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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
DECEMBER 15, 1999
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NEWMARK HOMES CORP.
(Exact name of registrant as specified in its charter)
NEVADA 000-23677 76-0460831
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
1200 SOLDIERS FIELD DRIVE
SUGAR LAND, TEXAS 77479
(Address of principal executive offices)
(281) 243-0100
Registrant's telephone number, including area code:
N/A
Former name or former address, if changed since last report
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Item 1. Change in Control of Registrant.
On December 15, 1999, Technical Olympic USA, Inc. ("TUSA") purchased
9,200,000 shares of the Registrant's common stock, $.01 par value ("Common
Stock") for $86 million in accordance with the terms of a Stock Purchase
Agreement dated November 24, 1999 that is being filed herewith as an exhibit.
The shares sold in this transaction represent 80% of the Registrant's
outstanding Common Stock. TUSA purchased the shares from Pacific Realty Group,
Inc. ("PRG"), a Nevada corporation, which is a wholly owned subsidiary of
Pacific USA Holdings Corp., a Texas corporation and an indirect subsidiary of
Pacific Electric Wire & Cable, Ltd.
TUSA, a Delaware corporation, is a wholly owned subsidiary of
Technical Olympic (UK) Plc, an English company, which is the wholly owned
subsidiary of Technical Olympic S.A., a Greek company.
Item 5. Other Events.
The Registrant issued a press release on December 16, 1999 (filed
herewith as an exhibit) to announce the closing of the transaction described in
Item 1.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number Description
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2.1 Stock Purchase Agreement dated November 24, 1999 between
Pacific Realty Group, Inc., Pacific USA Holdings Corp.
and Technical Olympic USA, Inc.
99.1 Press release issued by the Registrant on December 16,
1999 announcing the sale of 80% of the shares of
outstanding common stock of the Registrant.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEWMARK HOMES CORP.
Date: December 22, 1999 By: /s/ Terry C. White
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Name: Terry C. White
Title: Senior Vice President/Chief
Financial Officer/Treasurer
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EXHIBIT INDEX
Exhibit
Number Description
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2.1 Stock Purchase Agreement dated November 24, 1999
between Pacific Realty Group, Inc., Pacific USA
Holdings Corp. and Technical Olympic USA, Inc.
99.1 Press release issued by the Registrant on December 16,
1999 announcing the sale of 80% of the shares of
outstanding common stock of the Registrant.
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Exhibit 2.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), is dated as of November 24,
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1999, between and among Pacific Realty Group, Inc., a Nevada corporation
("Stockholder"), Pacific USA Holdings Corp., a Texas corporation ("Pacific
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USA"), Technical Olympic USA, Inc., a Delaware corporation ("Buyer") which is
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indirectly owned by Technical Olympic S.A. ("T.O. Greece"), a Greek corporation
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which indirectly owns all the outstanding capital shares of Buyer.
WHEREAS, Stockholder is the owner of 9,200,000 of the outstanding shares
(the "Stockholder Shares") of common stock, par value $.01 per share ("Company
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Common Stock") of Newmark Homes Corp., a Nevada corporation (the "Company"),
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representing 80% of the issued and outstanding shares of Company Common Stock;
WHEREAS, subject to all the terms and conditions of this Agreement,
Stockholder has agreed to sell the Stockholder Shares to Buyer, and Buyer has
agreed to purchase the Stockholder Shares (the "Stock Purchase") in exchange for
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the consideration set forth in this Agreement such that, immediately following
the Closing, (i) Buyer shall hold 9,200,000 shares of Company Common Stock,
representing 80% of the issued and outstanding shares of Company Common Stock,
(ii) 2,300,000 shares of Company Common Stock shall remain outstanding and held
by other stockholders of the Company and (iii) there shall be 18,500,000
authorized and unissued shares of Company Common Stock and 3,000,000 authorized
and unissued shares of Company Preferred Stock (as hereinafter defined); and
WHEREAS, T.O. Greece as indirect parent of Buyer desires to induce
Stockholder and Pacific USA to enter into this Agreement by guaranteeing the
duties and obligations of Buyer hereunder; and
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Stock Purchase, and also to
prescribe various conditions to such transactions.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and for
other good and valuable consideration, intending to be legally bound herein,
Pacific USA, Stockholder and Buyer agree as follows:
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ARTICLE I
DEFINITIONS
As used in this Agreement:
"Affiliate", as applied to any person, shall mean any other person
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directly or indirectly controlling, controlled by, or under common control
with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through
the ownership of voting securities, by contract or otherwise.
"Affiliated Group" means any affiliated group within the meaning of
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Code 1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
"Agreement" is defined in the introductory paragraph of this
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Agreement.
"ASE" means the Athens Stock Exchange.
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"Business Day" means any day other than a day on which banks in the
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State of Texas are authorized to close or the national securities exchanges
in the United States are closed.
"Buyer" is defined in the introductory paragraph of this Agreement.
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"Buyer Disclosure Letter" is defined in the introductory paragraph of
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Article V.
"Capital Stock" means common stock, preferred stock, partnership
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interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof.
"Closing" and "Closing Date" are defined in Section 2.3.
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"Code" means the Internal Revenue Code of 1986, as amended (or any
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successor thereto).
"Companies" means the Company and each Subsidiary of the Company.
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"Company" is defined in the first recital of this Agreement.
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"Company Benefit Plans" means each of the following which is
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sponsored, maintained or contributed to by any of the Companies for the
benefit of the current or former employees, officers or directors of any of
the Companies, or has been so sponsored, maintained or contributed to
within six years prior to the Closing Date: (i) each "employee benefit
plan," as such term is defined in Section 3(3) of ERISA, (including, but
not limited to, employee benefit plans, such as foreign plans, which are
not subject to the provisions of ERISA), and (ii) each personnel policy,
stock option plan, collective bargaining agreement, bonus plan or
arrangement, incentive award plan or arrangement, vacation policy,
severance pay plan, policy, or agreement, deferred compensation agreement
or arrangement, executive compensation or supplemental income arrangement,
consulting agreement, employment agreement, and each other employee benefit
plan, agreement, arrangement, program, practice, or understanding which is
not described in clause (i) of this sentence.
"Company Common Stock" is defined in the first recital of this
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Agreement.
"Company Employees" is defined in Section 6.8(a).
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"Company Letters of Credit"is defined in Section 6.14.
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"Company Material Contracts" is defined in Section 4.5.
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"Company Permits" is defined in Section 4.l.
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"Company Preferred Stock" is defined in Section 4.2.
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"Company Reports" is defined in Section 4.6.
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"Confidentiality Agreement" is defined in Section 8.5.
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"D&O Insurance" is defined in Section 6.11(c).
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"Deferred Intercompany Transaction" has the meaning set forth in
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Treasury Regulation 1.1502-13 in effect before July 12, 1995.
"Environmental Laws" is defined in Section 4.13.
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"Environmental Matters" is defined in Section 4.13.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended (or any successor thereto).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Financial Advisor" means Laidlaw Global Securities, Inc.
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"GAAP" is defined in Section 4.6.
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"Governmental Entity" is defined in Section 3.3.
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"Guaranty" is defined in Section 6.14.
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"Hazardous Materials" is defined in Section 4.13.
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"Intercompany Transaction" has the meaning set forth in Treasury
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Regulation 1.1502-13 in effect on or after July 12, 1995.
"IRS" is defined in Section 4.10(b).
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"Known" or "Knowledge", when used in reference to a statement
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regarding the existence or absence of facts in this Agreement, is intended
by the parties to mean that the only information to be attributed to such
person is information actually known to (a) the person in the case of an
individual, (b) in the case of a corporation, an executive officer or
director of the corporation, or (c) in the case of an entity other than a
corporation, an individual holding a position similar to that of an
executive officer or director of a corporation. In the case of Stockholder,
it is agreed that Stockholder has been put on reasonable notice to duly
inquire of the executive officers and directors of the Company as to the
accuracy of the representations and warranties contained in Article IV
relating to the Company.
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"Lien" or "Liens" means all liens (including judgment and mechanics'
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liens, regardless of whether liquidated), mortgages, assessments, security
interests, easements, claims, pledges, trusts (constructive or otherwise),
deeds of trust, option or other charges, encumbrances, restrictions or
other agreements or instruments having the same economic effect as any of
the foregoing.
"Material Adverse Effect" means, unless otherwise indicated, with
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respect to any person, a material adverse effect on the business, assets,
condition (financial or otherwise), results of operations or prospects of
such person and its subsidiaries, taken as a whole, or on the ability of
such person to consummate the transactions contemplated hereby.
"Order" is defined in Section 7.1(c).
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"Pacific Disclosure Letter" is defined in the introductory paragraph
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of Article III.
"Pacific USA" is defined in the introductory paragraph of this
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Agreement.
"Person" or "person" shall include individuals, corporations,
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partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act).
"Property Taxes" means any federal, state or local ad valorem, real
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property, personal property, sales, use, transfer, registration, value
added, intangibles, documentary, or other Tax related to the ownership of
real or personal property, including any interest, penalty, or addition
thereto, whether disputed or not, and will include any transferred
liability in respect of any and all of the above.
"Purchase Price" is defined in Section 2.2.
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"Regulatory Filings" is defined in Section 3.3.
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"Releasee" is defined in Section 9.2.
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"SEC" means the United States Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
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"Shares" is defined in the first recital of this Agreement.
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"Stockholder" is defined in the introductory paragraph of this
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Agreement.
"Stock Purchase" is defined in the second recita of this Agreement.
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"Stockholder Shares" is defined in the second recital of this
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Agreement.
"Subsidiary" or "Subsidiaries" means, with respect to any other
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person, any corporation, limited liability company, partnership, joint
venture or other legal entity of which such person (either alone or through
or together with any other subsidiary), owns, directly or indirectly, stock
or other equity interests the holders of which are generally entitled to
more than 50% of the vote for the election of the board of directors or
other governing body of such corporation or other legal entity. In
addition, for purposes of this Agreement, whenever the terms "Subsidiary"
or "Subsidiaries" are used with reference to the Company, such terms shall
also include Twin Acres Partnership, a general partnership organized under
the laws of Florida.
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"Tax" or "Taxes" means any federal, state, local, or foreign income,
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gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, intangibles, documentary, or
other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, and will include any transferee
liability in respect of any and all of the above.
"Tax Authority" includes the IRS and any state, local, foreign or
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other governmental authority (domestic or foreign) responsible for the
administration of any Taxes.
"Tax Indemnity Agreement" is defined in Section 6.13.
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"Tax Return" or "Tax Returns" means any return, declaration, report,
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claim for refund, or information return or statement (including any
schedule or attachment thereto) and any amendment thereof required to be
filed with, or where none is required to be filed with a Tax Authority, the
statement or other document issued by, a Tax Authority in connection with
any Tax.
"Third Party" is defined in Section 6.10.
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"T.O. Greece" is defined in the Introductory paragraph to this
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Agreement.
"Treasury Regulation" or "Treasury Regulations" means any regulation
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promulgated under the Code.
ARTICLE II
STOCK PURCHASE
2.1 Sale and Delivery. Stockholder agrees to sell and deliver to
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Buyer, and Buyer agrees to purchase and accept from Stockholder, free and clear
of all Liens, on the terms and subject to the conditions set forth in this
Agreement, and for the purchase price described in Section 2.2, good and
marketable title to the Stockholder Shares.
2.2 Purchase Price. The purchase price (the "Purchase Price") for
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the Stockholder Shares shall be U.S.$86,000,000 in cash (representing $9.34783
per share) to be delivered to Stockholder at the Closing by wire transfer to an
account designated in writing by Stockholder (the "Closing Payment"). All
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amounts deposited in escrow ("Escrow Funds") pursuant to that certain escrow
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agreement dated October 18, 1999 between Stockholder, Pacific USA, T.O. Greece,
on behalf of and in the name of an entity to be designated by T.O. Greece by
notice to all parties to the Escrow Agreement, and Chase Bank of Texas, National
Association, shall be delivered to T.O. Greece at the Closing by wire transfer
to such account as designated in writing by T.O. Greece.
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2.3 Closing. Subject to the satisfaction or waiver of the conditions
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to closing set forth in Article VII of this Agreement, the purchase and sale of
the Stockholder Shares (the "Closing") shall occur upon the earlier of (a)
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December 15, 1999 or (b) twenty (20) days following the approval by ASE of the
information memorandum prepared by T.O. Greece in connection with the share
capital increase resolved by the T.O. Greece Extraordinary General Meeting of
Shareholders dated October 21, 1999, as it may be amended or supplemented, and
the commencement of the related T.O. Greece share capital increase, at the
offices of Thompson Knight Brown Parker & Leahy L.L.P., 1200 Smith, Suite
3600, Houston, Texas 77002 , or at such other time or place as Buyer and
Stockholder shall mutually agree, (such date shall be referred to herein
as the "Closing Date"). At the Closing:
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(a) Stockholder shall deliver, or cause to be delivered, to Buyer, against
payment by Buyer to Stockholder of the Closing Payment:
(i) a certificate or certificates representing the Stockholder Shares,
duly endorsed for transfer, or accompanied by duly executed assignments
separate from the certificate or other documentation reasonably requested
to transfer the Stockholder Shares in the stock records of the Company,
transferring to Buyer full and exclusive ownership of such shares, free and
clear of all Liens;
(ii) the agreements specified in Section 7.2(g) executed by all
parties thereto; and
(iii) all other documents, certificates and other instruments required
to be delivered, or caused to be delivered, by Stockholder pursuant hereto.
(b) Buyer shall deliver, or cause to be delivered, to Stockholder,
against delivery of the certificate or certificates representing the Stockholder
Shares (properly endorsed for transfer or accompanied by proper assignments):
(i) the Closing Payment; and
(ii) all of the documents, certificates and other instruments required
to be delivered, or caused to be delivered, by Buyer pursuant hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PACIFIC USA AND STOCKHOLDER
Except as set forth in the disclosure letter delivered by or on behalf of
Stockholder and Pacific USA to Buyer at or prior to the execution hereof that is
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Agreement (the "Pacific Disclosure Letter"), Pacific USA and
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Stockholder, jointly and severally, represent and warrant to Buyer as follows:
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3.1 Ownership of Shares Stockholder owns of record and beneficially the
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Stockholder Shares and, except as disclosed in Schedule 3.1 of the Pacific
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Disclosure Letter, such Stockholder Shares are free and clear of all Liens. The
Stockholder Shares are duly registered in the name of Stockholder on the stock
register records of the Company. As of the Closing, Stockholder will own all of
the Stockholder Shares, free and clear of any Liens, with any Liens listed on
Schedule 3.1 of the Pacific Disclosure Letter being removed at or before
Closing. Assuming Buyer has the requisite power and authority to be the lawful
owner of the Stockholder Shares, upon delivery to Buyer at the Closing of
certificates representing the Stockholder Shares, duly endorsed by Stockholder
for transfer to Buyer, and upon Stockholder's receipt of the Purchase Price,
Buyer will own the Stockholder Shares, free and clear of any Liens, other than
those arising from agreements entered into by Buyer or its Affiliates or under
Greek law. Immediately following the Closing, the Stockholder Shares will
represent 80% of the issued and outstanding shares of Company Common Stock.
Other than this Agreement, the Stockholder Shares are not subject to any voting
trust agreement or other agreement, arrangement or understanding, including any
such agreement, arrangement or understanding restricting or otherwise relating
to the voting, dividend rights or disposition of the Stockholder Shares.
3.2 Authorization, Validity, and Effect of Agreements. Each of Pacific USA
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and Stockholder is acorporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated herein to be executed and
delivered by it and to consummate the transactions contemplated hereby. The
consummation by each of Pacific USA and Stockholder of the transactions
contemplated herein has been duly authorized by all requisite corporate action
of Pacific USA and Stockholder. This Agreement has been duly executed and
delivered by Pacific USA and Stockholder and constitutes, and all agreements and
documents contemplated herein to be executed by Pacific USA and Stockholder
(when executed and delivered pursuant hereto for value received) will
constitute, the valid and legally binding obligations of Pacific USA and
Stockholder, as applicable, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
3.3 No Violations. Except as set forth in Schedule 3.3 of the Pacific
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Disclosure Letter, neither the execution and delivery by Stockholder or Pacific
USA of this Agreement nor the consummation of the transactions contemplated
herein in accordance with the terms hereof will: (i) conflict with or result in
a breach of any provisions of the articles of incorporation or by-laws (or other
similar constituent documents with respect to any firm other than a corporation)
of Stockholder, Pacific USA or any Affiliate thereof, as applicable; (ii)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the triggering of any payments or obligations under, or result in the
creation of any Lien upon the Stockholder Shares under any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which Stockholder, Pacific USA, the Company or any Company
Subsidiary is a party or by which any of their respective properties or assets
are bound or (iii) violate any judgment, order or decree, or statute, law,
ordinance, rule or regulation applicable to Stockholder, Pacific USA, the
Company or any Company Subsidiary or their respective properties or assets,
other than, in the case of clauses (ii) and (iii) above, any such items that,
individually or in the aggregate, would not have a Material Adverse Effect on
Stockholder, Pacific USA or the Company. Except as set forth in Schedule 3.3 of
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the Pacific Disclosure Letter, no consent, approval or authorization of, or
declaration, filing or registration with, any court or governmental,
administrative or regulatory authority or agency, domestic or foreign (each, a
"Governmental Entity") is required to be made by or with respect to Stockholder,
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Pacific USA, the Company or any Company Subsidiary in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, or conduct by the Company of its business
following the Closing as conducted on the date hereof other than those that may
be required solely by reason of Buyer's participation in the transactions
contemplated hereby.
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3.4 No Brokers. Except for the engagement of the Financial Advisor, no
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broker, finder or similar agent has been employed by or on behalf of
Stockholder, Pacific USA or any of their Affiliates in connection with this
Agreement or the transactions contem-plated herein. Except for the engagement of
the Financial Advisor (whose fees will be paid by Stockholder), neither
Stockholder, Pacific USA nor any of their Affiliates has entered into any
agreement or understanding of any kind with any person or entity which would
obligate Buyer or the Companies to pay any brokerage commission, finder's fee or
any similar compensation in connection with this Agreement or the transactions
contemplated herein. Pacific USA has paid in full all amounts due (through the
date of this Agreement) under its engagement letter, as amended, with BT Alex.
Brown (or its successor in interest) relating to the Company, and will pay all
amounts due after the date of this Agreement when scheduled to become due.
3.5 Employee Benefit Plan Matters. With respect to any employee benefit
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plan, within the meaning of Section 3(3) of ERISA, which is sponsored,
maintained, or contributed to, or has been sponsored, maintained, or contributed
to within six years prior to the Closing Date, by Pacific USA, Stockholder, or
any corporation, trade, business, or entity under common control with Pacific
USA or Stockholder, within the meaning of Section 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA, (A) no withdrawal liability, within the meaning
of Section 4201 of ERISA, has been incurred, which withdrawal liability has not
been satisfied, (B) no liability to the Pension Benefit Guaranty Corporation has
been incurred by any such entity, which liability has not been satisfied, (C) no
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code has been incurred, and (D) all
contributions (including installments) to such plan required by Section 302 of
ERISA and Section 412 of the Code have been timely made.
3.6 Access to Information. During the course of the negotiation of this
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Agreement, Pacific USA and Stockholder have reviewed or have been afforded the
opportunity to review all information required to be provided to it by Buyer and
have had the opportunity to ask questions of and receive answers to their
satisfaction from representatives of Buyer concerning Buyer and to obtain
additional information reasonably requested by Pacific USA or Stockholder. The
foregoing access or review shall not be deemed to affect the representations and
warranties and indemnities made by Buyer hereunder. Notwithstanding any "due
diligence" investigations made by Pacific USA or Stockholder, no information
shall be deemed to have been disclosed for purposes of the representations and
warranties made herein unless contained in the Buyer Disclosure Letter.
ARTICLE IVIV
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
AND PACIFIC USA AS TO THE COMPANY
Except as set forth in the Pacific Disclosure Letter, Stockholder and
Pacific USA, jointly and severally, represent and warrant to Buyer as follows:
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4.1 Existence; Good Standing; Corporate Authority; Compliance with Law. The
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Company is a corporation duly incorporated, validly existing and in good
standing under the laws of Nevada. The Company is duly licensed or qualified to
do business as a foreign corporation and is in good standing under the laws of
any other state of the United States in which the character of the properties or
assets owned or leased by it therein or in which the transaction of its business
makes such qualification necessary, except where the failure to be so qualified
or to be in good standing would not have a Material Adverse Effect on the
Company. The Company has all requisite corporate power and authority to own,
operate and lease its properties and assets and carry on its business as now
conducted. Each of the Company's Subsidiaries is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation or
organization, has the corporate, limited liability company or partnership power
and authority to own its properties and assets and to carry on its business as
it is now being conducted, and is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its properties and
assets or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good standing
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. Neither the Company nor any of its Subsidiaries is in violation of
any order or decree of any Governmental Entity, any law, ordinance, governmental
rule or regulation to which the Company or any of its Subsidiaries or any of
their respective properties or assets is subject or any non-governmental
restriction as to property or asset use, except where such violation,
individually or in the aggregate, does not and would not reasonably be expected
to have a Material Adverse Effect on the Company. The Company and its
Subsidiaries have obtained all licenses, permits, easements, variances,
exemptions, consents, certificates, orders, approvals and other authorizations
(collectively, the "Company Permits") and have taken all actions required by
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applicable law or regulations of any Governmental Entity in connection with
their business as now conducted (or to the extent such actions are currently
required, in connection with the business reasonably anticipated by the Company
to be conducted over the next six months), except where the failure to obtain
any such Company Permit or to take any such action, individually or in the
aggregate, does not and would not reasonably be expected to have a Material
Adverse Effect upon the Company. The copies of the Company's articles of
incorporation and by-laws previously delivered to or made available to Buyer are
true and correct. The copies of the articles of incorporation and by-laws, or
other organizational documents, of each Company Subsidiary previously delivered
or made available to Buyer are true and correct.
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4.2 Capitalization. The authorized Capital Stock of the Company consists of
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30,000,000 shares of Company Common Stock, and 3,000,000 shares of preferred
stock, par value $.01 per share (the "Company Preferred Stock"). As of June 30,
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1999, there were 11,500,000 shares of Company Common Stock issued and
outstanding and no shares of Company Preferred Stock issued and outstanding.
Since June 30, 1999, no additional shares of Capital Stock of the Company have
been issued. Neither the Company nor any Company Subsidiary has any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with its stockholders on any matter and, except as set
forth in Schedule 4.2 of the Pacific Disclosure Letter, there are no equity
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equivalent interests in the ownership or earnings of the Company or any of its
Subsidiaries. All such issued and outstanding shares of Company Common Stock are
duly authorized, validly issued, fully paid and nonassessable, and none of such
shares of Capital Stock has been issued in violation of or is subject to any
purchase option, call, right of first refusal, preemptive, subscription or
similar right under any provision of applicable law, the articles of
incorporation of the Company, or any contract, agreement or instrument to which
the Company is subject, bound by or a party thereto or otherwise. Schedule 4.2
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of the Pacific Disclosure Letter sets forth a true and complete list of all
outstanding rights to purchase shares of Company Common Stock or shares of
Capital Stock of any Company Subsidiary, the name of each holder thereof, the
number of shares of Company Common Stock or shares of Capital Stock of any
Company Subsidiary purchasable thereunder and the per share exercise price of
each right. Except as set forth on Schedule 4.2 of the Pacific Disclosure
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Letter, there are no options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate the
Company or any of its Subsidiaries to issue, transfer or sell any shares of
Capital Stock of the Company or any of its Subsidiaries or any securities
exercisable or exchangeable for, or convertible into, such Capital Stock. There
are no obligations, contingent or otherwise, of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or any Capital Stock or other equity interest in any of its
Subsidiaries or to make any investment (in the form of a loan, capital
contribution or otherwise) in the Company or any of its Subsidiaries.
4.3 Subsidiaries. Schedule 4.3 of the Pacific Disclosure Letter sets forth
------------ ------------
for each Company Subsidiary (i) that is a corporation, the amount of its
authorized Capital Stock, the amount of its outstanding Capital Stock and the
record and beneficial owners of its outstanding Capital Stock and (ii) that is a
partnership, limited liability company or joint venture, the names and interests
of the partners or members thereof. Except as set forth in Schedule 4.3 of the
------------
Pacific Disclosure Letter, the Company owns directly or indirectly each of the
outstanding shares of Capital Stock of each of its Subsidiaries free and clear
of all Liens. Each of the outstanding shares of Capital Stock or partnership,
limited liability company or joint venture interests of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and none of such Capital Stock has been issued in violation of or is subject to
any purchase option, call, right of first refusal, preemptive, subscription or
similar right under any provision of applicable law, the articles of
incorporation or comparable governing instruments of any Company Subsidiary, or
any contract, agreement or instrument which the Company or any Company
Subsidiary is subject to, bound by or a party thereto or otherwise.
4.4 Other Interests. Except for interests in its Subsidiaries and the
----------------
interests set forth in Schedule 4.4 of the Pacific Disclosure Letter, neither
------------
the Company nor any of its Subsidiaries owns directly or indirectly any interest
or investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity.
4.5 Company Material Contracts; No Violation. Except as set forth in
--------------------------------------------
Schedule 4.5 of the Pacific Disclosure Letter or as filed as an exhibit to the
- ------------
Company Reports or as entered into in the ordinary course of business since the
date of this Agreement, neither the Company nor any Company Subsidiary is a
party to or bound by any:
(i) employment agreement or employment contract that has an aggregate
future liability in excess of $50,000 and is not terminable by the Company
or a Company Subsidiary by notice of not more than 60 days for a cost of
less than $50,000;
(ii) employee collective bargaining agreement or other contract with
any labor union;
(iii) covenant of the Company or a Company Subsidiary not to compete
(other than pursuant to any radius restriction contained in any lease,
reciprocal easement or develop-ment, construction, operating or similar
agreement) or other covenant of the Company or a Company Subsidiary
restrict-ing the development, manufacture, marketing or distri-bution of
the products and services of the Company or any Company Subsidiary that,
individually or in the aggregate, materially impairs the operation of the
business of the Company or any such Subsidiary as presently conducted;
10
<PAGE> 11
(iv) agreement, contract or other arrangement with (A) Stockholder or
any Affiliate of Stockholder (other than the Company or a Company
Subsidiary) or (B) any current or former officer, director or employee of
the Company, a Company Subsidiary, Stockholder or any Affiliate of
Stockholder (other than employment agreements covered by clause (i) above);
(v) lease, sublease or similar agreement with any person (other than
the Company or a Company Subsidiary) under which the Company or a Company
Subsidiary is a lessor or sublessor of, or makes available for use to any
person (other than the Company or a Company Subsidiary), (A) any Company
property or (B) any portion of any premises otherwise occupied by the
Company or a Company Subsidiary (except in each case leases or subleases
entered into in the ordinary course of business);
(vi) lease or similar agreement with any person (other than the
Company or a Company Subsidiary) under which (A) the Company or a Company
Subsidiary is lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by any person (except
personal property leases and installment and conditional sales agreements
having a value per item or aggregate payments of less than $50,000) (B) the
Company or a Company Subsidiary is a lessor or sub-lessor of, or makes
available for use by any person, any tangi-ble personal property owned or
leased by the Company or a Company Subsidiary, in any such case which has
an aggregate future liability or receivable, as the case may be, in excess
of $50,000 and is not terminable by the Company or a Company Subsidiary by
notice of not more than 60 days for a cost of less than $50,000;
(vii) (A) continuing contract for the future pur-chase of materials,
supplies or equipment (other than purchase contracts and orders for
inventory in the ordinary course of business consistent with past
practice), (B) management, service, consulting, financial advisory or other
similar type of contract or (C) advertising agreement or arrangement, in
any such case which has an aggregate future liability to any person (other
than the Company or a Company Subsidiary), in the case of either (A), (B)
or (C) in excess of $50,000 and is not terminable by the Company or a
Company Subsidiary by notice of not more than 60 days for a cost of less
than $50,000;
(viii) license, option or other agreement relating in whole or in part
to the intellectual property set forth in Schedule 4.17 of the Pacific
Disclosure Letter;
(ix) agreement, contract or other instrument under which the Company
or a Company Subsidiary has borrowed any money from, or issued any note,
bond, debenture or other evidence of indebtedness or reimbursement
obligation to, any person (other than the Company or a Company Subsidiary)
or any other note, bond, debenture or other evidence of indebtedness issued
to any person (other than the Company or a Company Subsidiary) in any such
case which, individually, is in excess of $50,000;
11
<PAGE> 12
(x) agreement, contract or other instrument (including so-called
take-or-pay or keepwell agree-ments) under which (A) any person (including
the Company or a Company Subsidiary) has directly or indirectly guaranteed
indebted-ness, liabilities or obligations of the Company or a Company
Subsidiary or (B) the Company or a Company Subsidiary has directly or
indirectly guaranteed or directly assumed indebtedness, liabilities or
obligations of any person (in each case other than endorsements for the
purpose of collection in the ordinary course of business), in any such case
which, individually, is in excess of $50,000;
(xi) agreement, contract or other instrument under which the Company
or a Company Subsidiary has, directly or indirectly, made any advance,
loan, extension of credit or capital contribution to, or other investment
in, any person (other than the Company, a Company Subsidiary or a person
other than a "Controlled Homeowner Association" or "Community Development
District - Florida" scheduled in Schedule 4.4 of the Pacific Disclosure
Letter), in any such case which, individually, is in excess of $50,000;
(xii) loan agreements or other instruments which contemplate the
granting of a lien or other encumbrance upon any Company property, which
lien or other encumbrance (A) is not described in Section 4.16 or 4.19 or
in the relevant Schedules of the Pacific Disclosure Letter related thereto,
(B) secures any indebtedness for borrowed money in excess of $50,000, (C)
secures any obligation in excess of $50,000 to pay the deferred purchase
price of stock or assets acquired by the Company or a Company Subsidiary or
(D) secures any obligation of, or is held by, Pacific USA or any Affiliate
(other than the Company or any Company Subsidiary);
(xiii) agreement or instrument providing for indemnification of any
person with respect to liabilities relating to any current or former
business of the Company, a Company Subsidiary or any predecessor person;
(xiv) power of attorney (other than in the ordinary course of business);
(xv) tax sharing or tax allocation agreement; or
(xvi) other agreement, contract, lease, license, commitment or
instrument (which is not listed on Schedules 4.10(a), 4.14, 4.16, or 4.18,
---------
of the Pacific Disclosure Letter) to which the Company or any Company
Subsidiary is a party or by or to which it or any of its assets or business
is bound or subject which has an aggregate future liability to any person
(other than the Company or a Company Subsidiary) in excess of $50,000 and
is not terminable by the Company or a Company Subsidiary by notice of not
more than 60 days.
Except as set forth in Schedule 4.5 of the Pacific Disclosure Letter, (I) all
------------
agreements, contracts, leases, licenses, commitments or instruments of the
Company or any Company Subsidiary listed in the Schedules to the Pacific
Disclosure Letter (collectively, the "Company Material Contracts") are valid,
---------------------------
binding and in full force and effect and are enforceable by the Company or the
relevant Company Subsidiary in accordance with their terms, (II) Stockholder,
the Company and the Company Subsidiaries have performed all obligations required
to be performed by them to date under the Contracts and they are not (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any respect thereunder except for any breaches or defaults which would not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
and (III) to the knowledge of Stockholder, no other party to any of the
Contracts is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any respect thereunder.
12
<PAGE> 13
4.6 SEC Documents. Stockholder has delivered or made available to Buyer
--------------
each registration statement, report, proxy statement or information statement
filed by the Company since March 31, 1998, each in the form (including exhibits
and any amendments thereto) filed with the SEC (collectively, the "Company
-------
Reports"). As of their respective dates, the Company Reports (i) were prepared
- -------
in all material respects in accordance with the applicable requirements of the
Securities Act or the Exchange Act, as applicable, and the respective rules and
regulations thereunder and (ii) did not (or if amended or superseded by a
subsequent filing prior to the date of this Agreement, then on the date of such
filing did not) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. None of the Company's Subsidiaries is required to file any
forms, reports or other documents with the SEC. Each of the consolidated balance
sheets of the Company and its Subsidiaries included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
fairly presents the consolidated financial position of Company and its
Subsidiaries as of its date and each of the consolidated statements of income,
retained earnings and cash flows of the Company and its Subsidiaries included in
or incorporated by reference into the Company Reports (including any related
notes and schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of the Company and its Subsidiaries
for the periods set forth therein (subject to, in the case of unaudited
statements, normal year-end audit adjustments which would not be material in
amount or effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved ("GAAP"), except as
----
may be noted therein. Except as and to the extent set forth on the consolidated
balance sheets of the Company and its Subsidiaries at December 31, 1998,
including all notes thereto, or as set forth in the Company Reports, neither the
Company nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise), except liabilities
arising in the ordinary course of business since such date which would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
The Company is in full compliance with Section 13(b)(2) of the Exchange Act.
13
<PAGE> 14
4.7 Compliance, Permits, Litigation.
---------------------------------
(a) Except as set forth in Schedule 4.7(c) of the Pacific Disclosure
---------------
Letter, as of the date of this Agreement neither the Company nor any Company
Subsidiary is a party or subject to or in default under any judgment, order,
injunction or decree of any Governmental Entity or arbitration tribunal
applicable to it or any of its respective properties, assets, operations or
business, except for any matter which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(b) The Company and its Subsidiaries are in compliance with the terms of
the Company Permits, except where the failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
No Company Permit will be subject to suspension, modification, revocation or
nonrenewal as a result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(c) Schedule 4.7(c) of the Pacific Disclosure Letter sets forth a list and
---------------
description as of the date of this Agreement of all pending lawsuits or claims,
with respect to which Stockholder, the Company or any Company Subsidiary has
been contacted in writing by counsel for the plaintiff or claimant, against the
Company or any Company Subsidiary or any of their respective properties, assets,
operations or businesses and which (i) relate to or involve more than $50,000,
(ii) relate to the transactions contemplated by this Agreement or (iii) seek any
material injunctive relief. Except as set forth in Schedule 4.7(c) of the
----------------
Pacific Disclosure Letter, as of the date of this Agreement there is no lawsuit
or claim by the Company or a Company Subsidiary relating to or involving more
than $50,000 pending against any other person. Except as set forth in Schedule
--------
4.7(c) of the Pacific Disclosure Letter, to the Knowledge of Stockholder, as of
- ------
the date of this Agreement there is no pending or, to the Knowledge of
Stockholder, threatened investigation of or affecting the Company or a Company
Subsidiary by any Governmental Entity. Except as disclosed in the Company
Reports filed with the SEC prior to the date of this Agreement, there are no
actions, suits or proceedings pending or, to the Knowledge of Stockholder,
threatened against the Company or any of its Subsidiaries, at law or in equity,
or before or by any Governmental Entity, that, individually or in the aggregate,
would have a Material Adverse Effect on the Company.
14
<PAGE> 15
4.8 Absence of Certain Changes. Except as disclosed in the Company Reports
--------------------------
filed with the SEC prior to the date of this Agreement or as disclosed in
Schedule 4.8 of the Pacific Disclosure Letter, since December 31, 1998, the
- ------------
Company and each Subsidiary has conducted its business only in the ordinary
course of such business consistent with past practice and there has not been (i)
any event or events which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Company, (ii) any declaration,
setting aside or payment of any dividend or other distribution with respect to
the Capital Stock of the Company or any of its Subsidiaries or any redemption or
repurchase of any shares of such Capital Stock, (iii) any material change in the
accounting principles, practices or methods of the Company or any of its
Subsidiaries, (iv) any increase in the salaries or other compensation payable to
any officer, director or employee of the Company or any of its Subsidiaries
(except for normal increases in the ordinary course of business consistent with
past practice) or any increase in, or addition to, other benefits to which such
officer, director or employee may be entitled (except as required by the terms
of plans as in effect on the date of this Agreement and which are listed on
Schedule 4.8 of the Pacific Disclosure Letter or as required by law), (v) any
- ------------
incurrence by the Company or any of its Subsidiaries of indebtedness for
borrowed money (except in the ordinary course of business consistent with past
practice), (vi) any material adverse change or threat of a material adverse
change in the Company's or any of its Subsidiaries' relations with, or any loss
or threat of loss of, any of the Company's or its Subsidiaries' important
suppliers or customers, (vii) any termination, cancellation or waiver of any
contract or other right material to the operation of the business of the Company
and its Subsidiaries taken as a whole or (viii) any material damage, destruction
or loss, whether or not covered by insurance, adversely affecting the
properties, assets, business or prospects of the Company and its Subsidiaries
taken as a whole, or any deterioration in the operating condition of the assets
of the Company and its Subsidiaries which would, individually or in the
aggregate, be material to the Company or its Subsidiaries taken as a whole.
4.9 Taxes.
-----
(a) Except as set forth on Schedule 4.9(a) of the Pacific Disclosure
---------------
Letter: (i) Pacific USA and Stockholder (with respect to the Companies) and the
Companies have duly and timely filed or will duly and timely file (or have
caused, or will cause, to be duly and timely filed on their behalf either
separately or as a member of a consolidated group of companies) all material Tax
Returns required to be filed by it or them with any Tax Authority with respect
to Taxes for any period ending on or before the date hereof, taking into account
any valid and proper extension of time to file granted to or obtained on behalf
of any of the Companies, and all such Tax Returns are true, correct and complete
in all material respects at the time of filing; (ii) all Taxes (whether or not
shown on such Tax Returns) owed by Pacific USA or Stockholder (with respect to
the Companies) or by any of the Companies have been timely paid in full when due
(taking into account extensions) or accrued and reflected in the financial
statements contained in the most recently filed Company Reports; (iii) as of the
date hereof, no deficiency for any amount of Taxes has been asserted or assessed
or has, to the Knowledge of Stockholder, been threatened by a Tax Authority
against Pacific USA or the Companies; (iv) no claim has ever been made by a Tax
Authority in a jurisdiction where Pacific USA or Stockholder (with respect to
the Companies) or any of the Companies do not file Tax Returns that any of the
Company or its Subsidiaries are or may be subject to taxation by that
jurisdiction; (v) neither the Company nor any Company Subsidiary has any
liability for the Taxes of any person under Treasury Regulation 1.1502-6 (or
any similar provision of state, local, or foreign law) as a transferee or
successor, by contract, or otherwise; (vi) as of the date hereof there are no
excess loss accounts, gains or losses from Deferred Intercompany Transactions or
Intercompany Transactions, or other like items pertaining to the Company or any
of its Subsidiaries; (vii) neither Pacific USA nor Stockholder (with respect to
the Companies) nor any of the Companies currently is the beneficiary of any
extension of time within which to file any material Tax Return; and (viii) there
are no security interests on any of the assets of the Company or any of its
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay Taxes when due.
(b) The Company and each Company Subsidiary has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or other third
party, and has otherwise complied with applicable laws relating thereto.
15
<PAGE> 16
(c) Except as set forth on Schedule 4.9(c) of the Pacific Disclosure
---------------
Letter, no director or officer (or employee responsible for Tax matters) of
Pacific USA or Stockholder (with respect to the Companies) or any of the
Companies expects (other than generally contemplating that Tax Authorities will
perform audits and other investigations and are likely to make assessments of a
non-material nature to the Company or any of its Subsidiaries, as the case may
be, or of some nature) any Tax Authority to assess any additional Taxes for any
period for which Tax Returns have been filed or should have been filed. Except
as set forth on Schedule 4.9(c) of the Pacific Disclosure Letter, there is no
---------------
audit, dispute, claim or other proceeding concerning any Taxes or Tax Return of
Pacific USA or Stockholder (with respect to the Companies) or any of the
Companies claimed or raised by any Tax Authority. Schedule 4.9(c) of the
---------------
Pacific Disclosure Letter to this Agreement lists all federal, state, local, and
foreign income material Tax Returns filed by Pacific USA and Stockholder (with
respect to the Companies) and the Companies for taxable periods ended on or
after September 30, 1993, that have been audited by a Tax Authority, and
indicates those Tax Returns that currently are the subject of audit by a Tax
Authority. Pacific USA and Stockholder has delivered or made available to Buyer
true, correct and complete copies of all Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by Pacific USA or
Stockholder (with respect to the Companies) and/or any of the Companies since
September 30, 1993.
(d) Except as described in Schedule 4.9(d) of the Pacific Disclosure
---------------
Letter, neither Pacific USA nor Stockholder (with respect to the Companies) nor
any of the Companies has waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency. Except as described in Schedule 4.9(d) of the Pacific Disclosure
---------------
Letter, Pacific USA and Stockholder (with respect to the Companies) and each of
the Companies has disclosed on their respective Tax Returns all positions taken
therein likely to give rise to any accuracy related penalty (including a
substantial understatement penalty) within the meaning of Code 6662 or any
similar provision of state, local or foreign law.
(e) Except as set forth on Schedule 4.9(e) of the Pacific Disclosure
----------------
Letter, neither Pacific USA nor Stockholder (with respect to the Companies) nor
any of the Companies: (i) has filed a consent under Code 341(f) concerning
collapsible corporations; (ii) has made any payment, is obligated to make any
payment, or is a party to any agreement that under certain circumstances could
obligate it to make any payment that will not be deductible under Code 280G;
(iii) is a party to any Tax allocation or sharing agreement; (iv) has been a
member of an Affiliated Group filing a consolidated federal income Tax Return;
(v) has granted a power of attorney with respect to any matter relating to
material Taxes of Pacific USA or Stockholder (with respect to the Companies) or
any of the Companies other than to Pacific USA pursuant to a consolidated
federal income tax return; (vi) has participated in an international boycott
under Code 999; (vii) is a party to any safe harbor lease within the meaning of
168(f)(8) of the Internal Revenue Code of 1954, as amended, as in effect prior
to amendment by the Tax Equity and Responsibility Act of 1982; (viii) has had
any permanent establishments in any foreign country as defined in any applicable
treaty or convention between the United States and such foreign countries; and
(ix) is a party to any joint venture, partnership or other arrangement or
contract that could be treated as a partnership for federal income tax purposes.
4.10 Certain Employee Plans.
------------------------
(a) (i) Each Company Benefit Plan complies, and has been administered, in
all material respects in accordance with its governing documents and all
applicable requirements of law, and (ii) no "prohibited transaction" (as such
term is defined in ERISA) or termination has occurred with respect to any
Company Benefit Plan which under either circumstance presents a risk of
liability by the Company or any of its Subsidiaries to any Governmental Entity
or other person, including a Company Benefit Plan, which liability would,
individually or in the aggregate, have a Material Adverse Effect on the Company.
The Company Benefit Plans are listed on Schedule 4.10(a) of the Pacific
-----------------
Disclosure Letter and copies or descriptions of all material Company Benefit
Plans have previously been provided to Buyer. There has also been furnished to
Buyer, with respect to each Company Benefit Plan required to file such report
and description, the most recent report on Form 5500 and the summary plan
description.
16
<PAGE> 17
(b) Each Company Benefit Plan intended to qualify under Section 401(a) of
the Code is so qualified and a determination letter has been issued by the
Internal Revenue Service ("IRS") with respect to the qualification of such
Company Benefit Plan and no circumstances exist which would adversely affect
such qualification. A copy of each determination letter referred to in the
preceding sentence has previously been furnished to Buyer. As to any Company
Benefit Plan intended to be qualified under Section 401(a) of the Code, there
has been no termination or partial termination of the Company Benefit Plan
within the meaning of Section 411(d)(3) of the Code. There is no trust funding a
Company Benefit Plan which is intended to be exempt from federal income taxation
pursuant to Section 501(c)(9) of the Code. No Company Benefit Plan nor any other
benefit plan maintained or contributed to by the Company, its Subsidiaries or
any buyer of the Company in the last five years is subject to Title IV of ERISA
or is subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the
Code.
(c) Except as required by applicable law or as set forth on Schedule
--------
4.10(c) of the Pacific Disclosure Letter, neither the Company nor any of its
- -------
Subsidiaries provides any health, welfare or life insurance benefits to any of
its former or retired employees.
(d) (i) The Companies have substantially performed all obligations, whether
arising by operation of law or by contract, required to be performed by them in
connection with the Company Benefit Plans, (ii) there have been no defaults or
violations by any other party to the Company Benefit Plans, and (iii) there are
no actions, suits, or claims pending (other than routine claims for benefits) or
threatened against, or with respect to, any of the Company Benefit Plans or
their assets; which under any of the circumstances present a risk of liability
to the Company or any of its Subsidiaries to any Governmental Entity or other
person, including a Company Benefit Plan, which liability would, individually or
in the aggregate, have a Material Adverse Effect on the Company. There is no
matter pending (other than routine qualification determination filings) with
respect to any of the Company Benefit Plans before the IRS or other Governmental
Entity. All contributions required to be made to the Company Benefit Plans
pursuant to their terms and the provisions of ERISA, the Code, or any other
applicable law have been timely made.
(e) No act, omission or transaction has occurred which would result in
imposition on any of the Companies of (A) breach of fiduciary duty liability
damages under Section 409 of ERISA, (B) a civil penalty assessed pursuant to
subsections (c), (i) or (l) of Section 502 of ERISA, or (C) a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code. With respect to any employee
benefit plan, within the meaning of Section 3(3) of ERISA, which is not listed
on Schedule 4.10(a) of the Pacific Disclosure Letter but which is sponsored,
-----------------
maintained, or contributed to, or has been sponsored, maintained, or contributed
to within six years prior to the Closing Date, by any corporation, trade,
business, or entity under common control with any of the Companies, within the
meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA,
(A) no withdrawal liability, within the meaning of Section 4201 of ERISA, has
been incurred, which withdrawal liability has not been satisfied, (B) no
liability to the Pension Benefit Guaranty Corporation has been incurred by any
such entity, which liability has not been satisfied, (C) no accumulated funding
deficiency, whether or not waived, within the meaning of Section 302 of ERISA or
Section 412 of the Code has been incurred, and (D) all contributions (including
installments) to such plan required by Section 302 of ERISA and Section 412 of
the Code have been timely made.
17
<PAGE> 18
(f) Except as disclosed in Schedule 4.10(f) of the Pacific Disclosure
----------------
Letter, the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not (A) require any of the Companies to
make a larger contribution to, or pay greater benefits or provide other rights
under, any Company Benefit Plan than it otherwise would, whether or not some
other subsequent action or event would be required to cause such payment or
provision to be triggered, or (B) create or give rise to any additional vested
rights or service credits under any Company Benefit Plan. Except as otherwise
set forth on Schedule 4.10(f) of the Pacific Disclosure Letter, none of the
-----------------
Companies is a party to any agreement, nor has any of the Companies established
any policy or practice, requiring it to make a payment or provide any other form
of compensation or benefit to any person performing services for the Companies
upon termination of such services which would not be payable or provided in the
absence of the consummation of the transactions contemplated by this Agreement.
(g) In connection with the consummation of the transactions contemplated by
this Agreement, no payments of money or other property, acceleration of
benefits, or provisions of other rights have or will be made hereunder, under
the Company Benefit Plans, or under any other agreement that would result in
imposition of the sanctions imposed under Sections 280G and 4999 of the Code,
whether or not some other subsequent action or event would be required to cause
such payment, acceleration, or provision to be triggered.
4.11 Labor Matters. Neither the Company nor any of its Subsidiaries is a
-------------
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. There is no
unfair labor practice or labor arbitration proceeding pending or, to the
Knowledge of Stockholder, threatened against the Company or its Subsidiaries
relating to their business, except for any such proceeding which, individually
or in the aggregate, would not have a Material Adverse Effect on the Company. To
the Knowledge of Stockholder, there are no organizational efforts with respect
to the formation of a collective bargaining unit presently being made or
threatened involving employees of the Company or any of its Subsidiaries. There
are no controversies pending or, to the Knowledge of Stockholder, threatened
between the Company or any of its Subsidiaries and any of their respective
employees, which, individually or in the aggregate, would have a Material
Adverse Effect on the Company. The Company has not received notice of any
strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of the Company or any of its Subsidiaries which,
individually or in the aggregate, would have a Material Adverse Effect on the
Company.
4.12 No Brokers. The Company has not entered into any contract, arrangement
----------
or understanding with any person or firm which may result in the obligation of
the Company or Buyer to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated herein. Other
than the arrangements described in Sections 3.4 and 5.4, there are no claims
against the Company for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transaction contemplated herein.
18
<PAGE> 19
4.13 Environmental Matters. Stockholder has made available to Buyer all
----------------------
environmental assessments and reports relating to environmental conditions with
respect to the real property owned or leased by the Companies, which are in the
possession of Stockholder, the Company, or its Subsidiaries. Except as set forth
on Schedule 4.13 of the Pacific Disclosure Letter and except for such matters
--------------
that, individually or in the aggregate, would not have a Material Adverse Effect
on the Company, (i) the Company and its Subsidiaries have no liability under,
have never violated, and have been and are in compliance with all applicable
Environmental Laws; (ii) the properties currently owned or operated by the
Company or any of its Subsidiaries (including soils, groundwater, surface water,
buildings, or other structures) do not contain and have not previously contained
any Hazardous Materials, in any amount or concentration (x) that could
reasonably be expected to threaten human health or welfare, (y) that exceeds any
applicable standard promulgated, enacted, or issued by any Governmental Entity,
or (z) that could reasonably be expected to result in any liability under the
Environmental Laws; (iii) the properties formerly owned or operated by the
Company or any of its Subsidiaries (including soils, groundwater, surface water,
buildings, or other structures) did not contain any Hazardous Materials at any
time during the period of ownership or operation by the Company or any of its
Subsidiaries in any amount or concentration (x) that could reasonably be
expected to threaten human health or welfare, (y) that exceeds any applicable
standard promulgated, enacted or issued by any Governmental Entity, or (z) that
could reasonably be expected to result in any liability under the Environmental
Laws; (iv) neither the Company nor any of its Subsidiaries has disposed or
arranged to dispose of any Hazardous Materials on any third party property which
could reasonably be expected to result in any liability under the Environmental
Laws; (v) neither the Company nor any of its Subsidiaries has Released any
Hazardous Materials at any property owned or operated by any of them at any time
that could reasonably be expected to result in any liability under the
Environmental Laws; (vi) neither the Company nor any of its Subsidiaries has
received any notices, demand letters, complaints, claims or requests for
information from any Governmental Entity or any third party indicating that the
Company or any of its Subsidiaries may be in violation of, or liable under, any
Environmental Law; (vii) none of the Company, its Subsidiaries or their
respective properties are subject to any order or decree of any Governmental
Entity or any agreement with any Government Entity arising under any
Environmental Law, or is a party to any indemnity or other agreement with any
third party which could reasonably be expected to result in any liability under
any Environmental Law; (viii) there are no circumstances, conditions, or
activities involving the Company or any of its Subsidiaries that could
reasonably be expected to result in any liability under any Environmental Law or
in any restriction pursuant to any Environmental Law on the ownership, use, or
transfer of any property now owned by the Company or any of its Subsidiaries;
(ix) none of the properties now owned by the Company or any of its Subsidiaries
contains any underground storage tank, asbestos-containing material, lead-based
products (including paint), or polychlorinated biphenyls; and (x) the properties
currently owned or operated by the Company or any of its Subsidiaries are not
subject to any liens imposed by any Governmental Entity in connection with the
presence on or off such property of any Hazardous Materials. For the purposes of
this Agreement, "Environmental Laws" means the Comprehensive Environmental
-------------------
Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq., the Emergency
-- ----
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et seq., the
-- ----
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., the Toxic
-- ----
Substances Control Act, 15 U.S.C. 2601 et seq., the Federal Insecticide,
-- ----
Fungicide, and Rodenticide Act, 7 U.S.C. 136 et seq., the Clean Air Act, 42
-- ----
U.S.C. 7401 et seq., the Clean Water Act (Federal Water Pollution Control Act),
-- ----
33 U.S.C. 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. 300f et seq., the
-- ---- -- ----
Occupational Safety and Health Act, 29 U.S.C. 641 et seq., the Hazardous
-- ----
Materials Transportation Act, 49 U.S.C. 1801 et seq., as any of the above
-- ----
statutes have been or may be amended from time to time, all rules and
regulations promulgated pursuant to any of the above statutes, and any other
foreign, federal, state or local law, statute, ordinance, permit, order, decree,
rule or regulation or other directive related to or governing Environmental
Matters as the same have been or may be amended from time to time, including any
19
<PAGE> 20
common law cause of action providing any right or remedy with respect to
Environmental Matters, and all applicable decisions, orders, and decrees of any
Governmental Entity relating to Environmental Matters. "Environmental Matters"
---------------------
means all matters involving pollution, wetlands and other natural resources,
protection of the environment, noise, human health, and occupational health and
safety. "Hazardous Materials" means any substance or material that is defined
--------------------
under the Environmental Laws as a "hazardous substance," "regulated substance,"
"pollutant," "contaminant," "hazardous waste," "extremely hazardous substance,"
"toxic substance," or "hazardous material," or that is otherwise defined in or
regulated under the Environmental Laws, including, without limitation,
petroleum, asbestos-containing materials, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials, and radon. "Release" means
-------
any releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing, or dumping into the soil,
surface waters, groundwaters, land, stream sediments, surface or subsurface
strata, ambient air, or any other environmental medium.
4.14 Related Party Transactions. There are no contracts, arrangements or
---------------------------
transactions in effect between the Company or any of its Subsidiaries, on the
one hand, and any officer, director or 5% or greater stockholder of the Company,
or any Affiliate or immediate family member of any of the foregoing persons, on
the other hand, except as set forth in the Company Reports or on Schedule 4.14
-------------
of the Pacific Disclosure Letter. Except as set forth on Schedule 4.14 of the
-------------
Pacific Disclosure Letter, no officer or employee of the Companies provides any
services to, including without limitation serving on the board of directors of,
any Affiliate of Pacific USA other than the Companies.
4.15 Restrictions on Business Activities. There is no judgment, injunction,
-----------------------------------
order, decree, statute, ordinance, rule, regulation, moratorium, or other action
by a Governmental Entity, pending before a Governmental Entity or, to
Stockholder's Knowledge, being considered by a Governmental Entity, which has or
would have the effect of restricting the conduct of business by the Company or
its Subsidiaries, except for any restrictions as would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
4.16 Real Property. Schedule 4.16 of the Pacific Disclosure Letter lists
------------- -------------
the lots (as of September 30, 1999) and office locations owned by the Company or
any of its Subsidiaries, the office locations leased by the Company or any of
its Subsidiaries, the lots that the Company or any of its Subsidiaries has the
right or obligation to purchase (as of September 30, 1999). The Company and its
Subsidiaries have good and marketable (or indefeasible, in jurisdictions where
the term "marketable" is not customarily used) title in fee simple, or as to
optioned property, has the right to acquire good and marketable (or
indefeasible, as the case may be) title in fee simple (or as to leased property,
has good and valid title to the leasehold estate), to the real property
purported to be owned, optioned or leased by them on Schedule 4.16 of the
--------------
Pacific Disclosure Letter, free and clear of all Liens, except Liens for Taxes
and assessments not yet due and payable, Liens relating to the indebtedness
described on Schedules 4.5-1 and 4.5 (xii) of the Pacific Disclosure Letter, and
-----------------------------
such Liens or other imperfections of title as do not or will not, individually
or in the aggregate, materially interfere with the present use or intended use
by the Company and its Subsidiaries or materially affect the value or marketing
of the property affected thereby. Neither the Company nor any Company Subsidiary
has given, nor has it received, any notice that a breach or an event of default
20
<PAGE> 21
exists, and no condition or event has occurred that with the giving of notice,
the lapse of time, or both would constitute a breach or event of default, by the
Company or any of its Subsidiaries, or, to Stockholder's Knowledge, any other
person with respect to any agreements, arrangements, contracts, covenants,
conditions, deeds, deeds of trust, rights-of-way, easements, mortgages,
restrictions, surveys, title insurance policies, or other documents granting to
or constituting a conveyance by the Company or any Company Subsidiary of title
to or an interest in or otherwise affecting the real property which,
individually or in the aggregate, is material to the operation of the business
of the Company and its Subsidiaries, as presently conducted or intended to be
conducted. No condemnation, eminent domain, or similar proceeding exists, is
pending or, to Stockholder's Knowledge, is threatened with respect to, or that
could affect, any real property owned or leased by the Company or any Company
Subsidiary that would, individually or in the aggregate, have a Material Adverse
Effect on the Company. No developer-related charges or assessments by any public
authority or any other person for public improvements or otherwise made against
any property developed by the Company or its Subsidiaries are unpaid (other than
those reflected on the December 31, 1998 consolidated balance sheets of the
Company and its Subsidiaries or incurred since such date in the ordinary course
of the Company's and its Subsidiaries' business consistent with past practices
and other than standard development agreements such as impact fee and water and
sewer connection fee agreements paid on a per unit basis at the time of building
permit or certificate of occupancy), except for charges or assessments as would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The real property of the Company and its Subsidiaries to be used for
homebuilding and any improvements located thereon conform, in all material
respects, to the appropriate Governmental Entity's standards. There is no
impediment to the development of (or to approval for the development of)
undeveloped real property, such approval to allow development in the manner in
which the Company and its Subsidiaries currently anticipate building thereon,
nor are there any moratoriums on such development, except for those that would
not, individually or in the aggregate, result in a Material Adverse Effect on
the Company. The developed real property of the Company and its Subsidiaries has
access to streets, and is serviced, in all material respects, by all utilities
and other services, as is necessary to construct homes on such property, and
such utilities and other services are adequate for the current and intended use
of such property. The undeveloped real property of the Company and its
Subsidiaries has access to streets, and such real property is serviced, in all
material respects, by all utilities and other services, as is necessary for the
development thereof or such utilities and other services are or will be
available, in all material respects, to such property. All leases pursuant to
which the Company or any Company Subsidiary leases from others real or personal
property are valid and effective in accordance with their respective terms, and
there is not under any of such leases, any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
material default), except where such failure or default would not, individually
or in the aggregate, have a Material Adverse Effect on the Company.
4.17 Intellectual Property. Schedule 4.17 of the Pacific Disclosure Letter
--------------------- -------------
sets forth a true and complete list of all material patents, trademarks, trade
names, service marks, internet domain names and copyrights and applications for
registration of any of the foregoing and other material intellectual property
and proprietary rights, whether or not subject to statutory registration or
protection, owned, used, filed by or licensed to the Company or any of its
Subsidiaries, in each case which are, individually or in the aggregate, material
to the financial condition, operating results, assets or operations of the
Company or any of its Subsidiaries. Except as set forth in Schedule 4.17 of the
-------------
Pacific Disclosure Letter, the Company and its Subsidiaries own, or are licensed
or otherwise possess legally enforceable rights to use, without payment to any
other person (other than payments to third parties pursuant to the contracts
21
<PAGE> 22
listed in Schedule 4.5 (viii) and those contracts not required to be listed
under such Schedule 4.5 (viii) because they are not material), all patents,
trademarks, trade names, service marks, internet domain names, copyrights, and
any applications for registration of any of the foregoing technology, know-how,
computer software programs or applications, and tangible or intangible
proprietary information or material that are used in the business of the Company
and its Subsidiaries as currently conducted, except where the failure to own, be
licensed or to possess such rights would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, and the consummation of the
transactions contemplated hereby will not conflict with, alter or impair any
such rights.
4.18 Insurance. The Companies maintain insurance with financially
---------
responsible insurance companies in amounts customary in their respective
industries to insure them against risks and losses associated with the operation
of the business and properties of the Companies. The insurance policies
maintained with respect to the Company and its Subsidiaries and their respective
assets and properties are listed in Schedule 4.18 of the Pacific Disclosure
--------------
Letter. All such policies are in full force and effect, all premiums due and
payable thereon have been paid (other than retroactive or retrospective premium
adjustments that are not yet, but may be, required to be paid with respect to
any period ending prior to the Closing Date), and no notice of cancellation or
termination has been received with respect to any such policy which has not been
replaced on substantially similar terms prior to the date of such cancellation.
To the Knowledge of Stockholder, the activities and operations of the Company
and its Subsidiaries have been conducted in a manner so as to conform in all
material respects to all applicable provisions of such insurance policies. The
Companies have not failed to disclose any fact to the insurance companies or
failed to take any other action, the consequences of which non-disclosure or
failure to take action would render any insurance policy void, or voidable, or
suspend, impair or defeat in whole or in part such insurance coverage.
4.19 Assets Other than Real Property Interests. The Company or a
----------------------------------------------
Company Subsidiary owns all material assets reflected on the consolidated
balance sheets of the Company and its Subsidiaries as of December 31, 1998, or
thereafter acquired, except those sold or otherwise disposed of since December
31, 1998 in the ordinary course of business consistent with past practice and
not in violation of this Agreement, in each case free and clear of all Liens
except (i) such as are set forth in Schedule 4.19 of the Pacific Disclosure
-------------
Letter, (ii) mechanics', carriers', workmen's, repairmen's or other like Liens
arising or incurred in the ordinary course of business, Liens arising under
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business and Liens for
Taxes or assessments which are not due and payable or which may thereafter be
paid without penalty, (iii) mortgages, liens, security interests and
encumbrances which secure debt that is reflected as a liability on the Company's
December 31, 1998 balance sheet or the existence of which is indicated in the
notes thereto and (iv) other imperfections of title or encumbrances, if any,
which, do not, individually or in the aggregate, materially impair the assets or
the intended use thereof.
All the material tangible personal property of the Company and its
Subsidiaries has been maintained in accordance with the past practice of the
Company and its Subsidiaries and generally accepted industry practice and is in
good operating condition and repair, ordinary wear and tear excepted, in each
case except such as would, individually or in the aggregate, not have a Material
Adverse Effect on the Company.
22
<PAGE> 23
4.20 Private Offering. Neither Stockholder, any of its Affiliates nor
------------------
anyone acting on its or their behalf has issued, sold or offered any security of
the Company to any person under circumstances that would cause the issuance and
sale of the Stockholder Shares, as contemplated by this Agreement, to be subject
to the registration requirements of the Securities Act. Neither Stockholder,
any of its Affiliates nor anyone acting on its or their behalf will offer the
Stockholder Shares or any part thereof or any similar securities for issuance or
sale to, or solicit any offer to acquire any of the same from, anyone so as to
make the issuance and sale of the Stockholder Shares subject to the registration
requirements of Section 5 of the Securities Act. Assuming the representations
of Buyer contained in Section 5.9 are true and correct, the issuance, sale and
delivery of the Stockholder Shares hereunder are exempt from the regis-tration
and prospectus delivery requirements of the Securi-ties Act.
4.21 Disclosure. No representation or warranty of Stockholder and
----------
Pacific USA contained in this Agreement, and no statement contained in any
document, certificate or schedule furnished or to be furnished by or on behalf
of Stockholder and Pacific USA to Buyer or any of its representatives pursuant
to this Agreement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary to fully and fairly
provide the information required to be provided in any such document,
certificate or schedule.
4.22 Antitakeover Statutes. Nevada Revised Statutes 78.378 to 78.3793
----------------------
and 78.411 to 78.444 do not apply to the transactions contemplated herein and
the Board of Directors of the Company is not required to take any action under
the terms thereof. No other "fair price", "moratorium", "control share
acquisition" or other similar antitakeover statute or regulation under the laws
of Nevada, Texas or Florida is applicable to the transactions contemplated
hereby.
4.23 Information Systems Plan. The Company has formulated a plan to
--------------------------
address the ability of the Company's information systems to process date and
time data from, into and beyond the year 2000 ("Year 2000 Data"), and the
ability of such systems to interact with third parties' systems and with
electrical power, telecommunications and other utilities and services. Schedule
--------
4.23 of the Pacific Disclosure Letter identifies the information systems
- ----
material to the operations of the Company and its Subsidiaries (the "Information
Systems") and identifies for each such Information System (i) whether such
Information System has been identified by the Company as being able to
accurately process such Year 2000 Data, and (ii) if such Information System has
not been identified by the Company as being able to accurately process Year 2000
Data, the plan and target date for replacing, updating or upgrading such
Information System in order to be able to accurately process such data. Such
plans are proceeding as scheduled and are being implemented at costs which do
not exceed the costs expected by the Company and its Subsidiaries to be incurred
with respect to their management information systems function in the ordinary
course of business. Stockholder and Pacific USA are not aware of any facts or
circumstances that create a reasonable basis for them to believe that, if the
scheduled replacements, updates or upgrades continue to be made in accordance
with the plans identified on Schedule 4.23 of the Pacific Disclosure Letter, the
-------------
Information Systems will be unable to accurately process such Year 2000 Data as
of and after December 31, 1999. No client, customer, supplier or vendor, and no
electric, telecommunications or other utility with whom the Information Systems
interact has notified the Company that the Information Systems, when used in
combination with any information systems of such person, will be unable to
accurately process such Year 2000 Data.
23
<PAGE> 24
4.24 Warranty Obligation. The $1,384,956 reserve for warranty costs
--------------------
included in the June 30, 1999 consolidated balance sheets of the Company and its
Subsidiaries filed with the Company Reports sets forth, as of June 30, 1999, the
reasonable judgment of the management of the Company of the estimate of the
Company's aggregate liability (whether accrued, absolute or contingent) in
respect of any warranties issued by the Company or any of its Subsidiaries in
connection with the sale of houses by the Company or any of its Subsidiaries.
4.25 Repurchase Rights. Except as set forth on Schedule 4.25 of the
----------------- -------------
Pacific Disclosure Letter, since June 30, 1999 no lots owned by the Company or
any of its Subsidiaries have become subject to repurchase by any person as a
result of the failure of the Company or any of its Subsidiaries to begin
construction thereon or to complete construction thereon within the time period
required under the lot purchase or lot option contracts pursuant to which such
lots have been purchased.
4.26 HSR Matters. The fair market value of the "non-exempt assets" of
------------
the Company within the meaning of the regulations under the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended ("HSR Regulations") (16 C.F.R.
801.10, 802.2 and 802.4) is less than $15 million. For purposes of this
representation, Stockholder and Pacific USA have relied on the Federal Trade
Commission's concurrence with the characterization of certain assets of the
Company as exempt under Section 802.2 of the HSR Regulations in the letter dated
September 29, 1999 from Thompson Knight Brown Parker & Leahy, L.L.P. to
the Federal Trade Commission.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Except as set forth in the disclosure letter delivered by or on behalf of
Buyer to Stockholder at or prior to the execution hereof that is arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article V (the "Buyer Disclosure Letter") Buyer represents and warrants to
-----------------------
each of Stockholder and Pacific USA, as follows:
5.1 Existence; Good Standing; Corporate Authority; Compliance with Law.
------------------------------------------------------------------
Each of T.O. Greece and Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Buyer is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect on Buyer. Buyer has all requisite corporate
power and authority to own, operate and lease its properties and carry on its
business as now conducted. Buyer is not in violation of any order or decree of
any Governmental Entity, or any law, ordinance, or regulation to which Buyer or
any of its properties or assets is subject, except where such violation,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Buyer. Buyer has obtained all licenses, permits and
other authorizations and have taken all actions required by applicable law or
regulations of any Governmental Entity in connection with its business as now
conducted, except where the failure to obtain any such item or to take any such
action, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Buyer.
24
<PAGE> 25
5.2 Authorization, Validity, and Effect of Agreements. Each of T.O. Greece
--------------------------------------------------
and Buyer has the requisite corporate power and authority to execute and deliver
this Agreement and all agreements and documents contemplated herein, as
applicable. The consummation by each of T.O. Greece and Buyer of the
transactions contemplated herein has been duly authorized by all requisite
corporate action. This Agreement constitutes, and all agreements and documents
contemplated herein to be executed by Buyer (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of each of T.O. Greece and Buyer, enforceable in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
5.3 No Violation. Neither the execution and delivery by either of T.O.
---------
Greece and Buyer of this Agreement, nor the consummation by T.O. Greece or Buyer
of the transactions contemplated herein in accordance with the terms hereof,
will: (i) conflict with or result in a breach of any provisions of the articles
of incorporation or By-laws of such corporation; (ii) violate, or conflict with,
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any Lien
upon any of the material properties of Buyer under, or result in being declared
void, voidable, or without further binding effect, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust or any
material license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which Buyer is a party, or by which
Buyer or any of its properties is bound or affected, except for any of the
foregoing matters which would not have a Material Adverse Effect on Buyer; or
(iii) except as set forth in Schedule 5.3 of the Buyer Disclosure Schedule,
-------------
require any material consent, approval or authorization of, or declaration,
filing or registration with, any Governmental Entity, the failure to obtain or
make which would have a Material Adverse Effect on Buyer.
5.4 No Brokers. Neither T.O. Greece nor Buyer has entered into any
-------
contract, arrangement or understanding with any person or firm which may result
in the obligation of any party to this Agreement to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated herein. Other than the arrangements described in Sections 3.4 and
4.12, neither T.O. Greece nor Buyer is aware of any claim for payment of any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated herein.
5.5 Financial Statements. T.O. Greece and Buyer have delivered to
---------------------
Stockholder and Pacific USA (a) the audited consolidated balance sheets of T.O.
Greece and its Subsidiaries as of December 31, 1998, and the related audited
statements of income, and retained earnings, and cash flow for the year then
ended, together with the report thereon of Nikolaos Christopoulos and Visilios
Tsapatsaris of the National Body of Certified Auditors, a Greek State-owned
company, the auditors, and English language versions of the unaudited
consolidated balance sheets, and related statements of income, retained earnings
and cash flow as of September 30, 1999 (collectively, the "Financial
---------
Statements"). The Financial Statements (including the related notes and
schedules) fairly present the consolidated financial position of T.O. Greece and
its Subsidiaries as of the dates thereof and each of the consolidated statements
25
<PAGE> 26
of income, retained earnings and cash flows included in the Financial Statements
(including any related notes and schedules) fairly presents the results of
operations, retained earnings or cash flows, as the case may be, of T.O. Greece
and its Subsidiaries for the periods set forth therein, in each case in
accordance with generally accepted accounting principles in Greece, consistently
applied during the periods involved, except as may be noted therein. Buyer is a
newly organized, wholly-owned indirect subsidiary of T.O. Greece and, except for
those matters contemplated in this Agreement, it has no assets, liability,
income or loss at the date hereof.
5.6 Funds. T.O. Greece and Buyer will have at the Closing Date, the funds
-----
necessary to consummate the Stock Purchase and the transactions contemplated
herein on a timely basis in accordance with this Agreement. Neither T.O. Greece
nor Buyer nor any of their Affiliates has any present intention or need to
pledge any asset of the Company or its Subsidiaries to support any financing of
this transaction.
5.7 Investment Purpose. Buyer is an "accredited investor," as such term is
------------------
defined in Regulation D of the Securities Act and will acquire the Stockholder
Shares for its own account and not with a view to a sale or distribution thereof
in violation of any securities laws, and Buyer will not sell or distribute any
of the Stockholder Shares in violation of any securities laws. Buyer has the
present intention of holding the Stockholder Shares for investment purposes.
5.8 Access to Information. During the course of the negotiation of this
----------------------
Agreement, Buyer reviewed or has been afforded the opportunity to review all
information provided to it by Stockholder and Pacific USA and has had the
opportunity to ask questions of and receive answers to its satisfaction from
representatives of Stockholder and Pacific USA concerning the Company, the
Stockholder Shares, and to obtain certain additional information reasonably
requested by Buyer. The foregoing access or review shall not be deemed to affect
the representations and warranties and indemnities made by Stockholder and
Pacific USA hereunder. Notwithstanding any "due diligence" investigations made
by Buyer, no information shall be deemed to have been disclosed for purposes of
the representations and warranties made herein unless contained in the Pacific
Disclosure Letter.
ARTICLE VI
COVENANTS
6.1 Conduct of Business. Except as (i) expressly contemplated in this
--------------------
Agreement, (ii) set forth in Schedule 6.1 of the Pacific Disclosure Letter, or
------------
(iii) as expressly agreed to in writing by Buyer, during the period from the
date of this Agreement to the termination of this Agreement or the Closing Date,
Stockholder and Pacific shall use their reasonable efforts to cause the Company
and each of its Subsidiaries:
(a) to conduct their respective operations according to the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted;
(b) to preserve intact their respective business organizations and
goodwill, keep available the services of their officers and employees and
maintain satisfactory relationships with their customers, suppliers and
other persons having business relationships with them;
26
<PAGE> 27
(c) to confer on a regular basis with one or more representatives of
Buyer to report operational matters of materiality and any proposals of the
Company or any of its Subsidiaries to engage in material transactions;
(d) not to permit the Company to amend the organizational documents of
the Company or any of its Subsidiaries;
(e) to promptly notify Buyer of (i) any material emergency or other
material change in the condition (financial or otherwise) of the Company's
or any Company Subsidiary's business, properties, assets, liabilities,
prospects or the normal course of its businesses or in the operation of its
properties, (ii) any material litigation or material complaints,
investigations or hearings of any Governmental Entity (or communications
indicating that the same may be contemplated), or (iii) the breach in any
material respect of any representation or warranty or covenant contained
herein;
(f) to promptly deliver to Buyer true and correct copies of any
report, statement or schedule filed by the Company with the SEC subsequent
to the date of this Agreement;
(g) not to permit the Company or any Company Subsidiary to (i) issue
any shares of its Capital Stock, effect any stock split or otherwise change
its capitalization as it exists on the date of this Agreement, (ii) grant,
confer or award any option, warrant, conversion right or other right not
existing on the date hereof to acquire any shares of its Capital Stock,
(iii) increase any compensation or benefits or enter into or amend any
employment, severance, termination or similar agreement with any of its
present or future employees, officers or directors, except for normal
increases in compensation and benefits to employees consistent with past
practice and the payment of cash bonuses to employees pursuant to and
consistent with existing plans or programs, (iv) adopt any new employee
benefit plan (including any stock option, stock benefit or stock purchase
plan) or amend any existing employee benefit plan in any material respect,
except for changes which are less favorable to participants in such plans
or as may be required by applicable law, or (v) increasing the amount, or
expanding the scope, of any indemnification currently provided for
employees, officers or directors;
(h) not to permit the Company to (i) declare, set aside or pay any
dividend or make any other distribution or payment with respect to any
shares of its Capital Stock; (ii) directly or indirectly redeem, purchase
or otherwise acquire any shares of its Capital Stock or Capital Stock of
any of its Subsidiaries, or make any commitment for any such action; or
(iii) split, combine or reclassify any of its Capital Stock;
(i) not to permit the Company or any of its Subsidiaries to sell,
lease or otherwise dispose of any assets (including Capital Stock of
Company Subsidiaries) outside of the ordinary course of business consistent
with past practices or any assets which in the aggregate are material to
the Company or any of its Subsidiaries, or enter into any commitment to do
so; provided that the sale of homes and lots by the Company and/or any of
its Subsidiaries in the ordinary the course of business shall not be a
violation of this clause (i);
27
<PAGE> 28
(j) not to permit the Company or any of its Subsidiaries to (i) incur
or assume any long-term or short-term debt or issue any debt securities
except for borrowings under existing lines of credit in the ordinary course
of business; (ii) except for obligations of Subsidiaries of the Company,
assume, guaranty, endorse or otherwise become liable or responsible
(whether directly, indirectly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practices in an amount not material to the Company or
any of its Subsidiaries; (iii) other than to Subsidiaries of the Company
and the entities listed in Schedule 4.4 of the Pacific Disclosure Letter in
------------
the ordinary course of business and consistent with past practice, make any
loans, advances or capital contributions to, or investments in, any other
person; (iv) modify in any manner adverse to the Company or any of its
Subsidiaries any outstanding indebtedness or obligation of the Company or
any of its Subsidiaries; (v) pledge or otherwise encumber shares of Capital
Stock of its Subsidiaries; or (vi) mortgage or pledge any of its material
assets, tangible or intangible, or create or suffer to create any material
mortgage, lien, pledge, charge, security interest or encumbrance of any
kind in respect to such asset except in the ordinary course of business
consistent with past practices;
(k) not to permit the Company or any of its Subsidiaries to acquire
assets outside the ordinary course of business consistent with past
practices or any assets which in the aggregate are material to the Company
and its Subsidiaries taken as a whole, or enter into any commitment to do
so;
(l) not to permit the Company or any Company Subsidiary to change any
of its accounting principles or practices;
(m) not to permit the Company or any of its Subsidiaries to: (i)
acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof
or any equity interest therein; (ii) enter into or amend any contract or
agreement other than in the ordinary course of business consistent with
past practice which would be material to the Company or any of its
Subsidiaries; (iii) authorize any new capital expenditure or expenditures
(including the purchase of land except in the ordinary course of business
consistent with past practice or pursuant to the contracts listed in
Schedule 4.5 of the Pacific Disclosure Letter) which, individually, is in
------------
excess of $250,000 or, in the aggregate, are in excess of $1,000,000;
provided, that none of the foregoing shall limit any capital expenditure
(including the purchase of land) within the aggregate amount previously
authorized by the Company's Board of Directors for capital expenditures,
written evidence of which has been provided to Buyer prior to the date of
this Agreement; or (iv) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action which
would be prohibited hereunder;
(n) not to permit the Company or any of its Subsidiaries to pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected, reserved against or disclosed in the consolidated
financial statements (or the notes thereto) of the Company and its
Subsidiaries or incurred in the ordinary course of business consistent with
past practice;
(o) not to permit the Company or any of its Subsidiaries to settle or
compromise any pending or threatened suit, action or claim relating to the
transactions contemplated herein;
28
<PAGE> 29
(p) not to permit the Company or any of its Subsidiaries to make any
material Tax election (other than in a manner consistent with prior
practices of the Company), file any Tax Return (other than Tax Returns
due), settle or compromise any material Tax liability (other than Taxes
due) or agree to an extension of a statute of limitations with respect to
any material amount of Tax (other than extensions for filing Tax Returns or
an extension relating to the current audit disclosed in Schedule 4.9(c) of
---------------
the Pacific Disclosure Letter), except to the extent the amount of any such
Tax, settlement or compromise has been reserved for in the financial
statements contained in the Company Reports filed prior to the date of this
Agreement; provided, the Buyer shall not unreasonably withhold or delay
consent as to such matters;
(q) not to permit the Company or any of its Subsidiaries to cancel any
material indebtedness (individually or in the aggregate) without having an
adequate replacement therefor with another lender, or waive any claims or
rights of substantial value;
(r) not to permit the Company or any of its Subsidiaries to pay, loan
or advance any amount to, or sell, transfer or lease any of its assets to,
or enter into any agreement or arrangement with, Stockholder or any of its
Affiliates (other than the Company and its Subsidiaries, other than
pursuant to agreements listed in Schedule 4.5(iv) or Schedule 4.14 of the
----------------- --------------
Pacific Disclosure Letter, and other than intercompany transactions in the
ordinary course of business);
(s) not to permit the Company or any of its Subsidiaries to take any
action having the same or similar economic effect, or being of the same or
similar nature, as any of the actions described in Sections 6.1(a) through
(r); and
(t) not to permit the Company or any of its Subsidiaries to commit to,
take, or agree in writing or otherwise to commit to or take, any of the
actions described in Section 6.1(a) through (s) or any action that would
result in a breach of any covenant of Pacific USA and Stockholder related
to the Company contained in this Agreement.
6.2 Covenants of Buyer. From the date of this Agreement until the
--------------------
termination of this Agreement or the Closing Date, Buyer covenants and agrees
that it shall take no action which would (i) materially adversely affect the
ability of any party to this Agreement to obtain any consents, approvals, or
authorizations required for the transactions contemplated herein, or (ii)
materially adversely affect the ability of any party to perform its covenants
and agreements under this Agreement.
6.3 Access to Information; Confidentiality. From the date hereof until the
---------------------------------------
termination of this Agreement or the Closing Date, upon reasonable notice and
subject to applicable laws, each party shall afford the other parties their
respective accountants, counsel, and other representatives, during normal
business hours, reasonable access to all of such party's properties or assets,
books, contracts, commitments, and records and, during such period, each party
shall furnish promptly to the other (a) a copy of each report, schedule, and
other document filed or received by it during such period pursuant to the
requirements of federal and state securities laws, (b) a copy of all filings
made with any Governmental Entity in connection with the transactions
contemplated in this Agreement and all written communications received from such
Governmental Entities related thereto, and (c) all other information concerning
29
<PAGE> 30
its business, properties, and personnel as such other party may reasonably
request. Each party shall, and shall cause its respective advisors and
representatives to (i) conduct its investigation in such a manner that will not
unreasonably interfere with the normal operations, customers or employee
relations of the other and shall be in accordance with procedures established by
the parties having due regard for the foregoing, and (ii) refrain from using for
any purposes other than as set forth in this Agreement and shall treat as
confidential in accordance the terms of the Confidentiality Agreement all such
information obtained by each hereunder or in connection herewith and not
otherwise known to them prior to disclosure hereunder.
6.4 Athens Stock Exchange Filings. T.O. Greece has filed with ASE an
-----------------------------
information memorandum in connection with a share capital increase resolved by
T.O. Greece at its Extraordinary General Meeting of Shareholders dated October
21, 1999 (together with any amendments or supplements thereto, the "Memorandum")
----------
it being understood that part of the share capital increase proceeds shall be
applied, directly or indirectly, in whole or in part, toward payment of the
Purchase Price. In addition, following the consummation of this Agreement, T.O.
Greece shall be required to file with the ASE an information bulletin, where it
acquired (or may be deemed to acquire) control of a non-ASE listed company and
the purchase price is in excess of 20% of the net asset value of such acquiring
party. Buyer shall use its reasonable best efforts to have the Memorandum
approved, where required by ASE as promptly as possible. Stockholder, Pacific
USA and the counsel of each shall be provided with any comments which T.O.
Greece or its counsel may receive from ASE or its staff with respect to such
filings.
6.5 Publicity. The initial press release relating to this Agreement shall
---------
be a joint press release which has heretofore been approved by the parties
hereto, and thereafter Stockholder and Buyer shall, subject to their respective
legal obligations (including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable efforts to agree
upon the text of any press release, before issuing any such press release or
otherwise making public statements with respect to the transactions contemplated
herein and in making any filings with any Governmental Entity or with any
national securities exchange with respect thereto.
6.6 Further Action. Upon the terms and subject to the conditions of this
---------------
Agreement, Pacific USA and Stockholder, on the one hand, and Buyer, on the other
hand, shall use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated in this Agreement, to obtain in a timely manner all
material waivers, consents and approvals, and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied in
all material respects all conditions precedent to its obligations under this
Agreement.
6.7 Expenses. Whether or not the Stock Purchase is consummated, all costs
--------
and expenses incurred in connection with this Agreement and the transactions
contemplated herein shall be paid by the party incurring such expenses.
6.8 Certain Benefits.
-----------------
(a) On or before the Closing Date, but effective immediately prior to
the Closing, Pacific USA shall cause (i) the Company and its Subsidiaries to
cease to be sponsors and/or adopting employers under the Company Benefit Plans
identified as items 1 through 4 of Schedule 4.10(a) to the Pacific Disclosure
Letter that are subject to Section 3(3) of ERISA (the "3(3) Plans") and (ii) the
30
<PAGE> 31
Company and its Subsidiaries to transfer, and thereafter be relieved of, all of
their respective obligations and liabilities relating to the 3(3)Plans to one or
more corporations or other entities designated by Pacific USA (other than the
Company and its Subsidiaries); provided, however, that after the Closing, the
Company and its Subsidiaries shall contribute such amounts to, or with respect
to, the 3(3) Plans as are necessary to satisfy the obligations of the Company
and its Subsidiaries with respect to benefits accrued under the 3(3) Plans prior
to the Closing Date.
(b) As soon as administratively feasible after the Closing Date, Buyer
shall cause each employee of the Company and its Subsidiaries (a "Company
Employee") on such date to be provided employee benefits that are reasonably
comparable to the employee benefits provided to such Company Employee by Pacific
USA and the Company at the date hereof. Buyer shall cause (i) each Company
Employee to be credited, for the year during which coverage under any Buyer
group health plan begins, with any deductibles and copayments already incurred
during such year under the Pacific USA's group health plan, (ii) each Company
Employee as of the Closing Date who participated in Pacific USA's group health
plan shall participate in the Buyer group health plan upon the later to occur of
the Closing Date or the effective date of such plan, (iii) any preexisting
condition restrictions to be waived to the extent that such restrictions were
not applicable under the Pacific USA group health plan and (iv) each Company
Employee's years of service with the Company and its Subsidiaries prior to the
Closing Date to be recognized for purposes of eligibility, vesting and benefit
determination under any employee benefit plans and programs (other than benefit
accruals under any defined benefit pension plan) implemented by the Company
after the Closing Date. Notwithstanding any provision in this Agreement to the
contrary, Buyer expressly reserves the right to amend, modify or terminate any
employee benefit plan or program established or maintained after the Closing
Date for the benefit of any Company Employee.
(c) Pacific USA shall , as soon as administratively feasible after the
Closing Date, cause to be transferred from the trustee of Pacific USA's 401(k)
Plan to the trustee of a qualified defined contribution plan established for the
Company ("Company's 401(k) Plan") an amount in cash equal to the aggregate
-----------------------
account balances of Company Employees who are participants in Pacific USA's
401(k) Plan as of the Closing Date ("Company Participants") under Pacific USA's
--------------------
401(k) Plan determined as of the transfer date (which shall be a valuation date)
in accordance with the methods of valuation set forth in Pacific USA's 401(k)
Plan; provided, however, that to the extent any Company Participant owes any
amount to Pacific USA's 401(k) Plan pursuant to the terms of a loan from such
plan to such Company Participant, an in-kind transfer of such loan shall be made
in lieu of the transfer of cash. From and after the date of such transfer,
Buyer shall cause Company's 401(k) Plan to assume the obligations of Pacific
USA's 401(k) Plan with respect to benefits accrued by the Company Participants
under Pacific USA's 401(k) Plan, and Pacific USA's 401(k) Plan shall cease to be
responsible therefor. Buyer and Pacific USA shall cooperate in making all
appropriate arrangements and filings, if any, in connection with the transfer
described above. Further, Buyer and Pacific USA shall cooperate and take such
actions as are necessary to permit the continuation of loan repayments by
Company Participants to Pacific USA's 401 (k) Plan by payroll deductions during
the period beginning on the Closing Date and ending on the date of the transfer
described in this subsection. Pacific USA represents, covenants and agrees with
respect to Pacific USA's 401(k) Plan, and Buyer represents, covenants and agrees
with respect to Company's 401(k) Plan, that, as of the date of the transfer
described in this subsection, such plan (i) will satisfy the requirements of
Sections 401(a), (k), and (m) of the Code, (ii) has or, in the case of the
Company's 401(k) Plan, will have, received a favorable determination letter
regarding such qualified status, and (iii) will have not, since the receipt of
the most recent favorable determination letter, been amended or operated in a
way which would adversely affect such qualified status.
31
<PAGE> 32
(d) Nothing contained in this Section 6.8 is intended to confer upon
any Company Employee any right to continued employment or any right to wages or
benefits at any time after the Closing Date.
6.9 Notification of Certain Matters. The parties hereto shall promptly
---------------------------------
notify each other orally and in writing of (i) the occurrence or non-occurrence
of any fact or event which would be reasonably likely (A) to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time or (B) to cause any covenant,
condition or agreement under this Agreement not to be complied with or satisfied
in any material respect and (ii) any failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that no such notification shall affect the
representations or warranties of any party or the conditions to the obligations
of any party hereunder. The parties hereto shall give prompt notice to the other
of any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated in this Agreement.
6.10 No Solicitation; Third Party Offers. Each of Pacific USA and
---------------------------------------
Stockholder represents and warrants to, and covenants and agrees with, Buyer
that neither it nor the Company has any agreement, arrangement or understanding
with any potential third party acquirer of the Company that, directly or
indirectly, would be violated, or require any notice or amendment or the payment
of any fee, by reason of the execution, delivery or consummation of this
Agreement. Each of Pacific USA and Stockholder shall, and it shall cause its
Affiliates, officers, directors, employees, investment bankers, attorneys and
other agents and representatives to, immediately cease any existing discussions
or negotiations with any person other than Buyer (a "Third Party") heretofore
-----------
conducted with respect to any Acquisition Transaction. At any meeting of
stockholders of the Company or in any other circumstances in which the
Stockholder's vote, consent or other approval may be sought, Stockholder will
vote the Stockholder Shares in favor of any action required to approve the
transactions contemplated hereby and against any Acquisition Transaction or
action that would tend in any manner to prevent, nullify, frustrate, delay or
impede the transactions contemplated hereby. Each of Pacific USA and Stockholder
shall not, and each shall prohibit its Affiliates, officers, directors,
employees, investment bankers, attorneys and other agents and representatives
from taking any action to, directly or indirectly, (i) solicit or initiate any
inquiries, proposals or offers from any Third Party with respect to any
acquisition or purchase of a material portion of the assets (other than in the
ordinary course of business) or business of, or any significant equity interest
in (including by way of a tender offer), or any merger, consolidation or
business combination with, or any recapitalization or restructuring, or any
similar transaction involving, the Company or the adoption of any plan of
liquidation of the Company or declaration of an extraordinary dividend or the
repurchase by the Company of any issued and outstanding Common Stock (the
foregoing being referred to collectively as an "Acquisition Transaction") or
------------------------
(ii) negotiate or otherwise communicate in any way with any Third Party or
otherwise with respect to any Acquisition Transaction or the details thereof.
32
<PAGE> 33
6.11 Indemnification by Company.
----------------------------
(a) For a period of three (3) years after the Closing, Buyer shall not
cause or permit the Company to (i) repeal or eliminate Article VIII of the
Company's by-laws as in effect on the date hereof ("Article VIII"), or (ii)
amend such Article or adopt any bylaw provision inconsistent with Article VIII
in such a manner that would eliminate or adversely effect the indemnification of
the present directors, officers, employees, and agents of the Company after the
Closing Date. Buyer shall not cause or permit any of the Company Subsidiaries
to repeal or eliminate indemnification provisions contained in any bylaws (or
other organizational document) of any such Company Subsidiary in such a manner
that would eliminate or adversely affect the indemnification of the present
directors, officers, employees, and agents of the Company after the Closing
Date.
(b) If during such three (3) year period, Buyer shall sell all or any
portion of the Company Shares or if the Company or any of its successors or
assigns shall consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving entity of such consolidation or merger
or shall transfer all or substantially all of its assets to any person,
corporation or entity, then in each case, Buyer shall not permit or authorize
such transaction unless proper provision shall be made so that the successors
and assigns of Buyer and the Company shall assume the obligations of Buyer set
forth in this Section 6.11 or provide comparable protections.
(c) For a period of six years after the Closing Date, Buyer shall cause
the Company to maintain in effect (through the continuation or endorsement of
the Company's existing directors' and officers' liability coverage (the "D&O
---
Insurance") or the purchase of a "tail-end" rider permitted by such D&O
- ---------
Insurance policy) the directors' and officers' liability coverage in force
covering persons who are directors and officers of the Company as of the date
hereof who are covered by the D&O Insurance, on the terms (including the amounts
of coverage and deductibles, if any) at least as favorable to those now
applicable to them; provided, that the total cost of such coverage does not
exceed 150% of the annual premium currently paid by the Company for D&O
Insurance and if the premium for such coverage exceeds such amount, the Company
shall maintain the greatest coverage available for such 150% of the annual
premium. In lieu of purchasing reporting tail coverage, Buyer may purchase
fully-paid in advance directors' and officers' liability insurance coverage
covering persons who are directors and officers of the Company or any Company
Subsidiary on the date hereof for the six-year period from the Closing Date on
terms no less advantageous to the intended beneficiaries thereof than the
existing D&O Insurance.
(d) The provisions of this Section 6.11 are intended to be for the
benefit of and shall be enforceable by, each indemnified party, his or her heirs
and representatives, and shall survive the consummation of the Stock Purchase
and be binding on all successors and assigns of Buyer and the Company.
6.12 Indemnification by Pacific USA and Stockholder
---------------------------------------------------
(a) Indemnity.
---------
(1) Pacific USA and Stockholder shall jointly and severally indemnify
Buyer, its Affiliates (including the Company and the Company Subsidiaries
following the Closing) and each of their respective officers, directors,
employees, stockholders, agents and representatives against and hold them
33
<PAGE> 34
harmless from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) (collectively "Damages") suffered or
-------
incurred by any such indemnified party to the extent arising from (i) any
breach of any representation or warranty of Pacific USA and Stockholder which
survives the Closing contained in this Agreement or contained in any certificate
delivered pursuant hereto (it being agreed and acknowledged by the parties that
for purposes of Buyer's right to indemnification the representations and
warranties of Pacific USA and Stockholder contained herein shall not be deemed
qualified by any references herein to materiality generally or to whether any
such breach results or may result in a Material Adverse Effect on the Company)
or (ii) any breach of any covenant of Pacific USA or Stockholder contained in
this Agreement.
(2) In addition, Pacific USA and Stockholder shall jointly and
severally indemnify Buyer, its Affiliates (including the Companies following the
Closing) and each of their respective officers, directors, employees,
stockholders, agents and representatives against and hold them harmless from any
and all Damages suffered or incurred by any such indemnified party to the extent
(and only to the extent) that any such Damage is a proximate result of the
reduction of carrying value, as reflected on the financial statements of the
Company and its Subsidiaries as of and at the Closing Date (including a
reduction through a restatement of such financial statements) of the assets
acquired by the Company in connection with its purchase of The Adler Companies,
Inc., a Florida corporation ("Adler"); and provided further, that (x) the
-----
indemnity contemplated in this sentence shall be available and shall apply only
to an action for Damages brought against any such indemnified party by any
unaffiliated third party on or before the third anniversary of the Closing Date,
arising from the reduction of such carrying value, and (y) that such indemnity
shall not apply to a restatement of the financial statements for the year during
which the Closing Date falls and prior years for the purpose of reducing such
carrying value unless Pacific USA and Stockholder and independent certified
public accountants of their selection have had an opportunity to discuss such
restatement with Buyer, the Company and the Company's certified independent
accountants, regarding the merits of any such restatement that could result in a
claim for indemnity under this Agreement.
(3) The express written waiver by Buyer of any condition set forth in
Section 7.2 based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will preclude any
right of Buyer to indemnification, payment of Damages, or other remedy based on
such representation, warranty, covenant, and obligation.
(b) Time Limitations. Pacific USA and Stockholder will have no
-----------------
liability (for indemnification or otherwise) with respect to any representation
or warranty, other than those in Sections 3.1, 3.5, 4.9, 4.10 and 4.13, unless
on or before six (6) months following the Closing Date, Buyer notifies Pacific
USA and Stockholder in writing of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer. Pacific USA and
Stockholder will have no liability (for indemnification or otherwise) with
respect to any representation or warranty contained in Section 4.13, unless on
or before three (3) years following the Closing Date, Buyer notifies Pacific USA
and Stockholder in writing of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by Buyer. Pacific USA and
Stockholder will have no liability (for indemnification or otherwise) with
respect to any representation or warranty contained in Section 4.9 relating to
Property Taxes, unless on or before two (2) years following the Closing Date,
Buyer notifies Pacific USA and Stockholder in writing of a claim relating to
34
<PAGE> 35
such Property Taxes, specifying the factual basis of the claim in reasonable
detail to the extent known by Buyer. A claim with respect to Section 3.1, 3.5,
or 4.10 may be made at any time prior to the expiration of the applicable
statute of limitations period. Any claim related to Taxes (other than Property
Taxes) shall be governed solely by the Tax Indemnity and Allocation Agreement
described in Section 6.13 hereof.
(c) Limitations on Amount. Pacific USA and Stockholder will have no
-----------------------
liability (for indemnification or otherwise) with respect to the matters
described in Section 6.12(a)(1) until the total of all Damages with respect to
such matters exceeds $250,000, and then only for the amount by which such
Damages exceed $250,000. In addition, the aggregate indemnification liability
under Section 6.12 (a) shall not exceed $30,000,000.
(d) Procedures Relating to Indemnification. In order for a party (the
----------------------------------------
"indemnified party") to be entitled to any indemnification provided for under
------------------
this Agreement in respect of, arising out of or involving a claim or demand made
by any person against the indemnified party (a "Third Party Claim"), such
-----------------
indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim within 10 business days after
receipt by such indemnified party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not affect the
- -------- -------
indemnification provided hereunder except to the extent the indemnifying party
shall have been actually prejudiced as a result of such failure (except that the
indemnifying party shall not be liable for any expenses incurred during the
period in which the indem-nified party failed to give such notice). Thereafter,
the indemnified party shall deliver to the indemnifying party, within five
business days after the indemnified party's receipt thereof, copies of all
notices and documents (includ-ing court papers) received by the indemnified
party relating to the Third Party Claim.
If a Third Party Claim is made against an indemni-fied party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges its obligation to indemnify the indemnified
party therefor, to assume the defense thereof with counsel selected by the
indemnifying party; provided that such counsel is not reasonably objected to by
--------
the indemnified party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall not be liable to
the indemnified party for legal expenses subse-quently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel (not reasonably
objected to by the indemnifying party), at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnify-ing party shall control such defense. The indemnifying party shall be
liable for the fees and expenses of counsel employed by the indemnified party
for any period during which the indemnifying party has failed to assume the
defense thereof (other than during the period prior to the time the indemnified
party shall have given notice of the Third Party Claim as provided above).
If the indemnifying party so elects to assume the defense of any Third
Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or prose-cution thereof. Such cooperation
shall include the reten-tion and (upon the indemnifying party's request) the
provi-sion to the indemnifying party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Whether or not the indemnify-ing party shall
35
<PAGE> 36
have assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent (which
consent shall not be unreasonably withheld). If the indemnifying party shall
have assumed the defense of a Third Party Claim, the indem-nified party shall
agree to any settlement, compromise or discharge of a Third Party Claim which
the indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnifying party completely in
connection with such Third Party Claim and which would not otherwise adversely
affect the indemnified party.
Notwithstanding the foregoing, the indemnifying party shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the
reasonable fees and expenses of counsel incurred by the indemnified party in
defending such Third Party Claim) if the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against the indemnified party which the indemnified party reasonably determines,
after conferring with its outside counsel, cannot be separated from any related
claim for money damages. If such equitable relief or other relief portion of
the Third Party Claim can be so separated from that for money damages, the
indemnifying party shall be entitled to assume the defense of the portion
relating to money damages. All claims under Sec-tion 6.12 (a) other than Third
Party Claims shall be governed by Section 6.12(e).
(e) Other Claims. In the event any indemnified party should have a
--------------
claim against any indemnifying party under Section 6.12 (a) that does not
involve a Third Party Claim being asserted against or sought to be collected
from such indemnified party, the indemnified party shall deliver notice of such
claim with reasonable promptness to the indemnifying party. The failure by any
indemnified party so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may have to such indemnified
party under Section 6.12 (a), except to the extent that the indemnifying party
demon-strates that it has been materially prejudiced by such failure. If the
indemnifying party does not notify the indemnified party within 10 calendar days
following its receipt of such notice that the indemnifying party disputes its
liability to the indemnified party under Section 6.12 (a), such claim specified
by the indemnified party in such notice shall be conclusively deemed a liability
of the indemnifying party under Section 6.12(a) and the indemnifying party shall
pay the amount of such liability to the indemnified party on demand or, in the
case of any notice in which the amount of the claim (or any portion thereof) is
estimated, on such later date when the amount of such claim (or such portion
thereof) becomes finally deter-mined. If the indemnifying party has timely
disputed its liability with respect to such claim, as provided above, the
indemnifying party and the indemnified party shall proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction.
(f) Sole and Exclusive Remedy. Should the Closing occur, Buyer's sole
--------------------------
and exclusive remedies for any breach of the representations and warranties of
Stockholder and Pacific USA under this Agreement and any certificate delivered
pursuant to this Agreement (other than claims of or causes of action arising
from fraud), shall be the remedies provided in Section 6.12 (a) through (e),
and Buyer hereby waives, from and after the Closing occur, any and all other
remedies (other than claims of or causes of actions arising from fraud) which
may be available at law or equity for any breach or alleged breach of
representations and warranties of Stockholder and Pacific USA and the Affiliates
of each.
36
<PAGE> 37
6.13 Tax Indemnity Agreement. Stockholder and Buyer will execute a tax
-----------------------
indemnity and allocation agreement substantially in the form of Exhibit 6.13
------------
hereto (the "Tax Indemnity Agreement") on or before the Closing Date, which
-------------------------
shall contain the sole and exclusive remedies of the parties with respect to the
matters covered therein.
6.14 Release of Guaranty or Indemnification. Pacific USA executed that
--------------------------------------
certain Limited Guaranty dated March 1998, executed by Pacific USA in favor of
Bank United (the "Guaranty") for the purpose of guarantying the payment by the
--------
Company of amounts relating to two certain letters of credit issued by Bank
United for the account of the Company in the amounts of $3,193,500 and
$7,316,096, respectively ("Company Letters of Credit"). The Company Letters of
-------------------------
Credit secure the payment by the Company of certain acquisition obligations of
the Company described under the heading "Acquisition Notes Payable" on Schedule
--------
4.5-1 of the Pacific Disclosure Letter. Buyer shall use its reasonable efforts
- -----
to cause Pacific USA to be released, as of the Closing Date, from any and all
obligations under the Guaranty and shall provide a substitute guaranty from T.O.
Greece and Buyer for the Guaranty on the Closing Date. In the event that Buyer
or Company are unable to obtain a full and complete release of Pacific USA from
the Guaranty, Buyer and Company shall, jointly and severally, indemnify Pacific
USA from all costs, fees, or expenses (including reasonable attorneys' fees)
judgments, fines, penalties, losses, damages, liabilities, and amounts paid in
settlement in connection with any claim, action, suit, proceeding, or
investigation, whether civil, administrative, or investigative, arising due to
actions after the Closing out of or relating to the Guaranty and shall execute
and deliver to Pacific USA such other agreements or documents as necessary to
properly evidence such indemnification obligation.
6.15 Non-Competition. For a period of four years from the Closing,
----------------
Stockholder, Pacific USA and their Affiliates shall not, and Stockholder and
Pacific USA shall cause each of their Affiliates not to, directly or indirectly:
(i) engage in homebuilding activities or businesses which are
substantially in competition with the homebuilding business of the Company
or its Subsidiaries within a fifty (50) mile radius of any location where
the Company or any of its Subsidiaries currently conducts its homebuilding
activities or businesses ("Competitive Activities"); and
(ii) perform any action, activity or course of conduct consisting of
the following ("Detrimental Activities"): (A) soliciting, recruiting or
hiring any employees of the Company or any Company Subsidiary; (B)
soliciting or encouraging any employee of the Company or any Company
Subsidiary to leave the employment of the Company or any Company Subsidiary
and (C) disclosing or furnishing to anyone any confidential information
relating to the Companies or other-wise using such confidential information
for its own benefit or the benefit of any other person.
Notwithstanding anything to the contrary contained in this Section 6.15,
Buyer hereby agrees that the foregoing covenant shall not be deemed breached as
a result of the ownership by Stockholder or Pacific USA or any Affiliate of
Stockholder or Pacific USA of: (i) less than an aggregate of 5% of any class of
stock of a person engaged, directly or indirectly, in Competitive Activities; or
(ii) less than 10% in value of any instrument of indebted-ness of a person
engaged, directly or indirectly, in Competitive Activities. In addition,
Pacific USA and its Affiliates (other than the Companies) are engaged in the
businesses of commercial and residential real estate acquisition and
investment, development and renovation and single-family lot development
37
<PAGE> 38
involving the subdivision of land and construction and installation of streets,
utilities, and other infrastructure improvements required to prepare single
family lots for sale to builders. Notwithstanding anything to the contrary
contained in this Section 6.15, Buyer hereby agrees that the foregoing covenants
shall not apply to these activities but shall be limited to the construction of
single family homes.
If any covenant in this Section 6.15 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against Pacific USA
and Stockholder.
6.16 Option to Purchase in Single Family Lot Developments.
-----------------------------------------------------------
(a) For a period of two (2) years from and after the Closing Date,
Pacific USA shall cause its Affiliates engaged in the business of single
family lot development (the "Lot Development Affiliates") to first offer to
--------------------------
the Company the option and right to purchase lots (the "Option") associated
------
with each single family lot development project in each market in which the
Company is then currently operating (the "Project"), for which an earnest
-------
money contract for the purchase of land for such Project is entered into by
the Lot Development Affiliate after the Closing Date. A Lot Development
Affiliate generally enters into such contracts subject to feasibility
studies and due diligence. During the due diligence period set forth in the
earnest money contract, the Lot Development Affiliate will send a written
notice to the Company offering the Company the first opportunity to
purchase such lots in such Project. Such offer ("Offer") shall include the
-----
number of lots, size of lots, the lot purchase price, lot price escalator
factor, minimum lot purchase requirements, zoning classification, earnest
money, specific performance requirements and other terms determined by the
Lot Development Affiliate in its sole discretion. The Company shall
exercise its Option within ten (10) days following receipt of the Offer. If
the Company does not notify the Lot Development Affiliate in writing of its
election to purchase the lots on or before 5:00 p.m. Central Time on the
10th day following receipt of the Offer, then it shall be deemed that the
Company has elected not to exercise its Option. If the Company desires to
make any changes to the terms of the Offer, then the Company must negotiate
with the Lot Development Affiliate during the ten (10) day period; if the
Company and the Lot Development Affiliate are unable to agree on terms
prior to the expiration of the ten (10) day period then the Company's
Option as to the lots described in the Offer shall terminate and the Lot
Development Affiliate shall have no further obligation to the Company
concerning such lots or the Project, except as provided in Section 6.16(b).
If the Company elects to purchase the lots, then the Company and the Lot
Development Affiliate shall, on or before the 20th day following receipt of
the Offer, execute the lot purchase agreement containing such terms and
conditions contained in the Offer (or as otherwise agreed to by both
parties prior to the expiration of the ten day period following the Offer).
If a lot purchase agreement acceptable to both parties is not agreed to and
executed prior to such twenty (20) day period, then the Company's Option as
to the lots described in the Offer shall terminate and the Lot Development
Affiliate shall have no further obligation to the Company concerning such
lots or the Project, except as provided in Section 6.16(b).If the Lot
Development Affiliate determines not to proceed with any Project at the end
of the due diligence period under the contract for purchase of the land,
then the lot purchase agreement shall terminate.
(b) In the event that the Company elects not to accept the Offer
described in Section 6.16(a), then the Company, at its election, may submit
to the Lot Development Affiliate, on or before ten (10) days following the
receipt of the Offer, a written offer to purchase (the "Company's Offer")
----------------
the lots identified in the Offer.
38
<PAGE> 39
The Lot Development Affiliates shall have ten (10) days following
receipt of the Company Offer to accept the Company Offer or the Company
Offer shall terminate; provided, however that the Lot Development Affiliate
shall not be permitted to sell said lots included in the Company Offer to a
third Party on financial terms less favorable to the Lot Development
Affiliate than that set forth in the Company Offer without giving the
Company an opportunity to match such financial terms.
(c) For purposes of this Section 6.16 only, offers, notices, and other
communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by overnight courier or
telecopier to the respective parties as follows:
If to the Company, in relation to a property in Florida:
Westbrook Communities, Inc.
Attention: James M. Carr
President & CEO
9350 Sunset Drive, Suite 100
Miami, FL 33173
Facsimile No.: (305) 595-2676
If to the Company, in relation to a property in a market other than
Florida:
Newmark Homes, L.P.
Attention: Eric Rome
5910 Courtyard Drive, Suite 230
Austin, TX 78731
Facsimile No.: (512) 342-0057
If to the Lot Development Affiliate:
LandSource Corporation
Attention: Coleman Bradley
17505 West Catawba Avenue, Suite 350
Cornelius, NC 28031
(704) 987-9873
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
6.17 Services Agreement. Stockholder and Pacific USA will execute a
-------------------
Services Agreement substantially in the form of Exhibit 6.17 hereto (the
------------
"Services Agreement") simultaneously with the Closing. Such Services Agreement
------------------
shall become effective upon the approval, after Closing, by the Company's Board
of Directors of the Services Agreement and the execution thereof by the Company.
39
<PAGE> 40
6.18 Company Board of Directors. Pacific USA and Stockholder shall
-----------------------------
cause Mike McCraw, and Bill Bradley to resign from their positions on the Board
of Directors of Company at the Closing Date.
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect Stock Purchase.
------------------------------------------------------------------
The respective obligation of each party to effect the Stock Purchase is subject
to the satisfaction or waiver at or prior to the Closing Date of each of the
following conditions:
(a) Regulatory Consents. All filings with any Governmental Entity
--------------------
required to be made prior to the Closing Date by Stockholder, Pacific USA
or Buyer or any of their respective Subsidiaries, and all consents of any
Governmental Entity required to be obtained prior to the Closing Date by
Stockholder, Pacific USA or Buyer or any of their respective Subsidiaries
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein by Stockholder,
Pacific USA and Buyer shall have been made or obtained (as the case may
be), except where the failure to so make or obtain will not result in a
Material Adverse Effect upon Buyer, Stockholder, Pacific USA or the
Company.
(b) Other Consents. All consents or waivers identified in Schedule 3.3
-------------- ------------
of the Pacific Disclosure Letter shall have been made or obtained.
(c) Prohibition. No court or other Governmental Entity of competent
-----------
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) (collectively, an "Order")
-----
that is in effect and restrains, enjoins or otherwise prohibits
consummation of the transactions contemplated in this Agreement. There
shall not be pending or threatened by any Governmental Entity any suit,
action or proceeding (or by any other person any suit, action or proceeding
which has a reasonable likelihood of success), challenging or seeking to
restrain or prohibit the purchase and sale of the Stockholder Shares or any
of the other transactions contemplated by this Agreement.
(d) Tax Indemnity Agreement. Buyer and Pacific USA shall have duly
-------------------------
executed and delivered the Tax Indemnity Agreement described in Section
6.13.
7.2 Conditions to Obligations of Buyer. The obligations of Buyer to effect
----------------------------------
the Stock Purchase are also subject to the satisfaction or waiver by Buyer at or
prior to the Closing Date of the following conditions:
40
<PAGE> 41
(a) Representations and Warranties. The representations and warranties
------------------------------
of Stockholder and Pacific USA set forth in this Agreement qualified as to
materiality shall be true and correct, and those not so qualified shall be
true and correct in all material respects, as of the date of this Agreement
and (except to the extent such representations and warranties speak as of
an earlier date, in which case such representation or warranty shall be
true and correct as of such earlier date) as of the Closing Date as though
made on and as of the Closing Date.
(b) Performance of Obligations of Stockholder and Pacific USA. Each of
---------------------------------------------------------
Stockholder and Pacific USA shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or
prior to the Closing Date.
(c) Officer's Certificates. Buyer shall have been furnished with
-----------------------
certificates, executed by a duly authorized officer of each of Stockholder
and Pacific USA, dated the Closing Date, certifying as to the fulfillment
of the conditions in Sections 7.2(a) and 7(b).
(d) Closing Documents. Each document required to be delivered pursuant
-----------------
to Section 2.3(a) must have been delivered.
(e) Opinion. Buyer shall have received an opinion dated the Closing
-------
Date of Thompson Knight Brown Parker & Leahy L.L.P., counsel to Pacific USA
and Stockholder, substantially in the form of Exhibit 7.2(e)-1. Buyer shall
----------------
have received an opinion dated the Closing Date of counsel to certain
Subsidiaries of the Company, substantially in the form of Exhibit 7.2(e)-2.
-----------------
(f) Proceedings. There shall not be pending or threatened by any
-----------
Governmental Entity any suit, action or proceeding (or by any other person
any suit, action or proceeding which has a reasonable likelihood of
success), (A) seeking to obtain from T.O. Greece or Buyer in connection
with the purchase and sale of the Stockholder Shares any money damages that
are material in relation to T.O. Greece and Buyer taken as a whole, (B)
seeking to prohibit or limit the ownership or operation by Buyer, the
Company or any of the Company's Subsidiaries, of any material portion of
the business or assets of Buyer or the Company and its Subsidiaries taken
as a whole, or to compel Buyer, the Company or any of the Company's
Subsidiaries to dispose of or hold separate any material portion of the
business or assets of Buyer or the Company and its Subsidiaries taken as a
whole, in each case as a result of the purchase and sale of the Stockholder
Shares or any of the other transactions contemplated by this Agreement, (C)
seeking to impose limitations on the ability of Buyer to acquire or hold,
or exercise full rights of ownership of, the Stockholder Shares, including
the right to vote the Stockholder Shares on all matters properly presented
to the stockholders of the Company or (D) seeking to prohibit Buyer from
effectively controlling in any material respect the business or operations
of the Company or any of its Subsidiaries.
(g) The appropriate officers of each of Pacific USA, the Companies and
any other person, as required by the applicable agreement, shall have
executed and delivered each agreement described in Exhibit 7.2(g) hereof
--------------
which is contemplated to be executed by each of them.
(h) Buyer shall have received a certificate of the Secretary or
Assistant Secretary (or other authorized corporate officer) of Pacific USA
and Stockholder certifying as true, accurate and complete, as of the date
of the execution of this Agreement and again as of the Closing Date: (i) a
copy of the resolutions of the respective Board of Directors authorizing
the execution, delivery and performance of this Agreement and the other
41
<PAGE> 42
documents contemplated hereby to which it is a party; (ii) a certified copy
of the Articles of Incorporation issued by the Secretary of State of the
respective entity; (iii) a copy of the Bylaws of the respective entity; and
(iv) the incumbency of the officer or officers authorized to execute on
behalf of such entity this Agreement and the other documents contemplated
hereby to which it is a party;
(i) Buyer shall have received a certificate of the Secretary or
Assistant Secretary (or other authorized corporate officer) of the Company
and each Subsidiary of the Company certifying as true, accurate and
complete, as of the date of this Agreement and again as of the Closing
Date: (i) a certified copy of the Articles of Incorporation (or other
similar constituent document) of the Subsidiary issued by the Secretary of
State of the state of such Subsidiary's incorporation or organization; and
(ii) a copy of the Bylaws (or other similar constituent document) of such
Subsidiary;
(j) Buyer shall have received on or before the Closing Date the
Services Agreement, duly executed, substantially in the form of Exhibit
6.17;
(k) Buyer shall have received on or before the Closing Date an
amendment to the Research Services Agreement dated November 1, 1997 between
the Company and Pacific Research Group, Inc. extending the term of such
agreement to December 31, 2001;
(l) The stock options or rights granted pursuant to and the 1988
Tandem Stock Option/Stock Appreciation Rights Plan shall have been
terminated on or prior to the Closing Date.
7.3 Conditions to Obligations of Stockholder and Pacific USA. The
----------------------------------------------------------------
obligation of Stockholder and Pacific USA to effect the Stock Purchase are also
subject to the satisfaction or waiver by Stockholder and Pacific USA prior to
the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Buyer set forth in this Agreement qualified as to materiality shall be
true and correct, and those not so qualified shall be true and correct in
all material respects, as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date, in
which case such representation or warranty shall be true and correct as of
such earlier date) as of the Closing Date as though made on and as of the
Closing Date.
(b) Performance of Obligations of Buyer. Buyer shall have performed in
-----------------------------------
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date.
(c) Officer's Certificates. Each of Pacific USA and Stockholder shall
----------------------
have been furnished with certificates, executed by a duly authorized
officer of Buyer, dated the Closing Date, certifying as to the fulfillment
of conditions in Sections 7.3(a) and (b).
(d) Release of Guaranty. Pacific USA and Stockholder shall have
---------------------
received reasonably satisfactory evidence of the release of the Guaranty as
set forth in Section 6.14 or, if the release has not been obtained, an
agreement or other document in form reasonably satisfactory to Stockholder
and Pacific USA evidencing the indemnification obligations of Buyer and the
Company, as set forth in Section 6.13.
42
<PAGE> 43
(e) Closing Documents. Each document required to be delivered pursuant
-----------------
to Section 2.3(b) must have been delivered.
(f) Opinion. Pacific USA and Stockholder shall have received an
-------
opinion dated the Closing Date of Vinson & Elkins, L.L.P., counsel to
Buyer, substantially in the form of Exhibit 7.3(f).
--------------
(g) Pacific USA and Stockholder shall have received a certificate of
the Secretary or Assistant Secretary (or other authorized corporate
officer) of Buyer certifying as true, accurate and complete, as of the date
of this Agreement and again as of the Closing Date: (i) a copy of
resolutions of the Board of Directors of Buyer authorizing the execution,
delivery and performance of this Agreement and the other documents
contemplated hereby to which it is a party; and (ii) the incumbency of the
officer or officers authorized to execute on behalf of Buyer this Agreement
and the other documents contemplated hereby to which it is a party.
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated and the
-----------------------------
Stock Purchase may be abandoned at any time prior to the Closing Date, by mutual
written consent of Stockholder and Buyer.
8.2 Termination by Either Buyer or Stockholder. This Agreement may be
--------------------------------------------
terminated and the Stock Purchase may be abandoned at any time prior to the
Closing Date by either Buyer or Stockholder, by action of their respective
Boards of Directors if any Order permanently restraining, enjoining or otherwise
prohibiting the Stock Purchase shall be entered and such Order is or shall have
become nonappealable, provided that (i) the party seeking to terminate this
Agreement shall have complied with its obligations under Section 6.6 with
respect to the removal or lifting of such Order and (ii) the noncompliance with
this Agreement by the party seeking to terminate this Agreement shall not have
been the proximate cause of the issuance of the Order.
8.3 Termination by Stockholder. This Agreement may be terminated and the
---------------------------
Stock Purchase may be abandoned at any time prior to the Closing Date, by
Stockholder if:
(a) (i) the Stock Purchase shall not have been consummated on or
before December 15, 1999 or (ii) any of the conditions set forth in Section
7.1 or 7.3 shall have become incapable of fulfillment; provided, however,
that the right to terminate this Agreement pursuant to this subsection (a)
shall not be available to Stockholder if it has breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the failure to consummate the Stock Purchase
referenced in this subsection (a); or
(b) there has been a material breach by Buyer of any representation,
warranty, covenant or agreement contained in this Agreement that is not
curable or, if curable, is not cured prior to the earlier of (i) twenty
(20) days after written notice of such breach is given by Stockholder to
Buyer and (ii) the date referred to in subsection (a).
43
<PAGE> 44
8.4 Termination by Buyer. This Agreement may be terminated and the Stock
---------------------
Purchase may be abandoned at any time prior to the Closing Date by Buyer if:
(a) (i) the Stock Purchase shall not have been consummated on or
before December 15, 1999 or (ii) any of the conditions set forth in Section
7.1 or Section 7.2 shall have become incapable of fulfillment; provided,
however, that the right to terminate this Agreement pursuant to this
subsection (a) shall not be available to Buyer if it has breached in any
material respect its obligations under this Agreement in any manner that
shall have proximately contributed to the occurrence of the failure
referred to in this subsection (a); or
(b) there has been a material breach by Stockholder or Pacific USA of
any representation, warranty, covenant or agreement contained in this
Agreement that is not curable or, if curable, is not cured prior to the
earlier of (i) twenty (20) days after written notice of such breach is
given by Buyer to such party and (ii) the date referred to in subsection
(a).
8.5 Effect of Termination. Each party's right of termination under Article
---------------------
VIII is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated, all further obligations of the
parties under this Agreement will terminate, except that the obligations in
Sections 6.7 and the Confidentiality Agreement between the parties dated July
--------------------------
28, 1999 (the "Confidentiality Agreement") will survive; provided, however, that
if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired. In addition, if the Agreement is
terminated, the Escrow Funds shall be returned to T.O. Greece.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations and Warranties. The representations
---------------------------------------------
and warranties made in this Agreement shall survive for six (6) months following
the Closing Date. Notwithstanding the foregoing, (a) the representations and
warranties related to Property Taxes shall survive for two (2) years following
the Closing, (b) the representations and warranties set forth in Section 4.13
shall survive for three (3) years following the Closing Date, and (c) the
representations and warranties set forth in Sections 3.1, 3.5, 4.9 (except for
Property Taxes) and 4.10 shall survive for the applicable statute of limitations
period.
9.2 Entire Agreement; Assignment.
------------------------------
(a) This Agreement (including the documents, schedules, exhibits and
the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and thereof,
except for the Confidentiality Agreement.
44
<PAGE> 45
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written
consent of each other party hereto; provided, however, that Buyer may
assign all or a portion of its rights and obligations under this Agreement
to T.O. Greece, Constantine Stengos or a company controlled directly or
indirectly by Mr. Stengos without the consent of Stockholder or Pacific
USA; provided that such assignee shall have (i) assumed all obligations of
Buyer set forth in this Agreement, (ii) made the representations and
warranties contained in Article V hereof, (iii) provided to Stockholder
appropriate evidence of the representation set forth in Section 5.6, and
(iv) provided a Buyer's Disclosure Schedule covering matters in Article V
which is reasonably acceptable to Pacific USA and Stockholder.
9.3 Validity. The invalidity or unenforceability of any provision of
--------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect. In lieu of such invalid or unenforceable provision there shall be
automatically added as part of this Agreement a provision as similar in terms to
such invalid or unenforceable provision as may possible and be valid and
enforceable provided that such new provision (x) reflects the intent of the
parties hereto and (y) does not change the bargained for consideration or
benefits to be received by each party hereto.
9.4 Notices. All notices, requests, clause, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or telecopier to the
respective parties as follows:
If to T.O. Greece:
Andreas Stengos
Technical Olympic S.A.
20 Solomou Street
Ana Kalamaki
Athens, Greece 17456
Facsimile Number: 011 301 9955586
If to Buyer:
Yiannis Delikanakis
Technical Olympic S.A.
20 Solomou Street
Ana Kalamaki
Athens, Greece 17456
Facsimile Number: 011 301 9955586
45
<PAGE> 46
with a copy to
Dr. Padazis O. Karamanolis
Karatzas & Perakis
6, Omirou Street
105 64 Athens, Greece
Facsimile Number: 32 34 363
and with a copy to
J. Brian Sokolik
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Facsimile Number: 713-615-5618
and with a copy to
T. Mark Kelly
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Facsimile Number: 713-615-5531
If to Stockholder or Pacific USA:
Pacific USA Holdings Corp.
2740 N. Dallas Parkway, Suite 200
Plano, TX 75093
Attention: Bill C. Bradley
Facsimile Number: 972-543-1501
46
<PAGE> 47
with a copy to:
Cathryn L. Porter
Chief General Counsel
Pacific USA Holdings Corp.
3200 Southwest Freeway
Suite 1220
Houston, Texas 77027
Facsimile Number: 713-871-0155
and with a copy to:
Pacific USA Holdings Corp.
100 Park Avenue, 28th Floor
New York, New York 10017
Attn: Larry Horner, Chairman
Facsimile Number: 212-949-5141
and with a copy to:
Dallas Parker
Thompson Knight Brown Parker & Leahy L.L.P.
1200 Smith, Suite 3600
Houston, Texas 77002
Facsimile Number: 713-654-1871
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
9.5 Governing Law. This Agreement shall be governed by andconstrued
-------------
in accordance with the laws of the State of Texas, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
9.6 Descriptive Headings. The descriptive headings herein are
---------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
9.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, including facsimile counterparts, each of which shall be deemed to
be an original, but all of which shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile transmission shall be effective delivery of a manually executed
counterpart to this Agreement.
9.8 Parties In Interest. This Agreement shall be binding upon and
---------------------
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement; provided, however, that the provisions of Sections 6.11 and 6.12
shall extend to and benefit such parties as expressly set forth in such
sections.
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<PAGE> 48
9.9 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 their specific terms or were otherwise
breached. It is accordingly agreed, unless otherwise specifically indicated in
this Agreement, that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any United States or state court having
competent jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity, except for expenses.
9.10 Amendments. No amendment, modification or waiver in respect of this
----------
Agreement shall be effective unless it shall be in writing and signed by the
parties hereto.
9.11 Further Assurances. The parties agree (a) to furnish upon request
------------------
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as any other
party hereto may reasonably request for the purpose of carrying out the
transactions contemplated by this Agreement.
[Signature pages follows]
48
<PAGE> 49
[SIGNATURE PAGE - STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
"STOCKHOLDER"
Pacific Realty Group, Inc.
By: /s/ MICHAEL K. McCRAW
------------------------------------------
Name: Michael K. McCraw
----------------------------------------
Title: President
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"PACIFIC USA"
Pacific USA Holdings Corp.
By: /s/ BILL C. BRADLEY
------------------------------------------
Name: Bill C. Bradley
----------------------------------------
Title: Chief Executive Officer
---------------------------------------
"BUYER"
Technical Olympic USA, Inc.
By: /s/ YANNIS DELIKANAKIS
------------------------------------------
Name: Yannis Delikanakis
----------------------------------------
Title: Vice President/Secretary
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49
<PAGE> 50
SIGNATURE AND GUARANTY OF T.O. GREECE
This Stock Purchase Agreement is being executed by and on behalf of
Technical Olympic, S.A., a Greek corporation ("T.O. Greece"), specifically to
-----------
induce Pacific USA and Stockholder to execute this Agreement. In this regard,
T.O. Greece hereby guarantees to each of Pacific USA and Stockholder the
performance of the covenants and agreements of Buyer contained in this Agreement
subject to the terms and conditions of such Stock Purchase Agreement.
Technical Olympic S.A.
By: /s/ ANDREAS STENGOS
------------------------------------------
Name: Andreas Stengos
----------------------------------------
Title: General Manager
---------------------------------------
Dated: November 24, 1999
50
<PAGE> 1
EXHIBIT 99.1
AFFILIATE OF GREEK CONSTRUCTION FIRM ACQUIRES
MAJORITY INTEREST IN NEWMARK HOMES
SUGAR LAND, Texas, December 16, 1999 -- Newmark Homes Corp. (NNM: NHCH)
announced today that Technical Olympic USA, Inc., an affiliate of Technical
Olympic, S.A., a leading Greek construction company, has completed the
acquisition of 80% of the outstanding common stock of Newmark from Pacific
Realty Group. The purchase price was $86 million, or $9.35 per share. On
October 4, 1999, Newmark announced the letter of intent for this transaction.
"With this strategic acquisition, Technical Olympic is establishing an active
presence in the US market and plans to further expand Newmark Homes'
operations, " said Yannis Delikanakis, Vice President of Technical Olympic USA.
Lonnie Fedrick, President and Chief Executive Officer of Newmark Homes Corp.
said, "Our employees are excited about the growth potential that Technical
Olympic offers our company and look forward to continuing to aggressively
expand our business."
Technical Olympic, S.A. is a fully diversified construction company based in
Athens, Greece. The firm is active in the United Kingdom, Germany, Romania and
Greece.
Newmark Homes Corp. designs, builds and sells single-family homes in eight
major markets within the Southwest and Southeast United States: Houston,
Austin, Dallas and San Antonio in Texas; Ft. Lauderdale, Palm Beach and Miami
in South Florida; Nashville, Tennessee, and Charlotte and
Greensboro/Winston-Salem in North Carolina. As of September 30, 1999, Newmark
operated in 73 subdivisions and has closed 1,406 homes with an average sales
price of $237,000 for the first nine months of 1999.
Safe Harbor Provision. This press release contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of known and
unknown risks and uncertainties including but not limited to: increases in
interest rates; business conditions; growth in the home building industry;
investment real estate; the economy in general; competitive factors; the cost
of building materials; and all other factors detailed in the Company's
Registration Statement on Form S-1 (SEC File No. 333-4221) that was declared
effective March 12, 1998 and its recent SEC reports on Form 10-Q.
For additional information, contact:
Terry White Sylvia A. Dresner
Chief Financial Officer Senior Vice President
Newmark Homes Corp. VMW Corporate & Investor Relations
(281) 243-0100 (212) 616-6161
newmarkhomecorp.com [email protected]
