1
EXHIBIT B
[EXECUTION COPY]
AGREEMENT AND PLAN OF MERGER
AMONG
CENTEX REAL ESTATE CORPORATION,
MFH HOLDING COMPANY,
MFH ACQUISITION COMPANY,
CAVCO INDUSTRIES, INC.
AND
THE SHAREHOLDER PARTIES IDENTIFIED HEREIN
DATED AS OF DECEMBER 4, 1996
2
TABLE OF CONTENTS
ARTICLE I - THE MERGER AND RELATED TRANSACTIONS.......................... 2
SECTION 1.1. The Merger........................................... 2
SECTION 1.2. Effective Time....................................... 2
SECTION 1.3. Effects of the Merger................................ 3
SECTION 1.4. Charter and Bylaws................................... 3
SECTION 1.5. Directors............................................ 3
SECTION 1.6. Officers............................................. 3
SECTION 1.7. Holding Company Transactions......................... 3
SECTION 1.8. Closing.............................................. 3
ARTICLE II - CONVERSION OF SECURITIES..................................... 5
SECTION 2.1. Conversion of Capital Stock; Company Shares.......... 5
SECTION 2.2. Conversion of Capital Stock; Merger Subsidiary Shares 5
SECTION 2.3. Company Stock Options................................ 5
SECTION 2.4. Dissenting Company Shares............................ 6
SECTION 2.5. Payment for Company Shares........................... 7
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY...................................................... 8
SECTION 3.1. Organization and Qualification...................... 8
SECTION 3.2. Authority; Binding Effect........................... 9
SECTION 3.3. Absence of Conflicts................................ 9
SECTION 3.4. Governmental Consents and Filings................... 10
SECTION 3.5. Proxy Statement; Schedule 13E-3. ................... 10
SECTION 3.6. Fairness Opinion; Board Findings and Recommendation. 10
SECTION 3.7. Capitalization. .................................... 11
SECTION 3.8. Subsidiaries........................................ 11
SECTION 3.9. Commission Reports.................................. 12
SECTION 3.10. Financial Statements................................. 13
SECTION 3.11. Absence of Undisclosed Liabilities................... 13
SECTION 3.12. Absence of Certain Changes or Events................. 14
SECTION 3.13. Property............................................. 16
SECTION 3.14. Contracts............................................ 17
SECTION 3.15. Litigation........................................... 20
SECTION 3.16. Compliance with Laws and Other Requirements.......... 20
SECTION 3.17. Environmental Matters................................ 21
SECTION 3.18. Taxes................................................. 23
-i-
3
SECTION 3.19. Employee Benefit Plans................................ 25
SECTION 3.20. Labor Matters......................................... 27
SECTION 3.21. Intellectual Property Rights.......................... 27
SECTION 3.22. Permits............................................... 28
SECTION 3.23. Insurance............................................. 28
SECTION 3.24. Transactions with Affiliates.......................... 29
SECTION 3.25. Absence of Certain Business Practices................. 29
SECTION 3.26. Disclosure............................................ 29
SECTION 3.27. Brokers' or Finders' Fees............................. 30
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDER PARTIES ......................................... 30
SECTION 4.1. Organization......................................... 30
SECTION 4.2. Authority; Binding Effect............................ 31
SECTION 4.3. Absence of Conflicts................................. 31
SECTION 4.4. Governmental Consents and Filings.................... 32
SECTION 4.5. Proxy Statement; Schedule 13E-3...................... 33
SECTION 4.6. Title to Company Shares.............................. 33
SECTION 4.7. Capitalization; Issuance of Shares. ................. 33
SECTION 4.8. No Material Operations. ............................. 34
SECTION 4.9. Brokers' or Finders' Fees............................ 34
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF CREC........................ 34
SECTION 5.1. Organization......................................... 34
SECTION 5.2. Authority; Binding Effect............................ 34
SECTION 5.3. Absence of Conflicts................................. 35
SECTION 5.4. Governmental Consents and Filings.................... 35
SECTION 5.5. Financing. .......................................... 35
SECTION 5.6. Brokers' or Finders' Fees............................ 35
ARTICLE VI - CERTAIN COVENANTS............................................ 36
SECTION 6.1. Conduct of Business................................. 36
SECTION 6.2. Other Proposals..................................... 39
SECTION 6.3. Access to Information............................... 40
SECTION 6.4. Best Efforts........................................ 41
SECTION 6.5. Certain Actions by the Shareholder Parties.......... 41
SECTION 6.6. HSR Act............................................. 41
SECTION 6.7. Special Meeting..................................... 42
-ii-
4
SECTION 6.8. Proxy Statement; Schedule 13E-3...................... 42
SECTION 6.9. Company Stock Options................................ 43
SECTION 6.10. Indemnification of Directors and Officers............ 43
SECTION 6.11. Notification of Certain Other Matters................ 44
SECTION 6.12. Convertible Note..................................... 45
SECTION 6.13. Arizona Takeover Statute Matters..................... 45
SECTION 6.14. Post-Termination Proposal............................ 46
SECTION 6.15. Supplemental Disclosure.............................. 47
ARTICLE VII - CONDITIONS TO CLOSING....................................... 47
SECTION 7.1. Conditions to the Obligations of Each of the Parties. 47
SECTION 7.2. Conditions to the Obligations of CREC................ 48
SECTION 7.3. Conditions to the Obligations of the Company and the
Shareholder Parties. ......................................... 49
ARTICLE VIII - INDEMNIFICATION............................................ 49
SECTION 8.1. Indemnification by the Shareholder Parties........... 49
SECTION 8.2. Indemnification by CREC.............................. 50
SECTION 8.3. Third-Party Claims; Procedures....................... 50
ARTICLE IX - TERMINATION.................................................. 51
SECTION 9.1. Termination.......................................... 51
SECTION 9.2. Effect of Termination................................ 53
SECTION 9.3. Termination Payments................................. 54
ARTICLE X - DEFINITIONS................................................... 54
SECTION 10.1. Definitions.......................................... 54
ARTICLE XI - MISCELLANEOUS................................................ 67
SECTION 11.1. Survival of Representation and Warranties............ 67
SECTION 11.2. Fees and Expenses.................................... 67
SECTION 11.3. Notices.............................................. 67
SECTION 11.4. Public Announcements................................. 69
SECTION 11.5. Amendment; Waivers................................... 69
SECTION 11.6. Entire Agreement..................................... 70
SECTION 11.7. No Additional Representations and Warranties......... 70
SECTION 11.8. Parties in Interest; Assignment...................... 70
SECTION 11.9. Governing Law........................................ 71
SECTION 11.10. Severability......................................... 71
-iii-
5
SECTION 11.11. Specific Performance................................ 71
SECTION 11.12. Interpretation...................................... 71
SECTION 11.13. Counterparts........................................ 71
-iv-
6
LIST OF EXHIBITS
Exhibit A -- Initial Directors of the Surviving Corporation
Exhibit B -- Initial Officers of the Surviving Corporation
Exhibit C -- Ownership of Shares by Shareholder Parties
Exhibit D -- Shareholders' Agreement
Exhibit E -- Opinion of Xxxxxx Xxxxxxx
Exhibit F -- Opinion of Xxxxxxx X. Xxxxxx
-v-
7
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, entered into as of December 4,
1996 (the "Agreement"), among CENTEX REAL ESTATE CORPORATION, a Nevada
corporation ("CREC"), MFH HOLDING COMPANY, a Nevada corporation (the "Holding
Company"), MFH ACQUISITION COMPANY, an Arizona corporation and a wholly owned
subsidiary of the Holding Company (the "Merger Subsidiary"), CAVCO INDUSTRIES,
INC., an Arizona corporation (the "Company"), XX X. XXXXXX and XXXXX X. XXXXXX
(the "Principal Shareholders") and XXXXX LIMITED PARTNERSHIP, an Arizona limited
partnership ("Xxxxx Partnership" and, together with the Principal Shareholders,
the "Shareholder Parties"),
WHEREAS, the Board of Directors of each of CREC, the Holding
Company, the Merger Subsidiary and the Company deem it advisable and in the best
interests of their respective shareholders to consummate the merger of the
Merger Subsidiary with and into the Company (the "Merger") and the other
transactions contemplated hereby, upon the terms and subject to the conditions
set forth herein;
WHEREAS, the Board of Directors of the Company has (i) determined
that the consideration to be paid to the shareholders of the Company other than
the Shareholder Parties (the "Independent Shareholders") in the Merger in
exchange for each share ("Company Share") of Common Stock, par value $.05 per
share ("Company Common Stock"), held by them is fair to, and in the best
interests of, the Independent Shareholders, (ii) approved this Agreement and the
Merger and the other transactions contemplated hereby and (iii) resolved to
recommend the approval and adoption of this Agreement to the shareholders of the
Company;
WHEREAS, the Boards of Directors of CREC, the Holding Company and
the Merger Subsidiary have approved this Agreement and the Merger and the other
transactions contemplated hereby and the sole shareholder of the Merger
Subsidiary has approved and adopted this Agreement;
WHEREAS, concurrently with the execution and delivery hereof, and as
an inducement to CREC to enter into this Agreement, the Shareholder Parties have
entered into (i) a Voting Agreement, dated the date hereof, with CREC (the
"Voting Agreement"), pursuant to which such Shareholder Parties have agreed to
vote all Company Shares owned by them in favor of this Agreement and (ii) a
Stock Purchase Agreement, dated the date hereof, with CREC (the "Stock Purchase
Agreement"), pursuant to which such Shareholder Parties have agreed to sell an
aggregate of 1,047,288 Company Shares owned by them (the
8
"Aggregate Subject Shares") to CREC (the "Subject Share Purchase") in the event
that this Agreement is terminated under the circumstances described therein;
WHEREAS, immediately prior to the Effective Time, it is contemplated
that (i) CREC will contribute cash in the amount of the CREC Purchase Price to
the Holding Company in exchange for certain Holding Company Shares, (ii) the
Shareholder Parties will contribute a total of 783,441 Company Shares owned by
them to the Holding Company in exchange for certain Holding Company Shares and
(iii) CREC and the Shareholder Parties will enter into certain arrangements with
respect to the Holding Company; and
WHEREAS, capitalized terms used in any provision of this Agreement
but not defined in such provision have the respective meanings set forth in
Section 10.1;
NOW, THEREFORE, in consideration of the premises, the terms and
provisions set forth herein, the mutual benefits to be gained by the performance
thereof and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
AND RELATED TRANSACTIONS
SECTION 1.1. The Merger. Upon the terms and subject to the
conditions set forth herein, and in accordance with the Arizona Act, the Merger
Subsidiary shall be merged with and into the Company (the "Merger") as promptly
as practicable following the satisfaction or waiver of the conditions set forth
in Article VII. Following the Merger, the Company shall continue as the
surviving corporation (the "Surviving Corporation") and the separate corporate
existence of the Merger Subsidiary shall cease.
SECTION 1.2. Effective Time. The Merger shall be effected through
the filing of this Agreement (or a plan of merger summarizing certain of the
principal terms hereof) and the articles of merger with the Arizona Commission
pursuant to Section 1105 of the Arizona Act (the "Articles of Merger"), and
shall be effective at the time of filing of the Articles of Merger, or at such
later time as may be agreed upon by the Merger Subsidiary and the Company and
set forth in the Articles of Merger in accordance with applicable law (the
"Effective Time").
-2-
9
SECTION 1.3. Effects of the Merger. The Merger shall have the
effects set forth in Section 1106 of the Arizona Act.
SECTION 1.4. Charter and Bylaws. The Charter and Bylaws of the
Merger Subsidiary as in effect immediately prior to the Effective Time shall be
the Charter and Bylaws of the Surviving Corporation.
SECTION 1.5. Directors. The persons identified in Exhibit A shall be
the initial directors of the Surviving Corporation.
SECTION 1.6. Officers. The persons identified in Exhibit B shall be
the initial officers of the Surviving Corporation and shall hold the offices set
forth opposite their respective names in such exhibit.
SECTION 1.7. Holding Company Transactions. Upon the terms and
subject to the conditions set forth herein, immediately prior to or concurrently
with the consummation of the Merger, (i) CREC shall contribute to the Holding
Company an amount in cash equal to the CREC Purchase Price in exchange for the
issuance by the Holding Company of the CREC Holding Company Shares (the "CREC
Stock Purchase"), (ii) each Shareholder Party shall transfer and contribute to
the Holding Company the number of Contributed Company Shares set forth opposite
the name of such Shareholder Party (under the caption "Contributed Company
Shares") on Exhibit C in exchange for the issuance by the Holding Company of the
number of Holding Company Shares set forth opposite the name of such Shareholder
Party (under the caption "Additional Holding Company Shares") on such exhibit
(the "Shareholder Party Contribution") and (iii) the Holding Company, CREC and
the Shareholder Parties shall enter into the Shareholders' Agreement, in the
form attached as Exhibit D (the "Shareholders' Agreement") in order to evidence
their agreement with respect to certain matters in relation to the Holding
Company and their respective holdings of Holding Company Shares.
SECTION 1.8. Closing.
(a) Upon the terms and subject to the conditions set forth herein,
as promptly as practicable following the satisfaction or waiver of the
conditions set forth in Article VII, the Merger Subsidiary and the Company shall
execute the Articles of Merger and deliver the Articles of Merger and this
Agreement (or a plan of merger summarizing certain of the principal terms
hereof) to the Arizona Commission, and the parties hereto shall take all such
other and further actions as may be required by law to make effective the Merger
and the other transactions contemplated hereby. Concurrently with the filing of
the
-3-
10
Articles of Merger in accordance with this Section 1.8(a), a closing (the
"Closing") shall be held at the offices of Xxxxx & Xxxxx, L.L.P., 0000 Xxxx
Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000 (or such other place as the parties may
agree) for the purpose of confirming the consummation of the Merger and the
other transactions contemplated by this Agreement.
(b) At the Closing, the parties hereto shall take each of the
following actions to make effective the CREC Stock Purchase and the Shareholder
Party Contribution:
(i) CREC shall deliver to the Holding Company immediately available
funds in an amount equal to the CREC Purchase Price (by wire transfer to
such account as shall have been designated in writing by the Holding
Company);
(ii) The Holding Company shall deliver to CREC a certificate, in
definitive form, dated the Closing Date and registered in the name of
CREC, evidencing the CREC Holding Company Shares;
(iii) Each Shareholder Party shall deliver to the Holding Company
the certificates evidencing the number of Contributed Company Shares set
forth opposite the name of such Shareholder Party (under the caption
"Contributed Company Shares") on Exhibit C, duly endorsed in blank or
accompanied by stock powers duly executed by such Shareholder Party in
blank, in proper form for transfer;
(iv) The Holding Company shall deliver to each Shareholder Party a
certificate, in definitive form, dated the Closing Date and registered in
the name of such Shareholder Party, evidencing the number of Holding
Company Shares set forth opposite the name of such Shareholder Party
(under the caption "Additional Holding Company Shares") on Exhibit C; and
(v) The Holding Company, CREC and the Shareholder Parties shall
execute and deliver the Shareholders' Agreement.
-4-
11
ARTICLE II.
CONVERSION OF SECURITIES
SECTION 2.1. Conversion of Capital Stock; Company Shares.
(a) As of the Effective Time, by virtue of the Merger and without
any action on the part of the holders of Company Shares, each Company Share that
is issued and outstanding immediately prior to such time (other than the
Contributed Company Shares and any Dissenting Company Shares) shall be converted
into the right to receive $26.75 in cash (the "Merger Consideration"), payable
to the holder thereof, without interest thereon, upon the surrender of the
certificate formerly evidencing such Company Share. The Company Shares so
converted shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate evidencing
any such Company Shares shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration in accordance with the
provisions set forth herein.
(b) As of the Effective Time, by virtue of the Merger and without
any action on the part of the holders of Company Shares, each Company Share that
is held by the Company in its treasury and each Contributed Company Share shall
automatically be canceled and retired and shall cease to exist, and no payment
shall be made in respect thereof (it being understood that the Holding Company
hereby expressly consents to the cancellation of such shares without the payment
of any consideration therefor).
SECTION 2.2. Conversion of Capital Stock; Merger Subsidiary Shares.
As of the Effective Time, by virtue of the Merger and without any action on the
part of the Holding Company (as the sole holder of Merger Subsidiary Shares)
each Merger Subsidiary Share that is issued and outstanding immediately prior to
such time shall be converted into the right to receive one share of common stock
of the Surviving Corporation, which consideration shall be issuable to the
Holding Company upon the surrender of the certificate formerly evidencing the
Merger Subsidiary Shares. The Merger Subsidiary Shares so converted shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and the Holding Company shall cease to have any rights with
respect thereto, except the right to receive the consideration provided for in
this Section 2.2.
SECTION 2.3. Company Stock Options. At the Effective Time, all
outstanding Company Stock Options (whether or not exercisable) shall be
canceled. The Company shall take all action necessary to ensure that all of the
outstanding Company
-5-
12
Stock Options are canceled as provided in this Section 2.3, including, but not
limited to, obtaining the written consent to the cancellation thereof from each
holder of a Company Stock Option who does not exercise the same prior to the
Effective Time for any reason.
SECTION 2.4. Dissenting Company Shares.
(a) Notwithstanding anything to the contrary contained in this
Agreement, Company Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by shareholders of the Company who have
not voted such Company Shares in favor of this Agreement and who have delivered
a written demand for payment for their Company Shares in accordance with Section
1321 of the Arizona Act and have complied with all other applicable provisions
of the Arizona Act concerning the right to demand appraisal of their Company
Shares in connection with the Merger (the "Dissenting Company Shares") shall not
be converted into the right to receive the Merger Consideration as provided in
Section 2.1(a), but shall instead become the right to receive such cash
consideration as may be determined to be due to such shareholders in accordance
with the applicable provisions of the Arizona Act, unless and until any such
shareholder shall have failed to perfect or shall have effectively withdrawn or
lost his right to appraisal and payment thereunder. If a shareholder of the
Company shall have so failed to perfect or shall have effectively withdrawn or
lost such right, the Company Shares held by such shareholder shall thereupon be
deemed to have been converted into the right to receive the Merger
Consideration, without any interest thereon, as of the Effective Time.
(b) If the CREC Purchase Price is not sufficient to enable the
Holding Company to pay (in addition to the Merger Consideration payable pursuant
to Section 2.1(a)) the cash consideration, if any, due to the holders of
Dissenting Company Shares in accordance with the applicable provisions of the
Arizona Act, then CREC shall provide to the Surviving Corporation, as additional
consideration for the issuance of the CREC Holding Company Shares, the funds
necessary to pay such consideration on a timely basis.
(c) Each of the Shareholder Parties hereby irrevocably waives any
right that it may have in connection with the Merger to demand payment for the
Company Shares held by such Shareholder Party in accordance with Section 1321 of
the Arizona Act.
(d) The Company shall give CREC prompt notice of any written demand
for payment received by the Company in accordance with Section 1321 of the
Arizona Act and shall permit CREC to participate in and direct all negotiations
and proceedings with respect to any such demands. The Company shall not make any
payment in respect of, or
-6-
13
settle, offer to settle or otherwise negotiate, any such demands without the
prior written consent of CREC.
SECTION 2.5. Payment for Company Shares.
(a) Prior to the Effective Time, the Holding Company shall (with the
consent of CREC) designate an agent to act as Paying Agent in connection with
the Merger (the "Paying Agent"). From time to time after the Effective Time, the
Holding Company shall provide to the Surviving Corporation, and shall take all
steps necessary to enable the Surviving Corporation to provide to the Paying
Agent, the funds necessary to make the payments contemplated by Section 2.1(a)
on a timely basis.
(b) Promptly after the Effective Time, the Paying Agent shall mail
to each Person who was a record holder as of the Effective Time of an
outstanding certificate or certificates (the "Certificates") which immediately
prior to the Effective Time evidenced any Company Shares to be converted into
the Merger Consideration in accordance with Section 2.1(a) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates for payment therefor. Upon surrender to the Paying
Agent of a Certificate, together with a duly executed letter of transmittal and
any other required documents, the holder of such Certificate shall receive the
Merger Consideration in exchange for each Company Share formerly evidenced
thereby, and such Certificate shall forthwith be canceled. No interest will be
paid or accrued on the cash payable upon the surrender of the Certificates. If
payment is to be made to a Person other than the Person in whose name the
surrendered Certificate is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the Person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a Person other than
the registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. At any time after the expiration of 90 days following the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any cash (including any interest received with respect thereto)
which has been made available to the Paying Agent and which has not been
disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look only to the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) as general creditors thereof with
respect to the cash payable upon due surrender of their Certificates. The
Surviving Corporation shall pay all charges and expenses of the Paying Agent in
connection with the distribution of the Merger Consideration upon conversion of
the Company Shares.
-7-
14
(c) From and after the Effective Time, until surrendered in
accordance with the provisions of Section 2.5(b), each Certificate shall
represent for all purposes only the right to receive, in full satisfaction of
all rights in respect of any Company Shares evidenced by such Certificate,
consideration equal to the Merger Consideration multiplied by the number of
Company Shares evidenced thereby, without any interest thereon. From and after
the Effective Time, holders of Certificates shall have no right to vote or to
receive any dividends or other distributions with respect to any Company Shares
which were theretofore represented by such Certificates, other than any
dividends or other distributions payable to holders of record as of a date prior
to the Effective Time, and shall have no other rights other than as provided
herein or by law.
(d) From and after the Effective Time, there shall be no transfers
of the Company Shares which were outstanding immediately prior to the Effective
Time on the stock transfer books of the Surviving Corporation. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged for the Merger Consideration in
accordance with the procedures set forth in this Section 2.5.
(e) The right of any holder of Company Shares to receive the Merger
Consideration shall be subject to and reduced by the amount of any required tax
withholding obligation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to CREC as follows:
SECTION 3.1. Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Arizona and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as
presently conducted. The Company is duly qualified to transact business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of its activities or the character of the properties that it owns, leases
or operates makes such qualification necessary, except where the failure to be
so qualified or in good standing would not have a Material Adverse Effect.
Schedule 3.1 sets forth a correct and complete list of all jurisdictions in
which the Company is duly
-8-
15
qualified to transact business as a foreign corporation. Schedule 3.1 also
contains a correct and complete copy of the Charter and Bylaws of the Company.
SECTION 3.2. Authority; Binding Effect. The Company has all
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and to consummate the Merger and the other
transactions contemplated hereby. The execution and delivery by the Company of
this Agreement have been duly and validly authorized by all necessary corporate
action on the part of the Company, and no other corporate proceedings or
shareholder actions (other than, with respect to the Merger, the approval and
adoption of this Agreement by the holders of a majority of the Company Shares)
on the part of or with respect to the Company are necessary to authorize this
Agreement, the performance by the Company of its obligations hereunder or the
consummation by the Company of the Merger and the other transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with the terms hereof.
SECTION 3.3. Absence of Conflicts. The execution and delivery by the
Company of this Agreement, the performance by it of its obligations hereunder
and the consummation by it of the Merger and the other transactions contemplated
hereby will not (i) conflict with, or result in any violation or breach of, any
provision of the Charter or Bylaws of the Company or any of its Subsidiaries,
(ii) except as set forth in Schedule 3.3, conflict with, result in any violation
or breach of, constitute a default under, give rise to any right of termination
or acceleration (with or without notice or the lapse of time or both) pursuant
to, or result in being declared void, voidable or without further effect, any
term or provision of any material note, bond, mortgage, indenture, lease,
franchise, permit, license, Contract or other instrument or document to which
the Company or any of its Subsidiaries is a party or by which their respective
properties or assets are bound, (iii) assuming that the filings and Consents
referred to in Section 3.4 are made or obtained, conflict with, or result in any
violation of, any law, ordinance, statute, rule or regulation of any
Governmental Authority or of any order, writ, injunction, judgment or decree of
any court, arbitrator or Governmental Authority applicable to the Company or any
of its Subsidiaries or their respective properties or assets or (iv) result in
the creation of, or impose on the Company or any of its Subsidiaries the
obligation to create, any Lien upon the properties or assets of the Company or
any of its Subsidiaries (other than Permitted Encumbrances).
-9-
16
SECTION 3.4. Governmental Consents and Filings. There is no
requirement applicable to the Company to obtain any Consent of, or to make or
effect any declaration, filing or registration with, any Governmental Authority
for the valid execution and delivery by the Company of this Agreement, the due
performance by it of its obligations hereunder or the lawful consummation by it
of the Merger and the other transactions contemplated hereby, except for (i) the
filing by the Principal Shareholders (as the ultimate parent entities of the
Company) of a premerger notification with the FTC and the Antitrust Division
under the HSR Act, (ii) the filing by the Company of the Proxy Statement and the
filing by the Company, the Holding Company and the Principal Shareholders of the
Schedule 13E-3 under the Exchange Act, (iii) the filing of the Articles of
Merger and this Agreement (or a plan of merger summarizing certain of the
principal terms hereof) under the Arizona Act and (iv) the filings and Consents
set forth in Schedule 3.4. Except as set forth in Schedule 3.4, no state
takeover, business combination or control share acquisition statute or other
similar statute or regulation prohibits, restrains or restricts the Merger or
the Subject Share Purchase.
SECTION 3.5. Proxy Statement; Schedule 13E-3. The Proxy Statement
and the Schedule 13E-3 will comply in all material respects at all relevant
times with the applicable requirements of the Exchange Act and any other
provisions of applicable law. The Proxy Statement and the Schedule 13E-3 will
not (i) at the time the Proxy Statement (or any supplements thereto) or the
Schedule 13E-3 (or any amendments thereto) is filed with the Commission, (ii) at
the time the Proxy Statement (or any supplements thereto) is mailed to the
holders of Company Shares, (iii) on the date of the Special Meeting or (iv) on
the Closing Date, contain any untrue statement of a material fact or omit 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.
SECTION 3.6. Fairness Opinion; Board Findings and Recommendation.
The Board of Directors of the Company has received an opinion (the "Fairness
Opinion") of Xxxxxxx, Xxxxx & Co. (the "Fairness Advisor") to the effect that
the consideration to be paid to the Independent Shareholders in the Merger is
fair to such shareholders. The Board of Directors of the Company has (i)
determined that the consideration to be paid to the Independent Shareholders in
the Merger in exchange for each Company Share is fair to, and in the best
interests of, the Independent Shareholders, (ii) approved this Agreement and the
Merger and the other transactions contemplated hereby and (iii) resolved to
recommend the adoption and approval of this Agreement to the shareholders of the
Company.
-10-
17
SECTION 3.7. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 8,000,000 shares of Company Common
Stock, of which 3,387,968 shares are issued and outstanding and no shares are
held in the treasury of the Company. All of the issued and outstanding shares of
capital stock of the Company have been duly authorized and are validly issued,
fully paid and nonassessable. None of the issued and outstanding shares of
capital stock of the Company have been issued in violation of, or subject to,
any preemptive rights or rights of subscription. All offers, issuances and sales
by the Company of any shares of its capital stock or other equity securities
have been made in compliance in all material respects with the registration and
qualification requirements of all applicable federal and state securities laws.
Except as set forth above, there are no outstanding shares of capital stock or
other equity securities of the Company. Except as set forth in Schedule 3.7,
there are no outstanding options, warrants, calls, rights, convertible
securities or other agreements or commitments of any character pursuant to which
the Company is or may be obligated to issue or sell any issued or unissued
shares of its capital stock or other equity securities or to purchase or redeem
any shares of its capital stock or other equity securities or make any other
payments in respect thereof, and there are no shares of its capital stock or
other equity securities reserved for issuance for any purpose. Schedule 3.7
contains a true and correct copy of all agreements, instruments or other
documents evidencing or otherwise relating to the outstanding options, warrants,
calls, rights, convertible securities or other agreements or commitments
referred to in such schedule, including, but not limited to, (i) the Convertible
Note and (ii) all outstanding Company Stock Options.
SECTION 3.8. Subsidiaries.
(a) Schedule 3.8(a) sets forth (i) the name of each Subsidiary of
the Company, (ii) the jurisdiction of incorporation or formation of each
Subsidiary of the Company, (iii) the authorized, issued and outstanding capital
stock or equity securities of, or other ownership interests in, each Subsidiary
of the Company and (iv) the names of the shareholders, equity holders or other
owners of each Subsidiary of the Company. Except as set forth in Schedule
3.8(a), the Company does not own, directly or indirectly, or have any voting
rights with respect to, any capital stock or equity securities of, or other
ownership interests in, any corporation, partnership or other Person or have any
direct or indirect interest in any business.
(b) Each Subsidiary of the Company that is a corporation is duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted. Each Subsidiary of the
-11-
18
Company that is a limited liability company is duly formed, validly existing and
(if applicable) in good standing under the laws of the jurisdiction of its
formation and has all requisite power and authority as a limited liability
company to own, lease and operate its properties and to carry on its business as
presently conducted. Each Subsidiary of the Company is duly qualified to
transact business as a foreign corporation or foreign limited liability company
and (if applicable) is in good standing in each jurisdiction in which the nature
of its activities or the character of the properties that it owns, leases or
operates makes such qualification necessary, except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect. Schedule
3.8(b) contains a correct and complete copy of Charter and Bylaws or other
constitutive instruments of each of the Subsidiaries of the Company.
(c) Except as set forth in Schedule 3.8(c), all of the issued and
outstanding shares of capital stock or equity interests of, or other ownership
interests in, each Subsidiary of the Company (i) have been duly authorized, (ii)
are validly issued, (iii) are (in the case of shares of capital stock) fully
paid and nonassessable or (in the case of limited liability company interests
and other ownership interests) not subject to any current or future capital
calls or similar obligations and (iv) are owned by the Company, directly or
indirectly, free and clear of all Encumbrances. None of the issued and
outstanding shares of capital stock or equity securities of, or other ownership
interests in, any Subsidiary of the Company has been issued in violation of, or
subject to, any preemptive rights or rights of subscription. All offers,
issuances and sales by the Company or any of its Subsidiary of any shares of the
capital stock or equity securities of, or ownership interests in, any Subsidiary
of the Company have been made in compliance in all material respects with the
registration and qualification requirements of all applicable federal and state
securities laws. Except as set forth on Schedule 3.8(c), there are no
outstanding options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character pursuant to which the Company or any
of its Subsidiaries is or may be obligated to issue or sell any issued or
unissued shares of capital stock or equity securities of, or other ownership
interests in, any Subsidiary of the Company or to purchase or redeem any shares
of capital stock or equity securities of, or other ownership interests in, any
Subsidiary of the Company or make any other payments in respect thereof, and
there are no shares of capital stock or equity securities of, or other ownership
interests in, any Subsidiary of the Company reserved for issuance for any
purpose.
SECTION 3.9. Commission Reports. The Company has filed all reports,
statements, forms and other documents required to be filed with the Commission
since September 30, 1993 (collectively, the "Commission Reports"), all of which
complied as of the filing date (or, in the case of any Commission Report that
has been amended, as of the
-12-
19
date of amendment) in all material respects with the applicable requirements of
the Securities Act or the Exchange Act, as the case may be, and of all
applicable rules and regulations thereunder. None of the Commission Reports
contained as of the filing date (or, in the case of any Commission Report that
has been amended, as of the date of amendment) 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.
SECTION 3.10. Financial Statements. Each of (i) the consolidated
financial statements (including the notes thereto) contained in the Commission
Reports and (ii) the consolidated financial statements as of and for the year
ended September 30, 1996 furnished by the Company to CREC, which consist of a
balance sheet as of such date (the "Latest Balance Sheet") and a statement of
operations and a statement of cash flows for the year then ended (collectively,
the "Company Financial Statements"), was prepared in accordance with GAAP
(subject to, in the case of the financial statements as of and for the year
ended September 30, 1996, the absence of notes thereto) applied on a consistent
basis throughout the periods covered thereby (except as may be indicated in any
notes thereto), is in accordance with and accurately based upon the books and
records of the Company and its Subsidiaries in all material respects and fairly
presents in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates thereof and the
consolidated results of operations and changes in cash flows of the Company and
its Subsidiaries for the periods indicated. The Company Financial Statements
provide fully for all fixed and non-contingent liabilities of the Company and
its Subsidiaries and disclose or provide for all contingent liabilities of the
Company and its Subsidiaries of a type required to be disclosed or provided for
in financial statements prepared in accordance with GAAP.
SECTION 3.11. Absence of Undisclosed Liabilities. As of September
30, 1996, there were no debts, liabilities or obligations (whether absolute,
contingent, accrued, unliquidated or otherwise) of the Company or any of its
Subsidiaries, except as set forth on the Latest Balance Sheet (including the
notes thereto) or as described in Schedule 3.11. Since the date of the Latest
Balance Sheet, the Company has not incurred any debts, liabilities or
obligations (whether absolute, contingent, accrued, unliquidated or otherwise),
except as described in Schedule 3.11 and except for (i) debts, liabilities and
obligations incurred in the ordinary course of business after the date of the
Latest Balance Sheet and (ii) other debts, liabilities and obligations which in
the aggregate do not and will not exceed $250,000.
-13-
20
SECTION 3.12. Absence of Certain Changes or Events. Since September
30, 1996, except as set forth in Schedule 3.12 or in any Commission Reports
filed during the period after that date and prior to the date hereof, the
Company and its Subsidiaries have conducted their respective businesses only in
the ordinary course and in a manner that is consistent in all material respects
with past practice, and there has not been any Material Adverse Change or any
event, occurrence of development that will result in or is reasonably likely to
result in a Material Adverse Change. In addition, since September 30, 1996,
except as set forth in Schedule 3.12 or in any Commission Reports filed during
the period after that date and prior to the date hereof (and except for actions
to be taken by the Company after the date hereof in accordance with the express
terms of this Agreement), there has not occurred any of the following events,
occurrences or developments:
(a) any damage, destruction or loss with respect to any properties
or assets which are material to the Company or any of its Subsidiaries, taken as
a whole (except for any such damage, destruction or loss which is fully covered
by insurance and which, after the application of the proceeds of such insurance,
has not had and will not have a Material Adverse Effect);
(b) the creation or imposition of any Lien or other Encumbrance
(other than any Permitted Encumbrance) with respect to any properties or assets
which are material to the Company and its Subsidiaries, taken as a whole;
(c) the revocation or termination, or any notice of revocation or
termination, of any Consents held by or benefitting the Company or any of its
Subsidiaries which are material to the Company and its Subsidiaries, taken as a
whole;
(d) any adverse change in the relationships between the Company or
any of its Subsidiaries on the one hand and any dealers, retailers, suppliers,
insurers or other Persons with whom they have business relationships that are
material to the Company and its Subsidiaries, taken as a whole, on the other
hand;
(e) the declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
capital stock of the Company or any redemption, purchase or other acquisition of
any of the capital stock or other securities of the Company;
(f) the sale, lease, transfer or other disposition of any properties
or assets which are material to the Company and its Subsidiaries, taken as a
whole, other than in ordinary course of business;
-14-
21
(g) except as contemplated by this Agreement, the entry into any
material Contract or transaction by the Company or any of its Subsidiaries
(including, but not limited to, any borrowing, issuance of notes or other
securities, capital expenditure or sale of assets), other than in the ordinary
course of business;
(h) the entry into any Contract between the Company or any of its
Subsidiaries on the one hand and any of their respective directors, officers or
employees on the other hand providing for the employment of any director,
officer or employee or any increase in the compensation, severance or
termination benefits payable or to become payable by the Company or any of its
Subsidiaries to any such director, officer or employee (except for (i) the entry
into "at will" employment Contracts, (ii) increases in compensation payable to
employees who are not directors or officers and (iii) the payment of severance
benefits to former employees, in each case in the ordinary course of business
and consistent with past practice) or the making of any loan to or entry into
any other material transaction or arrangement with any such director, officer or
employee;
(i) any increase in the benefits payable by the Company or any of
its Subsidiaries under any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase or other
employee benefit plan, program or arrangement made to, for or with any of the
directors, officers or employees of the Company or any of its Subsidiaries,
other than any scheduled increase pursuant to the existing terms thereof;
(j) any material labor dispute involving any employees of the
Company or any of its Subsidiaries;
(k) any significant change by the Company in its accounting
principles, methods or practices;
(l) any waiver of any material rights or write off of any material
notes or accounts receivable not fully reserved for in the Company Financial
Statements;
(m) any action or omission on the part of the Company or any of its
Subsidiaries that, if taken or omitted to be taken after the date hereof
(without the prior written consent of CREC), would cause a breach or violation
of the covenants set forth in Section 6.1; or
(n) any agreement or commitment to do any of the foregoing.
-15-
22
SECTION 3.13. Property.
(a) The Company and its Subsidiaries have good, valid and marketable
title to all Real Property and Personal Property owned by them and valid
leasehold interests in all Real Property and Personal Property leased by them,
in each case free of all Encumbrances other than Permitted Encumbrances. The
Company and its Subsidiaries enjoy peaceful possession of all Real Property or
Personal Property owned or leased by them.
(b) Schedule 3.13(a) hereto identifies each lot, parcel and tract of
Real Property owned or leased by the Company or its Subsidiaries, together with
(except in the case of any Real Property leased by the Company or its
Subsidiaries that is not material to the Company and its Subsidiaries, taken as
a whole) a legal description thereof which is accurate in all material respects.
(c) The operation of the Real Property owned or leased by the
Company and its Subsidiaries in the manner in which they are currently being
utilized does not violate any applicable zoning ordinances or other applicable
code or regulations, with such exceptions as are not reasonably likely to have a
Material Adverse Effect. No covenants, easements, restrictions, servitudes,
rights of way or regulations applicable to the Real Property owned or leased by
the Company or its Subsidiaries are reasonably likely to have a Material Adverse
Effect or to materially detract from the use, value or marketability of any such
Real Property.
(d) All buildings, improvements and other facilities located on any
Real Property owned or leased by the Company or its Subsidiaries are
structurally sound and in good operating condition and repair, normal wear and
tear excepted, in each case with such exceptions as would not materially detract
from the continued use of any such Real Property in the conduct of the normal
business of the Company and its Subsidiaries during the remaining useful lives
of such buildings, improvements and other facilities.
(e) The existing water, sewer, gas and electricity lines, storm
sewers and other utility systems on or in the Real Property owned or leased by
the Company or its Subsidiaries are adequate in all material respects to serve
the utility needs of such Real Property. All of such utilities are installed and
operating and all installation and connection charges have been paid in full.
(f) Since January 1, 1996, the Company has not received any written
appraisals, reports or other similar data relating to the value or condition of
the Real
-16-
23
Property or Personal Property owned or leased by the Company or its Subsidiaries
which have not been specifically disclosed and delivered to CREC (except
appraisals received in connection with the sales of homes to customers).
SECTION 3.14. Contracts.
(a) Schedule 3.14(a) contains a correct and complete list of each of
the following Contracts to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their
respective properties or assets are bound:
(i) all employment, agency, consultation or representation Contracts
or other Contracts of any type with any present officer, director,
employee or other Representative of the Company or any of its Subsidiaries
(or any former officer, director, employee or other Representative of the
Company or any of its Subsidiaries, if there exists any present or future
liability with respect to such Contract, whether now existing or
contingent), other than (A) "at will" employment Contracts and (B)
Contracts with consultants and similar Representatives which provide for
aggregate payments by the Company and its Subsidiaries of less than
$50,000 per annum and are terminable by the Company or any of its
Subsidiaries without penalty on not more than 90 days' notice;
(ii) all Contracts containing any provision or covenant limiting the
ability of the Company or any of its Subsidiaries to engage in any line of
business or to compete with or to obtain products or services from any
Person;
(iii) all partnership, joint venture or similar Contracts;
(iv) all credit agreements, indentures or other Contracts relating
to the borrowing of money by the Company or any of its Subsidiaries or
providing for any direct or indirect guarantee by the Company or any of
its Subsidiaries of any indebtedness of any other Person;
(v) all Contracts which by their terms provide for the creation,
existence or maintenance of a material Lien or other Encumbrance on any
properties or assets of the Company or any of its Subsidiaries (except for
Permitted Encumbrances);
-17-
24
(vi) all leases or subleases of Real Property and all other leases,
subleases or rental Contracts under which the Company or any of its
Subsidiaries is lessee or is permitted to hold or operate any Real
Property which either provide for aggregate payments by the Company and
its Subsidiaries of more than $50,000 in any year or are otherwise
material to the Company and its Subsidiaries, taken as a whole, other than
any of such leases, subleases or other such Contracts that are terminable
by the Company without penalty on not more than 60 days' notice;
(vii) all leases or subleases of Real Property and all other leases,
subleases or rental or use Contracts under which the Company or any of its
Subsidiaries is lessor or permits any other Person to hold or operate any
Real Property which either provide for aggregate payments to the Company
and its Subsidiaries of more than $50,000 in any year or are otherwise
material to the Company and its Subsidiaries, taken as a whole;
(viii) all Contracts that involve the disposition or acquisition by
the Company or any of its Subsidiaries after the date hereof of any
material properties or assets not in the ordinary course of business and
in a manner consistent with past practice;
(ix) all Contracts (including, but not limited to, those relating to
allocations of expenses, personnel, services or facilities) between or
among the Company or any of its Subsidiaries on the one hand and any of
their respective Affiliates (other than direct or indirect wholly owned
Subsidiaries of the Company) on the other hand;
(x) all material proxies, powers of attorney or similar delegations
of authority of the Company or any of its Subsidiaries;
(xi) all material Contracts containing any "change of control"
provision or agreement;
(xii) all sales, distribution or franchise Contracts not entered
into in the ordinary course of business;
(xiii) all warranty Contracts with respect to services rendered or
products sold by the Company not entered into in the ordinary course of
business;
-18-
25
(xiv) all Contracts that involve the payment or potential payment by
or to the Company or any of its Subsidiaries of amounts exceeding $50,000
in any year, other than Contracts between or among the Company or any of
its wholly owned Subsidiaries and Contracts which are terminable by the
Company or such Subsidiary without penalty on not more than 60 days'
notice; and
(xv) all other Contracts that are material to the Company and its
Subsidiaries, taken as a whole, or that could prevent, impede or otherwise
adversely affect the consummation of the Merger or the other transactions
contemplated by this Agreement.
(b) The Company has heretofore provided to CREC correct and complete
copies of each of the following documents:
(i) all of the Contracts identified or required to be identified in
Schedule 3.14(a) (the "Identified Contracts") or (in the case of any
Identified Contracts which are not in writing) written descriptions of all
of the material terms thereof;
(ii) the standard forms of all Contracts (including, but not limited
to, warranty Contracts) entered into by the Company or any of its
Subsidiaries with any manufactured housing dealers or retailers to which
the Company or any of its Subsidiaries sells manufactured housing units;
and
(iii) the standard forms of all agreements entered into by the
Company or any of its Subsidiaries, with any banks or financing sources
under which the Company or any of its Subsidiaries is obligated to
repurchase or otherwise acquire any manufactured housing units the sale of
which is financed by such bank or other financing source.
(c) All of the Identified Contracts are valid and legally binding
obligations of the Company or its Subsidiaries, as the case may be, and, to the
knowledge of the Company, each the other parties thereto, enforceable in
accordance with the terms thereof, in each case with such exceptions as are not
reasonably likely to have a Material Adverse Effect. The Company and its
Subsidiaries have performed in all material respects all obligations required to
be performed by them under each of the Identified Contracts and are not in
breach in any material respect of, or in default in any material respect under,
any
-19-
26
term or provision of any Identified Contract or in receipt of any claim of such
default or breach. No event has occurred which (with the passage of time or the
giving of notice or both) would result in any default, breach or event of
noncompliance by the Company or any of its Subsidiaries under any Identified
Contract, with such exceptions as are not reasonably likely to have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has any present
expectation or intention of not fully performing all its obligations under any
Identified Contract. Except as set forth in Schedule 3.14(c), neither the
Company nor any of its Subsidiaries has knowledge of any breach or anticipated
breach by the other parties to any Identified Contract or has received any
notice or other communication to the effect that any such other parties intends
to terminate an Identified Contract prior to the expiration of the maximum
stated term thereof. Except as set forth in Schedule 3.14(c), no Identified
Contract contains any provision which prohibits or restricts, or provides that
the other party thereto may terminate such Contract in the event or by reason
of, the Merger or the other transactions contemplated by this Agreement, or
contains any other provision that would be altered or otherwise become
applicable by reason of such transactions.
SECTION 3.15. Litigation. Schedule 3.15 sets forth a list of all
actions, suits, inquiries, investigations or other proceedings which are pending
against the Company or any of its Subsidiaries, or to which any of their
respective properties or assets is subject, in any court or before any
arbitrator or any foreign or United States federal, state or local Governmental
Authority. To the knowledge of the Company, except as set forth on Schedule
3.15, there are no actions, suits, inquiries, investigations or other
proceedings threatened against the Company or any of its Subsidiaries or their
respective properties or assets which are reasonably likely to have a Material
Adverse Effect. None of the actions, suits, inquiries, investigations or other
proceedings pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or to which any of their respective assets
are subject, could prevent, impede or otherwise adversely affect the Merger or
the other transactions contemplated by this Agreement.
SECTION 3.16. Compliance with Laws and Other Requirements. Except as
set forth on Schedule 3.16, neither the Company nor any of its Subsidiaries is
in breach or violation of, or default under, any provision of its Charter or
Bylaws, any term or provision of any note, bond, mortgage, indenture, lease,
franchise, permit, license, Contract or other instrument or document to which it
is a party or by which its properties or assets are or may be bound or, any term
of any law, ordinance, statute, rule or regulation of any Governmental Authority
or of any order, writ, injunction, judgment or decree of any court, arbitrator
or Governmental Authority applicable to it or its properties or assets, except
for any breach, violation or default which (i) is not reasonably likely to have
a Material Adverse Effect and (ii) could not prevent, impede or otherwise
adversely affect the Merger
-20-
27
or the other transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, neither the Company nor any of its Subsidiaries has
violated any federal, state, local or foreign statute, law, regulation or rule
relating to the design, construction or installation of manufactured housing,
including the national construction standards of the United States Department of
Housing and Urban Development, except for any violation which is not reasonably
likely to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has failed to file with or submit to the applicable Governmental
Authorities any statement, report, information or form required by any
applicable statute, law, regulation or rule, except where the failure to file or
submit such report is not reasonably likely to have a Material Adverse Effect.
All such filings or submissions made by the Company or any of the Subsidiaries
with Governmental Authorities were in compliance in all material respects with
all applicable laws when filed, and no material deficiencies have been asserted
by any Governmental Authority with respect to such filings or submissions. The
Company does not know of any proposed law, ordinance, statute, rule or
regulation of any Governmental Authority relating to the design, construction or
installation of manufactured housing which, if enacted or promulgated, would
have a Material Adverse Effect.
SECTION 3.17. Environmental Matters.
(a) Except as set forth in Schedule 3.17(a), the facilities and
property presently owned or leased by the Company and its Subsidiaries have been
(to the knowledge of the Company) prior to the date hereof, and continue to be,
owned and operated by the Company and its Subsidiaries in compliance in all
material respects with all applicable Environmental Laws.
(b) Except as set forth in Schedule 3.17(b), neither the Company nor
any of its Subsidiaries has received notice from any Person of any Environmental
Claim that is currently pending or threatened against the Company or any of its
Subsidiaries.
(c) Except as set forth in Schedule 3.17(c), there are no past or
present actions, activities, circumstances, conditions, events or incidents
(including, but not limited to, the release, emission, discharge, presence, or
disposal of any Hazardous Material) that are reasonably likely to form the basis
of any Environmental Claim against the Company or any of its Subsidiaries or, to
the knowledge of the Company, any Person whose liability for such an
Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law.
-21-
28
(d) Schedule 3.17(d) identifies all material permits, licenses,
certifications, consents, exemptions, approval and other authorizations
currently held by the Company or any of its Subsidiaries pursuant to applicable
Environmental Laws and the Company and its Subsidiaries are in compliance in all
material respects with the terms thereof.
(e) Except as set forth in Schedule 3.17(e), neither the Company nor
any of its Subsidiaries has received notice or otherwise has knowledge that
property presently owned or leased, or previously owned or leased, by the
Company or any of its Subsidiaries is listed or proposed for listing on the
National Priorities List created pursuant to CERCLA, or on the CERCLIS or any
similar state, local or other list of sites potentially requiring investigation
or cleanup.
(f) Except as set forth in Schedule 3.17(f), neither the Company nor
any of its Subsidiaries has transported or arranged for the transportation of
any Hazardous Materials to any location which is listed on the National
Priorities List, the CERCLIS or any similar state list, nor has any of them
received notice or otherwise has knowledge of pending or threatened claims as a
result of transporting, disposing or arranging to transport or dispose Hazardous
Materials to any location.
(g) Schedule 3.17(g) identifies all underground and aboveground
storage tanks, and the capacity and contents of such tanks, located on property
that is owned or, to the knowledge of the Company, on property that is leased by
the Company or any of its Subsidiaries.
(h) Except as set forth in Schedule 3.17(h), there is no asbestos
containing material located in any building, building component, structure or
office space that is owned or, to the knowledge of the Company, that is leased
by the Company or any of its Subsidiaries, nor is there any asbestos containing
material stored, disposed of or otherwise present at any property that is owned
or, to the knowledge of the Company, that is leased by the Company or any of its
Subsidiaries, in each case with such exceptions as are not reasonably likely to
give rise to any liability under an Environmental Law that is material to the
Company and its Subsidiaries, taken as a whole.
(i) Except as set forth in Schedule 3.17(i), no polychlorinated
biphenyls (PCBs) are used, disposed of, stored or otherwise present at any
property that is owned or, to the knowledge of the Company, that is leased by
the Company or any of its Subsidiaries and no formaldehyde containing material
is contained in any of the products manufactured by the Company or any of its
Subsidiaries, in each case with such exceptions as are not
-22-
29
reasonably likely to give rise to any liability under an Environmental Law that
is material to the Company and its Subsidiaries, taken as a whole.
(j) All written reports and studies (including, but not limited to,
any site assessments or environmental, health or safety audit report) obtained
by or in the possession of the Company or any of its Subsidiaries with respect
to any of the matters referred to in paragraphs (a) through (i) above are
identified in Schedule 3.17(j). The Company has heretofore provided to CREC
correct and complete copies of all such reports and studies in the possession of
or otherwise available to the Company.
(k) The Company has not owned, operated, or used any underground
storage tanks at the Litchfield facility and has not engaged in or permitted any
activities or incidents at the Litchfield facility, the Durango facility, or the
Durango storage yard that have caused or contributed to the release of any
Hazardous Material into the groundwater underlying those properties.
SECTION 3.18. Taxes.
(a) All Tax Returns required to be filed on or before the Closing
Date by or on behalf of, or in which is required to be reported the income or
other items of, the Company or any of its Subsidiaries have been or will be
filed within the time prescribed by law (including extensions of time approved
by the appropriate taxing authority). Such Tax Returns accurately and completely
set forth, or will set forth, in all material respects all liabilities for Taxes
(if any) and any other items (including, but not limited to, items of income,
gain, loss, deduction or credit) required (under applicable tax law) to be
reflected or included in such Tax Returns.
(b) The Company and each of its Subsidiaries has paid or will pay,
on a timely basis, all Taxes of the Company and each such Subsidiary that are
due on or before the Closing Date (including, but not limited to, Taxes shown to
be due on the Tax Returns described in the preceding paragraph), except those
Taxes that are being disputed in good faith and for which adequate provision has
been made in the Company Financial Statements.
(c) Adequate provision has been made by the Company and each of its
Subsidiaries on the Latest Balance Sheet for the payment of Taxes due after the
Closing Date, including but not limited to, Taxes attributable to the taxable
period (if any) ending on, or within which occurs, the Closing Date.
-23-
30
(d) There are no material Liens for Taxes upon any of the properties
or assets of the Company or any of its Subsidiaries (except for Permitted
Encumbrances).
(e) Except as set forth in Schedule 3.18(e), there are no pending
audits, actions, proceedings, investigations, disputes or claims with respect to
any Taxes payable by or asserted against the Company or any of its Subsidiaries
and, to the knowledge of the Company, there is no basis on which any claim for
material Taxes can be asserted with respect to the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has received
notice from any taxing authority of its intent to examine or audit any Tax
Returns of the Company or any of its Subsidiaries.
(f) The taxable year or periods for the assessment of federal income
Tax of the Company and its Subsidiaries are closed either by agreement with the
Internal Revenue Service or by operation of the applicable statute of
limitations for all taxable periods through the taxable period ended September
30, 1992. The taxable years or periods for the assessment of state and local
income or franchise Tax of the Company and its Subsidiaries are closed either by
agreement with the appropriate taxing authority or by application of the
applicable statute of limitations for all periods specified in Schedule 3.18(f).
Neither the Company nor any of its Subsidiaries (i) has given or been requested
to give waivers of any statute of limitations relating to the payment of Taxes
for taxable periods for which the applicable statutes of limitations have not
expired or (ii) has made any election which would result or has resulted in an
adjustment under Section 481 of the Internal Revenue Code.
(g) The Company and its Subsidiaries are not and have not been
subject to tax in any jurisdiction outside the United States.
(h) No agreements relating to allocation or sharing of, or
liability or indemnification for, Taxes exist (i) among the Company and any of
the Subsidiaries or (ii) among the Company and any of its present or former
shareholders or Affiliates.
(i) All material Taxes required to be withheld, collected or
deposited by the Company or any of its Subsidiaries (including, but not limited
to, amounts paid or owing to any employee, creditor, independent contractor or
other Person) have been timely withheld, collected or deposited and, to the
extent required, have been timely paid to the relevant taxing authority.
(j) Neither the Company nor any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Internal Revenue Code or agreed to
have Section 341(f)(2)
-24-
31
of the Internal Revenue Code apply to any disposition of a Section 341(f) asset
(as such term is defined in Section 341(f)(4) of the Internal Revenue Code).
(k) Neither the Company nor any of its Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement that
could obligate it to make any payments that will not be deductible under Section
280G of the Internal Revenue Code.
(l) Neither the Company nor any of its Subsidiaries has ever been a
member of an affiliated group of corporations (as defined in Section 1504(a) of
the Internal Revenue Code), other than the group of which the Company is the
Common Parent.
SECTION 3.19. Employee Benefit Plans.
(a) Schedule 3.19(a) sets forth a true, complete and correct list of
all "employee benefit plans" (as defined in Section 3(3) of ERISA) and any other
employee benefit arrangements or payroll practices (including, but not limited
to, severance pay, vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus or other incentive
compensation and stock purchase arrangements or policies) maintained by the
Company or any ERISA Affiliate or to which the Company or any ERISA Affiliate
contributes or is obligated to contribute (collectively, the "Employee Benefit
Plans"). Schedule 3.19(a) also sets forth the name, current annual compensation
rate (including bonus and commissions), title and current base salary rate of
the ten most highly compensated present employees of the Company or any ERISA
Affiliate. No Employee Benefit Plans cover persons employed outside of the
United States. No Employee Benefit Plan is subject to Section 4063 or 4064 of
ERISA. No Employee Benefit Plans are "multiemployer plans" as defined in Section
3(37) of ERISA. No Employee Benefit Plans that are welfare plans as defined in
Section 3(1) of ERISA provide benefits after termination of employment (other
than as required by Section 4980B of the Internal Revenue Code and at the former
employee's own expense). Neither the Company nor any ERISA Affiliate maintains
or contributes to, or ever maintained or contributed to, a "defined benefit
plan" as defined in Section 3(35) of ERISA.
(b) Each of the Employee Benefit Plans intended to qualify under
Section 401 of the Internal Revenue Code (collectively, the "Qualified Plans")
so qualifies, and nothing has occurred with respect to the operation of any such
plan which could cause the loss of such qualification or the imposition of any
material liability, penalty or tax under ERISA or the Internal Revenue Code. The
Company has delivered to CREC a copy of the most recent favorable determination
letter received from the Internal Revenue Service with
-25-
32
respect to each Qualified Plan. Any entity maintained or contributed to by the
Company or any of its Subsidiaries and which is intended to be an association
described in Section 501(c)(9) of the Internal Revenue Code is exempt from
federal income Tax under Section 501(a) of the Internal Revenue Code and a copy
of the determination letter received from the Internal Revenue Service with
respect to the exemption of such association has been furnished to CREC.
(c) All contributions and premiums required by law or by the terms
of each Employee Benefit Plan or any agreement relating thereto have been timely
made (without regard to any waivers granted with respect thereto).
(d) There has been no violation of ERISA that could result in a
material liability with respect to the filing of applicable returns, reports,
documents or notices regarding any of the Employee Benefit Plans with the
Secretary of Labor or the Secretary of the Treasury or the furnishing of such
notices or documents to the participants or beneficiaries of the Employee
Benefit Plans.
(e) Correct and complete copies of the following documents with
respect to each of the Employee Benefit Plans (as applicable) have been
delivered by the Company to CREC: (i) any plans and related trust documents, and
all amendments thereto, (ii) the most recent Forms 5500 and schedules thereto,
(iii) the most recent summary plan description, and (iv) written descriptions of
all non-written agreements relating to the Employee Benefit Plans.
(f) Except as set forth in Schedule 3.19(f), there are no pending
actions, suits or proceedings which have been asserted, instituted or threatened
against any Employee Benefit Plan, the assets of any such plan or the Company,
or the plan administrator or fiduciary of any Employee Benefit Plan with respect
to the operation of any such plan (other than routine, uncontested benefit
claims), and there are no facts or circumstances which are reasonably likely to
form the basis for any such action, suit or proceeding. Neither the Company nor
any of its Subsidiaries nor any fiduciary of any Employee Benefit Plan has
engaged in a nonexempt prohibited transaction described in Section 406 of ERISA
or 4975 of the Internal Revenue Code.
(g) Each of the Employee Benefit Plans has been maintained and
administered in all material respects in accordance with its terms and all
provisions of applicable laws, statutes, rules or regulations of any
Governmental Authorities. All amendments and actions required to bring each of
the Employee Benefit Plans into conformity with all of the applicable provisions
of ERISA and other applicable laws,
-26-
33
statutes rules or regulations of any Governmental Authorities have been made or
taken except to the extent that such amendments or actions are not required by
law to be made or taken until a date after the Closing Date or are disclosed on
Schedule 3.19(h).
(h) As to each Employee Benefit Plan, the Company and its
Subsidiaries comply in all material respects with all applicable requirements of
(i) the Age Discrimination in Employment Act of 1967, as amended, and the
regulations thereunder; (ii) Title VII of the Civil Rights Act of 1964, as
amended, and the regulations thereunder; (iii) the health care continuation
provisions of ERISA and the Internal Revenue Code; and (iv) the Medicare
Secondary Payor Provisions of Section 1862(b) of the Social Security Act.
(i) Except as set forth in Schedule 3.19(j) , the Company will not
have, by reason of the Merger or the other transactions contemplated by this
Agreement, any obligation to make any payment to any employee pursuant to any
Employee Benefit Plan, contract or employment agreement.
SECTION 3.20. Labor Matters. Except as set forth on Schedule 3.20,
(i) neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by them and the Company does not know of any activities or proceedings
of any labor union to organize any such employees and (ii) there are no unfair
labor practice complaints pending against the Company or any of its Subsidiaries
before the National Labor Relations Board.
SECTION 3.21. Intellectual Property Rights.
(a) Schedule 3.21(a) contains a true, correct and complete list of
all (i) registered Intellectual Property Rights owned or used by the Company or
any of its Subsidiaries, (ii) applications for registrations of Intellectual
Property Rights filed by the Company or any of its Subsidiaries, (iii)
unregistered trade names and corporate names owned or used by the Company or any
of its Subsidiaries and (iv) unregistered trademarks and service marks owned or
used by the Company or any of its Subsidiaries. Schedule 3.21(a) also contains a
true, correct and complete list of all licenses granted by the Company or any of
its Subsidiaries to any third party with respect to any Intellectual Property
Rights and all licenses granted by any third party to the Company or any of its
Subsidiaries with respect to any Intellectual Property Rights (other than
standard form licenses with respect to commercial software that is generally
available from third parties), in each case, identifying the Intellectual
Property Rights covered thereby. Except as set forth on Schedule 3.21(a), the
Company or one of its Subsidiaries owns all right, title and
-27-
34
interest to, or has the right to use pursuant to a valid license, all
Intellectual Property Rights identified on such schedule. The Company and its
Subsidiaries have taken all actions which are reasonably necessary to maintain
and protect their Intellectual Property Rights, except to the extent the failure
to take such actions would not have a Material Adverse Effect.
(b) Except as set forth on Schedule 3.21(b), (i) there have been no
claims made against the Company or any of its Subsidiaries asserting the
invalidity, misuse or unenforceability of any Intellectual Property Rights
listed on Schedule 3.21(a), (ii) neither the Company nor any of its Subsidiaries
has received any notices of any infringement or misappropriation by, or conflict
with, any third party with respect to such Intellectual Property Rights
(including, but not limited to, any demand or request that the Company or any of
its Subsidiaries license any rights from a third party), (iii) to the knowledge
of the Company, the conduct of the businesses conducted by the Company and its
Subsidiaries does not infringe or misappropriate in any material respect, and is
not in conflict in any material respect with, any Intellectual Property Rights
of other Persons, and (iv) to the knowledge of the Company, the Intellectual
Property Rights owned by or licensed to the Company or any of its Subsidiaries
are not being infringed or misappropriated in any material respect by any other
Persons. Except as set forth in Schedule 3.21(b), the Merger and the other
transactions contemplated by this Agreement will not adversely affect in any
material respect the Intellectual Property Rights of the Company or any of its
Subsidiaries.
SECTION 3.22. Permits. Except as set forth in Schedule 3.22, the
Company and its Subsidiaries own or validly hold all licenses, franchises,
permits, approvals, authorizations, exemptions, classifications, certificates,
registrations and similar documents or instruments (collectively, "Permits")
that are required in connection with the conduct of their respective businesses,
except where the failure to do so would not have a Material Adverse Effect. All
such Permits owned or held by the Company or any of its Subsidiaries are valid
and in full force and effect. No proceeding is pending or, to the knowledge of
the Company, threatened which could result in the revocation or termination of
any such Permits, and the Company knows of no basis on which any such proceeding
could be commenced. Except as set forth in Schedule 3.22, the consummation of
the Merger and the other transactions contemplated by this Agreement will not
affect the continued validity or effectiveness or alter the terms and conditions
of any such Permits owned or held by the Company.
SECTION 3.23. Insurance. Schedule 3.23 sets forth true and correct
summaries of all liability and other insurance policies maintained by the
Company and its Subsidiaries, and accurately states the coverages, deductible
amounts and carriers of each
-28-
35
such insurance policy. All such insurance policies are in full force and effect
and no notice of cancellation or termination has been received with respect to
any such policy. There are no circumstances known to the Company that would
enable any insurance company or association to avoid liability under any of the
insurance policies maintained by the Company or any of its Subsidiaries. Except
as set forth in Schedule 3.23, the coverage provided by such insurance policies
with respect to events occurring prior to the Closing Date will not be affected
in any manner by, and will not terminate or lapse by reason of, any of the
Merger or the other transactions contemplated by this Agreement. At no time
since September 30, 1995 has any insurance company or association canceled or
reduced any coverage maintained by the Company or any of its Subsidiaries, or
given any notice or other indication of its intention to cancel or reduce any
such coverage. The loss, damage or destruction of any properties and assets of
the Company or its Subsidiaries which are not fully covered by insurance would
not have a Material Adverse Effect.
SECTION 3.24. Transactions with Affiliates. Except as set forth in
Schedule 3.24, since September 30, 1996, neither the Company nor any of its
Subsidiaries has purchased, acquired or leased any property or services from, or
sold, transferred or leased any property or services to, or loaned or advanced
any money to, or borrowed any money from, or guaranteed or otherwise become
liable for any indebtedness or other obligations of, or acquired any capital
stock, obligations or securities of, or made any management, consulting or
similar fee arrangement with, or entered into or consummated any other material
transaction, agreement or arrangement with or for the benefit of, any officer,
director or Key Employee of the Company or any of its Affiliates, other than (i)
compensation and benefits provided to any such officer, director or Key Employee
in the ordinary course of business and consistent with past practice and (ii)
any such transactions between or among the Company and its direct or indirect
wholly owned Subsidiaries.
SECTION 3.25. Absence of Certain Business Practices. Neither the
Company nor any of its Subsidiaries, Affiliates, directors, officers, employees
or agents has, directly or indirectly, given or agreed to give any gift or
similar benefit to any supplier, property developer, competitor or governmental
employee or official (domestic or foreign) which is reasonably likely to subject
the Company or any of its Subsidiaries to any damage or penalty in any civil,
criminal or governmental litigation or proceeding.
SECTION 3.26. Disclosure. The representations and warranties by the
Company contained in this Agreement, and the statements contained in any
Schedule required hereby or any other document, certificate or other writing
delivered or to be delivered or made available by or on behalf of the Company
pursuant to the provisions of this Agreement or in connection with the Merger or
the other transactions contemplated
-29-
36
hereby, taken as an entirety, do not and will not contain any untrue statement
of a material fact, and do not and will not omit to state any material fact
required in order to make the statements therein, in the light of the
circumstances under which they were or will be made, not misleading.
SECTION 3.27. Brokers' or Finders' Fees. Except as set forth in
Schedule 3.27, no broker, finder or investment banker is entitled to any
brokerage or finder's fee or other fees or commissions in connection with this
Agreement or the Merger or the other transactions contemplated hereby based upon
arrangements made by or on behalf of the Company.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDER PARTIES
The Shareholder Parties jointly and severally represent and warrant
to CREC as follows:
SECTION 4.1. Organization. Each of the Holding Company and the
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as presently conducted.
-30-
37
SECTION 4.2. Authority; Binding Effect.
(a) Each of the Holding Company and the Merger Subsidiary has all
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by the Holding Company and the Merger
Subsidiary of this Agreement, the performance by them of their obligations
hereunder and the consummation by them of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on the
part of the Holding Company and the Merger Subsidiary and all necessary action,
if any, on the part of their shareholders. This Agreement has been duly executed
and delivered by each of the Holding Company and the Merger Subsidiary and
constitutes a legal, valid and binding agreement of each of them, enforceable
against each of them in accordance with the terms hereof.
(b) Each Shareholder Party has all necessary power and authority to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. In the case of any Shareholder Party that
is a partnership, the execution and delivery of this Agreement by such
Shareholder Party have been duly and validly authorized by all necessary
partnership action on the part of such Shareholder Party and all necessary
action on the part of its partners, and no other proceedings or actions on the
part of or with respect to such Shareholder Party or its partners are necessary
to authorize this Agreement, the performance by such Shareholder Party of its
obligations hereunder or the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of the
Shareholder Parties and constitutes a legal, valid and binding obligation of
each of them, enforceable against each of the Shareholder Parties in accordance
with the terms hereof.
SECTION 4.3. Absence of Conflicts.
(a) The execution and delivery by the Holding Company and the Merger
Subsidiary of this Agreement, the performance by them of their obligations
hereunder and the consummation by them of the transactions contemplated hereby
will not (i) conflict with, or result in any violation or breach of, any
provision of the Charter or Bylaws of the Holding Company or the Merger
Subsidiary, (ii) conflict with, result in any violation or breach of, or
constitute a default under, any term or provision of any material note, bond,
mortgage, indenture, lease, franchise, permit, license, Contract or other
instrument or document to which the Holding Company or the Merger Subsidiary is
a party or by which their respective properties or assets are bound or (iii)
assuming that the filings and Consents referred to in Section 3.4 are made or
obtained, conflict with, or result in any violation of,
-31-
38
any law, ordinance, statute, rule or regulation of any Governmental Authority or
of any order, writ, injunction, judgment or decree of any court, arbitrator or
Governmental Authority applicable to the Holding Company or the Merger
Subsidiary or their respective properties or assets.
(b) The execution and delivery by the Shareholder Parties of this
Agreement, the performance by them of their obligations hereunder and the
consummation by them of the transactions contemplated hereby will not (i) in the
case of any Shareholder Party that is a partnership, result in any violation or
breach of any provision of the partnership agreement of such Shareholder Party
or the Charter, Bylaws or other constitutive instruments of any of its partners,
(ii) conflict with, result in any violation or breach of, constitute a default
under, give rise to any right of termination or acceleration (with or without
notice or the lapse of time or both) pursuant to, or result in being declared
void, voidable or without further effect, any material term or provision of any
note, bond, mortgage, indenture, lease, franchise, permit, license, Contract or
other instrument or document to which the any of the Shareholder Parties is a
party or by which its properties or assets are bound or (iii) assuming that any
waiting period under the HSR Act applicable to the transactions to be
consummated by the Shareholder Parties pursuant to this Agreement shall have
expired or been terminated, conflict with, or result in any violation of, any
law, ordinance, statute, rule or regulation of any Governmental Authority or of
any order, writ, injunction, judgment or decree of any court, arbitrator or
Governmental Authority applicable to the Shareholder Parties or their respective
properties or assets.
SECTION 4.4. Governmental Consents and Filings.
(a) There is no requirement applicable to the Holding Company or the
Merger Subsidiary to obtain any Consent of, or to make or effect any
declaration, filing or registration with, any Governmental Authority for the
valid execution and delivery by the Holding Company or the Merger Subsidiary of
this Agreement, the due performance by them of their obligations hereunder or
the lawful consummation by them of the transactions contemplated hereby, except
for the filings and Consents on the part of the Holding Company and the Merger
Subsidiary referred to in Section 3.4.
(b) There is no requirement applicable to any of the Shareholder
Parties to obtain any Consent of, or to make or effect any declaration, filing
or registration with, any Governmental Authority for the valid execution and
delivery by the Shareholder Parties of this Agreement, the due performance by
them of their obligations hereunder or the lawful consummation by them of the
Merger or the other transactions contemplated hereby, except for (i) the filings
and consents on the part of the Shareholder Parties referred to in
-32-
39
Section 3.4 and (ii) any filings required to be made by the Shareholder Parties
in connection with such transactions pursuant to Section 13(d) of the Exchange
Act and the rules and regulations promulgated by the Commission thereunder.
SECTION 4.5. Proxy Statement; Schedule 13E-3. None of the
information supplied in writing by the Shareholder Parties or the Holding
Company for inclusion in the Proxy Statement or the Schedule 13E-3 will contain
any untrue statement of a material fact or omit 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.
SECTION 4.6. Title to Company Shares. As of the date hereof, each
Shareholder Party is the record and beneficial owner of the number of Company
Shares set forth opposite the name of such Shareholder Party (under the caption
"Company Shares") on Exhibit C. The Company Shares set forth opposite the name
of each Shareholder Party (under the caption "Company Shares") on Exhibit C are
the only Company Shares owned by such Shareholder Party. Such Company Shares are
owned by the Shareholder Parties free and clear of all Encumbrances, except for
those provided for under the express terms of this Agreement, the Voting
Agreement and the Stock Purchase Agreement.
SECTION 4.7. Capitalization; Issuance of Shares.
(a) Immediately prior to giving effect to the CREC Stock Purchase
and the Shareholder Party Contribution, the authorized capital stock of the
Holding Company will consist of 100,000 shares of Holding Company Common Stock,
of which 10 shares will be issued and outstanding and owned by Xxxxx Partnership
and no shares will be held in the treasury of the Holding Company. The CREC
Holding Company Shares will, upon the issuance thereof in accordance with the
terms of this Agreement, be validly issued, fully paid and nonassessable, and
none of such shares will have been issued in violation of, or subject to, any
preemptive rights or rights of subscription. Except as expressly provided in
this Agreement, there are no outstanding options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
pursuant to which the Holding Company is or may be obligated to issue or sell
any issued or unissued shares of its capital stock or other equity securities or
to purchase or redeem any shares of its capital stock or other equity securities
or make any other payments in respect thereof, and there are no shares of its
capital stock or other equity securities reserved for issuance for any purpose.
-33-
40
(b) Immediately prior to the Effective Time, the authorized capital
stock of the Merger Subsidiary will consist of 1,000 shares of Merger Subsidiary
Common Stock, all of which will be issued and outstanding and owned by the
Holding Company. There are no outstanding options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
pursuant to which the Merger Subsidiary is or may be obligated to issue or sell
any issued or unissued shares of its capital stock or other equity securities or
to purchase or redeem any shares of its capital stock or other equity securities
or make any other payments in respect thereof, and there are no shares of its
capital stock or other equity securities reserved for issuance for any purpose
SECTION 4.8. No Material Operations. Prior to the Effective Time,
neither the Holding Company nor the Merger Subsidiary will have any material
assets or liabilities or will be engaged in any material business or operations,
other than as expressly contemplated by this Agreement.
SECTION 4.9. Brokers' or Finders' Fees. Except as set forth on
Schedule 3.27, none of the Shareholder Parties, the Holding Company or the
Merger Subsidiary has authorized any broker, finder or investment banker to act
on their behalf or on behalf of the Company in connection with this Agreement or
the Merger or the other transactions contemplated hereby in such a manner as to
give rise to a valid claim against CREC, the Holding Company, the Merger
Subsidiary or the Company for any brokerage or finder's fee or other fees or
commissions.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF CREC
CREC hereby represents and warrants to the Company and the
Shareholder Parties as follows:
SECTION 5.1. Organization. CREC is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Nevada and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as presently conducted.
SECTION 5.2. Authority; Binding Effect. CREC has all requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and to
-34-
41
consummate the transactions contemplated hereby. The execution and delivery by
CREC of this Agreement, the performance by it of its obligations hereunder and
the consummation by it of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of CREC.
This Agreement has been duly executed and delivered by CREC and constitutes a
legal, valid and binding agreement of CREC, enforceable against CREC in
accordance with the terms hereof.
SECTION 5.3. Absence of Conflicts. The execution and delivery by
CREC of this Agreement, the performance by it of its obligations hereunder and
the consummation by it of the transactions contemplated hereby will not (i)
conflict with, or result in any violation or breach of, any provision of the
Charter or Bylaws of CREC, (ii) conflict with, result in any violation or breach
of, or constitute a default under, any term or provision of any material note,
bond, mortgage, indenture, lease, franchise, permit, license, Contract or other
instrument or document to which CREC is a party or by which its properties or
assets are bound or (iii) assuming that any waiting period under the HSR Act
applicable to the transactions to be consummated by CREC pursuant to this
Agreement shall have expired or been terminated, conflict with, or result in any
violation of, any law, ordinance, statute, rule or regulation of any
Governmental Authority or of any order, writ, injunction, judgment or decree of
any court, arbitrator or Governmental Authority applicable to CREC or its
properties or assets.
SECTION 5.4. Governmental Consents and Filings. There is no
requirement applicable to CREC to obtain any Consent of, or to make or effect
any declaration, filing or registration with, any Governmental Authority for the
valid execution and delivery by CREC of this Agreement, the due performance by
it of its obligations hereunder or the lawful consummation by it of the
transactions contemplated hereby, except for any filing required to be made by
CREC under the HSR Act in connection with the transactions to be consummated by
CREC pursuant to this Agreement .
SECTION 5.5. Financing. CREC has, or will have at the Closing Date,
the funds necessary to pay the CREC Purchase Price.
SECTION 5.6. Brokers' or Finders' Fees. CREC has not authorized any
broker, finder or investment banker to act on its behalf in connection with this
Agreement or the transactions contemplated hereby in such a manner as to give
rise to a valid claim against the Company or any of the Shareholder Parties for
any brokerage or finder's fee or other fees or commissions.
-35-
42
ARTICLE VI.
CERTAIN COVENANTS
SECTION 6.1. Conduct of Business. From the date hereof until the
Closing Date, the Company and its Subsidiaries shall conduct their businesses in
the ordinary course of business and in a manner that is consistent in all
material respects with past practice and the Company and its Subsidiaries shall
preserve intact their business organizations, and use their best efforts to keep
available the employees identified in Schedule 6.1 (the "Key Employees") and
maintain their present relationships with material dealers, retailers,
suppliers, insurers, lessors and licensees (except that the Company and its
Subsidiaries may terminate or replace, or modify the terms of their contractual
relationships with, dealers, retailers, suppliers, insurers, lessors and
licensees to the extent that such terminations, replacements and changes are
effected in the ordinary course of business and are not reasonably likely to
have a Material Adverse Effect) and with all Governmental Authorities and other
Persons having material business relationships with the Company or any of its
Subsidiaries. Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, neither the Company nor any of its Subsidiaries
shall do, or propose or commit to do, directly or indirectly, any of the
following without the prior written consent of CREC, except for actions to be
taken in accordance with the express terms of this Agreement and except as set
forth in Schedule 6.1:
(a) amend or make any other change in its Charter or Bylaws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock or other equity securities of, or ownership interests in, the Company or
any of its Subsidiaries (except in connection with the exercise of any
outstanding Company Stock Options), or any options, warrants, calls or other
rights to acquire any shares of capital stock or other equity securities of, or
ownership interests in, the Company or any of its Subsidiaries;
(c) sell, lease, transfer or otherwise dispose of any material
properties or assets of the Company or any of its Subsidiaries (whether or not
reflected on the books of the Company or any of its Subsidiaries and whether
real, personal or mixed, tangible or intangible), other than in the ordinary
course of business;
(d) consolidate with, or merge with or into, any Person, except as
contemplated by this Agreement;
-36-
43
(e) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of the
Company or redeem, purchase or otherwise acquire any capital stock or other
equity interests of, or ownership interests in, the Company or any of its
Subsidiaries, except in connection with the exercise of any outstanding Company
Stock Options;
(f) reclassify, combine, split or subdivide any shares of the
capital stock of the Company or any of its Subsidiaries;
(g) incur or assume any indebtedness for borrowed money or issue any
debentures, notes or other debt securities or assume, guarantee, endorse or
otherwise become liable (whether directly, contingently or otherwise) for the
obligations of any other Person, except in the ordinary course of business
(provided, however, that the aggregate amount of indebtedness to be incurred or
assumed by the Company and its Subsidiaries after the date hereof as permitted
by this paragraph (g) shall not exceed $2,000,000);
(h) make any loans, advances or capital contributions to, or
investments in, any other Person (other than any of direct or indirect wholly
owned Subsidiary), except for (i) investments to be made in accordance with
existing financial and operating plans disclosed by the Company to CREC prior to
the date hereof and (ii) temporary cash investments made in the ordinary course
of business and consistent with past practice;
(i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof;
(j) create or incur any Liens upon any material properties or assets
of the Company or any of its Subsidiaries (except for Permitted Encumbrances);
(k) enter into any material Contracts or commitments or engage in
any material transactions (other than this Agreement and the Merger and the
other transactions contemplated hereby) not in the ordinary course of business
and consistent with past practice;
(l) engage in any transactions with any Affiliate (other than (i)
the Merger and the other transactions contemplated by this Agreement or (ii)
transactions between the Company and any of its direct or indirect wholly owned
Subsidiaries), except on terms and conditions at least as favorable to the
Company as those that would apply in the case of a similar arms'-length
transaction;
-37-
44
(m) enter into any agreement, arrangement or understanding with any
director, officer or employee of the Company or any of its Subsidiaries
providing for the employment of any such director, officer or employee or any
increase in the compensation, severance or termination benefits payable or to
become payable by the Company or any of its Subsidiaries to any such director,
officer or employee (except that the Company shall not be prohibited from (i)
entering into "at will" employment Contracts, (ii) increasing compensation
payable to employees who are not directors or officers or (iii) paying severance
benefits to former employees, in each case in the ordinary course of business
and consistent with past practice) or make any loan to or enter into any other
material transaction or arrangement with any such director, officer or employee;
(n) increase the benefits payable by the Company or any of its
Subsidiaries under any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase or other
employee benefit plan, program or arrangement made to, for or with any of the
directors, officers or employees of the Company or any of its Subsidiaries,
other than any scheduled increase pursuant to the existing terms thereof;
(o) fail to keep all of the material properties and assets of
insurable character of the Company or any of its Subsidiaries insured at least
to the extent described in or pursuant to the provisions of this Agreement, or
take any action that would enable any insurance company or association to avoid
liability under any insurance policy for claims arising out of occurrences prior
to the Closing Date;
(p) cancel or compromise any material claim, waive or release any
material rights or change in any material respect or terminate any material
Contract (except that the Company and its Subsidiaries may terminate or replace,
or modify the terms of their contractual relationships with, dealers, retailers,
suppliers, insurers, lessors and licensees to the extent that such terminations,
replacements and changes are effected in the ordinary course of business and are
not reasonably likely to have a Material Adverse Effect) of the Company or any
of its Subsidiaries;
(q) fail to maintain in full force and effect all material Permits
that are required in connection with the conduct of the businesses of the
Company or any of its Subsidiaries or sell, transfer, license or otherwise
dispose of any material rights or interests under any such Permits;
-38-
45
(r) change any significant accounting principles, methods or
practices of the Company or any of its Subsidiaries, except as required as a
result of any mandatory change in accounting standards;
(s) fail to maintain the books and records of the Company or any of
its Subsidiaries in all material respects in the usual, regular and ordinary
manner on a basis consistently applied;
(t) make any tax elections or settle or compromise any income tax
liability, except in the ordinary course of business and consistent with past
practice; and
(u) take any action which would cause any representation or warranty
of the Company contained in this Agreement (as qualified by the Schedules
delivered to CREC hereunder, as the same have been supplemented from time to
time pursuant to Section 6.15 with the consent of CREC) to be untrue or
incorrect in any material respect as of the date when made or as of a future
date.
SECTION 6.2. Other Proposals.
(a) From the date hereof until the Closing Date, the Company and its
Subsidiaries shall not, and shall not permit any of their respective
Representatives to, initiate any contact with, solicit, encourage or enter into
or continue any discussions, negotiations, understandings or agreements with any
Third Party with respect to, or furnish or disclose any non-public information
regarding the Company or any of its Subsidiaries or their respective businesses
to any Third Party in connection with, any Acquisition Proposal. Notwithstanding
the foregoing, to the extent that the Board of Directors of the Company or the
Special Committee reasonably determines based on the advice of its counsel that
it is required to do so by virtue of its fiduciary obligations under applicable
law, the Company may (i) in response to an unsolicited request therefor, furnish
non-public information with respect to the Company or its Subsidiaries or their
respective businesses to any Qualified Third Party pursuant to a customary
confidentiality agreement and discuss such information (but not any non-public
information relating to the structure of the Merger or the other transactions
contemplated hereby, other than any such information which the Company
demonstrates was independently developed solely by the Company and its
Representatives) with such Qualified Third Party, (ii) upon receipt of a
Qualified Acquisition Proposal from a Qualified Third Party, participate in
discussions and negotiations with such Qualified Third Party regarding such
Qualified Acquisition Proposal (but not enter into any agreements with respect
thereto except as permitted pursuant to the express terms of clause (iii) below)
if each of the Overbid Negotiation Conditions is
-39-
46
satisfied and (iii) enter into an agreement with a Qualified Third Party with
respect to an Overbid Transaction if each of the Overbid Transaction Conditions
is satisfied. Unless each of the Overbid Transaction Conditions is satisfied,
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to
CREC, the approval or recommendation by such Board of Directors of this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal or (iii) cause the Company to authorize or
commit to enter into any agreement with respect to an Acquisition Proposal.
(b) In the event that either the Company or any of the Shareholder
Parties shall directly or indirectly receive any offer, proposal or inquiry
relating to an Acquisition Proposal, such party shall notify CREC within one
Business Day after the receipt of such offer, proposal or inquiry and shall, in
any such notice to CREC, indicate the identity of the offeror and set forth all
of the material terms of such offer, proposal or inquiry. The Company and the
Shareholder Parties shall keep CREC fully informed of the status and details of
any such offer, proposal or inquiry.
(c) Without the prior written consent of CREC, the Company shall not
modify or release any Third Party from any confidentiality or standstill
agreement to which the Company is a party if such action would have the purpose
or effect of permitting or facilitating the submission of an Acquisition
Proposal by such Third Party.
SECTION 6.3. Access to Information. From the date hereof until the
Closing Date, the Company shall permit CREC and its Representatives (including,
but not limited to, any attorney or environmental consulting firm) to make a
full investigation of the business, prospects, properties, financial condition
and results of operations of the Company and its Subsidiaries including, but not
limited to, an environmental investigation of the Real Property owned or leased
by them, and shall afford CREC and its Representatives full access to the
offices, buildings, properties, records, files, books of account, tax returns,
agreements and commitments, record books and stock books of the Company and its
Subsidiaries and to their directors, officers, independent accountants and other
Representatives, at such reasonable times during regular business hours and as
often as CREC may reasonably request. Upon request by CREC, the Company shall
request their present and former independent accountants to afford to CREC and
its Representatives access to all accountants' working papers for all audits and
reviews of the financial statements of the Company and its Subsidiaries. The
Company shall furnish CREC and its Representatives with all such other
information relating to the business, prospects, properties, financial condition
and results of operations as CREC or its Representatives may reasonably request.
No investigation pursuant to this Section 6.3 shall affect any
-40-
47
representations or warranties made by the Company in this Agreement or the
conditions to the obligations of any party hereto to consummate the Merger and
the other transactions contemplated hereby. The provisions of the
Confidentiality Agreement shall apply to any information provided to CREC or its
Representatives pursuant to this Section 6.3; provided, however, that as of the
Closing Date, the Confidentiality Agreement shall terminate and be of no further
force and effect.
SECTION 6.4. Best Efforts. Subject to the terms and conditions
hereof, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things which are necessary, proper or advisable under applicable laws and
regulations or otherwise in order to consummate and make effective the Merger or
the other transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, each of the parties hereto shall execute and
deliver, or cause to be executed and delivered, all reasonable agreements,
certificates and other instruments and shall use its reasonable best efforts
promptly to obtain all waivers, permits, consents, approvals and other
authorizations from, and to effect all registrations, filings and notices with
or to, any Governmental Authorities or other Persons which are necessary or
appropriate in connection with said transactions or in order to fulfill all
conditions to obligations of the parties under this Agreement.
SECTION 6.5. Certain Actions by the Shareholder Parties. Each of the
Shareholder Parties shall use its reasonable best efforts to cause each of the
Company, the Holding Company and the Merger Subsidiary to perform all of its
agreements, covenants and obligations set forth in this Agreement and to
consummate the Merger and the other transactions contemplated hereby, upon the
terms and subject to the conditions set forth herein.
SECTION 6.6. HSR Act. Each of CREC and the Principal Shareholders
(as the ultimate parent entities of the Company) will promptly file or cause to
be filed with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division") notification
and report forms pursuant to the HSR Act relating to the Merger and the other
transactions contemplated by this Agreement. CREC and the Principal Shareholders
shall promptly respond to any request for additional information or documentary
material by the FTC or the Antitrust Division and shall cooperate with each
other in order to ensure that all waiting periods (and any extension thereof)
applicable to the consummation of the Merger and the other transactions
contemplated by this Agreement under the HSR Act expire or are terminated as
promptly as practicable.
-41-
48
SECTION 6.7. Special Meeting. As promptly as practicable following
the date hereof, the Company, acting through its Board of Directors, shall, in
accordance with the provisions of the Arizona Act, the Exchange Act and any
other provisions of applicable law, call, give notice of, convene and hold a
special meeting (the "Special Meeting") of the shareholders of the Company and
submit this Agreement to a vote of such shareholders. The Company, acting
through its Board of Directors, shall recommend to its shareholders approval of
this Agreement and the Merger and shall use its best efforts to obtain the
necessary approval of this Agreement by its shareholders. Unless the Company
enters into an agreement with respect to an Overbid Transaction as permitted
pursuant to Section 6.2, the Company and the Shareholder Parties shall use their
best efforts to obtain the vote of the shareholders of the Company required
under the Arizona Act to approve this Agreement.
SECTION 6.8. Proxy Statement; Schedule 13E-3.
(a) As promptly as practicable following the date hereof, the
Company shall prepare and file with the Commission the Proxy Statement pursuant
to the Exchange Act and the Company and the Principal Shareholders shall prepare
and file with the Commission the Schedule 13E-3 pursuant to the Exchange Act.
The Company shall include in the Proxy Statement the recommendation of the Board
of Directors with respect to the approval of the Merger Agreement referred to in
the recitals to this Agreement and the written opinion of the Financial Advisor
that the Merger is fair to the shareholders of the Company from a financial
point of view. The Proxy Statement and Schedule 13E-3 shall comply as to form
with the applicable requirements of the Exchange Act and any other provisions of
applicable law.
(b) In preparing the Proxy Statement and the Schedule 13E-3, the
Company shall use its best efforts (i) to obtain and furnish all material
information required to be included therein pursuant to the Exchange Act and any
other provisions of applicable law, (ii) file with the Commission pursuant to
the Exchange Act preliminary copies of the Proxy Statement and the Schedule
13E-3 for review and comment, (iii) respond promptly to any comments made by the
Commission with respect to the preliminary copies of the Proxy Statement and the
Schedule 13E-3 and (iv) to have the Proxy Statement cleared by the Commission
and mailed to the shareholders of the Company at the earliest practicable date.
CREC and its counsel shall be given a reasonable opportunity to review and
comment upon the Proxy Statement (and any supplements thereto) and the Schedule
13E-3 (and any amendments thereto) prior to the time they are filed with the
Commission. The Company and the Principal Shareholders shall provide CREC and
its counsel with a copy of any written comments or telephonic notification of
any verbal comments that are received by
-42-
49
the Company, the Principal Shareholders or their counsel from the Commission or
its staff with respect to the Proxy Statement or the Schedule 13E-3 and shall
further provide CREC and its counsel with a copy of any written responses and
telephonic notification of any verbal responses by the Company, the Principal
Shareholders or their counsel.
(c) If at any time prior to the Closing Date any fact, event or
development is discovered by the Company or the Principal Shareholders which is
required under applicable law to be set forth in a supplement to the Proxy
Statement or an amendment to the Schedule 13E-3, the Company shall prepare and
file with the Commission any such supplements and amendments and shall
disseminate the same to the Shareholders of the Company in the manner required
by applicable law.
SECTION 6.9. Company Stock Options. The Company shall take all
action necessary to terminate the Company Stock Plan and any other employee
stock option or similar plans prior to the Effective Time and will use its
reasonable best efforts to obtain the written consent of each holder of a
Company Stock Option to the transactions contemplated by Section 2.3.
SECTION 6.10. Indemnification of Directors and Officers.
(a) The Company shall indemnify and hold harmless each person that
is a director or officer of the Company (each, an "Individual Indemnified
Party") to the fullest extent permitted under applicable law, the provisions of
its Charter and Bylaws as in effect on the date hereof and any indemnification
agreement to which the Company and any Individual Indemnified Party are parties
from and against all claims, demands, actions, causes of action, suits,
proceedings and investigations that are asserted against such Individual
Indemnified Party and all losses, claims, damages, liabilities, costs, expenses
(including fees and disbursements of counsel), judgments, assessments, fines,
penalties and amounts paid in settlement with the consent of the Company that
are incurred by or imposed on such Individual Indemnified Party in connection
therewith which arise out of or are based upon any actual or alleged acts or
omissions on the part of such Individual Indemnified Party prior to the
Effective Time, including, but not limited to, acts or omissions arising from or
relating to the Merger or any other transactions contemplated by this Agreement.
In connection with any such claim, demand, action, cause of action, suit,
proceeding or investigation, the Company shall advance the reasonable expenses
incurred by each Individual Indemnified Party promptly upon request and delivery
of any undertaking required by law.
-43-
50
(b) In the event that the Company shall fail to comply with any of
its obligations set forth in paragraph (a) above for any reason, including as a
result of any determination or claim that compliance with such obligations by
the Company would be illegal, contrary to public policy or beyond the power of,
or otherwise unenforceable against, the Company, CREC shall be responsible
therefor and, to the fullest extent permitted by law, shall perform such
obligations unconditionally without regard to any defense or other basis for
nonperformance which the Company may be entitled to assert (it being understood
that CREC hereby expressly waives any such determination or claim as a basis for
nonperformance of such obligations to the extent that it may lawfully do so).
(c) The provisions of this Section 6.10 are intended to be for the
benefit of, and shall be enforceable by, each Individual Indemnified Party (each
of whom shall be an express third-party beneficiary of this Section 6.10). The
obligations of the Company and CREC under this Section 6.10 shall not be
terminated or modified in such a manner as to adversely affect any of the
Individual Indemnified Parties without the prior written consent of each
Individual Indemnified Party affected thereby.
SECTION 6.11. Notification of Certain Other Matters. The Company and
the Shareholder Parties shall promptly notify CREC of:
(a) any action, suit, inquiry, investigation or proceeding commenced
or threatened against or affecting the Company or any of its Subsidiaries which,
if pending on the date hereof, would have been required to have been set forth
or described in any Schedule required hereby or which relate to the Merger or
the other transactions contemplated by this Agreement;
(b) any notice or other communication from any Person alleging that
the Consent of such Person is or may be required in connection with the Merger
or the other transactions contemplated by this Agreement;
(c) any notice or other communication from any Governmental
Authority in connection with the Merger or the other transactions contemplated
by this Agreement; and
(d) any fact, development or occurrence that constitutes a Material
Adverse Change or, so far as reasonably can be foreseen at the time of its
occurrence, is likely to have a Material Adverse Effect.
-44-
51
SECTION 6.12. Convertible Note. Prior to the Effective Time, the
Company shall (i) prepay in cash one-half of the outstanding principal amount of
the Convertible Note and (ii) cause the remainder of the outstanding principal
amount of the Convertible Note to be converted into Company Shares in accordance
with the terms thereof (which Company Shares will, in accordance with and
subject to the provisions of Article II, be converted into the Merger
Consideration and canceled as of the Effective Time). The Company represents and
warrants that, as of the date hereof, the outstanding principal amount of the
Convertible Note is $4,100,000 and that the number of Company Shares issuable
upon the conversion of one-half of the principal amount thereof is 128,125 and
agrees that it shall not take any action which would require the Company to
issue a greater number of Company Shares upon the conversion of the Convertible
Note.
SECTION 6.13. Arizona Takeover Statute Matters.
(a) The Company has taken and shall take all action required in
order to ensure that the provisions of the Arizona Business Combination Statute
do not prohibit or restrict the Merger or any of the other transactions
contemplated hereby.
(b) The Company hereby represents and warrants to CREC that a
committee of disinterested directors of the Company has approved the Subject
Share Purchase, which approval satisfies the applicable requirements of Section
2741A.2 of the Arizona Business Combination Statute.
(c) To the fullest extent permitted by law, the Company hereby
irrevocably waives any right that it may have under the Arizona Control Share
Acquisition Statute to redeem or repurchase any of the Aggregate Subject Shares
at any time after the consummation of the Subject Share Purchase. Unless
prohibited by law, the Shareholder Parties shall take all reasonable action
within their control necessary to ensure that the Company does not exercise or
attempt to exercise any such right.
(d) If the Subject Share Purchase is consummated, the Company and
the Shareholder Parties shall take all reasonable action within their control
(including any action required or contemplated by the Arizona Control Share
Acquisition Statute) to ensure that the Aggregate Subject Shares will at all
times have the same voting rights as any other outstanding Company Shares,
unless prohibited by law. Without limiting the generality of the foregoing, if
CREC so requests and provides any undertaking required by law (it being
expressly understood and agreed that, to the fullest extent permitted by law,
the Company hereby irrevocably waives the requirement that any such undertaking
be provided by CREC), the Company and the Shareholder Parties shall take all
reasonable
-45-
52
action within their control necessary (including the preparation, filing and
mailing of a proxy statement) in accordance with the applicable provisions of
the Arizona Act, the Arizona Control Share Acquisition Statute, the Exchange Act
and any other provision of applicable law to convene a meeting of the
shareholders of Company as promptly as practicable to consider and vote upon the
approval of a resolution providing that the Aggregate Subject Shares will at all
times have the same voting rights as any other outstanding Company Shares. Any
solicitation by the Company in connection with the approval of the foregoing
resolution shall be made in accordance with Regulation 14A under the Exchange
Act. The Board of Directors of the Company shall, subject to its fiduciary
duties under applicable law, recommend approval of such resolution and the
Company and, unless prohibited by law, the Shareholder Parties shall use their
reasonable best efforts to obtain such approval.
SECTION 6.14. Post-Termination Proposal. In consideration of the
waivers, representations, warranties, covenants and agreements on the part of
the Company and the Shareholder Parties set forth in Section 6.13(b), (c) and
(d), CREC hereby agrees that, if this Agreement is terminated and the Subject
Share Purchase is consummated in accordance with the Stock Purchase Agreement,
within 30 days after the consummation of the Subject Share Purchase (or, if at
the time of the consummation of the Subject Share Purchase, the Company is a
party to an agreement with a Third Party with respect to an Overbid Transaction,
within 30 days after the termination of such agreement within the time period
specified in the last sentence of this Section 6.14), CREC shall make a written
proposal (a "Post-Termination Proposal") to the Board of Directors of the
Company with respect to a transaction or transactions (a "Post-Termination
Transaction") pursuant to which CREC or one or more of its Affiliates would
acquire all of the outstanding Company Shares which are held by the Independent
Shareholders at a price of $26.75 per share. It is understood and agreed that
the form and structure of any Post-Termination Transaction to be proposed by
CREC pursuant to this Section 6.14 shall be determined by CREC in its reasonable
judgment based upon such regulatory, tax and other considerations as it
considers to be relevant; provided, however, that the proposed terms of such
transaction, when taken in their entirety, shall be, in the reasonable judgement
of the Board of Directors of CREC, no less favorable to the Independent
Shareholders than the terms and conditions set forth in this Agreement. Until
such time as the Company, the Shareholder Parties and CREC enter into a
definitive written agreement with respect to a Post-Termination Transaction, a
Post-Termination Proposal shall not give rise to a binding obligation on the
part of any of the parties hereto; provided, however, that if the Company
notifies CREC within ten days after receipt of such a proposal that it is
willing to enter into a Post-Termination Transaction on substantially the terms
described in the Post-Termination Proposal, the Company, Shareholder Parties and
CREC shall negotiate in good faith with
-46-
53
a view toward entering into a definitive written agreement with respect thereto
as soon as reasonably practicable. Notwithstanding the foregoing, CREC shall not
be obligated to submit a Post-Termination Proposal to the Board of Directors of
the Company if, at the time such proposal would otherwise be required to be
submitted hereunder, (i) the Company is a party to an agreement with a Third
Party with respect to an Overbid Transaction (and such agreement is not
terminated within a period of 60 days), (ii) the Company or the Shareholder
Parties are in breach in any material respect of their obligations under Section
6.13(b), (c) or (d) or (iii) there shall be issued and in effect any order,
writ, injunction, judgment or decree of any federal or state court or other
Governmental Authority which has the effect of making illegal, impeding,
restraining or prohibiting CREC from making a Post-Termination Proposal,
entering into an agreement with respect to such a proposal or consummating a
Post-Termination Transaction.
SECTION 6.15. Supplemental Disclosure. After the date hereof, the
Company shall have the continuing obligation promptly to supplement or amend the
Schedules required hereby or any writing previously delivered to CREC with
respect to any matter hereafter arising or discovered which, if existing or
known at the date hereof, would have been required to be set forth or described
in a Schedule required hereby or in any writing delivered to CREC; provided,
however, that for the purpose of the rights and obligations of the parties
hereunder, any such supplemental or amended disclosure shall not be deemed to
have been disclosed as of the date hereof unless otherwise agreed to in writing
by CREC.
ARTICLE VII.
CONDITIONS TO CLOSING
SECTION 7.1. Conditions to the Obligations of Each of the Parties.
The respective obligations of each party to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, prior to or
concurrently with the Closing, of the following conditions:
(a) This Agreement shall have been approved and adopted by the
affirmative vote of the holders of at least a majority of the outstanding
Company Shares;
(b) Any waiting period applicable to such transactions under the HSR
Act shall have expired or been terminated; and
-47-
54
(c) No statute, rule, regulation, order, writ, injunction, judgment
or decree shall have been enacted, promulgated, entered or enforced by any
federal or state court or other Governmental Authority which has the effect of
making illegal, impeding or otherwise restraining or prohibiting such
transactions.
SECTION 7.2. Conditions to the Obligations of CREC. The obligations
of CREC to consummate the CREC Stock Purchase and the other transactions
contemplated by this Agreement shall be subject to the fulfillment, prior to or
concurrently with the Closing, of the following conditions (any one or more of
which may be waived, in whole or in part, by CREC):
(a) Each of the representations and warranties of the Company
contained in this Agreement (as qualified by the Schedules delivered to CREC
hereunder, as the same are supplemented from time to time pursuant to Section
6.15 with the consent of CREC), shall be true and correct as of the Closing Date
as if made on such date and each of the representations and warranties of the
Shareholder Parties contained in this Agreement shall be true and correct in all
material respects as of the Closing Date as if made on such date; provided,
however, that the failure of any such representations or warranties of the
Company to be true and correct shall not be a condition to the obligations of
CREC unless the Claims Reserve is less than or equal to zero;
(b) The Company, the Holding Company and the Shareholder Parties
shall have performed and complied in all material respects with all provisions,
covenants and conditions contained in this Agreement which are required to be
performed or complied with by them prior to or on the Closing Date;
(c) There shall be no Company Stock Options outstanding immediately
prior to the Effective Date;
(d) The Company and the Shareholder Parties shall have delivered to
CREC certificates, dated as of the Closing Date, which in the case of the
certificate delivered by the Company, shall be executed by the chief executive
officer and chief financial officer of the Company, certifying that, to the best
of their knowledge, the conditions specified in paragraphs (a) and (b) above
have been fulfilled; and
(e) CREC shall have received an opinion, dated as of the Closing
Date, of Xxxxxx Xxxxxxx, counsel for the Company, in the form attached as
Exhibit E hereto.
-48-
55
SECTION 7.3. Conditions to the Obligations of the Company and the
Shareholder Parties. The obligations of the Company and the Shareholder Parties
to consummate the Merger, the Shareholder Party Contribution and the other
transactions contemplated by this Agreement shall be subject to the fulfillment,
prior to or concurrently with the Closing, of the following conditions (any one
or more of which may be waived, in whole or in part, by the Company and the
Shareholder Parties jointly):
(a) Each of the representations and warranties of CREC contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date as if made on such date;
(b) CREC shall have performed and complied in all material respects
with all provisions, covenants and conditions contained in this Agreement which
are required to be performed or complied with by it prior to or on the Closing
Date;
(c) CREC shall have delivered to the Company and the Shareholder
Parties a certificate, dated as of the Closing Date, which shall be executed by
the chief executive officer and chief financial officer of CREC, certifying
that, to the best of their knowledge, the conditions specified in paragraphs (a)
and (b) above have been fulfilled;
(d) The Company shall have received an opinion, dated as of the
Closing Date, of Xxxxxxx X. Xxxxxx, Vice President and Chief Legal Officer of
CREC, in the form attached as Exhibit F.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1. Indemnification by the Shareholder Parties. In
accordance with the terms and subject to the conditions of this Article VIII,
the Shareholder Parties shall jointly and severally indemnify and hold harmless
CREC and its Representatives for, from and against any and all demands, claims,
actions, causes of action, proceedings, assessments, losses, damages,
liabilities, settlements, judgments, fines, penalties, interest, costs and
expenses (including fees and disbursements of counsel) which are asserted
against, imposed upon or incurred by any such Person as a result of or in
connection with the breach or alleged breach by the Shareholder Parties of any
of their representations, warranties, covenants or agreements contained in this
Agreement (the "CREC Claims"); provided, however, that the Shareholder Parties
shall only be obligated to indemnify CREC
-49-
56
and its Representatives pursuant to this Section 8.1 if and to the extent that
the aggregate of all CREC Claims for which any Persons have sought or are
seeking indemnification hereunder exceeds $50,000.
SECTION 8.2. Indemnification by CREC. In accordance with the terms
and subject to the conditions of this Article VIII, CREC shall indemnify and
hold harmless the Shareholder Parties and their Representatives for, from and
against any and all demands, claims, actions, causes of action, proceedings,
assessments, losses, damages, liabilities, settlements, judgments, fines,
penalties, interest, costs and expenses (including fees and disbursements of
counsel) which are asserted against, imposed upon or incurred by any such Person
as a result of or in connection with the breach or alleged breach by CREC of any
of its representations, warranties, covenants or agreements contained in this
Agreement (the "Shareholder Party Claims"); provided, however, that CREC shall
only be obligated to indemnify the Shareholder Parties and their Representatives
pursuant to this Section 8.2 if and to the extent that the aggregate of all
Shareholder Party Claims for which any Persons have sought or are seeking
indemnification hereunder exceeds $50,000.
SECTION 8.3. Third-Party Claims; Procedures. The obligations of the
parties provided for under Sections 8.1 and 8.2 hereof in respect of any CREC
Claims or Shareholder Party Claims, as the case may be ("Claims"), made or
asserted by a third party ("Third-Party Claims") shall be performed in
accordance with the following procedures:
(a) Each Person entitled to indemnification under Section 8.1 or 8.2
hereof (each, an "Indemnified Party") shall give the party or parties from whom
it is seeking indemnification hereunder (collectively, the "Indemnifying Party")
written notice as promptly as reasonably practicable after the written assertion
of any Third-Party Claim or commencement of any action, suit or proceeding in
respect thereof; provided, however, that, if an Indemnified Party fails to give
Indemnifying Party written notice as provided herein, Indemnifying Party shall
only be relieved of its obligations under this Article VIII in respect of such
Third-Party Claim if and to the extent that the Indemnifying Party is materially
prejudiced thereby (whether as a result of the forfeiture of substantive
defenses or otherwise).
(b) Promptly after receipt of written notice of a Third-Party Claim
as contemplated by Section 8.3(a), the Indemnifying Party shall (or, in the case
of the Shareholder Parties, may in their sole discretion elect to) assume the
defense of such Third-Party Claim with counsel reasonably satisfactory to the
Indemnified Party; provided, however, that (i) if the Indemnifying Party fails,
within a reasonable time after receipt of written notice of such Third-Party
Claim, to assume the defense thereof with counsel
-50-
57
reasonably satisfactory to the Indemnified Party, the Indemnified Party shall
have the right to undertake the defense, compromise and settlement of such
Third-Party Claim on behalf of and for the account and risk of the Indemnifying
Party, subject to the right of the Indemnifying Party (upon notifying the
Indemnified Party of its election to do so) to assume the defense of such
Third-Party Claim with counsel reasonably satisfactory to the Indemnified Party
at any time prior to the settlement, compromise, judgment or other final
determination thereof, (ii) if in the reasonable judgment of the Indemnified
Party a direct or indirect conflict of interest exists between the Indemnified
Party and the Indemnifying Party in respect of the Third-Party Claim or any
other fact, condition or circumstance exists such that the assumption of the
defense of such Third Party Claim by the Indemnifying Party would materially and
adversely affect the Indemnified Party, the Indemnified Party shall (upon
written notice to the Indemnifying Party of its election to do so) have the
right to undertake the defense, compromise and settlement of such Third-Party
Claim on behalf of and for the account and risk of the Indemnifying Party (it
being understood and agreed that the Indemnifying Party shall not be entitled to
assume the defense of such Third-Party Claim), (iii) if the Indemnified Party in
its sole discretion so elects, it shall be entitled to employ separate counsel
and to participate in the defense of such Third-Party Claim (and the
Indemnifying Party shall cooperate with the Indemnified Party so as to allow it
to participate in the defense thereof), but the fees and expenses of counsel so
employed shall (except as otherwise contemplated by clauses (i) and (ii) above)
be borne solely by the Indemnified Party and (iv) the Indemnifying Party shall
not (A) settle or compromise any Third-Party Claim, or consent to the entry of
any judgment relating thereto, that does not include as an unconditional term
thereof the grant by the claimant or plaintiff to each Indemnified Party of a
release from any and all liability in respect thereof or (B) settle or
compromise any Third-Party Claim, or consent to the entry of any judgment
relating thereto, that would materially and adversely affect the Indemnified
Party other than as a result of money damages or other money payments to be
fully paid by the Indemnifying Party, without the prior written consent of the
Indemnified Party.
ARTICLE IX.
TERMINATION
SECTION 9.1. Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether prior to or after the approval of this
Agreement by the shareholders of the Company, as follows:
(a) by mutual written consent of CREC and the Company;
-51-
58
(b) by either CREC or the Company if:
(i) any federal or state court or other Governmental Authority shall
have issued an order, writ, injunction, judgment or decree which shall
have the effect of making illegal, impeding or otherwise restraining or
prohibiting the transactions contemplated hereby and such order, writ,
injunction, judgment or decree shall have become final and nonappealable;
or
(ii) the condition to the obligations of the parties set forth in
Section 7.1(a) shall not have been satisfied by reason of the failure to
obtain the required vote of the shareholders of the Company at the Special
Meeting or any adjournment thereof;
(c) by CREC if:
(i) the Overbid Transaction Conditions shall have been satisfied;
(ii) there shall have been any violation or breach in any material
respect on the part of the Company or any of the Shareholder Parties of
any covenant or agreement contained in Sections 6.2 through 6.8,
inclusive, and Section 6.12;
(iii) there shall have been any violation or breach in any material
respect on the part of the Company or any of the Shareholder Parties of
any covenant or agreement (other than the covenants and agreements
referred to in clause (ii) above) contained in this Agreement which shall
not have been cured within 30 days after receipt of notice of such
violation or breach from CREC;
(iv) there shall have been any violation or breach on the part of
the Company or any violation or breach in any material respect on the part
of the Shareholder Parties of any representation or warranty contained in
this Agreement (except that CREC may not terminate this Agreement pursuant
to this clause (iv) as a result of any violation or breach on the part of
the Company of any such representation or warranty unless the Claims
Reserve is less than or equal to zero); or
-52-
59
(v) the Merger shall not have been consummated prior to or on
December 31, 1997;
provided, however, that, in the case of any termination pursuant to clause
(iii), (iv), or (v) above, CREC has diligently and in good faith performed or
complied in all material respects with the agreements and covenants required to
be performed by it hereunder; or
(d) by the Company and the Shareholder Parties jointly if
(i) the Board of Directors of the Company shall have modified or
withdrawn, in a manner adverse to CREC, the approval or recommendation by
such Board of Directors of this Agreement or the Merger and shall have
authorized the Company to enter into an agreement with a Third Party with
respect to an Acquisition Proposal as permitted pursuant to Section 6.2;
(ii) there shall have been any violation or breach in any material
respect on the part of CREC of any covenant or agreement contained in this
Agreement which shall not have been cured within 30 days after receipt of
notice of such violation or breach from the Company;
(iii) there shall have been any violation or breach in any material
respect on the part of CREC of any representation or warranty contained in
this Agreement; or
(iv) the Merger shall not have been consummated prior to or on
December 31, 1997;
provided, however, that, in the case of any termination pursuant to clause (ii),
(iii) or (iv) above, the Company and the Shareholder Parties have diligently and
in good faith performed or complied in all material respects with the agreements
and covenants required to be performed by them hereunder.
SECTION 9.2. Effect of Termination. In the event of the termination
of this Agreement in accordance with Section 9.1 hereof, this Agreement shall
forthwith become void and of no further force or effect, and there shall be no
liability hereunder on the part of any party or its Affiliates, directors,
officers, shareholders, agents or other representatives; provided, however, that
(i) this Section 9.2 and Sections 6.13, 6.14, 9.3, 11.2, 11.4, 11.8, 11.9 and
11.10 shall survive any termination of this Agreement and (ii)
-53-
60
nothing contained herein shall relieve any party from liability for any breach
of this Agreement.
SECTION 9.3. Termination Payments.
(a) If this Agreement is terminated for any reason (other than
pursuant to the provisions of Section 9.1(a), (b)(i) (solely by reason of an
order, writ, injunction, judgment or decree issued in an action brought by a
plaintiff that is a Governmental Authority), (c)(v), (d)(ii) or (d)(iii)), the
Company shall pay to CREC the Termination Payments, which payments shall be made
in immediately available funds no later than one Business Day after the date of
termination hereof.
(b) If this Agreement is terminated pursuant to the provisions of
Section 9(c)(v), (d)(ii) or (d)(iii), CREC shall pay to the Company the
Termination Payments, which payments shall be made in immediately available
funds no later than one Business Day after the date of termination hereof.
(c) Any amounts payable pursuant to this Section 9.3 shall be paid
without set-off or deduction.
ARTICLE X.
DEFINITIONS
SECTION 10.1. Definitions.
(a) As used in this Agreement, the terms set forth below shall have
the following meanings:
"Acquisition Proposal" means a proposal by a Third Party relating to
an acquisition (whether by merger, consolidation, purchase of assets, purchase
of stock or otherwise) of the Company or any of its capital stock (other than an
acquisition of capital stock in connection with the prepayment or conversion of
the outstanding principal amount of the Convertible Note in accordance with
Section 6.12 or the exercise of any outstanding Company Stock Options) or any
substantial part of its assets or any other business combination or transaction
of a similar nature that is inconsistent with the Merger or the other
transactions contemplated by this Agreement; provided, however, that the term
-54-
61
"Acquisition Proposal" shall not include any proposal relating to a Permitted
Sale Transaction.
"Affiliate" means, with respect to any Person, any other Person who,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether by contract or
otherwise.
"Arizona Act" means the Arizona Business Corporation Act as set
forth in Sections 120 et seq. of Title 10 of the Arizona Revised Statutes, as
amended (including any successor statute).
"Arizona Business Combination Statute" means the provisions of the
Arizona Corporate Takeovers Statute with respect to certain business
combinations set forth in Sections 2741 et seq. of Title 10 of the Arizona
Revised Statutes, as amended (including any successor statute).
"Arizona Commission" means the Arizona Corporation Commission.
"Arizona Corporate Takeovers Act" means the act relating to
Corporate Takeovers set forth in Sections 2701 et seq. of Title 10 of the
Arizona Revised Statutes, as amended (including any successor statute).
"Arizona Control Share Acquisition Statute" means the provisions of
the Arizona Corporate Takeovers Statute with respect to certain control share
acquisitions set forth in Section 2721 et seq. of Title 10 of the Arizona
Revised Statutes, as amended (including any successor statute).
"Business Day" means any day except a Saturday, Sunday or federal
holiday.
"Bylaws" means, with respect to any corporation, the bylaws of such
corporation, as in effect from time to time.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
-55-
62
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System.
"Charter" means, with respect to any corporation, the certificate or
articles of incorporation (or similar governing document) of such corporation,
as in effect from time to time.
"Claims Adjusted Consolidated Net Worth" means as of any date the
excess of (i) the Consolidated Net Worth of the Company as of the end of the
most recently completed calendar month over (ii) the aggregate amount of all
assessments, losses, damages, liabilities, settlements, judgments, fines,
penalties, interest, costs and expenses (including fees and disbursements of
counsel) which have been or are reasonably likely to be imposed upon or incurred
by either the Company or CREC as a result of or in connection with the violation
or breach by the Company of any of its representations and warranties contained
in this Agreement (it being understood and agreed that, for purposes for this
definition, all such representations and warranties shall be construed as if
they were not qualified in any manner as to materiality).
"Claims Reserve" means as of any date the excess, if any, of (i) the
Claims Adjusted Consolidated Net Worth of the Company over (ii) $26,170,656
(which represents the Consolidated Net Worth of the Company as of September 30,
1996, less $2,500,000).
"Closing Date" means the date upon which the Closing occurs in
accordance with Section 1.8.
"Commission" means the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act or the
Exchange Act.
"Company Stock Options" means options to purchase Company Common
Stock under the Company Stock Plan.
"Company Stock Plan" means the 1985 Stock Option Plan of the
Company.
"Confidentiality Agreement" means the letter agreement, dated as of
September 20, 1996, between the Company and CREC.
"Consent" means any consent, approval, permit, notice, action or
other authorization of any Person not a party to this Agreement.
-56-
63
"Consolidated Net Worth" means, with respect to the Company, the
consolidated shareholders' equity of the Company and its Subsidiaries, as
determined in accordance with GAAP, applied on a basis consistent with the
Company Financial Statements.
"Contributed Company Shares" means the Company Shares owned as of
the date hereof by the Shareholder Parties which are set forth on Exhibit C
under the caption "Contributed Company Shares."
"Contract" means any contract, subcontract, letter contract,
agreement, purchase order, delivery order, arrangement, understanding or other
instrument, obligation or commitment of any kind or character (whether oral or
written).
"Convertible Note" means the promissory note, dated as of April 28,
1994, in the aggregate principal amount of $4,100,000 issued by the Company to
Xxxx X. Xxxxxxxx, as trustee of the CAVCO Convertible Note Trust, in accordance
with the Loan Agreement, dated as of April 28, 1994, by and among the Company
and such trustee.
"CREC Holding Company Shares" means a number of Holding Company
Shares which bears the same ratio to the number of Holding Company Shares to be
held by the Shareholder Parties after giving effect to the Shareholder Party
Contribution as the number of Company Shares that are converted into the Merger
Consideration pursuant to Section 2.1(a) (plus any Dissenting Company Shares)
bears to the total number of Contributed Company Shares.
"CREC Purchase Price" means an amount equal to the product of (i)
the number of Company Shares that are outstanding immediately prior to the
Effective Time (other than the Contributed Company Shares) and (ii) $26.75.
"Encumbrance" means (i) with respect to any capital stock or other
equity securities of any corporation, partnership or other Person, any Lien,
charge, claim, encumbrance, limitation or restriction applicable to or affecting
such capital stock, equity securities or ownership interest (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock, equity securities or other ownership interest) and (ii) with respect to
any Real Property or Personal Property (other than any capital stock or other
equity securities of any corporation, partnership or other Person), any Lien,
defect in title, easement, covenant, restriction, claim, charge, levy or
assessment against or relating to any portion of such Real Property or Personal
Property.
-57-
64
"Environmental Claim" means any claim (including, but not limited
to, any claim under CERCLA), action, cause of action, investigation or notice by
any Person alleging potential liability (including, but not limited to,
potential liability for investigatory costs, assessment costs, cleanup costs,
response costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from (a) the release by the
Company into the environment of any Hazardous Materials at any location, whether
or not owned by the Company, (b) the presence of any Hazardous Materials at any
location owned or leased by the Company or (c) circumstances forming the basis
of any liability under or any violation of any Environmental Law.
"Environmental Laws" means all federal, state, local and foreign
laws (including common law), statutes, codes, ordinances, rules and regulations
relating to pollution or protection of human health or the environment
(including, but not limited to, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws, statutes,
codes, ordinances, rules and regulations relating to emissions, discharges,
releases or threatened releases of Hazardous Materials, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended (including any successor statute).
"ERISA Affiliate" means, with respect to the Company, any
corporation or other trade or business under common control with the Company
(within the meaning of Section 414 of the Internal Revenue Code or Section
4001(a)(14) or 4001(b) of ERISA).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(including any successor statute).
"GAAP" means United States generally accepted accounting principles
as in effect at the time of the application thereof as described in or
contemplated by this Agreement.
"Governmental Authority" means any nation or government, any state
or political subdivision thereof, any federal or state court and any other
agency or authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
-58-
65
"Hazardous Materials" means (i) any substance, material or waste
defined or characterized as hazardous, extremely hazardous, toxic or dangerous
within the meaning of any Environmental Law, (ii) any substance, material or
waste classified as a contaminant or pollutant under any Environmental Law or
(iii) any other substance (including, but not limited to, petroleum), material
or waste, the manufacture, processing, distribution, use, treatment, storage,
placement, disposal, removal or transportation of which is subject to regulation
under any Environmental Law.
"Holding Company Common Stock" means the common stock, par value
$.01 per share, of the Holding Company.
"Holding Company Shares" means shares of Holding Company Common
Stock.
"HSR Act" means Section 7A of the Xxxxxxx Act (Title II of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976), as amended (including
any successor statute).
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof, (iii) copyrights (registered or
unregistered) and copyrightable works and registrations and applications for
registration thereof, (iv) computer software, data, data bases and documentation
thereof, (v) trade secrets and other confidential information (including, but
not limited to, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial and marketing plans and customer and supplier
lists and information), (vi) other intellectual property rights and (vii) all
goodwill associated with any of the foregoing intellectual property rights.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
the same may be amended from time to time (including any successor statute).
"Leasing Business" means the business conducted by the Company and
its Subsidiaries which relates to the sale and leasing of temporary security
storage containers and trailer vans, as described in the Company's most recent
Annual Report on Form 10-K filed with the Commission.
-59-
66
"Lien" means (i) any mortgage, pledge, hypothecation, assignment,
security interest, option, lien or any preference, priority or other right or
interest granted pursuant to a security agreement or preferential arrangement of
any kind or character whatsoever (including, but not limited to, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction) and (ii) any other lien, charge,
levy or encumbrance, whether arising by operation of law or otherwise.
"Material Adverse Change" means a material adverse change in the
business, prospects, properties, financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, prospects, properties, financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole.
"Merger Subsidiary Common Stock" means the common stock, without par
value, of the Merger Subsidiary.
"Merger Subsidiary Shares" means shares of Merger Subsidiary Common
Stock.
"Overbid Negotiation Conditions" means, in the case of any Qualified
Acquisition Proposal, each of the following conditions:
(i) the Company has complied fully and in a timely manner with its
obligations to notify CREC of the receipt of such Qualified Acquisition Proposal
(and the identity of the offeror and the material terms of such proposal) in
accordance with Section 6.2(b);
(ii) the Company has delivered an Overbid Notice to CREC with
respect to such Qualified Acquisition Proposal; and
(iii) CREC has not delivered to the Company a Topping Offer with
respect to such Qualified Acquisition Proposal.
"Overbid Notice" means a written notice from the Company to CREC
stating that the Board of Directors of the Company or the Special Committee has
-60-
67
determined that an Acquisition Proposal received by the Company from a Qualified
Third Party constitutes a Qualified Acquisition Proposal (which notice shall be
accompanied by copies of the documentation received by the Company from such
Qualified Third Party setting forth the material terms of such Qualified
Acquisition Proposal).
"Overbid Transaction" means a transaction contemplated by an
Acquisition Proposal received from a Qualified Third Party (i) which would
provide for consideration attributable to the Company Shares held by the
Independent Shareholders having a fair market value, as reasonably determined by
the Board of Directors of the Company after consultation with its financial
advisors, that is at least $1,000,000 greater than the product of (A) $26.75 and
(b) the total number of Company Shares held by the Independent Shareholders,
(ii) the terms and conditions of which, when taken in their entirety, are no
less favorable to the Independent Shareholders than the terms and conditions set
forth in this Agreement and (iii) which is not subject to any conditions or
other limitations as a result of which such transaction is not reasonably likely
to be consummated on the terms proposed by the Qualified Third Party.
"Overbid Transaction Conditions" means, in the case of a Qualified
Acquisition Proposal, each of the following conditions:
(i) each of the Overbid Negotiation Conditions shall have been
satisfied with respect to such Qualified Acquisition Proposal;
(ii) at least ten days shall have expired from the date upon which
the Company delivered to CREC an Overbid Notice with respect to such Qualified
Acquisition Proposal and CREC shall not have delivered a Topping Offer to the
Company;
(iii) the terms of the Qualified Acquisition Proposal shall not have
been modified in any manner materially adverse to the Company or the Independent
Shareholders since the date of the Overbid Notice (it being understood and
agreed that, if the terms of the Qualified Acquisition Proposal shall have been
so materially modified, the Company shall be required to deliver a new Overbid
Notice to CREC in order for the conditions set forth in this definition to be
satisfied); and
(iv) the Company shall have paid to CREC the full amount of the
Termination Payments.
"Permitted Encumbrances" means:
-61-
68
(i) tax liens with respect to taxes not yet due and payable or which
are being diligently contested in good faith by appropriate proceedings and for
which appropriate reserves have been established in accordance with GAAP,
consistently applied;
(ii) interests or title of a lessor as lessor under any lease
disclosed in writing to CREC;
(iii) mechanics' or materialmen's liens or encumbrances arising in
the ordinary course of business, if the underlying obligations are not overdue
for a period of more than 90 days;
(iv) deposits made in the ordinary course of business to secure
contractual or other obligations of the Company or any of its Subsidiaries, if
the underlying obligations are not overdue for a period of more than 90 days;
(v) easements, rights-of-way, restrictions and other similar charges
and encumbrances on Real Property not materially interfering with the conduct of
the business of the Company and its Subsidiaries or materially detracting from
the use, value or marketability of such Real Property; and
(vi) other Liens in existence on the date hereof which are described
in the Schedules to this Agreement.
"Permitted Sale Transaction" means any sale or disposition by the
Company or its Subsidiaries (whether through a stock sale, asset sale, joint
venture or otherwise) of the Leasing Business or the Real Estate Development
Business, in whole or in part, if such sale or disposition does not have the
purpose or effect of hindering, preventing or delaying the consummation of the
Merger or the other transactions contemplated by this Agreement.
"Person" means any individual, corporation, partnership,
association, trust or any other entity or organization of any kind or character,
including a Governmental Authority.
"Personal Property" means all furniture, fixtures, machinery,
equipment, supplies and other tangible personal property.
"Proxy Statement" means a letter to shareholders, notice of meeting,
proxy statement and form of proxy to the shareholders of the Company to be
distributed by the
-62-
69
Company to its shareholders in connection with the approval and adoption of this
Agreement.
"Qualified Centex Subsidiary" means a Subsidiary of Centex
Corporation of which at least 80% of the outstanding capital stock and other
equity securities are owned, directly or indirectly, by Centex Corporation.
"Qualified Acquisition Proposal" means a bona fide, unsolicited
Acquisition Proposal received by the Company from a Qualified Third Party which
the Board of Directors of the Company or the Special Committee has reasonably
determined would, if consummated, constitute an Overbid Transaction.
"Qualified Third Party" means a Third Party who the Board of
Directors of the Company or the Special Committee has reasonably determined is
financially able to consummate an Overbid Transaction.
"Real Property" means all real property or real estate, all
buildings and improvements thereon and all rights under any contracts, options,
easements, declarations or other agreements and instruments affecting or
relating to any of the foregoing.
"Real Estate Development Business" means the business conducted by
the Company and its Subsidiaries which relates to the development of housing
subdivisions and the sale of manufactured, modular and conventional housing
units or lots located therein, as described in the Company's most recent Annual
Report on Form 10-K filed with the Commission.
"Representatives" means, with respect to any of the parties hereto,
the Affiliates, directors, officers, agents or other representatives of such
party, including, but not limited to, any investment banker, financial advisor,
attorney or accountant.
"Securities Act" means the Securities Act of 1933, as amended
(including any successor statute).
"Schedule 13E-3" means a transaction statement on Schedule 13E-3 to
be filed by the Company and the Principal Shareholders with the Commission
pursuant to Section 13(e)(3) of the Exchange Act and Rule 13e-3 thereunder in
connection with the Merger or the other transactions contemplated by this
Agreement.
-63-
70
"Special Committee" means the special committee of the Board of
Directors of Company established in connection with the negotiation and
consideration of the Merger and the other transactions contemplated hereby from
the perspective of the Independent Shareholders.
"Subsidiary" means, with respect to any Person, (i) any corporation
or other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are owned directly or indirectly by such Person or
(ii) any partnership, limited liability company or other unincorporated entity
of which such Person or any of its Subsidiaries is a general partner or manager
or of which such Person directly or indirectly owns partnership interests or
limited liability company interests which entitle it to receive more than 50% of
the distributions made by such partnership or limited liability company.
"Tax Returns" means any returns, declarations, reports, claims for
refund and informational returns or statements relating to Taxes, including any
schedules or attachments thereto.
"Taxes" means all taxes, charges, fees, levies or other assessments
(including, but not limited to, income, gross receipts, excise, property, sales,
occupation, use, service, service use, license, payroll, franchise, transfer and
recording taxes, fees and charges) imposed by any Governmental Authority,
whether computed on a separate, consolidated, unitary or combined basis or in
any other manner, and includes any interest, penalties and additions to any Tax.
"Termination Payments" means the following amounts:
(i) a fee of $2,500,000 in cash;
(ii) reimbursement of all Transaction Expenses incurred by the party
entitled to receive the Termination Payments (the "Recipient") in an amount of
up to $300,000 in the aggregate; and
(iii) in the event that the Company or CREC, as the case may be,
shall fail to pay the Recipient any of the foregoing payments when due, the
costs and expenses actually incurred or accrued by the Recipient (including, but
not limited to, reasonable fees and expenses of counsel) in connection with the
collection under and enforcement of Section 9.3, together with interest on such
unpaid Termination Payments, commencing on the date that such payments became
due, at a rate of 10% per annum.
-64-
71
"Third Party" means any Person other than CREC and its respective
Affiliates.
"Topping Offer" means, with respect to any Qualified Acquisition
Proposal, a written offer by CREC to amend this Agreement in order to provide
for consideration attributable to the Company Shares held by the Independent
Shareholders having a value at least $1,000,000 greater than the value of the
consideration provided to the Independent Shareholders under such Qualified
Acquisition Proposal, which offer shall state that it may not be withdrawn or
revoked by CREC unless the parties hereto do not enter into an amendment to this
Agreement to reflect the acceptance of the Topping Offer by the Company and the
Shareholder Parties within ten calendar days after receipt thereof by the
Company.
"Transaction Expenses" means, with respect to any party, all
expenses and fees (including, but not limited to, fees and expenses payable to
all investment banking firms and all fees of counsel, accountants, experts and
consultants) actually incurred or accrued by such party or on its behalf in
connection with the Merger or the other transactions contemplated by this
Agreement, including, but not limited to, all expenses and fees in connection
with the negotiation, preparation, execution and performance of this Agreement
and the structuring, consummation or implementation of the Merger or the other
transactions contemplated thereby.
(b) Each of the terms set forth below has the meaning specified in
the provision set forth opposite such term in the following table:
Term Provision
---- ---------
Aggregate Subject Shares Recitals
Antitrust Division Section 6.6
Articles of Merger Section 1.2
Certificates Section 2.5(b)
Claims Section 8.3
Closing Section 1.8(a)
Commission Reports Section 3.9
Company Introductory paragraph
Company Common Stock Recitals
Company Financial Statements Section 3.10
Company Share Recitals
Commission Reports Section 3.9
-65-
72
CREC Introductory paragraph
CREC Claims Section 8.1
CREC Stock Purchase Section 1.7
Dissenting Company Shares Section 2.4(a)
Effective Time Section 1.2
Employee Benefit Plans Section 3.19(a)
Fairness Advisor Section 3.6
Fairness Opinion Section 3.6
FTC Section 6.6
Holding Company Introductory paragraph
Indemnified Party Section 8.3(a)
Indemnifying Party Section 8.3(a)
Individual Indemnified Party Section 6.10(a)
Identified Contracts Section 3.14(b)(i)
Independent Shareholders Recitals
Key Employees Section 6.1
Latest Balance Sheet Section 3.10
Merger Recitals
Merger Consideration Section 2.1(a)
Merger Subsidiary Introductory paragraph
Paying Agent Section 2.5(a)
Permits Section 3.22
Principal Shareholders Introductory paragraph
Qualified Plans Section 3.19(b)
Shareholder Parties Introductory paragraph
Shareholder Party Claims Section 8.2
Shareholder Party Contribution Section 1.7
Shareholders' Agreement Section 1.7
Special Meeting Section 6.7
Stock Purchase Agreement Recitals
Subject Share Purchase Recitals
Surviving Corporation Section 1.1
Third-Party Claims Section 8.3
Voting Agreement Recitals
-66-
73
ARTICLE XI.
MISCELLANEOUS
SECTION 11.1. Survival of Representation and Warranties. The
representations and warranties made by the Company in this Agreement shall not
survive the Merger. The representations and warranties made by CREC and the
Shareholder Parties in this Agreement shall survive the Merger and the other
transactions contemplated hereby and shall continue in effect after the Closing
Date.
SECTION 11.2. Fees and Expenses. Except as expressly provided
herein, all fees and expenses incurred by any of the parties hereto in
connection with this Agreement or the Merger or the other transactions
contemplated hereby shall be borne and paid solely by the party incurring such
fees and expenses.
SECTION 11.3. Notices. All notices and other communications
hereunder shall be in writing and shall be given by delivery in person, by
registered or certified mail (return receipt requested and with postage prepaid
thereon) or by cable, telex or facsimile transmission to the parties at the
following addresses (or at such other address as any party shall have furnished
to the others in accordance with the terms of this Section 11.3):
if to CREC:
Centex Real Estate Corporation
0000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000-0000
Facs: (000) 000-0000
Attention: Xxxxx X. Xxxxx
with copies to (which shall not constitute notice to CREC):
Centex Corporation
0000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000-0000
Facs: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx
and
-67-
74
Xxxxx & Xxxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx
if to the Company:
Cavco Industries, Inc.
0000 X. Xxxxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
Attention: Xx X. Xxxxxx
with copies to (which shall not constitute notice to the Company):
Xxxxxx Xxxxxxx
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
-68-
75
if to any of the Shareholder Parties:
Al R. and Xxxxx X. Xxxxxx
c/o Cavco Industries, Inc.
0000 X. Xxxxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
with copies to (which shall not constitute notice to the Shareholder
Parties):
Xxxxxx Xxxxxxx
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
All notices and other communications hereunder that are addressed as provided in
or pursuant to this Section 11.3 shall be deemed duly and validly given (a) if
delivered in person, upon delivery, (b) if delivered by registered or certified
mail (return receipt requested and with postage paid thereon), 72 hours after
being placed in a depository of the United States mails and (c) if delivered by
cable, telex or facsimile transmission, upon transmission thereof and receipt of
the appropriate answerback.
SECTION 11.4. Public Announcements. The timing and content of any
public announcement by any party with respect to this Agreement will be mutually
agreed upon by the Company and CREC, except as otherwise required by applicable
law, stock exchange requirements or Nasdaq designation requirements. If either
the Company or CREC determines that a public announcement is required by
applicable law, stock exchange requirements or Nasdaq designation requirements,
prior to making such announcement, it will consult with the other party
regarding the substance thereof.
SECTION 11.5. Amendment; Waivers. The terms and provisions of this
Agreement may be modified or amended only by a written instrument executed by
each of the parties hereto, and compliance with any term or provision hereof may
be waived only by a written instrument executed by each party entitled to the
benefits of the same. Except as expressly provided herein to the contrary, no
failure to exercise any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise
-69-
76
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege granted hereunder.
SECTION 11.6. Entire Agreement. This Agreement (including the
Exhibits and Schedules hereto and the certificates, opinions and documents
delivered in accordance with the provisions hereof) constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior written or oral agreements and understandings and all
contemporaneous oral agreements and understandings among the parties or any of
them with respect to the subject matter hereof. All Exhibits and Schedules
hereto and certificates, opinions and other documents delivered in accordance
with the provisions hereof are expressly made a part of this Agreement.
SECTION 11.7. No Additional Representations and Warranties. Each of
the parties hereto expressly disclaims any and all representations and
warranties in connection with this Agreement, the Merger and the other
transactions contemplated hereby, other than the representations and warranties
expressly made by such party in this Agreement (including the Exhibits hereto
and other documents referred to herein.) Without limiting the generality of the
foregoing, none of the Shareholder Parties shall have any liability to CREC,
whether in their capacities as controlling shareholders or otherwise, as a
result of any failure of the representations and warranties made by the Company
pursuant to this Agreement to be true and correct.
SECTION 11.8. Parties in Interest; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns (it being understood and agreed that, except
as expressly provided herein, nothing contained in this Agreement is intended to
confer any rights, benefits or remedies of any kind or character on the holders
of Company Shares or any other Person under or by reason of this Agreement). No
party may assign this Agreement without the prior written consent of each of the
other parties hereto; provided, however, that (i) any Shareholder Party may
assign its rights and delegate its duties under this Agreement to any other
Shareholder Party and (ii) CREC may assign its rights and delegate its duties
under this Agreement to any Qualified Centex Subsidiary, in each case without
the consent of any other party; provided, however, that no such assignment or
delegation by a Shareholder Party or CREC shall relieve such party of any of its
obligations hereunder to the extent that such obligations are not performed by
the assignee. It is expressly understood and agreed that any attempted or
purported assignment by any party of this Agreement in violation of this Section
11.8 shall be null and void.
-70-
77
SECTION 11.9. Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Arizona,
without regard to any principles of conflicts of law that would result in the
application of the laws of any other jurisdiction.
SECTION 11.10. Severability. In the event any provision contained
herein shall be held to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of any such provision in every other
respect and the validity, legality and enforceability of the remaining
provisions contained in this Agreement shall not be in any way impaired thereby.
SECTION 11.11. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with the terms hereof. Accordingly,
the parties agree that each of them shall be entitled to injunctive relief to
prevent breaches of the terms of this Agreement and to specific performance of
the terms hereof, in addition to any other remedy now or hereafter available at
law or in equity, or otherwise.
SECTION 11.12. Interpretation.
(a) The headings herein are for convenience of reference only, do
not constitute a part of this Agreement and shall not be deemed to limit, extend
or otherwise affect the meaning of any of the provisions hereof.
(b) It is expressly understood and agreed that, in interpreting the
provisions of this Agreement, time is of the essence in the performance of the
obligations of the parties.
(c) As used herein, the phrase "to the knowledge" of a party or any
phrases of like import shall be deemed to refer to the knowledge, after
reasonable inquiry, of the officers of such party.
SECTION 11.13. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
-71-
78
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed as of the date first above written.
CENTEX REAL ESTATE CORPORATION
By: /s/ XXXXXXXX X. XXXXXX
______________________________________________
Name: Xxxxxxxx X. Xxxxxx
______________________________________________
Title: Chairman of the Board
______________________________________________
MFH HOLDING COMPANY
By: /s/ XX XXXXXX
______________________________________________
Name: Xx Xxxxxx
______________________________________________
Title:Chairman
______________________________________________
MFH ACQUISITION COMPANY
By: /s/ XX XXXXXX
______________________________________________
Name: Xx Xxxxxx
______________________________________________
Title: President
______________________________________________
CAVCO INDUSTRIES, INC.
By: /s/ XX X. XXXXXX
______________________________________________
Name: Xx X. Xxxxxx
______________________________________________
Title: Chairman of the Board
______________________________________________
/s/ XX X. XXXXXX
__________________________________________________
Xx X. Xxxxxx
-72-
79
/s/ XXXXX X. XXXXXX
______________________________________________
Xxxxx X. Xxxxxx
XXXXX LIMITED PARTNERSHIP
By: THE 1994 ALSONS TRUST, created
February 9, 1994, general partner
By: /s/ XXXXX X. XXXXXX
______________________________________________
Xxxxx X. Xxxxxx,
Independent Trustee
By: /s/ XX X. XXXXXX
______________________________________________
Xx X. Xxxxxx,
Family Trustee
By: XXXXXX AND XXXXX XXXXXX TRUST,
created August 24, 1989, general partner
By: /s/ XX X. XXXXXX
______________________________________________
Xx X. Xxxxxx,
Trustee
By: /s/ XXXXX X. XXXXXX
______________________________________________
Xxxxx X. Xxxxxx,
Trustee
-73-
80
EXHIBIT A
INITIAL DIRECTORS OF THE (to AGREEMENT
SURVIVING CORPORATION and PLAN OF MERGER)
Xx X. Xxxxxx
Xxxxx X. Xxxxxx
Xxxxxxxx X. Xxxxxx
Xxxxx X. Xxxxx
Xxxxxxx X Xxxxxxxx III
81
EXHIBIT B
(to AGREEMENT and
PLAN OF MERGER)
INITIAL OFFICERS OF THE
SURVIVING CORPORATION
NAME OFFICE
---- ------
Xx X. Xxxxxx Chairman of the Board of Directors
Xxxxx X. Xxxxxx President and Chief Executive Officer
Xxxxxx Xxxx Vice President and Chief Financial
Officer
Xxxxx Xxxxx Vice President of Operations
Xxxxxxx Xxxxxx Executive Vice President of Plant
Development
Xxx Xxxxxxxx Vice President - Sales and Marketing
Xxxxxxx X. Xxxxxx Vice President and Secretary
Xxxxxxx X. Xxxxxx Assistant Vice President
Xxxxx X. Xxxxxx Assistant Secretary
82
EXHIBIT C
(to AGREEMENT and
PLAN OF MERGER)
OWNERSHIP OF SHARES
BY SHAREHOLDER PARTIES
ADDITIONAL
SHAREHOLDER COMPANY CONTRIBUTED HOLDING COMPANY
PARTIES SHARES COMPANY SHARES SHARES
----------- ------- -------------- ---------------
Xx X. Xxxxxx and
Xxxxx X. Xxxxxx 180,729 77,340 773.40
Xxxxx Limited 1,650,000 706,101 7,051.01
Partnership --------- ------- --------
Total 1,830,729 783,441 7,824.41
========= ======= ========
83
EXHIBIT D
[to AGREEMENT and
PLAN OF MERGER]
SHAREHOLDERS' AGREEMENT
AMONG
MFH HOLDING COMPANY
AND
THE SHAREHOLDERS IDENTIFIED HEREIN
DATED AS OF_________________, 1997
84
TABLE OF CONTENTS
PAGE
ARTICLE I - CORPORATE GOVERNANCE ........................................ 2
SECTION 1.1. Board of Directors ............................... 2
SECTION 1.2. Dividends ........................................ 3
SECTION 1.3. Intercompany Indebtedness ........................ 3
SECTION 1.4. Actions Requiring Supermajority Board Vote ....... 4
SECTION 1.5. Sale of Leasing Business ......................... 6
SECTION 1.6. Fiscal Year ...................................... 7
SECTION 1.7. Certain Restrictions ............................. 7
ARTICLE II - TRANSFER OF SHARES; RIGHTS OF PURCHASE AND SALE ............ 8
SECTION 2.1. General Restrictions on Transfer ................. 8
SECTION 2.2. Pledge of Shares ................................. 9
SECTION 2.3. Voluntary Transfer; Right of Participation ....... 9
SECTION 2.4. Involuntary Transfer ............................. 11
SECTION 2.5. Put Option ....................................... 11
SECTION 2.6. Call Option ...................................... 12
SECTION 2.7. Appraisal of Additional Businesses ............... 12
SECTION 2.8. Purchase Price ................................... 13
SECTION 2.9. Closing .......................................... 14
SECTION 2.10. HSR Act .......................................... 14
SECTION 2.11. Effect of Prohibited Transfer ................... 15
ARTICLE III - CERTAIN CAPITAL PROJECTS .................................. 15
SECTION 3.1. Election as to Capital Projects .................. 15
SECTION 3.2. Excluded Projects ................................ 16
SECTION 3.3. Excluded Project Payments ........................ 16
ARTICLE IV - REPRESENTATIONS AND WARRANTIES ............................. 17
SECTION 4.1. Representations and Warranties of the Company .... 17
SECTION 4.2. Representations and Warranties of the Shareholders 18
ARTICLE V - DEFINITIONS; ACCOUNTING MATTERS ............................. 20
SECTION 5.1. Certain Definitions .............................. 20
SECTION 5.2. Certain Accounting Matters ....................... 29
ARTICLE VI - MISCELLANEOUS .............................................. 30
i
85
SECTION 6.1. Legend .................................................... 30
SECTION 6.2. Termination ............................................... 30
SECTION 6.3. Further Assurances; Frustration of Purposes ............... 31
SECTION 6.4. Fees and Expenses ......................................... 31
SECTION 6.5. Certain Reports ........................................... 31
SECTION 6.6. Determination of Certain Amounts; Dispute Resolution ...... 32
SECTION 6.7. Notices ................................................... 33
SECTION 6.8. Amendment; Waivers ........................................ 35
SECTION 6.9. Entire Agreement .......................................... 35
SECTION 6.10. Parties in Interest; Assignment ........................... 35
SECTION 6.11. Governing Law ............................................. 35
SECTION 6.12. Severability .............................................. 35
SECTION 6.13. Specific Performance ...................................... 36
SECTION 6.14. Default Interest .......................................... 36
SECTION 6.15. Counterparts .............................................. 36
ii
86
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT, entered into as of _________,
1997 (the "Agreement"), by and among MFH HOLDING COMPANY, a Nevada corporation
(the "Company"), CENTEX REAL ESTATE CORPORATION, a Nevada corporation ("CREC"),
XX X. XXXXXX, XXXXX X. XXXXXX and XXXXX LIMITED PARTNERSHIP, an Arizona limited
partnership ("Xxxxx Partnership"),
W I T N E S S E T H:
WHEREAS, as of December 4, 1996, CREC, the Company, MFH
Acquisition Company, an Arizona corporation ("MFH Acquisition"), Cavco
Industries, Inc., an Arizona corporation ("Cavco"), Xx X. Xxxxxx, Xxxxx X.
Xxxxxx and Xxxxx Limited Partnership entered into an Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, concurrently with the execution and delivery of this
Agreement, the parties to the Merger Agreement are consummating the transactions
contemplated thereby, including, but not limited to, the merger (the "Merger")
of MFH Acquisition with and into Cavco;
WHEREAS, upon consummation of the Merger, the Company will own
all of the issued and outstanding shares of common stock, par value $.05 per
share, of Cavco;
WHEREAS, the parties hereto other than the Company (the
"Shareholders") own all of the issued and outstanding shares of common stock,
par value $.01 per share, of the Company;
WHEREAS, the Merger Agreement provides that the parties hereto
will execute and deliver this Agreement concurrently with the consummation of
the Merger and the other transactions contemplated by the Merger Agreement;
WHEREAS, the Company and the Shareholders deem it to be in
their best interests to provide for consistent and uniform management of the
Company;
WHEREAS, the Company and the Shareholders desire to restrict
the Transfer (as hereinafter defined) of shares of Common Stock, whether issued
and outstanding on the date hereof or issued from time to time hereafter, by the
Shareholders
-1-
87
and to provide for certain rights and obligations of the Shareholders in respect
of the purchase and sale of such shares;
WHEREAS, the Company and the Shareholders desire to evidence
their agreement with respect to certain other matters in relation to the Company
and the issued and outstanding shares of Common Stock; and
WHEREAS, capitalized terms used in any provision of this
Agreement but not defined in such provision have the respective meanings set
forth in Section 5.1;
NOW, THEREFORE, in consideration of the premises, the terms
and provisions set forth herein, the mutual benefits to be gained by the
performance thereof and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
CORPORATE GOVERNANCE
SECTION 1.1. Board of Directors. Each Shareholder shall use
its best efforts and take all actions within its power (including, but not
limited to, the voting of shares of Common Stock owned by such Shareholder at
any annual or special meeting of the shareholders of the Company, or in any
action by written consent in lieu of a meeting) to effectuate and carry out the
following provisions:
(a) The Company shall at all times be managed by or under the
direction of a Board of Directors consisting of five persons.
(b) The members of the Board of Directors of the Company shall
at all times be designated and elected as follows: (i) so long as the Xxxxxx
Shareholders own the Option Shares, two members of the Board of Directors shall
be designated by the Xxxxxx Shareholder Representative; and (ii) all of the
remaining members of the Board of Directors shall be designated by CREC. The
directors initially designated by the Xxxxxx Shareholder Representative are Xx
X. Xxxxxx and Xxxxx X. Xxxxxx. The directors initially designated by CREC are
Xxxxxxxx X. Xxxxxx, Xxxxx X. Xxxxx and Xxxxxxx X Xxxxxxxx III.
(c) In the event that any vacancy is created on the Board of
Directors of the Company by reason of the death, resignation or removal of any
director, such
-2-
88
vacancy shall be filled by a substitute director designated by the party or
parties entitled to designate the director whose death, resignation or removal
created such vacancy.
(d) A director shall be removed if, and only if, the party or
parties entitled to designate such director deliver a written notice to the
Company stating that such director shall be removed and replaced with a
substitute director designated in such notice.
(e) The Board of Directors of the Company shall meet no less
frequently than once each calendar quarter.
SECTION 1.2. Dividends. The Company shall (and each
Shareholder shall use its best efforts and take all actions within its power to
cause the Company to) declare and pay to the holders of its Common Stock (i)
cash dividends in an amount equal to 20% of the Adjusted Consolidated Net Income
of the Company for each Dividend Period, which dividends shall be paid within
120 days after the end of such Dividend Period to the holders of record of
shares of Common Stock as of the opening of business on the last day thereof,
and (ii) dividends in an amount equal to (and in the same form as) the net
proceeds received by the Company or any of its Subsidiaries from the sale or
other disposition of the Leasing Business, which dividends shall be paid within
30 days after the receipt of such proceeds to the holders of record of shares of
Common Stock as of the date of consummation of the sale or other disposition of
the Leasing Business.
SECTION 1.3. Intercompany Indebtedness. Each Shareholder shall
use its best efforts and take all actions within its power to cause all
Intercompany Indebtedness to bear interest at the Intercompany Rate; provided,
however, that if the directors designated by the Xxxxxx Shareholder
Representative shall have proposed an Eligible Capital Project for consideration
by the Board of Directors of the Company but, notwithstanding the affirmative
vote in favor of such Eligible Capital Project by the directors so designated,
the Board of Directors shall have rejected such project or deferred
consideration thereof (it being understood and agreed that each Shareholder
shall use its best efforts and take all actions within its power to cause the
directors designated by it to consider in good faith any Eligible Capital
Project proposed by the directors designated by the Xxxxxx Shareholder
Representative), then the Eligible Capital Project Deficit Amount shall bear
interest at a rate of 12.5% per annum.
SECTION 1.4. Actions Requiring Supermajority Board Vote. The
Company shall not (and each Shareholder shall use its best efforts and take all
actions within its power to cause the Company not to) take any of the following
actions unless approved by a Supermajority Board Vote:
-3-
89
(a) an amendment to the Charter or Bylaws of the Company that
abolishes or alters in any material respect the rights, privileges or
preferences of the holders of Common Stock or the rights, privileges or
immunities of directors or officers of the Company;
(b) a consolidation of the Company with, or merger of the
Company or Cavco with or into, any Person;
(c) a sale, lease, pledge, transfer or other disposition to
any Person (other than a wholly owned Subsidiary of the Company) of (i) all or
substantially all of the properties and assets of the Company or Cavco or (ii)
any properties or assets of the Company or any of its Subsidiaries (other than
(A) properties or assets used in connection with the Additional Businesses or
(B) manufactured housing units or other products sold, leased, transferred or
otherwise disposed of in the ordinary course of business) with a fair market
value in excess of $2,000,000;
(d) a sale, transfer, pledge or other disposition to any
Person (other than a wholly owned Subsidiary of the Company) of any Capital
Stock of Cavco;
(e) a change in the general nature of the Principal Businesses
as conducted by the Company and its Subsidiaries as of the date hereof;
(f) the issuance or transfer to any Person (other than a
wholly owned Subsidiary of the Company) of any shares of Common Stock or other
Capital Stock of the Company or any of its Subsidiaries;
(g) the acquisition of any shares of Common Stock or other
Capital Stock of the Company or any of its Subsidiaries;
(h) the approval of the Annual Budget for any fiscal year of
the Company;
(i) an acquisition of a business (whether in the form of a
stock purchase, asset purchase, merger or otherwise) or operating properties or
assets from any Person (A) not related to or for use in the Principal Businesses
or (B) for a purchase price in excess of $5,000,000, other than as contemplated
by the Annual Budget for the fiscal year of the Company in which such
acquisition is consummated;
(j) a determination not to have the consolidated financial
statements for any fiscal year of the Company and its consolidated subsidiaries
audited by a firm of
-4-
90
independent public accountants or to have such consolidated financial statements
audited by any firm other than Xxxxxx Xxxxxxxx, LLP;
(k) a change in the fiscal year of the Company, other than as
contemplated by Section 1.6;
(l) the payment of any dividend in respect of the Common Stock
or other Capital Stock of the Company not required to be declared and paid
pursuant to Section 1.2;
(m) any payment or reimbursement by the Company or any of its
Subsidiaries to CREC or any of its Affiliates of any Prohibited Intercompany
Charges;
(n) any sale or lease of goods by CREC or any of its
Affiliates (other than the Company or any of its Subsidiaries) to the Company or
any of its Subsidiaries, or by the Company or any of its Subsidiaries to CREC or
any of its Affiliates (other than the Company or any of its Subsidiaries),
except on terms that are at least as favorable to the Company and its
Subsidiaries as could be obtained in an arm's-length transaction with an
unaffiliated third party;
(o) any amendment to, or change in the terms of, the Tax
Agreement that is material and adverse to the Company;
(p) the appointment or dismissal of the chief executive
officer or the chief financial officer of the Company or Cavco;
(q) the filing of any petition seeking to reorganize the
Company or Cavco pursuant to, or to obtain relief under, any federal or state
bankruptcy or insolvency law; and
(r) the dissolution, liquidation or winding-up of the affairs
of the Company or Cavco.
Each party hereto acknowledges and agrees that, to the fullest
extent permitted by law, with respect to the approval of the matters specified
in this Section 1.4 only, (i) the members of the Board of Directors designated
by the Xxxxxx Shareholders shall have the right to act and vote as directors of
the Company in a manner determined by them as necessary or advisable to preserve
and protect the rights and interests of the Xxxxxx Shareholders, and except as
expressly provided herein, shall have no duty or obligation to give any
consideration to any interest of CREC and (ii) the members of the Board of
-5-
91
Directors designated by CREC shall have the right to act and vote as directors
of the Company in a manner determined by them as necessary or advisable to
preserve and protect the rights and interests of CREC, and except as expressly
provided herein, shall have no duty or obligation to give any consideration to
any interest of the Xxxxxx Shareholders.
SECTION 1.5. Sale of Leasing Business.
(a) If the Board of Directors of the Company determines that
it is advisable and in the best interests of the Company to effect a sale or
other disposition of the Leasing Business (whether in the form of a stock sale,
asset sale, merger or otherwise), the Company shall notify the Xxxxxx
Shareholder Representative promptly after making such a determination. Within 30
days after such notification, the Xxxxxx Shareholder Representative shall submit
to the Company a written notice (the "Leasing Business Acquisition Notice")
stating whether it has an interest in negotiating and consummating a transaction
(a "Leasing Business Acquisition") pursuant to which one or more Xxxxxx
Shareholders and any other Persons designated by the Xxxxxx Shareholder
Representative (collectively, the "Xxxxxx Purchasers") would acquire the Leasing
Business (including all or substantially all of the properties and assets of the
Company and its Subsidiaries used in connection therewith and all or
substantially all of the debts, liabilities and obligations arising therefrom).
If the Xxxxxx Shareholder Representative submits a Leasing Business Acquisition
Notice to the Company, the Company and the Xxxxxx Shareholder Representative
shall negotiate in good faith for a period of up to 90 days with respect to the
terms of a Leasing Business Acquisition. If the Company and the Xxxxxx
Purchasers do not enter into a definitive agreement with respect to a Leasing
Business Acquisition within such 90-day period (or if any definitive agreement
entered into by them is terminated), the Company shall, subject to the
provisions of paragraph (b) below, be entitled to negotiate and consummate a
sale or other disposition of the Leasing Business to a Person other than the
Xxxxxx Purchasers.
(b) Notwithstanding the last sentence of paragraph (a) above
(and regardless of whether the Xxxxxx Shareholder Representative submits a
Leasing Business Acquisition Notice to the Company stating that it has an
interest in negotiating and consummating a Leasing Business Acquisition), the
Company shall, prior to consummating a sale or other disposition of the Leasing
Business to any Person other than a Xxxxxx Purchaser, make a written offer to
the Xxxxxx Shareholder Representative to sell or otherwise dispose of the
Leasing Business to any Xxxxxx Purchasers designated by the Xxxxxx Shareholder
Representative on the same terms and conditions as proposed by such other
Person. The Xxxxxx Shareholder Representative shall then have a period of 30
days within which to accept such offer on behalf of the Xxxxxx Purchasers by
notifying the
-6-
92
Company that the Xxxxxx Purchasers irrevocably agree to consummate a Leasing
Business Acquisition on the proposed terms and conditions. If the Xxxxxx
Shareholder Representative elects to accept such offer on behalf of the Xxxxxx
Purchasers, the Company and the Xxxxxx Purchasers shall cooperate and use their
reasonable best efforts to enter into a definitive agreement setting forth, and
to consummate the Leasing Business Acquisition in accordance with, the proposed
terms and conditions.
SECTION 1.6. Fiscal Year. The Company shall (and each
Shareholder shall use its best efforts and take all actions within its power to
cause the Company to) cause the fiscal year of each of the Company and Cavco to
be the 12-month period commencing on the first day of April in each year and
ending on the last day of March in the next succeeding year, with the first such
fiscal year to commence on April 1, 1997 and end on March 31, 1998.
SECTION 1.7. Certain Restrictions. No Shareholder shall grant
any proxy, other than to an officer of the Company designated by the Board of
Directors (or, in the case of a Xxxxxx Shareholder, the Xxxxxx Shareholder
Representative), or enter into or agree to be bound by any voting trust
agreement or arrangement of any kind with respect to any shares of Common Stock,
nor shall any Shareholder enter into any shareholder agreement or arrangement of
any kind with respect to any shares of Common Stock inconsistent with the
provisions of this Agreement, including, but not limited to, any agreement or
arrangement with respect to the voting of shares of Common Stock, or act as a
member of a group or in concert with any other Person in connection with the
acquisition of shares of Common Stock in any manner inconsistent with the
provisions of this Article I.
ARTICLE II
TRANSFER OF SHARES;
RIGHTS OF PURCHASE AND SALE
SECTION 2.1. General Restrictions on Transfer.
(a) No Shareholder shall effect a Transfer of any shares of
Common Stock owned or held by such Shareholder unless (i) the certificate or
certificates representing such shares bear a legend as provided in Section 6.1
hereof to the effect that such shares have not been registered under the
Securities Act and that the Transfer thereof is subject to the terms of this
Agreement, (ii) the Transferee shall have executed, as a condition to obtaining
ownership of the shares of Common Stock, an appropriate document
-7-
93
(a "Supplemental Agreement") in which the Transferee agrees that its ownership
of such shares shall be subject to, and that the Transferee shall comply with,
all of the terms and conditions of this Agreement (including, but not limited
to, the restrictions on Transfer set forth in this Section 2.1) and that the
Transferee shall not effect any Transfer of such shares except in compliance
with the provisions hereof and in which the Transferee confirms that the
representations and warranties contained in Section 4.2 are true and correct
with respect to such Transferee as of the date of the Supplemental Agreement and
(iii) the Supplemental Agreement shall have been promptly delivered to the
Company and approved (as to its conformity with the requirements of this Section
2.1) by it in its reasonable discretion prior to the acquisition by such
Transferee of the shares of Common Stock. The Company shall not unreasonably
withhold or delay its approval of any Supplemental Agreement. A Transferee that
is not already a party to this Agreement, by executing a Supplemental Agreement
approved by the Company as hereinabove provided, shall become a Shareholder for
all purposes of this Agreement and shall have the same rights and shall be
subject to the same restrictions as the Shareholder effecting the Transfer.
(b) No Shareholder shall effect a Transfer of any shares of
Common Stock owned or held by such Shareholder if such action would constitute a
violation of any applicable registration or qualification requirements of the
Securities Act or any state securities or blue sky laws. In the event of any
disagreement between a Shareholder and the Company as to whether or not a
proposed Transfer would result in a violation of the applicable registration or
qualification requirements of the Securities Act or any state securities or blue
sky laws, such Shareholder shall deliver to the Company an opinion of counsel
reasonably acceptable to the Company to the effect that such proposed Transfer
would not result in such a violation, which opinion shall state the basis of the
legal conclusions expressed therein. The delivery of such opinion shall be
deemed to constitute compliance with the provisions of this Section 2.1(b)
unless, within ten days after receipt thereof, the Company notifies the
Shareholder in writing that, in the judgment of the Company based upon the
advice of its counsel, the proposed Transfer would result in such a violation.
(c) During the period commencing on the date hereof and ending
on the fifth anniversary of the date hereof, except as expressly contemplated by
this Article II, no Shareholder shall effect a Transfer of any shares of Common
Stock owned or held by such Shareholder to any Person other than a Permitted
Transferee unless (i) in the case of any Transfer by a Xxxxxx Shareholder, such
Transfer shall have been approved in writing by CREC or (ii) in the case of any
Transfer by CREC, such Transfer shall have been approved in writing by the
Xxxxxx Shareholder Representative. CREC or the Xxxxxx Shareholder
Representative, as the case may be, shall have the right to grant or withhold
any approval required under this paragraph (c) in its or his sole discretion
and, in doing so, shall be
-8-
94
entitled to consider only such interests and factors as it or he deems
appropriate and shall have no duty or obligation to give any consideration to
any other interest of, or factor affecting, any other party to this Agreement.
SECTION 2.2. Pledge of Shares. A Shareholder shall have the
right to pledge any shares of Common Stock owned or held by such Shareholder to
a commercial bank, savings and loan association or other lending or financial
institution or to a Permitted Transferee as security for any bona fide
Indebtedness of such Shareholder; provided, however, that no such pledge shall
be made unless (i) the Person to which such pledge is made shall have executed
an appropriate document (a "Pledgee Agreement") in which such Person agrees
that, in the event of foreclosure or other realization upon such shares, such
shares shall continue to be subject to the terms and conditions of this
Agreement (including, but not limited to, the restrictions on Transfer set forth
in Section 2.1) and that such Person shall not effect any Transfer of such
shares except in compliance with the provisions hereof and (ii) the Pledgee
Agreement shall have been promptly delivered to the Company and approved (as to
its conformity with the requirements of this Section 2.2) by it in its
reasonable discretion prior to the pledge of such shares. The Company shall not
unreasonably withhold or delay its approval of any Pledgee Agreement.
SECTION 2.3. Voluntary Transfer; Right of Participation.
(a) If either a Xxxxxx Shareholder or CREC (an "Offeror")
desires to make a voluntary Transfer of any shares of Common Stock owned or held
by such Offeror (other than a pledge permitted pursuant to Section 2.2) at any
time after the fifth anniversary of the date of this Agreement to any Person
other than a Permitted Transferee, such Offeror shall first submit to (i) in the
case of a proposed Transfer by a Xxxxxx Shareholder, CREC or (ii) in the case of
a proposed Transfer by CREC, the Xxxxxx Shareholder Representative (the
"Offeree") a written notice (an "Offering Notice") pursuant to which such
Offeror shall irrevocably offer to sell such shares of Common Stock (the
"Offered Stock") to the Offeree. The Offering Notice shall specify (i) the
number of shares of Offered Stock involved in the proposed Transfer, (ii) the
proposed Offering Price (or, if the transaction involves the payment of
consideration other than cash, a good faith estimate thereof), in the case of a
sale or other Transfer for value, or a description of the proposed Transfer, in
the case of a transaction other than a sale or other Transfer for value, (iii)
the name and address of the prospective Transferee, (iv) the other terms of the
proposed Transfer, if any, and (v) if applicable, the Participation Offer
required to be included therein pursuant to paragraph (b) below. Within 30 days
(or, if the Offeree is the Xxxxxx Shareholder Representative, 180 days) after
the receipt of an Offering Notice from the Offeror, the Offeree shall give
written notice (a "First Refusal Response Notice") to the Offeror stating
whether it elects to purchase the Offered Stock. If the Offered Stock is not
-9-
95
purchased by the Offeree, the Offeror may make a Transfer of the Offered Stock
to the Transferee named in the Offering Notice, but only in strict compliance
with the terms therein stated and subject to the provisions of Section 2.1. If
the Offeror shall fail to complete such a Transfer of the Offered Stock within
30 days after the delivery of the First Refusal Response Notice, the Offeror
shall be required to submit another Offering Notice in order to make a Transfer
of the Offered Stock in accordance with this Section 2.3(a).
(b) If CREC delivers an Offering Notice to the Xxxxxx
Shareholder Representative pursuant to paragraph (a) above with respect to a
voluntary sale or other Transfer of shares of Common Stock for value (a "CREC
Sale Transaction"), CREC shall include in such notice an offer (a "Participation
Offer") to include in such CREC Sale Transaction a number of shares owned by the
Xxxxxx Shareholders (which may be allocated among the Xxxxxx Shareholders in
such manner as is determined by the Xxxxxx Shareholder Representative) equal to
the product of (i) the aggregate number of shares of Common Stock proposed to be
sold or otherwise transferred for value by CREC and (ii) a fraction the
numerator of which is equal to the number of shares of Common Stock held by the
Xxxxxx Shareholders and denominator of which is equal to the number of shares of
Common Stock held by all of the parties hereto. The Xxxxxx Shareholder
Representative shall deliver a written notice (a "Participation Offer Response
Notice") to CREC within 30 days after the delivery of such Offering Notice
stating whether the Xxxxxx Shareholders elect to accept the Participation Offer
and the number of shares to be sold by each Xxxxxx Shareholder in connection
therewith. Any Participation Offer made by CREC shall be conditioned upon the
consummation of the sale by CREC of the shares of Common Stock specified in the
Offering Notice pursuant to the CREC Sale Transaction. If the Xxxxxx Shareholder
Representative has accepted the Participation Offer on behalf of the Xxxxxx
Shareholders, CREC shall reduce the number of shares of Common Stock that it
would otherwise have sold in the CREC Sale Transaction to the extent necessary
to permit the Xxxxxx Shareholders to sell the number of shares specified
pursuant to this paragraph (b), and each of the Xxxxxx Shareholders shall be
obligated to sell the number of shares specified in the Participation Offer
Response Notice to the proposed Transferee in accordance with the terms of such
sale set forth in the Offering Notice.
(c) Notwithstanding anything to the contrary contained herein,
it is understood and agreed that any Transfer of shares of Common Stock
contemplated by this Section 2.3 shall be subject to, and shall be effected in
compliance with, the provisions of Section 2.1(a) and (b), including, but not
limited to, the requirement that the Transferee execute a Supplemental Agreement
in accordance with Section 2.1(a).
SECTION 2.4. Involuntary Transfer. A Transfer of shares of
Common Stock in connection with any bankruptcy, insolvency or similar
proceedings involving a
-10-
96
Shareholder or pursuant to any judicial order, legal process, execution or
attachment with respect to a Shareholder or any other involuntary Transfer
(other than a Transfer by will, trust or pursuant to the laws of intestate
succession) shall be subject to the restrictions set forth in this Agreement,
and in any such case, the Person seeking to effect such Transfer (the
"Involuntary Transferor") shall be required to effect the same in compliance
with the provisions set forth in Section 2.3 in all respects as if such
Involuntary Transferor were an Offeror desiring to make a voluntary Transfer of
such shares; provided, however, that, in the case of any such involuntary
Transfer, if the Involuntary Transferor is not a Shareholder, in addition to the
other information required to be set forth in the Offering Notice pursuant to
Section 2.3, the Offering Notice shall specify the address of the Involuntary
Transferor that is to be its location for notices and other communications
hereunder.
SECTION 2.5. Put Option. At any time during a Put Option
Window Period, the Xxxxxx Shareholders shall have the option (the "Put Option")
to sell all, but not less than all, of the shares of Common Stock specified in
Exhibit A hereto (the "Option Shares") to CREC at the applicable Purchase Price.
The Xxxxxx Shareholders shall be entitled to exercise the Put Option by
delivering a written notice to CREC, executed by the Xxxxxx Shareholder
Representative on behalf of each of the Xxxxxx Shareholders, at any time during
a Put Option Window Period stating that the Xxxxxx Shareholders irrevocably
elect to exercise the Put Option. If the Xxxxxx Shareholders exercise the Put
Option, the Xxxxxx Shareholders shall be obligated to sell to CREC, and CREC
shall be obligated to purchase from the Xxxxxx Shareholders, the Option Shares,
upon the terms and subject to the conditions set forth herein.
SECTION 2.6. Call Option. At any time during a Call Option
Window Period, if the Put Option has not been exercised by the Xxxxxx
Shareholders, CREC shall have the option (the "Call Option") to purchase all,
but not less than all, of the Option Shares from the Xxxxxx Shareholders at the
applicable Purchase Price. CREC shall be entitled to exercise the Call Option by
delivering a written notice to the Xxxxxx Shareholder Representative, executed
by CREC, at any time during a Call Option Window Period stating that CREC
irrevocably elects to exercise the Call Option. If CREC exercises the Call
Option, the Xxxxxx Shareholders shall be obligated to sell to CREC, and CREC
shall be obligated to purchase from the Xxxxxx Shareholders, the Option Shares,
upon the terms and subject to the conditions set forth herein.
-11-
97
SECTION 2.7. Appraisal of Additional Businesses. Within 30
days after the exercise of the Put Option or the Call Option, if the Company has
not sold or otherwise disposed of or discontinued the Additional Businesses in
their entirety, CREC and the Xxxxxx Shareholder Representative shall jointly
engage an Independent Appraiser for the purpose of determining the fair market
value of all remaining portions of the Additional Businesses. The Independent
Appraiser shall determine the fair market value of all remaining portions of the
Additional Businesses based on such factors as it considers to be relevant,
including, but not limited to, (i) the financial condition and results of
operations of such businesses, (ii) the prospects for future growth of such
businesses, (iii) if applicable, amounts paid in recent transactions involving
companies engaged in businesses considered to be comparable to such businesses
and (iv) if applicable, trading prices and values of comparable publicly traded
companies. Upon reaching its determination, the Independent Appraiser shall
prepare and deliver to CREC and the Xxxxxx Shareholder Representative a report
(the "Appraisal Report") stating its determination of the fair market value of
all remaining portions of the Additional Businesses and setting forth in
reasonable detail the method by which the same was determined. The determination
of the fair market value of all remaining portions of the Additional Businesses
set forth in the Appraisal Report shall be final, conclusive and binding on the
parties. CREC and the Xxxxxx Shareholders shall cooperate with each other and
with the Independent Appraiser and shall provide the Independent Appraiser with
such information as it may reasonably require. The fees and expenses of the
Independent Appraiser shall be borne equally by CREC and the Xxxxxx
Shareholders.
SECTION 2.8. Purchase Price. The purchase price (the "Purchase
Price") to be paid for the purchase of shares of Common Stock by the parties
hereto pursuant to this Article II shall be as follows:
(a) in the case of a purchase of the Offered Stock by any
party pursuant to Section 2.3 or 2.4, the applicable Purchase Price shall be (i)
in the case of a voluntary sale or other Transfer for value, the Offering Price
or (ii) in the case of any other Transfer, the Base Price;
(b) in the case of a purchase by CREC of the Option Shares
upon the exercise of the Put Option pursuant to Section 2.5, the applicable
Purchase Price shall be the product of (i) the Formula Price and (ii) the
Retained Interest Fraction; or
(c) in the case of a purchase by CREC of the Option Shares
upon the exercise of the Call Option pursuant to Section 2.6, the applicable
Purchase Price shall be the product of (i) the Formula Price and (ii) the
Retained Interest Fraction (provided,
-12-
98
however, that the Purchase Price determined pursuant to this paragraph (c) shall
in no event be less than the Base Price).
SECTION 2.9. Closing. The closing (the "Closing") of any
purchase and sale of shares of Common Stock by a party hereto pursuant to this
Article II (a "Share Purchase") shall take place at the principal office of the
Company or at such other location as may be mutually agreed upon by the party
purchasing such shares (the "Purchaser") and the party selling such shares (the
"Seller") on such date and at such time as shall be specified by the Purchaser
in a written notice (the "Closing Notice") delivered to the Seller as promptly
as practicable after the Purchaser becomes entitled to purchase such shares in
accordance with the provisions of this Agreement (or, if applicable, the date
upon which the applicable Purchase Price for such shares is determined in
accordance with the terms of this Agreement), which date shall be not less than
ten nor more than 30 days after the date of such notice; provided, however, that
if the condition to the obligations of the Purchaser and the Seller to
consummate such Share Purchase set forth in Section 2.10 shall not have been
satisfied as of the date specified in the Closing Notice, the date and time of
the Closing shall be postponed until the first Business Day on which such
condition shall have been satisfied. At the Closing, (i) the Seller shall
deliver to Purchaser a certificate or certificates evidencing the shares of
Common Stock to be sold by the Seller, duly endorsed in blank or accompanied by
stock powers duly executed in blank or otherwise in a form acceptable for
transfer on the books of the Company, and (ii) the Purchaser shall deliver to
the Seller a certified or official bank check payable to the order of the Seller
in an amount equal to the applicable Purchase Price, whereupon all right, title
and interest in and to such shares of Common Stock will pass to the Purchaser.
If the Seller fails to tender for transfer certificates evidencing the shares of
Common Stock to be sold at the Closing, the Company will treat the Share
Purchase as having been completed if the Purchaser delivers to the Company the
aforementioned certified or official bank check (which the Company will hold in
trust for the Seller), and the Seller thereafter will have no rights as a holder
of such shares of Common Stock (including, but not limited to, any rights to
vote such shares or receive dividends with respect thereto).
SECTION 2.10. HSR Act. The respective obligations of the
Purchaser and the Seller to consummate any Share Purchase pursuant to this
Article II shall be subject to the condition that any waiting period applicable
to such Share Purchase under the HSR Act shall have expired or been terminated.
Each of the Purchaser and the Company (or, if applicable, their ultimate parent
entities) shall promptly file or cause to be filed with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") notification and report forms pursuant to the HSR Act
relating to a Share Purchase whenever required thereunder. The Purchaser and the
Company (or, if applicable, their ultimate parent entities) shall promptly
respond to any
-13-
99
request for additional information or documentary material by the FTC or the
Antitrust Division and shall cooperate with each other in order to ensure that
all waiting periods (and any extension thereof) applicable to the consummation
of the Share Purchase under the HSR Act expire or are terminated as promptly as
practicable.
SECTION 2.11. Effect of Prohibited Transfer. Any attempted or
purported Transfer of shares of Common Stock in violation of the provisions of
this Article II shall not be effective to Transfer ownership of such shares to
the purported Transferee, who shall not be entitled to any rights as a holder of
Common Stock with respect to the shares of Common Stock attempted or purported
to be Transferred. All rights with respect to any shares of Common Stock
attempted or purported to be Transferred in violation of the aforementioned
provisions shall remain the property of the Person who initially attempted or
purported to transfer such shares in violation thereof. Upon a determination by
the Board of Directors of the Company that there has been or is threatened an
attempted or purported Transfer of shares of Common Stock in violation of the
aforementioned provisions, the Board of Directors of the Company may take such
action as it deems necessary or appropriate, including, but not limited to,
refusing to give effect on the books of the Company to such attempted or
purported Transfer or instituting legal proceedings to enjoin or rescind the
same, to effectuate the purposes of this Article II.
ARTICLE III
CERTAIN CAPITAL PROJECTS
SECTION 3.1. Election as to Capital Projects. In the event
that the Board of Directors approves any project (a "Capital Project") which
would require the Company or any of its Subsidiaries to make any investment or
capital expenditure in an aggregate amount exceeding $2,000,000, the Company
shall deliver a written notice (a "Capital Project Notice") to the Xxxxxx
Shareholder Representative identifying such Capital Project and (to the extent
that the Xxxxxx Shareholder Representative has not been afforded access to such
information in its capacity as a director of the Company) providing a brief
description of such Capital Project and a statement of the projected investments
and capital expenditures to be made in connection therewith and the projected
revenue and operating income to be derived therefrom and shall provide to the
Xxxxxx Shareholder Representative such other information regarding such Capital
Project as it shall reasonably request. No later than 30 days after receipt of a
Capital Project Notice, the Xxxxxx Shareholders may (but shall not be obligated
to) deliver a written notice (the "Excluded Project Notice"), executed by the
Xxxxxx Shareholder Representative on behalf of each of the Xxxxxx Shareholders,
to the Company and CREC stating that they irrevocably elect not to
-14-
100
participate in the Capital Project described therein. If the Xxxxxx Shareholder
Representative does not deliver an Excluded Project Notice to the Company and
CREC with the aforementioned 30-day period, the Xxxxxx Shareholders (and any
directors designated by them) shall be conclusively deemed to have approved the
Capital Project described therein.
SECTION 3.2. Excluded Projects. If the Xxxxxx Shareholder
Representative delivers an Excluded Project Notice to CREC and the Company with
respect to a Capital Project (an "Excluded Project") within the time period
provided for in Section 3.1, the Company shall establish on its books and
records separate accounts relating to such Excluded Project, and the activities
and operations conducted by the Company and its Subsidiaries in connection with
such Excluded Project (the "Excluded Project Operations") shall in all respects
be treated as a separate division of the Company. The separate accounts relating
to an Excluded Project shall be maintained on a cash basis and shall identify
(i) all assets of the Company and its Subsidiaries, if any, used in connection
with the Excluded Project Operations, (ii) all liabilities incurred by the
Company and its Subsidiaries in connection with the Excluded Project Operations,
(iii) all items of income and other receipts and all gains realized by the
Company and or its Subsidiaries ("Excluded Project Income") which are
attributable to the Excluded Project Operations (including, but not limited to,
any revenues from the sale of products and provision of services in connection
with the Excluded Project and the sale or exchange of assets used in connection
with the Excluded Project Operations) and (iv) all items of expense and other
payments and all losses incurred by the Company or its Subsidiaries ("Excluded
Project Expense") which are attributable to the Excluded Project Operations
(including, but not limited to, any operating costs associated with such
Excluded Project and any payment of liabilities incurred in connection therewith
such as a payment of principal, interest or other costs associated with
indebtedness incurred in order to fund the Excluded Project).
SECTION 3.3. Excluded Project Payments. Within 90 days after
the end of each fiscal quarter of the Company, (i) if the aggregate amount of
Excluded Project Income for such fiscal quarter derived from all Excluded
Projects exceeds the aggregate amount of Excluded Project Expense for such
fiscal quarter incurred in connection therewith, the Company shall make a
payment in cash to CREC in an amount equal to such excess and (ii) if the
aggregate amount of Excluded Project Expense for such fiscal quarter incurred in
connection with all Excluded Projects exceeds the aggregate amount of Excluded
Project Income for such fiscal quarter derived therefrom, CREC shall make a
payment in cash to the Company in an amount equal to such excess. All receipts
and payments pursuant to this Section 3.3 will be included as income or expense,
as the case
-15-
101
may be, for an Excluded Project for purposes of clause (ii) of the definition of
"Adjusted Consolidated Net Income" contained in Section 5.1.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Shareholders as follows:
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Arizona and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as presently conducted.
(b) The Company has all requisite corporate power and
authority to enter into and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery by
the Company of this Agreement have been duly and validly authorized by all
necessary corporate action on the part of the Company, and no other corporate
proceedings or shareholder actions on the part of or with respect to the Company
are necessary to authorize this Agreement, the performance by the Company of its
obligations hereunder or the consummation by the Company of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with the terms hereof.
(c) The execution and delivery by the Company of this
Agreement, the performance by it of its obligations hereunder and the
consummation by it of the transactions contemplated hereby will not (i) conflict
with, or result in any violation or breach of, any provision of the Charter or
Bylaws of the Company or any of its Subsidiaries, (ii) conflict with, result in
any violation or breach of, constitute a default under, give rise to any right
of termination or acceleration (with or without notice or the lapse of time or
both) pursuant to, or result in being declared void, voidable or without further
effect, any term or provision of any material note, bond, mortgage, indenture,
lease, franchise, permit, license, contract or other instrument or document to
which the Company or any of its Subsidiaries is a party or by which their
respective properties or assets are bound or (iii) conflict with, or result in
any violation of, any law, ordinance, statute, rule or regulation of any
Governmental Authority or of any order, writ, injunction, judgment
-16-
102
or decree of any court, arbitrator or Governmental Authority applicable to the
Company or any of its Subsidiaries or their respective properties or assets.
(d) There is no requirement applicable to the Company to
obtain any consent, authorization or approval of, or to make or effect any
declaration, filing or registration with, any Governmental Authority for the
valid execution and delivery by the Company of this Agreement, the due
performance by it of its obligations hereunder or the lawful consummation by it
of the transactions contemplated hereby, except for any filings under the HSR
Act contemplated by Section 2.10.
SECTION 4.2. Representations and Warranties of the
Shareholders. Each Shareholder hereby represents and warrants to the Company and
the other Shareholders as follows:
(a) If such Shareholder is a corporation, such Shareholder is
a corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted. If such Shareholder is a partnership, such Shareholder
is a partnership duly formed, validly existing and in good standing under the
laws of the state of its formation and has all requisite partnership power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted.
(b) Such Shareholder has all necessary power and authority to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. If such Shareholder is a corporation, the
execution and delivery of this Agreement by such Shareholder have been duly and
validly authorized by all necessary corporate action on the part of such
Shareholder, and no other corporate proceedings or shareholder actions on the
part of or with respect to such Shareholder are necessary to authorize this
Agreement, the performance by such Shareholder of its obligations hereunder or
the consummation by such Shareholder of the transactions contemplated hereby. If
such Shareholder that is a partnership, the execution and delivery of this
Agreement by such Shareholder have been duly and validly authorized by all
necessary partnership action on the part of such Shareholder and all necessary
action on the part of its partners, and no other proceedings or actions on the
part of or with respect to such Shareholder or its partners are necessary to
authorize this Agreement, the performance by such Shareholder of its obligations
hereunder or the consummation by such Shareholder of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Shareholder and constitutes a legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with the terms
hereof.
-17-
103
(c) The execution and delivery by such Shareholder of this
Agreement, the performance by it of its obligations hereunder and the
consummation by it of the transactions contemplated hereby will not (i) conflict
with, or result in any violation or breach of, if such Shareholder is a
corporation, any provision of the Charter or Bylaws of such Shareholder or, if
such Shareholder is a partnership, any provision of the partnership agreement of
such Shareholder or the Charter, Bylaws or other constitutive instruments of any
of its partners, (ii) conflict with, result in any violation or breach of,
constitute a default under, give rise to any right of termination or
acceleration (with or without notice or the lapse of time or both) pursuant to,
or result in being declared void, voidable or without further effect, any term
or provision of any material note, bond, mortgage, indenture, lease, franchise,
permit, license, contract or other instrument or document to which such
Shareholder Party is a party or by which its properties or assets are bound or
(iii) assuming that any waiting period applicable to any Share Purchase by or
involving such Shareholder under the HSR Act shall have expired or been
terminated, conflict with, or result in any violation of, any law, ordinance,
statute, rule or regulation of any Governmental Authority or of any order, writ,
injunction, judgment or decree of any court, arbitrator or Governmental
Authority applicable to such Shareholder or its properties or assets.
(d) There is no requirement applicable to such Shareholder to
obtain any consent, approval or authorization of, or to make or effect any
declaration, filing or registration with, any Governmental Authority for the
valid execution and delivery by such Shareholder of this Agreement, the due
performance by it of its obligations hereunder or the lawful consummation by it
of the transactions contemplated hereby, except for any filings under the HSR
Act contemplated by Section 2.10.
(e) If such Shareholder is Xxxxxx Shareholder, such
Shareholder has duly appointed the Xxxxxx Shareholder Representative as its
agent and representative to take all actions and make all decisions required or
permitted to be taken or made by the Xxxxxx Shareholder Representative in
accordance with this Agreement and in connection with the transactions
contemplated hereby, and all actions and decisions so taken or made shall be
binding in all respects on such Shareholder.
-18-
104
ARTICLE V
DEFINITIONS;
ACCOUNTING MATTERS
SECTION 5.1. Certain Definitions.
(a) As used herein, the terms set forth below shall have the
following respective meanings:
"Additional Businesses" means the Leasing Business and the
Real Estate Development Business.
"Adjusted Consolidated Net Income" means, with respect to the
Company for any period, the Consolidated Net Income of the Company for such
period, adjusted to exclude (to the extent included in computing Consolidated
Net Income) each of the following:
(i) all income, expenses, gains or losses arising from the
Additional Businesses;
(ii) all income, expenses, gains or losses arising from the
Excluded Projects;
(iii) all gains or losses which are extraordinary (as
determined in accordance with GAAP);
(iv) all income, expenses, gains or losses arising from the
sale or other disposition of assets outside the ordinary course of business;
(v) all interest, if any, expensed by the Company or its
consolidated subsidiaries during such fiscal year in respect of any Excluded
Debt;
(vi) all gains or losses arising from investments in
marketable securities; and
(vii) all charges or credits relating to the amortization of
acquisition costs, intangible assets, deferred taxes (and all write downs of any
such items) and similar charges or credits for depreciation or amortization
arising from any purchase accounting adjustments and write downs or reserves
attributable to purchase accounting write ups as
-19-
105
a result of the Merger and the other transactions contemplated by the Merger
Agreement or any future reorganization or restructuring of the Company or its
Subsidiaries.
"Adjusted EBT" means, with respect to the Company for any
period, the Adjusted Consolidated Net Income of the Company for such period,
adjusted to exclude (to the extent included in computing Adjusted Consolidated
Net Income) consolidated income tax expense for such fiscal year.
"Affiliate" means, with respect to any Person, any other
Person who, directly or indirectly, controls, is controlled by or is under
common control with such Person. As used in this definition, the term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether by contract or
otherwise.
"Annual Budget" means, with respect to the Company for any
fiscal year, a budget prepared by the management of the Company and approved by
the Board of Directors reflecting, among other things, projected expenditures
(including marketing and sales expenditures) and capital outlays by the Company
and its Subsidiaries for such fiscal year.
"Availability Date" means the date upon which audited
financial statements of the Company for any fiscal year are distributed to the
Shareholders in accordance with Section 6.5(b).
"Base Price" means the product of (i) the number of shares of
Common Stock to be sold by a party hereto pursuant to the applicable provision
of Article II and (ii) $2,675.00.
"Business Day" means any day except a Saturday, Sunday or
federal holiday.
"Bylaws" means, with respect to any corporation, the bylaws of
such corporation, as in effect from time to time.
"Call Option Window Period" means a period of 60 days after
the Availability Date with respect to the audited financial statements of the
Company for the fiscal year ending March 31, 2002 and each even numbered fiscal
year thereafter.
"Capital Stock" means, with respect to any corporation, all
shares, interests, participations or other equivalents of capital stock of such
corporation, however
-20-
106
designated, and any warrants, options or other rights to purchase or acquire any
such capital stock and any securities convertible into or exchangeable for any
such capital stock.
"Centex" means Centex Corporation.
"Charter" means, with respect to any corporation, the
certificate or articles of incorporation (or similar governing document) of such
corporation, as in effect from time to time.
"Consolidated Net Income" means, with respect to the Company
for any period, the net income (or loss) of the Company and its consolidated
subsidiaries for such period, determined in accordance with GAAP, applied on a
basis consistent with the Company's past practices as reflected in the most
recent audited financial statements of the Company delivered to CREC prior to
the date hereof.
"Dividend Period" means (i) the period commencing on the date
of this Agreement and ending on March 31, 1998 and (ii) each subsequent period
commencing on the day after the end of the immediately preceding Dividend Period
and ending on the earlier of (A) the last day of the then current fiscal year of
the Company or (B) the Closing Date of any purchase of shares of Common Stock by
a party hereto pursuant to the provisions of Article II.
"Eligible Capital Project" means any investment or capital
project which is reasonably projected to generate an average annual return on
investment by the Company and its Subsidiaries (excluding the effect of any
projected income tax or interest expense) in excess of 20% in accordance with
the criteria and methodology normally used by CREC in evaluating similar
investments made by CREC and its Subsidiaries.
"Eligible Capital Project Deficit Amount" means, with respect
to an Eligible Capital Project, the portion of the Excess Intercompany
Indebtedness outstanding from time to time which, if repaid by CREC, would have
been available for use to fund such Eligible Capital Project if such project had
been approved by the Board of Directors and had been implemented by the Company
in accordance with the financial and operating plans submitted to the Board of
Directors by the directors designated by the Xxxxxx Shareholder Representative.
"Excess Intercompany Indebtedness" means the excess, if any,
of (i) the net amount of any Intercompany Indebtedness owing by CREC or any of
its Affiliates (other than the Company and its Subsidiaries) to the Company or
any of its Subsidiaries over (ii) $3,000,000.
-21-
107
"Excluded Debt" means all indebtedness and related finance
charges and expenses incurred to finance the Merger and the other transactions
contemplated by the Merger Agreement.
"Formula Price" means the sum of the following amounts:
(i) the applicable amount set forth below in paragraph (A),
(B) or (C) below:
(A) in the case of a sale of the Option Shares to CREC upon
the exercise of the Put Option after the Availability Date with respect
to the financial statements for the fiscal year ending March 31, 2000
(but prior to the Availability Date for the financial statements for
the next succeeding fiscal year), an amount equal to six times the
Adjusted EBT of the Company for such fiscal year;
(B) in the case of a sale of the Option Shares to CREC upon
the exercise of the Put Option after the Availability Date with respect
to the financial statements for the fiscal year ending March 31, 2001
(but prior to the Availability Date for the financial statements for
the next succeeding fiscal year), an amount equal to seven times the
Adjusted EBT of the Company for such fiscal year; or
(C) in the case of a sale of the Option Shares to CREC upon
the Exercise of the Put Option at any time after the Availability Date
with respect to the financial statements for the fiscal year ending
March 31, 2002 or upon the exercise of the Call Option at any time, an
amount equal to eight times the Adjusted EBT of the Company for such
fiscal year;
(ii) the fair market value of all remaining portions of the
Additional Businesses as set forth in the Appraisal Report; and
(iii) the aggregate amount of the net proceeds received by the
Company and its Subsidiaries from any sale or other disposition of all or any
part of the properties, assets and operations of the Real Estate Development
Business held by the Company as of the date hereof (including the stock of any
Subsidiary of the Company engaged in such business).
"GAAP" means generally accepted accounting principles as in
effect in the United States on the date of the Merger Agreement.
-22-
108
"Xxxxxx Shareholder Representative" means Xx X. Xxxxxx or such
other Person as is designated from time to time in a written instrument executed
by the holders of at least a majority of the outstanding shares of Common Stock
held by the Xxxxxx Shareholders and delivered to the Company at its address
specified in Section 6.7.
"Xxxxxx Shareholders" means Xx X. Xxxxxx, Xxxxx X. Xxxxxx and
Xxxxx Partnership and any Person who acquires shares of Common Stock directly or
indirectly from Xx X. Xxxxxx, Xxxxx X. Xxxxxx or Xxxxx Partnership and who has
executed a Supplemental Agreement or a Pledgee Agreement which has been approved
by the Company as contemplated by Section 2.1(a) or 2.2, as the case may be.
"Governmental Authority" means any nation or government, any
state or political subdivision thereof, any federal or state court and any other
agency or authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HSR Act" means Section 7A of the Xxxxxxx Act (Title II of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976), as amended (including any
successor statute).
"Independent Appraiser" means an investment banking firm or
firm of independent certified public accountants of national or regional
standing and reputation or other qualified expert or appraiser which has not had
any material business relationship with CREC, the Company or their respective
Subsidiaries or the Xxxxxx Shareholders for a period of at least two years.
"Intercompany Indebtedness" means all indebtedness owing by
the Company or any of its Subsidiaries to CREC or any of its Affiliates (other
than the Company and its Subsidiaries) or owing by CREC or any of its Affiliates
(other than the Company and its Subsidiaries) to the Company or any of its
Subsidiaries.
"Intercompany Rate" means the weighted average rate of
interest charged from time to time on the outstanding long- and short-term
indebtedness of Centex and its Subsidiaries owing to banks and other outside
financing sources or evidenced by promissory notes, bonds, debentures or other
similar instruments, as calculated by Centex no less frequently than once each
calendar week.
"Leasing Business" means the business conducted by the Company
and its Subsidiaries which relates to the sale and leasing of temporary security
storage containers and trailer vans.
-23-
109
"Offering Price" means, in the case of a sale or other
Transfer for value of any Offered Stock, the amount of cash and the fair market
value of any other consideration to be paid for the Offered Stock by the
proposed Transferee.
"Ownership Change" means, with respect to any Xxxxxx
Shareholder that is a corporation, partnership or other entity, Xx X. Xxxxxx or
Xxxxx X. Xxxxxx (or their Permitted Transferees) ceasing for any reason to (i)
have the full and exclusive right to manage, conduct and control the business
and activities of such Xxxxxx Shareholder or (ii) beneficially own all of the
outstanding Capital Stock or equity securities of, or other ownership interests
in, such Xxxxxx Shareholder.
"Permitted Transferee" means (i) in the case of a proposed
Transfer by CREC, any Qualified Centex Subsidiary or (ii) in the case of a
proposed Transfer by a Xxxxxx Shareholder, any person that is a Xxxxxx
Shareholder named in this Agreement and any spouse or lineal ancestor or
descendant of any such Xxxxxx Shareholder, any entity the entire equity interest
in which is owned by any of the foregoing persons, any Qualified Xxxxxx Trust
and any executor or administrator of the estate of any of the foregoing persons.
"Person" means any individual, corporation, partnership,
association, trust or any other entity or organization of any kind or character,
including a Governmental Authority.
"Principal Businesses" means (i) the business of designing,
manufacturing and selling manufactured housing to be used for residential,
recreational or other purposes and (ii) the Additional Businesses.
"Prohibited Intercompany Charges" means any secretarial,
bookkeeping, reporting, data processing, office, rent and other office expenses,
salaries and other compensation expenses and other similar internal
administrative, management or other expenses incurred by CREC or its Affiliates
in connection with the operations of the Company and its Subsidiaries; provided,
however, that such term shall not include any properly allocable costs of
premiums and other insurance costs (whether or not they represent out-of-pocket
expenses) or out-of-pocket expenses incurred by CREC or its Affiliates which are
directly attributable to the operations of the Company or its Subsidiaries and
the amount of which is not greater than the amount of the charges that would be
incurred by the Company or its Subsidiaries in an arm's-length transaction with
an unaffiliated third party.
-24-
110
"Put Option Window Period" means a period of 60 days after the
Availability Date with respect to the audited financial statements of the
Company for the fiscal years ending March 31, 2000, 2001 and 2002 and each even
numbered fiscal year thereafter.
"Qualified Centex Subsidiary" means a Subsidiary of Centex of
which at least 80% of the outstanding Capital Stock or other equity securities
are owned, directly or indirectly, by Centex.
"Qualified Xxxxxx Trust" means any trust of which the sole
trustees are persons who are named as Xxxxxx Shareholders in this Agreement or
any spouse or lineal ancestor or descendant of any such Xxxxxx Shareholder and
of which the sole beneficiaries are any of the foregoing persons or any charity
designated from time to time by the grantors or trustees of such trust.
"Real Estate Development Business" means the business
conducted by the Company and its Subsidiaries which relates to the development
of housing subdivisions and the sale of manufactured, modular and conventional
housing units or lots located therein.
"Retained Interest Fraction" means a fraction the numerator of
which is the number of Option Shares and the denominator of which is the total
number of shares of Common Stock that are outstanding as of the date upon which
the Put Option or the Call Option, as the case may be, is exercised.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any Person, (i) any
corporation or other Person of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are owned directly or indirectly by
such Person or (ii) any partnership of which such Person or any of its
Subsidiaries is a general partner or of which such Person directly or indirectly
owns partnership interests which entitle it to receive more than 50% of the
distributions made by such partnership.
"Supermajority Board Vote" means a vote of directors of the
Company representing at least two-thirds of the total number of members of the
Board of Directors of the Company; provided, however, that for purposes of this
definition, if one or more vacancies is created on the Board of Directors of the
Company by reason of the death, resignation or removal of any director, the
total number of members of the Board of
-25-
111
Directors shall be deemed to include the number of vacancies so created (until
such time as such vacancies are filled in the manner provided in Section
1.1(c)).
"Tax Agreement" means the Tax Sharing and Tax Benefit
Reimbursement Agreement, dated as of the date hereof, between the Company and
CREC in the form attached as Exhibit B hereto.
"Transfer" means any sale, transfer, assignment, gift,
exchange, pledge, hypothecation, encumbrance or other disposition of any shares
of Common Stock, or any interest therein, whether voluntary or involuntary and
regardless of the nature or method thereof.
"Transferee" means a Person that acquires any shares of Common
Stock, or any interest therein, as a result of a Transfer.
(b) Each of the terms set forth below has the meaning
specified in the provision set forth opposite such term in the following table:
Term Provision
---- ---------
Agreement Introductory paragraph
Antitrust Division Section 2.10
Applicable Amounts Section 6.6(a)
Appraisal Report Section 2.7
Call Option Section 2.6
Capital Project Section 3.1
Capital Project Notice Section 3.1
Closing Section 2.9
Closing Notice Section 2.9
Company Introductory paragraph
Common Stock Recitals
CREC Introductory paragraph
CREC Sale Transaction Section 2.3(b)
Dispute Notice Section 6.6(b)
Disputing Shareholder Section 6.6(b)
Excluded Project Section 3.2
Excluded Project Expense Section 3.2
Excluded Project Income Section 3.2
Excluded Project Notice Section 3.1
Excluded Project Operations Section 3.2
-26-
112
FTC Section 2.10
First Refusal Response Notice Section 2.3(a)
Involuntary Transferor Section 2.4
Xxxxx Partnership Introductory paragraph
Leasing Business Acquisition Section 1.5(a)
Leasing Business Acquisition
Notice Section 1.5(a)
Merger Recitals
Merger Agreement Recitals
MFH Acquisition Recitals
Offered Stock Section 2.3(a)
Offeree Section 2.3(a)
Offeror Section 2.3(a)
Offering Notice Section 2.3(a)
Option Shares Section 2.5
Participation Offer Section 2.3(b)
Participation Offer Response
Notice Section 2.3(b)
Pledgee Agreement Section 2.2
Purchase Price Section 2.8
Purchaser Section 2.9
Put Option Section 2.5
Seller Section 2.9
Share Purchase Section 2.9
Shareholders Recitals
Supplemental Agreement Section 2.1(a)
SECTION 5.2. Certain Accounting Matters. Unless otherwise
specified in this Agreement, all accounting terms used herein shall be
interpreted, all accounting determinations contemplated hereby shall be made and
all financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent with the Company's past
practices as reflected in the most with the most recent audited financial
statements of the Company delivered to CREC prior to the date hereof.
-27-
113
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Legend. A copy of this Agreement shall be filed
with the permanent records of the Company and shall be kept at all times at the
principal place of business of the Company. Each Shareholder agrees, on behalf
of itself and its successors and assigns, that all certificates representing
shares of Common Stock shall have affixed thereto a legend substantially in the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF OR PLEDGED OR
HYPOTHECATED UNLESS REGISTERED UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND ANY SUCH LAWS IS AVAILABLE
(AND, IN SUCH CASE, AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY SHALL HAVE BEEN DELIVERED TO THE
COMPANY TO THE EFFECT THAT THE OFFER, SALE, TRANSFER,
DISPOSITION, PLEDGE OR HYPOTHECATION THEREOF IS EXEMPT FROM
REGISTRATION UNDER THE ACT AND ANY SUCH LAWS). THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING
AGREEMENTS, RESTRICTIONS ON TRANSFER AND OTHER TERMS AND
CONDITIONS SET FORTH IN A SHAREHOLDERS' AGREEMENT DATED AS OF
________, 1997 AMONG THE COMPANY AND ITS SHAREHOLDERS. A COPY
OF SUCH AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF
THE SHARES REPRESENTED BY THIS CERTIFICATE WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.
SECTION 6.2. Termination. This Agreement may be terminated by
mutual written consent of the Company, CREC and the Xxxxxx Shareholder
Representative, and shall terminate automatically upon the Closing of the
purchase by CREC or the Xxxxxx
-28-
114
Shareholders, as the case may be, of all of the outstanding shares of Common
Stock held by the other Shareholders pursuant to Article II.
SECTION 6.3. Further Assurances; Frustration of Purposes. The
Company and each Shareholder shall do, or cause to be done, such further acts
and execute and deliver, or to cause to be executed and delivered, such further
agreements, instruments, certificates and other documents as may be reasonably
necessary to effectuate and carry out the purposes of this Agreement. No party
to this Agreement shall, directly or indirectly, do any act or thing which is
intended to frustrate the provisions of this Agreement or prevent the
effectuation of the purposes hereof, whether or not such act or thing is
expressly prohibited under the terms hereof. Without limiting the generality of
the foregoing, the Xxxxxx Shareholders shall use their best efforts and take all
action within their power to prevent the occurrence of an Ownership Change with
respect to any of the Xxxxxx Shareholders.
SECTION 6.4. Fees and Expenses. Except as expressly provided
herein, all fees and expenses incurred by any of the parties hereto in
connection with this Agreement or any of the transactions contemplated hereby
shall be borne and paid solely by the party incurring such fees and expenses.
SECTION 6.5. Certain Reports. The Company shall furnish to
each of the Shareholders:
(a) as soon as available and in any event within 45 days after
the end of each fiscal quarter (including the last) of each fiscal year, (i) the
balance sheet of the Company and its consolidated subsidiaries as of the end of
such fiscal quarter and the related statement of operations of the Company and
its consolidated subsidiaries for such quarter and also for the period beginning
on the first day of such fiscal year and ending on the date of such balance
sheet, all prepared in accordance with GAAP, applied on a consistent basis
throughout the periods covered, subject to the absence of notes thereto and
normal year-end adjustments, (ii) a summary balance sheet and statement of
operations relating to all operations of the Company and its consolidated
subsidiaries other than the Excluded Projects and (iii) a summary balance sheet
and statement of operations relating to each Excluded Project; and
(b) as soon as available and in any event within 120 days
after the end of each fiscal year, the balance sheet of the Company and its
consolidated subsidiaries as of the end of such fiscal year and the related
statement of earnings and statement of cash flows of the Company for such fiscal
year, all prepared in accordance with GAAP, applied on a consistent basis
throughout the period covered, which financial statements shall be
-29-
115
audited by Xxxxxx Xxxxxxxx, LLP (except to the extent otherwise permitted
pursuant to Section 1.4).
SECTION 6.6. Determination of Certain Amounts; Dispute
Resolution.
(a) In any case in which the provisions of this Agreement
contemplate or require a determination of (i) the amount of the Purchase Price
to be paid in connection with the purchase of any shares of Common Stock (and,
if applicable, the amounts of the Consolidated Net Income, Adjusted Consolidated
Net Income or Adjusted EBT used in computing such Purchase Price but not the
fair market value of the Additional Businesses used in computing the same, which
shall be determined in accordance with the provisions of Section 2.7), (ii) the
amount of any payments required to be made by the Company or CREC pursuant to
Section 3.3 (and the amounts of Excluded Project Income and Excluded Project
Expense used in computing such payments) or (iii) the amount of the Offering
Price in the case of a sale or other Transfer of Offered Stock in a transaction
that involves the payment of consideration other than cash (collectively, the
"Applicable Amounts"), such determination shall initially be made (after
consultation with the Company's independent public accountants) by the Board of
Directors of the Company (or any officer of the Company designated by the Board
of Directors) based on the audited financial statements and other books and
records of the Company or such other information as the Board of Directors or
such officer shall consider to be relevant. As promptly as practicable after any
such determination has been made, the Company shall deliver a written notice (a
"Determination Notice") to each of the Shareholders setting forth its
determination of the Applicable Amount.
(b) A Shareholder (a "Disputing Shareholder") shall be
entitled to dispute the determination of any Applicable Amount in accordance
with paragraph (a) above if, and only if, such Shareholder delivers a written
notice (the "Dispute Notice"), executed by such Shareholder (or, in the case of
a Xxxxxx Shareholder, by the Xxxxxx Shareholder Representative on behalf of such
Xxxxxx Shareholder), to the Company within 30 days after receipt of the
Determination Notice, which Dispute Notice shall describe in reasonable detail
the amount and nature of the dispute. The Company and the Disputing Shareholders
shall attempt in good faith to resolve any dispute as to the determination of an
Applicable Amount. In the event that the Company and the Disputing Shareholders
are unable to resolve any such dispute within 30 days after delivery of the
Dispute Notice, the items in dispute shall be submitted to an independent
accounting firm selected by the parties, whose determination shall be limited to
the matters in dispute and shall be final, conclusive and binding on the
parties. The parties will cooperate with each other and with said accounting
firm and will provide said accounting firm with such information as it may
reasonably require. The fees and expenses of said accounting firm shall be borne
equally
-30-
116
by the Company and the Disputing Shareholders; provided, however, that if said
accounting firm resolves all material elements of any dispute pursuant to this
Section 6.6 against either the Company or the Disputing Shareholders, the
Company or the Disputing Shareholders, as the case may be, shall bear all fees
and expenses of said accounting firm.
SECTION 6.7. Notices. All notices and other communications
hereunder shall be in writing and shall be given by delivery in person, by
registered or certified mail (return receipt requested and with postage prepaid
thereon) or by cable, telex or facsimile transmission to the parties at the
following addresses (or at such other address as any party shall have furnished
to the others in accordance with the terms of this Section 6.7):
if to the Company:
MFH Holding Company
0000 X. Xxxxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
Attention: Xx X. Xxxxxx
with copies to (which shall not constitute notice to the Company):
Xxxxxx Xxxxxxx
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
if to CREC:
Centex Real Estate Corporation
0000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxx X. Xxxxx
with copies to (which shall not constitute notice to CREC):
Centex Corporation
0000 Xxxxx Xxxxxxx
-00-
000
Xxxxxx, Xxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx
and
Xxxxx & Xxxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx
if to any of the Xxxxxx Shareholders:
Al R. and Xxxxx X. Xxxxxx
Cavco Industries, Inc.
0000 X. Xxxxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
with copies to (which shall not constitute notice to the Xxxxxx
Shareholders):
Xxxxxx Xxxxxxx
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Facs: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
All notices and other communications hereunder that are addressed as provided in
or pursuant to this Section 6.7 shall be deemed duly and validly given (a) if
delivered in person, upon delivery, (b) if delivered by registered or certified
mail (return receipt requested and with postage paid thereon), 72 hours after
being placed in a depository of the United States mails and (c) if delivered by
cable, telex or facsimile transmission, upon transmission thereof and receipt of
the appropriate answerback.
SECTION 6.8. Amendment; Waivers. The terms and provisions of
this Agreement may be modified or amended only by a written instrument executed
by the Company, CREC and the Xxxxxx Shareholder Representative, and compliance
with any
-32-
118
term or provision hereof may be waived only by a written instrument executed by
each party entitled to the benefits of the same (or, if the Xxxxxx Shareholders
are the parties entitled to the benefits thereof, by the Xxxxxx Shareholder
Representative). Except as expressly provided herein to the contrary, no failure
to exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
granted hereunder.
SECTION 6.9. Entire Agreement. This Agreement (including the
Exhibits hereto) constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior written or oral agreements
and understandings and all contemporaneous oral agreements and understandings
among the parties or any of them with respect to the subject matter hereof. All
Exhibits hereto are expressly made a part of this Agreement.
SECTION 6.10. Parties in Interest; Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns (it being understood and agreed that, except
as expressly provided herein, nothing contained in this Agreement is intended to
confer any rights, benefits or remedies of any kind or character on any other
Person under or by reason of this Agreement). No party may assign this Agreement
without the prior written consent of each of the other parties hereto; provided,
however, that a party may assign this Agreement to a Permitted Transferee
without the consent of any other party, but such assignment shall not relieve a
party of any of its obligations hereunder to the extent that such obligations
are not performed by the assignee. It is expressly understood and agreed that
any attempted or purported assignment by any party of this Agreement in
violation of this Section 6.10 shall be null and void.
SECTION 6.11. Governing Law. This Agreement shall be governed
by and construed and interpreted in accordance with the laws of the State of
Nevada, without regard to any principles of conflicts of law that would result
in the application of the laws of any other jurisdiction.
SECTION 6.12. Severability. In the event any provision
contained herein shall be held to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of any such provision in
every other respect and the validity, legality and enforceability of the
remaining provisions contained in this Agreement shall not be in any way
impaired thereby.
-33-
119
SECTION 6.13. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with the terms hereof.
Accordingly, the parties agree that each of them shall be entitled to injunctive
relief to prevent breaches of the terms of this Agreement and to specific
performance of the terms hereof, in addition to any other remedy now or
hereafter available at law or in equity, or otherwise.
SECTION 6.14. Default Interest. In the event that any amount
becomes due and payable by any party in accordance with the express terms of
this Agreement but is not paid on the date upon which it becomes due, in
addition to any other rights and remedies that may be available as a result of
the failure to pay such amount, the party that is entitled to receive such
amount shall have the right to recover, for each day from and after the due date
and until such amount has been paid, interest thereon at a rate of 10.0% per
annum (or such lower rate as shall be the highest rate of interest permitted
under applicable law).
SECTION 6.15. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
-34-
120
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed as of the date first above written.
MFH HOLDING COMPANY
By:_________________________________________________
Name:_______________________________________________
Title:______________________________________________
CENTEX REAL ESTATE CORPORATION
By:_________________________________________________
Name:_______________________________________________
Title:______________________________________________
____________________________________________________
Xx X. Xxxxxx
____________________________________________________
Xxxxx X. Xxxxxx
-35-
121
XXXXX LIMITED PARTNERSHIP
By: THE 1994 ALSONS TRUST, created
February 9, 1994, general partner
By:_________________________________________________
Xxxxx X. Xxxxxx,
Independent Trustee
By:_________________________________________________
Xx X. Xxxxxx,
Family Trustee
By: XXXXXX AND XXXXX XXXXXX TRUST,
created August 24, 1989, general partner
By:_________________________________________________
Xx X. Xxxxxx,
Trustee
By:_________________________________________________
Xxxxx X. Xxxxxx,
Trustee
-36-
122
EXHIBIT A
(to SHAREHOLDERS'
AGREEMENT)
OPTION SHARES
NUMBER
SHAREHOLDERS OF SHARES
------------ ---------
Xx X. Xxxxxx and Xxxxx X. Xxxxxx 773.40
Xxxxx Limited Partnership 7061.01
-------
Total 7834.41
=======
123
EXHIBIT B
(to SHAREHOLDERS'
AGREEMENT)
TAX SHARING AND TAX BENEFIT
REIMBURSEMENT AGREEMENT
This AGREEMENT, made and entered into as of the ____ day of
_________________, 1997, by and between CENTEX CORPORATION, a Nevada corporation
("Centex"), and CAVCO INDUSTRIES, INC., an Arizona corporation ("Cavco").
W I T N E S S E T H:
WHEREAS, Centex files consolidated federal income tax returns
in accordance with the privilege granted by Sections 1501 and 1502 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the temporary and
final Treasury regulations promulgated thereunder (the "Regulations"), for and
on behalf of itself and other "includible corporations" within the meaning of
Section 1504 of the Code which are members of the affiliated group of which
Centex is the common parent (the "Group"); and
WHEREAS, it is deemed equitable that with respect to each
taxable period for which a consolidated return is filed by Centex which includes
Cavco, Cavco pay to Centex an amount equal to Cavco's Separate Return Tax
Liability hereinafter defined; and
WHEREAS, it is deemed equitable that with respect to each
taxable period for which a consolidated return is filed by Centex which includes
Cavco and in which the Group utilizes a net operating loss or credit of Cavco,
Centex shall, in the manner prescribed hereinafter, compensate Cavco therefor in
an amount equal to the income tax benefit obtained by Centex as a result of the
utilization by the Group of such net operating loss or credit of Cavco; and
WHEREAS, it is deemed equitable that in the event that Cavco
or its subsidiaries, if any, for any reason becomes disaffiliated from the Group
as a result of failing to meet the requirements for inclusion in the Group
prescribed by Section 1504 of the Code, the portion of the economic burdens and
benefits of tax payments, deficiencies and refunds of the Group which are
attributable to the period in which disaffiliation occurs and for prior
consolidated return periods in which Cavco or any such subsidiary was included
in the Group, are to be allocated to Centex and Cavco as hereinafter provided.
-1-
124
NOW, THEREFORE, the parties signatory hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following
additional definitions shall apply:
(a) "Cavco Group" shall mean Cavco and its Subsidiaries, if
any.
(b) "Subsidiary" of Centex or Cavco, as the context may
require, shall mean any corporation that is a member of the Group and that is
connected in an unbroken chain of stock ownership satisfying the requirements of
Section 1504(a) of the Code beginning with Centex or Cavco as the case may be.
2. Payment of Separate Return Tax Liability by Cavco to
Centex.
(a) With respect to each taxable period for which a
consolidated, combined or unitary tax return is filed by Centex which includes
Cavco, Cavco shall pay to Centex an amount equal to the Separate Return Tax
Liability of the Cavco Group, determined in accordance with Section 3 hereof,
such payment by Cavco, including installments of estimated tax payments, to be
made to Centex at least five (5) business days prior to the due dates thereof
(such due dates being determined as if the Cavco Group were required to file a
separate consolidated or unitary tax return reflecting its Separate Return Tax
Liability for the taxable period), whether or not the Group is obligated to pay
a tax liability for the applicable period. The amount and due dates of estimated
tax payments to be made by Cavco to Centex shall be determined by Centex, but
shall not be, in the aggregate, less than the Cavco Group's Separate Return Tax
Liability for the immediately preceding taxable period.
(b) The parties hereto acknowledge that any payment under this
Section 2 is the payment of a tax obligation by Cavco and shall be taken into
account in determining the earnings and profits of Cavco and Centex's basis in
Cavco's stock in the hands of Centex, subject to the applicable provisions of
Sections 1552 and 312(h) of the Code and Sections 1.312-10, 1.1552-1, 1.1502-32,
and 1.1502-33 of the Regulations.
3. Determination of Separate Return Tax Liability. For each
taxable period during which Cavco is a member of the Group, the Separate Return
Tax Liability of the Cavco Group shall mean the hypothetical federal, state or
local income tax liability (computed without regard to any consolidated credit,
capital loss or net operating loss deduction allocated under the Regulations
under Section 1502 of the Code to one or more members of the Cavco Group, to the
extent that (i) such credit or loss becomes allocable
-2-
125
as a carryover for the first taxable year of the Cavco Group beginning on or
after the date on which Cavco becomes disaffiliated from the Group or (ii) such
credit or loss has previously been taken into account in determining the tax
sharing obligations of any member or members of the Cavco Group for any prior
taxable period under this Agreement or any other tax sharing agreement or
arrangement previously in effect), determined as if the Cavco Group had filed a
separate consolidated, unitary or combined income tax return for the applicable
period and its income were taxable at the rates that would have been applicable
for such period. If the computation of the Separate Return Tax Liability of the
Cavco Group pursuant to this Section 3 for a taxable period does not result in
positive tax liability, then for purposes of Section 2 hereof the Separate
Return Tax Liability of the Cavco Group shall be deemed to be zero, and any net
operating loss of the Cavco Group for such period shall be taken into account
only as otherwise provided herein. The determination of the Separate Return Tax
Liability of the Cavco Group shall be made by Centex and such determination
shall be conclusive for purposes hereof.
4. Compensation for Use of Tax Attributes of Cavco. If the
Cavco Group is entitled to a tax credit or would incur a capital or net
operating loss during a taxable period if it filed a separate consolidated
return for such period, or would, if it filed a separate consolidated, combined
or unitary return for all periods covered by this Agreement computed as
described in section 3, be entitled to a credit or a capital or net operating
loss deduction with respect to capital losses, net operating losses or credits
carried forward or back to such period (exclusive of capital losses, net
operating losses or credits for which the Cavco Group has previously received
compensation for use of such items under this Agreement), and if it is
determined by Centex that such credit, capital loss, net operating loss or
deduction will be utilized by Centex in filing its consolidated, combined or
unitary income tax return for the current taxable period or for any previous
period and that such credit, capital loss, net operating loss or deduction will
provide a tax benefit in any such period, Centex shall credit against the
Separate Return Tax Liability owed by Cavco to Centex pursuant to this Agreement
for the current taxable period an amount equal to the net tax benefit which
Centex, in its sole judgement, determines the Group will obtain. Centex shall
apply such credit against the Separate Return Tax Liability of the Cavco Group
as provided above with respect to any taxable period as of the first installment
date for such year. Centex shall have the right to adjust, as of the last day of
succeeding quarters the amount credited pursuant to this Section 4 based upon
the determination of Centex that the amount credited in preceding quarters was
incorrect. To the extent that the amount creditable pursuant to the preceding
terms of this Section 4 exceed the creditable tax liability of Cavco
(hereinafter the " Excess Credit"), Centex shall pay to Cavco, in cash, at the
time the aforesaid credit would have been applied, an amount equal to the Excess
Credit.
-3-
126
5. Tax Liability of Cavco in the Event of Disaffiliation. In
the event that Cavco or another member of the Cavco Group becomes disaffiliated
from the Group for any reason, Cavco shall remain liable under this Agreement
for the tax liability of the Group for the taxable period during which
disaffiliation occurs and for prior taxable periods in which Cavco or the other
affected member, as the case may be, was a member of the Group and this
Agreement was effective. Cavco shall be required to pay Centex only those
amounts for the period of disaffiliation that are determined pursuant to
Sections 2, 3 and 4 hereof. Payment of such tax liability by Cavco shall be made
to Centex at least five (5) business days prior to the due date of the
applicable tax return. Moreover, should a tax controversy with the Internal
Revenue Service or any state or local taxing authority ultimately result in
assessment of a tax deficiency against the Group for years in which Cavco was
affiliated with such Group, Cavco shall remain liable for Cavco's portion of
such tax deficiency determined pursuant to Sections 2, 3 and 4 hereof, plus
interest and penalties as provided in Section 8, if any.
6. Payment of Tax Refunds to Cavco. If, after the
disaffiliation of Cavco from the Group, Centex receives from the Internal
Revenue Service or any state or local taxing authority any refund of tax (and
interest, if any) paid by the Group, any amount of which in the sole judgment of
Centex should be regarded as a refund of amounts paid by Cavco pursuant to
Section 2 or 4 hereof, such amount shall be paid by Centex to Cavco within sixty
(60) business days after receipt.
7. Indemnity. In the event Cavco is required to pay to the
Internal Revenue Service or any state or local taxing authority tax liability in
excess of its Separate Return Tax Liability determined pursuant to Section 3
hereof, Cavco shall be entitled to reimbursement within sixty (60) business days
of such payment by Centex. In the event Centex is required to pay to the
Internal Revenue Service or any state or local taxing authority additional taxes
due to the disallowance of all or part of any item utilized by Centex and for
which Cavco received credit against amounts due from Cavco hereunder as provided
in Section 4 hereof (or if Centex would have been so required to pay the
Internal Revenue Service or any state or local taxing authority but for other
adjustments), Cavco shall pay to Centex the amount of such additional tax paid
by Centex (or which Centex would have been required to pay but for other
adjustments); provided, however, the amount so paid by Cavco to Centex shall not
exceed the cumulative payments made by Centex to Cavco pursuant to Section 4
hereof with respect to such item (except as provided in Section 8 below).
8. Payment of Interest, Penalties and Expenses. Interest,
penalties and expenses incurred by Centex in connection with the amendment of
any consolidated,
-4-
127
combined or unitary tax return, and/or the examination of any consolidated,
combined or unitary return by the Internal Revenue Service or any state or local
taxing authority or subsequent administrative or judicial proceedings, shall be
borne equitably by those parties whose tax liability may be affected by such
amendment, examination or subsequent proceedings. No interest shall be charged
to Centex or Cavco in connection with any allocation under this Agreement,
however, unless interest is payable to the Internal Revenue Service or any state
or local taxing authority or to another member of the Group as a result of any
tax allocation.
9. Centex as Agent.
(a) Centex, as agent for the members of the Group, shall have
full authority to prepare and file the Group's consolidated, combined or unitary
tax return, to pay any tax liability shown thereon, and to represent the Group
in connection with the examination of any such return by the Internal Revenue
Service or any state or local taxing authority and in the resolution of disputes
regarding any consolidated, combined or unitary tax liability. Centex shall
consult in good faith with Cavco on all matters that are the subject of this
Agreement affecting Cavco.
(b) Cavco shall provide Centex with the data necessary for the
proper and timely filing of all federal, state and local tax returns and forms.
In the event Cavco fails to provide data in proper form and within sufficient
time to permit the timely filing of any such tax return, any penalties or
interest assessed against the Group by reason of a delay in filing such tax
return shall be payable by Cavco. If Cavco provides data in proper form and
within sufficient time to permit the timely filing of a particular tax return,
any penalties or interest assessed against the Group by reason of a delay in
filing such return shall not be payable by Cavco. Any and all such data shall be
confidential and may be disclosed by Centex to third parties only to the extent
Centex, in the exercise of its reasonable business judgment, determines such
disclosure is necessary or appropriate to comply with its obligations under
applicable federal, state or local taxing provisions.
(c) The agency power of Centex, as described in this section,
shall extend to all periods during which Cavco or any member of the Cavco Group
is a member of the Group, and, in the event of Cavco's disaffiliation, Centex
shall retain the sole power to make or change on behalf of Cavco any election or
other decision affecting tax liabilities for such periods that Cavco was
affiliated with the Group under the provisions of the Code providing for
elections.
-5-
128
10. State or Local Income or Excise Tax Returns. Centex shall
have the responsibility and authority to file in any state or local
consolidated, combined or unitary income, franchise and excise tax returns on
behalf of the Group and to allocate state or local income, franchise or excise
tax liabilities among the members of the Group in an equitable manner.
11. Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of Centex and Cavco and their respective successors
and assigns; provided, however, that neither this Agreement, nor any rights or
interest hereunder, shall be assignable by any such corporation without the
prior written consent of Centex.
12. Application of Agreement. This Agreement shall be
applicable to the first taxable period of the Group during which Cavco is a
member thereof, and to each taxable period thereafter, so long as a consolidated
federal income tax return is filed by Centex which includes Cavco.
13. Allocation Among Cavco and Its Included Subsidiaries.
Nothing herein shall be deemed to preclude or require any allocation of the
Separate Return Tax Liability of Cavco among or between Cavco and its
Subsidiaries, if any.
14. Modifications. This Agreement may be modified or amended
only pursuant to an instrument in writing executed by all the parties signatory
hereto.
15. Entire Agreement. This Agreement constitutes the entire
agreement among the parties relating to the allocation of the consolidated
federal income tax liability of the Group between or among the parties.
16. Applicable Law. This Agreement shall constitute a contract
governed and construed in accordance with the laws of the State of Texas.
17. Headings. The headings used in this Agreement are for
convenience only and shall not in any way affect the meaning or interpretation
of any provision hereof.
18. Copies. This Agreement may be executed in multiple
counterparts each of which shall be deemed an original, but all of which shall
together constitute one Agreement.
-6-
129
IN WITNESS WHEREOF, this Agreement has been executed and the
corporate seals affixed hereto as of the date first above written.
CENTEX CORPORATION
By:__________________________________________
CAVCO INDUSTRIES, INC.
By:__________________________________________
-7-
130
EXHIBIT E
(to AGREEMENT and
PLAN OF MERGER)
FORM OF OPINION
OF
XXXXXX XXXXXXX
The opinion of Xxxxxx Xxxxxxx to be delivered pursuant to
Section 7.2(d) of the Agreement and Plan of Merger, dated as of December 4, 1996
(the "Merger Agreement"), among CREC, the Holding Company, the Merger
Subsidiary, the Company and the Shareholder Parties shall be substantially to
the effect set forth below. Capitalized terms used herein without definition
shall have the respective meanings set forth in the Merger Agreement.
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Arizona and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as presently conducted.
2. To the knowledge of such counsel, the only Subsidiaries of
the Company are the corporations and limited liability companies identified in
Schedule 3.8(a) to the Merger Agreement.
3. Each Subsidiary of the Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as presently
conducted.
4. To the knowledge of such counsel, the Company is duly
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of its activities or the character of
the properties that it owns, leases or operates makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect.
5. To the knowledge of such counsel, each Subsidiary of the
Company is duly qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of its activities or
the character of the properties that it owns, leases or operates makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect.
-1-
131
6. The Company has all requisite corporate power and authority
to enter into and perform its obligations under the Merger Agreement and the
Shareholders' Agreement (collectively, the "Agreements") and to consummate the
transactions contemplated thereby. The execution and delivery by the Company of
the Agreements have been duly authorized by all necessary corporate action on
the part of the Company, and no other corporate proceedings or shareholder
actions on the part of or with respect to the Company are necessary to authorize
the Agreements, the performance by the Company of its obligations thereunder or
the consummation by the Company of the transactions contemplated thereby. Each
of the Agreements has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with the terms thereof.
7. Each Shareholder Party has all necessary power and
authority to enter into and perform its obligations under the Agreements and to
consummate the transactions contemplated thereby. In the case of any Shareholder
Party that is a partnership, the execution and delivery of the Agreements by
such Shareholder Party have been duly and validly authorized by all necessary
partnership action on the part of such Shareholder Party and all necessary
action on the part of its partners, and no other proceedings or actions on the
part of or with respect to such Shareholder Party or its partners are necessary
to authorize the Agreements, the performance by such Shareholder Party of its
obligations thereunder or the consummation by it of the transactions
contemplated thereby. Each of the Agreements has been duly executed and
delivered by the Shareholder Parties and constitutes a legal, valid and binding
obligation of each of them, enforceable against each of the Shareholder Parties
in accordance with the terms thereof.
8. The execution and delivery by the Company of the
Agreements, the performance by it of its obligations thereunder and the
consummation by it of the transactions contemplated thereby will not (i)
conflict with, or result in any violation or breach of, any provision of the
Charter or Bylaws of the Company or any of its Subsidiaries; (ii) conflict with,
result in any violation or breach of, constitute a default under, give rise to
any right of termination or acceleration (with or without notice or the lapse of
time or both) pursuant to, or result in being declared void, voidable or without
further effect, any term or provision of any material note, bond, mortgage,
indenture, lease, franchise, permit, license, Contract or other instrument or
document known to such counsel to which the Company or any of its Subsidiaries
is a party or by which their respective properties or assets are bound; (iii)
conflict with, or result in any violation of, (A) any Arizona State law,
statute, rule or regulation, (B) any federal law, statute, rule or regulation of
general application or (C) any other law, ordinance, statute, rule or regulation
of any
-2-
132
Governmental Authority known to such counsel, in each case that is applicable to
the Company or any of its Subsidiaries or their respective properties or assets;
(iv) conflict with, or result in any violation of, any order, writ, injunction,
judgment or decree of any court, arbitrator or Governmental Authority known to
such counsel to which the Company or any of its Subsidiaries or their respective
properties or assets are subject or (v) to the knowledge of such counsel, result
in the creation of, or impose on the Company or any of its Subsidiaries the
obligation to create, any Lien upon the properties or assets of the Company.
9. The execution and delivery by the Shareholder Parties of
the Agreements, the performance by them of their obligations thereunder and the
consummation by them of the transactions contemplated thereby will not (i) in
the case of any Shareholder Party that is a partnership, result in any violation
or breach of any provision of the partnership agreement of such Shareholder
Party or the Charter, Bylaws or other constitutive instruments of any of its
partners, (ii) conflict with, result in any violation or breach of, constitute a
default under, give rise to any right of termination or acceleration (with or
without notice or the lapse of time or both) pursuant to, or result in being
declared void, voidable or without further effect, any term or provision of any
material note, bond, mortgage, indenture, lease, franchise, permit, license,
Contract or other instrument or document known to such counsel to which any of
the Shareholder Parties is a party or by which its properties or assets are
bound, (iii) conflict with, or result in any violation of, any law, ordinance,
statute, rule or regulation of any Governmental Authority that is applicable to
any of the Shareholder Parties or their respective properties or assets; or (iv)
conflict with, or result in any violation of, any order, writ, injunction,
judgment or decree of any court, arbitrator or Governmental Authority known to
such counsel to which any of the Shareholder Parties or their respective
properties or assets are subject.
10. There is no requirement applicable to the Company to
obtain any Consent of, or to make or effect any declaration, filing or
registration with, any Governmental Authority for the valid execution and
delivery by the Company of the Agreements, the due performance by it of its
obligations thereunder or the consummation by it of the transactions
contemplated thereby, except for any Consent or filing that has been made or
obtained prior to the date hereof.
11. There is no requirement applicable to any of the
Shareholder Parties to obtain any Consent of, or to make or effect any
declaration, filing or registration with, any Governmental Authority for the
valid execution and delivery by the Shareholder Parties of the Agreements, the
due performance by them of their obligations thereunder or the lawful
consummation by them of the transactions contemplated thereby, except for any
-3-
133
Consent or filing that has been made or obtained prior to the date hereof.
12. Without limiting the generality of the opinions set forth
in paragraphs 10 and 11 above, neither the Arizona Control Share Acquisition
Statute nor the Arizona Business Combination Statute prohibits, restrains or
restricts any of the transactions contemplated by the Agreements. Such counsel
may set forth an explanation of its reasoning in arriving at the opinion set
forth in this paragraph 12.
13. As of the date hereof, the authorized capital stock of the
Company consists of 8,000,000 shares of Company Common Stock. To the knowledge
of such counsel, as of the date hereof, the outstanding capital stock of the
Company consists of 3,561,093 shares of Company Common Stock, and there are no
shares of Company Common Stock held in the treasury of the Company. All of the
issued and outstanding shares of capital stock of the Company have been duly
authorized and are validly issued, fully paid and nonassessable. None of the
issued and outstanding shares of capital stock of the Company have been issued
in violation of, or subject to, any preemptive rights or rights of subscription
arising by law or pursuant to the Charter or Bylaws of the Company or under any
Contract or other instrument known to such counsel to which the Company is a
party or by which it is bound.
14. To the knowledge of such counsel, except as set forth in
Schedule 3.7 to the Merger Agreement, there are no outstanding options,
warrants, calls, rights, convertible securities or other agreements or
commitments of any character pursuant to which the Company is obligated to issue
or sell any issued or unissued shares of its capital stock or other equity
securities or to purchase or redeem any shares of its capital stock or other
equity securities or make any other payments in respect thereof, and there are
no shares of its capital stock or other equity securities reserved for issuance
for any purpose.
15. All of the issued and outstanding shares of capital stock
of each Subsidiary of the Company have been duly authorized and are validly
issued, fully paid and nonassessable and, to the knowledge of such counsel, are
owned by the Company, directly or indirectly, free and clear of all
Encumbrances. None of the issued and outstanding shares of capital stock of any
Subsidiary of the Company have been issued in violation of, or subject to, any
preemptive rights or rights of subscription arising by law or pursuant to the
Charter or Bylaws of such Subsidiary or under any Contract or other instrument
known to such counsel to which the Company or such Subsidiary is a party or by
which either of them is bound.
16. To the knowledge of such counsel, there are no outstanding
options,
-4-
134
warrants, calls, rights, convertible securities or other agreements or
commitments of any character pursuant to which the Company or any of its
Subsidiaries is obligated to issue or sell any issued or unissued shares of
capital stock or other equity securities of any Subsidiary of the Company or to
purchase or redeem any shares of capital stock or other equity securities of any
Subsidiary of the Company or make any other payments in respect thereof, and
there are no shares of capital stock or other equity securities of any
Subsidiary of the Company reserved for issuance for any purpose.
17. Upon filing of the Merger Agreement (or a plan of merger
summarizing certain of the principal terms thereof) and the Articles of Merger
with the Arizona Commission pursuant to Section 1105 of the Arizona Act, the
Merger will become effective under the laws, rules and regulations of the State
of Arizona in accordance with the Merger Agreement, and the effect thereof will
be as set forth in Section 1106 of the Arizona Act. Such counsel may note in its
opinion that, within 60 days after such filing, a copy of the Articles of Merger
must be published, and within 90 days after such filing, an affidavit evidencing
such publication shall be filed with the Arizona Commission, pursuant to Section
1105 of the Arizona Act.
18. To the knowledge of such counsel, except as set forth in
Schedule 3.15 to the Merger Agreement, there is no action, suit, inquiry,
investigation or other proceeding pending or threatened against the Company or
any of its Subsidiaries, or to which any of their respective properties or
assets is subject, in any court or before any arbitrator or any foreign or
United States federal, state or local Governmental Authority which (i) could
reasonably be expected to have a Material Adverse Effect or (ii) could prevent,
impede or otherwise affect the transactions contemplated by the Agreements.
19. All descriptions in the Proxy Statement and Schedule 13E-3
of any statutes, rules or regulations applicable to the Company or any of its
Subsidiaries or any legal or governmental proceedings to which the Company or
any of its Subsidiaries is or is threatened to be made a party are accurate, and
fairly present, in all material respects the information required to be set
forth therein pursuant to the applicable requirements of the Exchange Act.
20. Such counsel have reviewed all Contracts, instruments or
documents referred to in the Proxy Statement and the Schedule 13E-3 to which the
Company or any of its Subsidiaries is a party or by which any of them is bound,
and the statements in the Proxy Statement and Schedule 13E-3 relating to such
Contracts, instruments or documents are accurate and fairly present in all
material respects the information required to be set forth therein pursuant to
the applicable requirements of the Exchange Act. Such counsel
-5-
135
shall also state that they do not know of any Contracts, instruments or
documents to which the Company or any of its Subsidiaries is a party or by which
any of them is bound that (i) are required to be described in the Proxy
Statement or the Schedule 13E-3 which are not so described or (ii) are required
to be filed as exhibits to the Schedule 13E-3 which have not be so filed.
Such counsel shall also state that they have participated in
the preparation of the Proxy Statement and the Schedule 13E-3, have participated
in conferences with representatives of the Company, CREC, the independent public
accountants for the Company and counsel for CREC, at which conferences the
contents of the Proxy Statement and the Schedule 13E-3 and related matters were
discussed and have advised the Company as to the requirements of the Exchange
Act applicable to (i) the solicitation of proxies from the holders of Company
Common Stock in connection with the approval and adoption of the Merger
Agreement, and (ii) the transactions that are the subject of the Schedule 13E-3.
On the basis of the information that such counsel has gained in the course of
the performance of the aforementioned services, considered in the light of their
understanding of the applicable law (including the requirements of Schedule 14A
and Rule 13e-3) and the experience such counsel has gained through their
practice under the Exchange Act, such counsel shall further state that it is
their opinion that the Proxy Statement and the Schedule 13E-3 (other than the
financial statements, schedules or other financial information included or
incorporated by reference therein, as to which such counsel need not express an
opinion), (i) at the time the Proxy Statement was mailed to the holders of
Company Common Stock (the "Time of Mailing") and (ii) at the date hereof,
complied or complies as to form with the applicable requirements of the Exchange
Act. Furthermore, although such counsel does not assume responsibility for the
accuracy, completeness or fairness of the statements contained in the Proxy
Statement or the Schedule 13E-3, such counsel shall state that nothing came to
their attention in the course of the performance of the aforementioned services
that leads such counsel to believe that the Proxy Statement or the Schedule
13E-3 (other than the financial statements, schedules or other financial
information included or incorporated by reference therein, as to which such
counsel need not comment), at (i) the Time of Mailing or (ii) at the date
hereof, contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading.
In rendering the opinions set forth above, such counsel shall
be entitled to state that said opinions are subject to the following
assumptions, qualifications, limitations and exceptions:
-6-
136
A. The opinions set forth above that relate to the
enforceability of the Agreements and the Employment Agreements are subject to
the effect of (i) bankruptcy, insolvency, reorganization, moratorium,
receivership, liquidation, fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and (ii) general principles of equity
(whether considered in a proceeding at law or in equity) and (iii) the
requirement that the parties to such agreements act in good faith in connection
with the performance of their obligations thereunder.
B. Insofar as the opinions set forth above relate to the
enforceability of the Agreements, such counsel have assumed that (i) CREC has
all requisite power and authority to enter into and perform its obligations
under the Agreements to which it is a party (the "Applicable Agreements"); (ii)
the execution and delivery by CREC of the Applicable Agreements, the performance
by it of its obligations thereunder and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action on the part of CREC; (iii) the Applicable Agreements
have been duly executed and delivered by CREC; (iv) the Applicable Agreements
constitute legal, valid, and binding obligations of CREC, enforceable against
CREC in accordance with the terms thereof; and (v) CREC shall not be in breach
in any material respect in the performance of its obligations under the
Agreements.
In addition, such counsel shall be permitted to state that
such counsel expresses no opinion as to matters governed by any law other than
the laws of the State of Arizona and the federal laws of the United States of
America of general application. Without limiting the generality of the
foregoing, to the extent that the Agreements expressly provide that they are to
be governed by the laws of the State of Texas, such counsel shall be entitled to
assume that the laws of the State of Texas are in all respects identical to the
laws of the State of Arizona.
Such counsel shall be permitted to rely on the opinions of
Messrs. Xxxxx X. Xxxxxxxx, Esq. and Xxxxxx Xxxxx, Esq. with respect to the
opinions set forth above to the extent heretofore agreed by the parties. Such
counsel shall state that it believes that such opinions are satisfactory in form
and that CREC is justified in relying on such opinions.
-7-
137
EXHIBIT F
(to AGREEMENT and
PLAN OF MERGER)
FORM OF OPINION
OF
XXXXXXX X. XXXXXX
The opinion of Xxxxxxx X. Xxxxxx, Vice President, General
Counsel and Secretary of CREC, to be delivered pursuant to Section 7.3(d) of the
Agreement and Plan of Merger, dated as of December 4, 1996, (the "Merger
Agreement"), among CREC, the Holding Company, the Merger Subsidiary, the Company
and the Shareholder Parties, shall be substantially to the effect set forth
below. Capitalized terms used herein without definition shall have the
respective meanings set forth in the Merger Agreement.
1. CREC is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Nevada and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as presently conducted.
2. CREC has all requisite corporate power and authority to
enter into and perform its obligations under the Merger Agreement and the
Shareholders' Agreement (collectively, the "Agreements"). The execution and
delivery by CREC of the Agreements, the performance by it of its obligations
thereunder and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary corporate action on the part of CREC,
and no other corporate proceedings or shareholder actions on the part of or with
respect to CREC are necessary to authorize the Agreements, the performance by
CREC of its obligations thereunder or the consummation by CREC of the
transactions contemplated thereby. Each of the Agreements has been duly executed
and delivered by CREC and constitutes a legal, valid and binding obligation of
CREC, enforceable against it in accordance with the terms thereof.
3. The execution and delivery by CREC of the Agreements, the
performance by it of its obligations thereunder and the consummation by it of
the transactions contemplated thereby will not (i) conflict with, or result in
any violation or breach of, any provision of the Charter or Bylaws of CREC, (ii)
conflict with, result in any violation or breach of, or constitute a default
under, any term or provision of any material note, bond, mortgage, indenture,
lease, franchise, permit, license, Contract or other instrument or document
known to such counsel to which CREC is a party or by which its
-1-
138
properties or assets are bound, (iii) conflict with, or result in a violation
of, any law, ordinance, statute, rule or regulation of any Governmental
Authority which is applicable to CREC or its properties or assets or (iv)
conflict with, or result in any violation of, any order, writ, injunction,
judgment or decree of any court, arbitrator or Governmental Authority known to
such counsel to which CREC or its properties or assets are subject.
4. There is no requirement applicable to CREC to obtain any
Consent of, or to make or effect any declaration, filing or registration with,
any Governmental Authority for the valid execution and delivery by CREC of the
Agreements, the due performance by it of its obligations thereunder or the
consummation by it of the transactions contemplated thereby, except for any
Consent or filing that has been made or obtained prior to the date hereof.
5. To the knowledge of such counsel, there is no action, suit,
inquiry, investigation or other proceeding pending or threatened against CREC,
or to which its properties or assets is subject, in any court or before any
arbitrator or any foreign or United States federal, state or local Governmental
Authority which seeks to enjoin or prevent the consummation of the transactions
contemplated by the Agreements.
In rendering the opinions set forth above, such counsel shall
be entitled to state that said opinions are subject to the following
assumptions, qualifications, limitations and exceptions:
A. The opinions set forth above that relate to the
enforceability of the Agreements are subject to the effect of (i) bankruptcy,
insolvency, reorganization, moratorium, receivership, liquidation, fraudulent
conveyance and similar laws relating to or affecting creditors' rights
generally, (ii) general principles of equity (whether considered in a proceeding
at law or in equity) and (iii) the requirement that the parties thereto act in
good faith in connection with the performance of their obligations thereunder.
B. Insofar as the opinions set forth above relate to the
enforceability of the Agreements, such counsel has assumed that (i) the Company
and the Shareholder Parties have all requisite power and authority to enter into
and perform their respective obligations under the Agreements; (ii) the
execution and delivery by the Company and the Shareholder Parties of the
Agreements, the performance by them of their respective obligations thereunder
and the consummation by them of the transactions contemplated thereby have been
duly and validly authorized by all necessary action on the part of the Company
and the Shareholder Parties; (iii) the Agreements have been duly executed and
delivered by the Company and the Shareholder Parties; (iv) the Agreements
constitute
-2-
139
legal, valid and binding obligations of the Company and the Shareholder Parties,
enforceable against the Company and the Shareholder Parties in accordance with
the terms thereof; and (v) the Company and the Shareholder Parties shall not be
in breach in any material respect in the performance of their obligations under
the Agreements.
In addition, such counsel shall be entitled to state that such
counsel expresses no opinion as to matters governed by any law other than the
laws of the States of Nevada and Texas and the federal laws of the United States
of America of general application. Without limiting the generality of the
foregoing, to the extent that the Agreements expressly provide that they are to
be governed by the laws of the State of Arizona, such counsel shall be entitled
to assume that the laws of the State of Arizona are in all respects identical to
the laws of the State of Texas.
-3-
