reimbursed amount shall not count
against the limits set forth in this Section 7.4(c).
(d) In no event will the liability of Buyer and Standard
Pacific (for indemnification or otherwise) with respect to the matters in
Section 7.2(b)(i) exceed, in the aggregate, the Cap, provided, however, claims
or causes of action arising from fraud, shall not be subject to the Cap.
(e) If Buyer or Standard Pacific seek indemnification
hereunder for any Warranty Claim, Buyer and Standard Pacific shall comply with
Section 6.11(a) in seeking timely insurance recoveries.
(f) Prior to commencing any arbitration against the
Sellers seeking indemnification hereunder, Buyer will, to the extent it can,
first utilize its rights to offset against amounts due under the Earnout;
provided, however, that this requirement will not apply if (i) the claim in
question arises more than 120 days prior to the next scheduled Earnout Payment
or (ii) if the amount of such claim exceeds Buyer's good faith projection of the
amount of such next scheduled Earnout Payment. Buyer may retain such amount of
the Earnout Payment as it reasonably believes is an adequate reserve against any
claims of which it has been advised and which may be covered by indemnification
hereunder, whether or not liquidated. To the extent Buyer offsets any amount
owed to it against an Earnout Payment under this Section 7.4(f), Buyer shall
offset such amount against the Earnout Payment, and then pay the remainder, if
any, to each Person, in proportion to their interest in the Earnout Payment.
(g) If Buyer or Standard Pacific commence any arbitration
seeking indemnification hereunder, or legal proceedings to enforce any such
arbitration award, they shall use their commercially reasonable efforts (for a
period of 30 days) to serve, and join in such action, all of the Sellers
potentially liable therefor. Notwithstanding the foregoing, (i) each of the
Sellers (other than the Xxxxxxxx Children Sellers) shall be jointly and
severally liable to the Buyer Indemnified Parties hereunder for 100% of the
Damages to which the Buyer Indemnified Parties are entitled under this
Agreement, and (ii) Buyer and Standard Pacific shall have no obligation to
exhaust remedies against any Seller before proceeding or enforcing against any
other Seller. Nothing herein shall effect the rights of such Sellers to
contribution from the other Sellers.
7.5 Set-Off. In addition to any rights of set-off, off-set or
other rights that Buyer or Standard Pacific may have at common law, by statute
or otherwise, Buyer and Standard Pacific shall have the right to set-off against
any amount that Buyer or Standard Pacific would otherwise be required to pay to
any Seller any amounts owing by the Sellers to Buyer pursuant to this Article
VII; provided, however, that notwithstanding Buyer or Standard Pacific's
exercise of the right to set-off described in this Section 7.5, Buyer, Standard
Pacific and the Sellers shall remain obligated to comply with their respective
obligations described in Section 7.6. Standard Pacific shall cause Buyer to
provide written notice to the Sellers of the nature and reason for any set-off
that occurs pursuant to this Section 7.5.
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7.6 Procedures Relating to Indemnification Involving Third Party
Claims.
(a) In order for an indemnified party to be entitled to
any indemnification provided for under this Agreement in respect of, arising out
of or involving a claim or demand made by any Person not a party to this
Agreement against the indemnified party (a "Third Party Claim"), such
indemnified party must promptly notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim after receipt by such indemnified
party of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall have been actually
prejudiced as a result of such failure. Thereafter, the indemnified party shall
promptly deliver to the indemnifying party after the indemnified party's receipt
thereof, copies of all notices and documents (including court papers) received
by the indemnified party relating to the Third Party Claim. In the event the
provisions of Section 8.4 are inconsistent with any provision of this Article
VII, the provisions of Section 8.4 shall control with respect to the contest of
tax matters. In the event that more than one Seller is an indemnifying party
hereunder, the indemnified party may provide the notices and other
communications required pursuant to this Section 7.6 solely to the Sellers'
Representative (or such other person selected by the Sellers based on their Pro
Rata Portion and provided in writing to the indemnified party).
(b) If a Third Party Claim is made against an indemnified
party, the indemnifying party shall be entitled to participate in the defense
thereof and, if it promptly so chooses and acknowledges its obligation to
indemnify the indemnified party therefore, to assume the defense thereof with
counsel selected by the indemnifying party; provided that such counsel is not
reasonably objected to by the indemnified party and provided further, that if
the indemnified party reasonably believes that the Damages that will be
recovered by such third parties may exceed the indemnification obligations of
the indemnifying parties (giving effect to the prior indemnification payments
made by the indemnifying parties, other claims pending, and the limitations set
forth in Section 7.4), then the indemnified party shall have the right, but not
the obligation, to assume such defense. Should the indemnifying party assume the
defense of a Third Party Claim, the indemnifying party shall not be liable to
the indemnified party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel (not reasonably
objected to by the indemnifying party), at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense.
(c) The indemnifying party shall be liable for the fees
and expenses of counsel employed by the indemnified party in connection with a
Third Party Claim for any period during which the indemnifying party has failed
to assume the defense thereof. In connection with any Third Party Claim, the
indemnified party and the indemnifying party shall cooperate with in the defense
or prosecution thereof. Such cooperation shall include the retention and (upon
the indemnified or indemnifying party's request) the provision to such party of
records and information which are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
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(d) If the indemnifying party shall have assumed the
defense of a Third Party Claim, the indemnified party shall agree to any
settlement, compromise or discharge of a Third Party Claim which the
indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim and which would not otherwise adversely
affect the indemnified party. If the indemnifying party shall not have assumed
the defense of a Third Party Claim, the indemnified party may settle, compromise
or discharge, such Third Party Claim in good faith without the indemnifying
party's prior consent.
(e) Notwithstanding the foregoing, the indemnifying party
shall not be entitled to assume the defense of any Third Party Claim (and shall
be liable for the reasonable fees and expenses of counsel incurred by the
indemnified party in defending such Third Party Claim) if:
(i) the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money
damages against the indemnified party which the indemnified party
reasonably determines, after conferring with its outside counsel,
cannot be separated from any related claim for money damages, or
(ii) the indemnified party reasonably determines,
after conferring with its outside counsel, that joint representation
would be expected to give rise to a conflict of interest.
If such equitable relief or other relief portion of the Third
Party Claim can be so separated from that for money damages, the indemnifying
party shall be entitled to assume the defense of the portion relating to money
damages. All claims under Section 7.2 other than Third Party Claims shall be
governed by Section 7.7.
7.7 Other Claims. A claim for indemnification for any matter not
involving a Third Party Claim may be asserted by written notice to the party
from whom indemnification is sought and shall be paid promptly after receipt of
such notice.
7.8 Sole and Exclusive Remedy. Should the Closing occur, except as
set forth in the Confidentiality Agreement and Section 6.8(e), (i) Buyer and
Standard Pacific's sole and exclusive remedies for any breach of the
representations, warranties or covenants of the Sellers under this Agreement and
any other Transaction Documents (other than claims of or causes of action
arising from fraud), shall be the remedies provided in this Article VII and
Article VIII, and Buyer and Standard Pacific hereby waive, from and after the
Closing, any and all other remedies (other than claims of or causes of actions
arising from fraud) which may be available at law or equity for any breach or
alleged breach of the representations, warranties and covenants of the Sellers
hereunder, and (ii) the Sellers' sole and exclusive remedies for any breach of
the representations, warranties or covenants of Buyer and Standard Pacific under
this Agreement and any other Transaction Documents (other than claims of or
causes of action arising from fraud), shall be the remedies provided in this
Article VII and Article VIII, and each of the Sellers hereby waives, from and
after the Closing, any and all other remedies (other than claims of or causes of
actions arising from fraud) which may be available at law or equity for any
breach or alleged
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breach of the representations, warranties and covenants of Buyer and Standard
Pacific hereunder. Notwithstanding the foregoing, nothing herein will limit the
right of any party to seek injunctive or other equitable relief for any breach
or alleged or threatened breach of any covenant in this Agreement or any other
Transaction Document.
ARTICLE VIII
TAX MATTERS
8.1 Section 338(h)(10) Elections.
(a) The parties intend that the acquisition by Buyer of
the stock of the Company qualify as a "qualified stock purchase" under Section
338 of the Code. At Buyer's request, the Sellers shall join Buyer in making a
timely election under Section 338(h)(10) of the Code and any comparable election
under state or local law with respect to the acquisition of the Shares acquired
pursuant to this Agreement (the "Section 338(h)(10) Election"). Buyer and the
Sellers shall be jointly responsible for the preparation and filing of all forms
that are necessary to effect the Section 338(h)(10) Election, including without
limitation an IRS Form 8023. Buyer and the Sellers shall execute and timely file
IRS Forms 8023 and all other forms, returns, elections, schedules and documents
required to effect and preserve timely the Section 338(h)(10) Election. After
the Closing Date, each party shall cooperate with the other and shall take all
actions reasonably requested by the other to assure timely and accurate filing
of the Section 338(h)(10) Election.
(b) In connection with the Section 338(h)(10) Election,
the parties agree that as of the Closing Date the fair market values of the
assets and liabilities deemed purchased for purposes of the computation of the
Aggregate Deemed Sale Price (as defined under applicable Treasury Regulations)
of the assets of the Acquired Companies with respect to which a Section
338(h)(10) Election is to be made and the allocation of such Aggregate Deemed
Sale Price among such assets in accordance with Section 338 of the Code is as
set forth on Schedule 8.1(b), as the same may be adjusted by Buyer and Standard
Pacific in their good faith reasonable judgment solely to reflect (i) changes
between the Balance Sheet Date Financial Statements and the financial statements
used to calculate the Estimated Balance Sheet Date Net Book Value, and (ii) the
financial results of operations of the Acquired Companies between the Balance
Sheet Date and the Closing Date (the "Allocation Agreement"). Subject to Section
8.1(d), Standard Pacific, Buyer and the Sellers shall act, and shall cause their
respective Affiliates to act, in accordance with the allocations contained in
the Allocation Agreement in any relevant Tax Returns or similar filings.
(c) The Sellers, Standard Pacific and Buyer agree that,
except as required by a final determination with any tax authority, they will
report, and will cause their respective Affiliates to report, the transfers
under this Agreement consistent with the Section 338(h)(10) Election and will
not take, or cause to be taken, any action in connection with the filing of any
Tax Return on behalf of the Sellers, Standard Pacific, Buyer, or their
Affiliates or otherwise that would be inconsistent with or prejudice the Section
338(h)(10) Election or the Allocation Agreement, and they will take all steps
necessary to obtain comparable treatment, where applicable, for state income Tax
purposes.
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(d) (i) In the event a Section 338(h)(10) Election is
made and the allocation set forth in the Allocation Agreement for
purposes of the Section 338(h)(10) Election changes as a result of a
tax determination, accounting determination or otherwise, such that the
after-tax amount received by the Sellers from this transaction is
decreased, Buyer agrees to pay to the Sellers, in their Pro Rata
Portion, an amount in cash such that the after-tax amount received by
the Sellers from this transaction equals the after-tax amount that the
Sellers would have received as a result of this transaction if the
Section 338(h)(10) Election had been made based on the values set forth
in the Allocation Agreement (the "Seller Gross-Up Amount").
(ii) In the event (A) a Section 338(h)(10)
Election is not made, or (B) the allocation set forth in the Allocation
Agreement for purposes of the Section 338(h)(10) Election changes as a
result of a tax determination, accounting determination or otherwise,
in either case such that the after-tax amount received by the Sellers
from this transaction is increased, the Sellers agree to pay to Buyer,
in their Pro Rata Portion, an amount in cash such that the after-tax
amount received by the Sellers from this transaction equals the
after-tax amount that the Sellers would have received as a result of
this transaction if the Section 338(h)(10) Election had been made based
on the values set forth in the Allocation Agreement (the "Buyer
Gross-Up Amount"). The Seller Gross Up Amount, or the Buyer Gross Up
Amount, as applicable, is referred to herein as the "Gross Up Amount").
(iii) The Gross-Up Amount shall be computed
assuming each Seller is taxable at the maximum marginal federal tax
rate applicable in 2002. Buyer shall provide to the Sellers the initial
computation of the Gross-Up Amount within a reasonable time following
the Closing Date. The Sellers shall have the right to review and
comment on such computations and, in the event the parties are unable
to resolve any differences, they shall appoint an Unrelated Accounting
Firm to finally resolve such differences and the Gross-Up Amount as so
resolved shall be paid either (A) to the Sellers, no later than five
days prior to the due date of Taxes (including payments of estimated
Taxes) resulting from the making of the Section 338(h)(10) Election, or
(B) to Buyer within five days after resolution of the Gross Up amount,
but no later than December 31, 2002. The parties agree that any Gross
Up Amounts paid hereunder shall be deemed to be an adjustment to the
Purchase Price. The parties further agree that all Tax Returns of the
Company and the Sellers shall be prepared in a manner consistent with
the computations that form the basis for the calculation of the
Gross-Up Amount, and further agree not to take any position
inconsistent with such calculations.
8.2 Indemnification Obligations With Respect to Taxes.
(a) The Sellers shall be responsible for, and shall
indemnify, defend and hold harmless Standard Pacific, Buyer and the Acquired
Companies from and against:
(i) all Taxes of the Acquired Companies due with
respect to periods ending on or prior to the Balance Sheet Date
including, without limitation, any Taxes resulting from the Corporate
Dividend;
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(ii) all Taxes of the Acquired Companies that are
due with respect to periods ("Straddle Periods") that include but do
not end on the Balance Sheet Date to the extent attributable to the
portion of the Straddle Period ending at the close of business on the
Balance Sheet Date;
(iii) all losses resulting from any inaccuracy in
or breach of the representations and warranties with respect to tax
matters that are contained in Section 4.8 or in this Article VIII and
any covenants contained in this Agreement with respect to tax matters
(without giving effect to any supplement to the Sellers' Disclosure
Schedule delivered after the date hereof), or contained in any
certificate or other Transaction Document delivered pursuant hereto;
and
(iv) all losses imposed on or sustained by Buyer
or its Affiliates (including the Acquired Companies after the Closing
Date), directly or indirectly, by reason of or in connection with the
foregoing amounts.
(b) Buyer shall be responsible for, and shall indemnify,
defend and hold harmless the Sellers from and against:
(i) all Taxes of the Acquired Companies that are
due with respect to periods commencing after the Balance Sheet Date;
(ii) all Taxes of the Acquired Companies that are
due with respect to Straddle Periods to the extent attributable to the
portion of the Straddle Period commencing with the Balance Sheet Date;
(iii) all losses resulting from any breach of any
covenants of Standard Pacific and Buyer contained in this Agreement
with respect to tax matters or contained in any certificate or other
Transaction Document delivered by Standard Pacific and Buyer pursuant
hereto; and
(iv) all losses imposed on or sustained by the
Sellers or their Affiliates, directly or indirectly, by reason or in
connection with the foregoing amounts.
(c) For purposes of this Article VIII, whenever it is
necessary to determine the liability for Taxes of the Acquired Companies for a
Straddle Period, the determination of the Taxes for the portion of the Straddle
Period ending on and including, and the portion of the Straddle Period beginning
after, the Balance Sheet Date shall be determined by assuming that the Straddle
Period consisted of two taxable years or periods, one which ended at the close
of the Balance Sheet Date and the other which began at the beginning of the day
following the Balance Sheet Date, and items of income, gain, deduction, loss or
credit, and state and local apportionment factors of the Acquired Companies for
the Straddle Period shall be allocated between such two taxable years or periods
on a "closing of the books basis" by assuming that the books of the Acquired
Companies were closed at the close of business on the Balance Sheet Date,
provided however, (i) exemptions, allowances or deductions that are calculated
on an annual basis, such as the deduction for depreciation; and (ii) periodic
taxes, such as real and personal property taxes, shall be apportioned ratably
between such periods on a daily basis.
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(d) Notwithstanding anything to the contrary in this
Agreement (including provisions set forth in Section 7.4 of this Agreement), the
obligations of the Sellers and Buyer under this Article VIII shall be
unconditional and absolute, shall not be limited, shall not be subject to a
deductible, threshold, cap, or similar concept, and shall remain in effect until
90 days after the expiration of all applicable statutes of limitation as to
time.
8.3 Tax Returns and Payment Responsibility.
(a) The Sellers will be responsible for and will cause to
be prepared and duly filed (i) all Tax Returns of the Acquired Companies that
are due before the Balance Sheet Date, and (ii) all Tax Returns of the Acquired
Companies that are income Tax Returns for all taxable periods ending on or
before the Balance Sheet Date. The Sellers shall pay any Taxes due in respect of
the Tax Returns described in the preceding sentence. Buyer shall file or cause
to be filed when due all Tax Returns with respect to the Acquired Companies,
other than those that are the responsibility of the Sellers pursuant to this
paragraph. Without affecting the indemnification obligations of the Sellers
under this Agreement, in the event that the Sellers fail to prepare and file or
cause to be prepared and filed any Tax Return that they are required to file
pursuant to this paragraph, Buyer shall have the right, but not the obligation,
to prepare and file all such Tax Returns at their expense. The Sellers shall pay
by wire transfer to Buyer the Taxes for which they are liable pursuant to this
Article VIII (including Taxes set forth in Section 8.2(a)(i) and (ii)), but
which are payable with Tax Returns to be filed by Buyer pursuant to this section
at least three days prior to the due date for the payment of such Taxes.
(b) All Tax Returns that are to be prepared and filed by
Buyer pursuant to the preceding paragraph and that relate to Taxes for which the
Sellers are liable under this Article VIII (including Straddle Period Tax
Returns) shall be submitted to the Sellers not later than 15 days prior to the
due date for filing of such Tax Returns (or if such due date is within 45 days
following the Closing Date, as promptly as practicable following the Closing
Date). The Sellers shall have the right to review such Tax Returns and to review
all work papers and procedures used to prepare any such Tax Return. If the
Sellers' Representative, within 10 days after delivery of any such Tax Return,
notifies Buyer in writing that it objects to any of the items in such Tax
Return, the parties shall attempt in good faith to resolve the dispute and, if
they are unable to do so, the disputed items shall be resolved (within a
reasonable time, taking into account the deadline for filing such Tax Return) by
an internationally recognized independent accounting firm chosen by both Buyer
and the Sellers. Upon resolution of all such items, the relevant Tax Return
shall be filed on that basis. The costs, fees and expenses of such accounting
firm shall be borne equally by Buyer and the Sellers.
(c) Buyer shall not (and shall not cause or permit the
Acquired Companies to) amend, refile or otherwise modify (or grant an extension
of any statute of limitation with respect to) any Tax Return relating in whole
or in part to the Acquired Companies with respect to any taxable year or period
ending on or before the Balance Sheet Date or with respect to any Straddle
Period without the prior written consent of the Sellers' Representative, which
consent may not be unreasonably withheld or delayed. The Sellers shall not
amend, refile, or otherwise modify any such Tax Return if such action could have
an adverse affect on the liability of the Acquired Companies, without the prior
written consent of Buyer, which consent may not be unreasonably withheld or
delayed.
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(d) All sales, use, transfer and other similar Taxes,
including any stock or asset transfer stamp Taxes shall be borne jointly and
severally by the Sellers.
8.4 Contest Provisions.
(a) In the event (i) any Seller or their Affiliates or
(ii) Buyer or its Affiliates receive notice of any pending or threatened Tax
audits or assessments or other disputes concerning Taxes with respect to which
the other party may incur liability under this Article VIII, the party in
receipt of such notice shall promptly notify the other party of such matter in
writing, provided that failure to comply with this provision shall not affect a
party's right to indemnification hereunder unless such failure materially
adversely affects the party's ability to challenge such Tax audits or
assessments.
(b) The Sellers shall have the sole right to represent
the interests of the Acquired Companies in any Tax audit or administrative or
court proceeding relating to any Tax for any taxable period ending on or before
the Balance Sheet Date, and to employ counsel of their choice at their expense.
Notwithstanding the foregoing, the Sellers shall not be entitled to settle,
either administratively or after the commencement of litigation, any claim for
Taxes with respect to any Tax Return of any of the Acquired Companies that is
not prepared on a consolidated, combined or unitary basis which would adversely
affect the liability for Taxes of Buyer or the Acquired Companies for any period
after the Balance Sheet Date to any extent (including, but not limited to, the
imposition of income Tax deficiencies, the reduction of asset basis or cost
adjustments, the lengthening of any amortization or depreciation periods, the
denial of amortization or depreciation deductions, or the reduction of the loss
or credit carry forwards) without the prior written consent of Buyer, which
consent shall not be unreasonably withheld, and such consent shall not be
necessary to the extent that the Sellers have indemnified Buyer against the
effect of any such settlement.
(c) Buyer shall have the sole right to represent the
interests of the Acquired Companies in any Tax audit or administrative or court
proceeding relating to Taxes with respect to taxable periods including (but not
ending on) or beginning after the Balance Sheet Date and to employ counsel of
its choice at its expense, provided that Buyer shall not be entitled to settle,
either administratively or after the commencement of litigation, any claim
regarding Taxes that would adversely affect the liability of the Sellers for any
Taxes for any period ending on or before the Balance Sheet Date or for any
Straddle Period, without the prior consent of the Sellers' Representative, which
consent shall not be unreasonably withheld and shall not be required to the
extent that Buyer has indemnified the Sellers against the effects of such
settlement. Where consent to a settlement is withheld by the Sellers'
Representative pursuant to this section, the Sellers may continue or initiate
any further proceedings at their own expense, provided that the liability of
Buyer, after giving effect to this Agreement, shall not exceed the liability
that would have resulted from the settlement or amended return.
8.5 Assistance and Cooperation. After the Closing Date, the
Sellers, on the one hand, and Buyer, on the other hand, shall (and shall cause
their respective Affiliates to): (a) assist the other party in preparing and
filing any Tax Returns or reports which such other party is responsible for
preparing and filing in accordance with this Article VIII; (b) cooperate fully
in preparing for any audits of, or disputes with taxing authorities regarding,
any Tax Returns of the
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Acquired Companies; (c) make available to the other and to any taxing authority
as reasonably requested all information, records, and documents relating to
Taxes of the Acquired Companies; (d) provide timely notice to the other in
writing of any pending or threatened Tax audits or assessments of the Acquired
Companies for taxable periods for which the other may have a liability under
this Article VIII; and (e) furnish the other with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period.
8.6 Retention of Records. After the Closing Date, the Sellers,
Buyer and the Acquired Companies will preserve all information, records or
documents relating to liabilities for Taxes of the Acquired Companies until six
months after the expiration of any applicable statute of limitations (including
extensions thereof) with respect to the assessment of such Taxes, provided that
neither party shall dispose of any of the foregoing items without first offering
such items to the other party.
8.7 Other Provisions. The provisions of this Article VIII (and not
Section 7.2) shall govern all indemnity claims with respect to Tax matters of
the Acquired Companies and the purchase of the Shares pursuant to this
Agreement. All indemnity payments under this Agreement and any adjustment to any
payment of the Purchase Price as described in Section 2.3 shall be treated as an
adjustment to the Purchase Price paid for the Shares for tax purposes.
ARTICLE IX
CONDITIONS
9.1 Conditions to Each Party's Obligation to Effect the Stock
Purchase. The respective obligations of each party to effect the Stock Purchase
and the other transactions contemplated hereby are subject to the satisfaction
or waiver at or prior to the Closing Date of each of the following conditions:
(a) All filings with any Governmental Entity required to
be made prior to the Closing Date by the Sellers, Buyer, Standard Pacific or any
of their respective Affiliates, and all consents of any Governmental Entity
required to be obtained prior to the Closing Date by the Sellers, Buyer,
Standard Pacific or any of their respective Affiliates in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by the Sellers, Buyer and Standard Pacific
shall have been made or obtained (as the case may be).
(b) No court or other Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order, whether
temporary, preliminary or permanent (collectively, an "Order") that is in effect
and restrains, enjoins or otherwise prohibits, materially delays, makes illegal,
or would be violated by consummation of the transactions contemplated in this
Agreement.
9.2 Conditions to Obligations of Buyer and Standard Pacific. The
obligations of Buyer and Standard Pacific to effect the Stock Purchase are also
subject to the satisfaction or waiver by Buyer and Standard Pacific at or prior
to the Closing Date of the following conditions:
70
(a) each of the representations and warranties of the
Sellers set forth in this Agreement qualified as to materiality shall be true
and correct, and those not so qualified shall each be true and correct in all
material respects, as of the date of this Agreement and as of the Closing Date
(without giving effect to any amendment or supplement to the Sellers' Disclosure
Schedule) as though made on and as of the Closing Date (except to the extent
such representations and warranties speak as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier
date);
(b) the Sellers shall have performed in all material
respects all obligations required to be performed by them under this Agreement
at or prior to the Closing Date;
(c) Buyer shall have been furnished with a certificate,
executed by the Sellers' Representative, dated the Closing Date, certifying as
to the fulfillment of the conditions in Sections 9.2(a) and (b);
(d) all consents required under the Material Contracts in
connection with the execution, delivery and performance of this Agreement, the
other Transaction Documents or the consummation of the transactions contemplated
hereby or thereby, including, to the extent necessary, consents to the
prepayment of all Debt of the Acquired Companies as contemplated by Section
2.2(a)(iii), shall been obtained by the Sellers on terms that are not materially
burdensome, shall be in full force and effect and shall have been delivered to
Buyer;
(e) Buyer shall have received opinions dated the Closing
Date of counsel to Sellers, substantially in the form of Exhibit D-1 from
Bricklemyer, Smolker & Bolves, P.A., substantially in the form of Exhibit D-2
from Xxxx, Xxxx & Xxxxxxxxx, P.A., substantially in the form of Exhibit D-3 from
Xxxxxxx Xxxxxxxxx, and substantially in the form of Exhibit D-4 from Ungaretti &
Xxxxxx;
(f) there shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (or by any other Person any
suit, action or proceeding which has a reasonable likelihood of success), (A)
seeking to obtain from Buyer, Standard Pacific or any Affiliate thereof, in
connection with the purchase and sale of the Shares or the other transactions
contemplated hereby any money damages; (B) seeking to prohibit or limit the
ownership or operation by Buyer, Standard Pacific or any of the Acquired
Companies, of any material portion of the business or assets of Buyer, Standard
Pacific or any of the Acquired Companies, or to compel Buyer, Standard Pacific
or any of the Acquired Companies to dispose of or hold separate any material
portion of the business or assets of Buyer, Standard Pacific or the Acquired
Companies, in each case as a result of the purchase and sale of the Shares or
any of the other transactions contemplated by this Agreement; (C) seeking to
impose limitations on the ability of Buyer or Standard Pacific to acquire or
hold, or exercise full rights of ownership of the Shares, including the right to
vote the Shares on all matters properly presented to the shareholders of the
Company; (D) seeking to prohibit Buyer or Standard Pacific from effectively
controlling in any material respect the business or operations of any of the
Acquired Companies; (E) claiming that such Person is a beneficial owner of, or
has the right to acquire or to obtain beneficial ownership of, any Capital Stock
of any of the Acquired Companies or is entitled to any portion of the Purchase
Price; or (F) that may otherwise have the effect of preventing, materially
delaying, or
71
otherwise materially interfering with the transaction contemplated by this
Agreement and the other Transaction Documents;
(g) since the date of this Agreement, there shall have
been no event, change, occurrence or circumstance having, or which could have,
individually or in the aggregate, a Material Adverse Effect on the Acquired
Companies;
(h) Buyer shall have received the resignations of the
directors of the Acquired Companies pursuant to Section 6.9;
(i) Buyer shall have received a duly executed and
delivered copy of a United States Internal Revenue Service Form 8023 from each
of the Sellers( and, to the extent any information in such forms is not
available on the Closing Date, such information may be added by Standard
Pacific, subject to the reasonable prior approval of the Sellers'
Representative), and each of the Sellers shall have delivered such other
documents Standard Pacific deems reasonably necessary or advisable for an
election under Section 338(h)(10) of the Code and any comparable election under
state or local law with respect to the transactions contemplated hereby, each in
a form reasonably satisfactory to Standard Pacific;
(j) all assets of the Acquired Companies shall be free
and clear of all Liens and Buyer shall have received original UCC Termination
Statements and mortgage reconveyances suitable for filing with the appropriate
authorities to evidence the release of such Liens;
(k) Buyer shall have received such other documents as
Buyer reasonably requests evidencing the satisfaction of any condition referred
to in this Section 9.2.;
(l) each of the Employee Sellers shall have entered into
his respective Employment Agreement;
(m) the Stockholder Agreement shall have been terminated;
and
(n) the Xxxxx Fargo Agreement shall have been amended to
the reasonable satisfaction of Standard Pacific.
9.3 Conditions to Obligations of the Sellers. The obligations of
the Sellers to effect the Stock Purchase are also subject to the satisfaction or
waiver by the Sellers prior to the Closing Date of the following conditions:
(a) each of the representations and warranties of Buyer
and Standard Pacific set forth in this Agreement qualified as to materiality
shall be true and correct, and those not so qualified shall each be true and
correct in all material respects, as of the date of this Agreement and as of the
Closing Date (without giving effect to any amendment or supplement to Buyer's
Disclosure Schedule) as though made on and as of the Closing Date (except to the
extent such representations and warranties speak as of an earlier date, in which
case such representation or warranty shall be true and correct as of such
earlier date);
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(b) Buyer and Standard Pacific shall have performed in
all material respects all obligations required to be performed by them under
this Agreement at or prior to the Closing Date;
(c) the Sellers' Representative shall have been furnished
with a certificate, executed by a duly authorized officer of Buyer, dated the
Closing Date, certifying as to the fulfillment of conditions in Sections 9.3(a)
and (b);
(d) Buyer shall have delivered to each Seller, such
Seller's Pro Rata Portion of the Closing Payment;
(e) the Sellers shall have received an opinion dated the
Closing Date of Xxxxxx, Xxxx & Xxxxxxxx LLP, counsel to Buyer, substantially in
the form of Exhibit E; and
(f) the Sellers shall have received such other documents
as the Sellers' Representative reasonably requests evidencing the satisfaction
of any condition referred to in this Section 9.3.
ARTICLE X
TERMINATION
10.1 Termination by Mutual Consent. This Agreement may be
terminated and the Stock Purchase may be abandoned at any time prior to the
Closing Date, by mutual written consent of the Sellers, Buyer and Standard
Pacific.
10.2 Termination by Either Buyer or the Sellers. This Agreement may
be terminated and the Stock Purchase may be abandoned at any time prior to the
Closing Date by either Standard Pacific and Buyer or the Sellers if any Order
permanently restraining, enjoining or otherwise prohibiting the Stock Purchase
shall be entered and such Order is or shall have become nonappealable, provided
that (i) the party seeking to terminate this Agreement shall have complied with
its obligations under Section 6.2 with respect to the removal or lifting of such
Order, and (ii) the noncompliance with this Agreement by the party seeking to
terminate this Agreement shall not have been the proximate cause of the issuance
of the Order.
10.3 Termination by Sellers. This Agreement may be terminated and
the Stock Purchase may be abandoned at any time prior to the Closing Date, by
the Sellers if:
(a) (i) the Stock Purchase shall not have been
consummated on or before August 31, 2002, or
(ii) any of the conditions set forth in Section 9.1
or 9.3 shall have become incapable of fulfillment;
provided, however, that the right to terminate this Agreement pursuant to this
subsection (a) shall not be available to the Sellers if any of them has breached
in any material respect its obligations under this Agreement in any manner that
shall have proximately contributed to the failure referenced in this subsection
(a); or
73
(b) there has been a material breach by Buyer or Standard
Pacific of any representation, warranty, covenant or agreement of Standard
Pacific and Buyer contained in this Agreement that is not curable or, if
curable, is not cured prior to the earlier of (i) 30 days after written notice
of such breach is given by the Sellers to Buyer and Standard Pacific and (ii)
the date referred to in subsection (a).
10.4 Termination by Buyer. This Agreement may be terminated and the
Stock Purchase may be abandoned at any time prior to the Closing Date by Buyer
and Standard Pacific if:
(a) (i) the Stock Purchase shall not have been
consummated on or before August 31, 2002, or
(ii) any of the conditions set forth in Section
9.1 or Section 9.2 shall have become incapable of fulfillment;
provided, however, that the right to terminate this Agreement pursuant to this
subsection (a) shall not be available to Buyer or Standard Pacific if they have
breached in any material respect their obligations under this Agreement in any
manner that shall have proximately contributed to the failure referred to in
this subsection (a); or
(b) there has been a material breach of any
representation, warranty, covenant or agreement of the Sellers contained in this
Agreement that is not curable or, if curable, is not cured prior to the earlier
of (i) 30 days after written notice of such breach is given by Buyer or Standard
Pacific to the Sellers' Representative, and (ii) the date referred to in
subsection (a).
10.5 Effect of Termination. Each party's right of termination under
this Article X is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated, all further
obligations of the parties under this Agreement will terminate, except that
Sections 6.3 and 6.5 and Article XI hereof and the Confidentiality Agreement
entered into between Standard Pacific and the Company on February 13, 2002 (the
"Confidentiality Agreement"), will survive. Notwithstanding the foregoing, if
this Agreement is terminated by a party because of the breach of the Agreement
by another party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of another
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
ARTICLE XI
MISCELLANEOUS
11.1 Entire Agreement; Assignment.
(a) This Agreement (including the documents, schedules,
exhibits and instruments referred to herein) constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
and all contemporaneous oral agreements and understandings among the parties
with respect to the subject matter hereof, except for (i) the provisions of the
Confidentiality Agreement not inconsistent herewith, and (ii) the compensation
74
provisions set forth in those certain letters from Standard Pacific to each
Employee Seller regarding "Proposed Employee Compensation," dated August 2,
2002. Except for express representations, warranties and covenants of Standard
Pacific, Buyer, and the Sellers contained herein, in the Transaction Documents,
or made by the executive officers or other authorized officers of such Persons
in writing after the date hereof, there are no representations or warranties
whatsoever by or on behalf of the Sellers, their Affiliates or agents relating
to the Acquired Companies, on the one hand and Standard Pacific, Buyer, their
Affiliates or agents relating to Standard Pacific, Buyer or the Standard Pacific
Common Stock, on the other hand.
(b) Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
each of the other parties hereto; provided, however, that Buyer may assign all
or a portion of its rights and obligations under this Agreement to any
Subsidiary of Standard Pacific without the consent of the Sellers (which such
assignment shall not relieve Buyer of any obligation or liability under this
Agreement).
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
11.2 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and effect
and in lieu of such invalid or unenforceable provision there shall be
automatically added as part of this Agreement a valid and enforceable provision
as similar in terms to the invalid or unenforceable provision as possible,
provided that this Agreement as amended, (i) reflects the intent of the parties
hereto, and (ii) does not change the bargained for consideration or benefits to
be received by each party hereto.
11.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or telecopier to the
respective parties as follows:
If to Standard Pacific or Buyer:
Standard Pacific Corp.
00000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxx
Facsimile Number: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxx
Facsimile Number: (000) 000-0000
75
If to the Sellers (prior to the Closing) or the Sellers' Representative
(post-Closing):
Westfield Homes USA, Inc.
0000 X. Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxxxxx
Facsimile Number: (000) 000-0000
with a copy to:
Sack & Xxxxxx, P.C.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Facsimile Number: (000) 000-0000
or to such other address as the Person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
11.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, regardless of the
laws or rules that might otherwise govern under applicable principles of
conflicts of laws thereof. In the event of the bringing of any action or suit by
a party hereto against another party hereunder arising out of or relating to
this Agreement, which claim or suit is for equitable relief, or to enforce any
resolution, opinion or order of an arbitrator pursuant to Section 11.12, or is
not subject to arbitration, as determined pursuant to Section 11.12, then in
that event, (i) the sole forum for resolving such disputes shall be the state
and federal courts located in Tampa, Florida, and each of the parties hereby
irrevocably submits to such exclusive jurisdiction, and (ii) the prevailing
party in such action or dispute, whether by final judgment, or out of court
settlement shall be entitled to have and recover of and from the non-prevailing
parties all costs and expenses of suit, including actual attorneys' fees. Any
judgment or order entered in any final judgment shall contain a specific
provision providing for the recovery of all costs and expenses of suit,
including actual attorneys' fees (collectively "Costs") incurred in enforcing,
perfecting and executing such judgment. For the purposes of this paragraph,
Costs shall include, without limitation, attorneys' fees, costs and expenses
incurred in (a) appeals, (b) post-judgment motions, (c) contempt proceeding, (d)
garnishment, levy, and debtor and third party examination, (e) discovery, and
(f) bankruptcy litigation. This paragraph shall survive any termination of this
Agreement and the Closing.
11.5 Construction. The headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement. Unless the context clearly requires otherwise
"or" is not exclusive, and "includes" means "includes, but is not limited to."
11.6 Counterparts. This Agreement may be executed in counterparts,
including facsimile counterparts, each of which shall be deemed to be an
original, but all of which shall
76
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile transmission shall be effective
delivery of a manually executed counterpart to this Agreement.
11.7 Parties In Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement,
including any employee or former employee of the Acquired Companies (or any
beneficiary or dependent thereof).
11.8 Waiver. No waiver of any breach of the provisions of this
Agreement will be deemed to have been made by any party, unless such waiver is
expressed in writing and signed by the party against which it is to be enforced.
The waiver by any party of any right under this Agreement or to a remedy for the
breach of any of the provisions herein shall not operate nor be construed by the
breaching party as a waiver of the non-breaching party's remedies with respect
to any other or continuing or subsequent breach.
11.9 Amendments. No amendment or modification in respect of this
Agreement shall be effective unless it shall be in writing and signed by the
parties hereto.
11.10 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as any other party hereto may reasonably request for the purpose of carrying out
the transactions contemplated by this Agreement.
11.11 Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any other rights,
remedies, powers and privileges provided by law.
11.12 Arbitration. Any dispute, claim or controversy arising out of
or relating to this Agreement or the breach, termination, enforcement,
interpretation or validity thereof, including the determination of the scope or
applicability of this Agreement to arbitrate, shall be determined by arbitration
in Tampa, Florida, before a sole arbitrator, in accordance with the laws of the
State of Florida for agreements made in and to be performed in that State. If
any dispute, claim or controversy arising out of or relating to this Agreement
or any other Transaction Document arises at the same time and relates to the
same or similar facts, claims or events as a dispute, claim or controversy
relating to or arising out of the employment of any Seller by Buyer or any of
the Acquired Companies or the License Agreement, such disputes, claims or
controversies shall, to the extent practicable, be combined in one arbitration
proceeding, and in such event, the provisions of this Agreement governing
dispute resolution shall supersede any provisions relating to such matters in
any employment agreement between any such Seller and any Acquired Company or any
Affiliate of the Acquired Companies or in the License Agreement, as applicable.
The arbitration shall be administered by the American Arbitration Association
pursuant to Commercial Arbitration Rules including the Emergency Interim Relief
Procedures, and judgment on the award rendered by the arbitrator may be entered
in any court set forth in Section 11.4. The sole arbitrator shall be a retired
or former district court or appellate court judge of a United States District
Court or United States Court of Appeals. The Federal Rules of
77
Evidence shall govern the admissibility of evidence during the arbitration. The
arbitrator will have no authority to award punitive or other damages not
measured by the prevailing party's actual damages, except as may be required by
statute. The arbitrator shall award to the prevailing party, if any, as
determined by the arbitrator, all of its costs and fees. "Costs and fees" mean
all reasonable pre-award expenses of the arbitration, including the arbitrators'
fees, administrative fees, travel expenses, out-of-pocket expenses such as
copying and telephone, court costs, witness fees, expert costs and fees, and
attorneys' fees. In absence of a determination of a prevailing party, the
parties shall split equally all expenses of the arbitration and shall bear their
own attorneys', expert, and witness fees and costs. The decision and award of
the arbitrator shall be accompanied by a reasoned opinion.
[Signature page follows]
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[SIGNATURE PAGE - STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
"STANDARD PACIFIC"
Standard Pacific Corp.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------ -----------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx Name: Xxxxxxx X. Xxxxxxx
Title Chief Executive Officer and Title President
Chairman of the Board
"BUYER"
WF Acquisition, Inc.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------ -----------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx Name: Xxxxxxx X. Xxxxxxx
Title Chief Executive Officer and Title President
Chairman of the Board
"SELLERS"
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxxx Xxxxx
------------------------------------ -----------------------------
Name: Xxxxx Xxxxxxxx Name: Xxxxx Xxxxx
By: /s/ Xxxx Xxxxxxxxxxxxxx By: /s/ Xxxxxx Xxxxxx
------------------------------------ -----------------------------
Name: Xxxx Xxxxxxxxxxxxxx Name: Xxxxxx Xxxxxx
By: /s/ Xxxxxx Xxxxx By: /s/ Xxxxx Xxxxxx
------------------------------------ -----------------------------
Name: Xxxxxx Xxxxx Name: Xxxxx Xxxxxx
S-1
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------ -----------------------------
Name: Xxxxx Xxxxxxx Name: Xxxxxxx Xxxxxxxx
Xxxxx X. Xxxxxxxx Irrevocable Xxxxx X. Xxxxxxxx Irrevocable
Trust for Xxxxxxxxx Xxxxxxxx, dated Trust for Xxxxxxxxx Xxxxxxxx, dated
May 16, 1988 May 16, 1988
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------ -----------------------------
Name: Xxxxxx X. Xxxxxxxx, Trustee Name: Xxxxxx X. Xxxxxxxx, Trustee
S-2
