<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: November 30, 1994
Date of earliest event reported: November 17, 1994
J.M. PETERS COMPANY, INC.
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
File No. 0-15925
------------------------------
(Commission File Number)
<TABLE>
<S> <C>
Delaware 95-2956559
- ------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
</TABLE>
3501 Jamboree Road, Suite 200, Newport Beach, California 92660
- ------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(714) 854-2500
------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. Acquisition or Disposition of Assets.
On November 17, 1994, with an effective date of September 1, 1994, J.M.
Peters Company, Inc. ("JMP") purchased 100% of the outstanding capital stock
("Purchased Shares") of Clark Wilson Homes, Inc., a Texas corporation ("CWH"),
under a definitive purchase agreement (the "Purchase Agreement") executed by
JMP and Clark Wilson ("Wilson") on November 17, 1994. JMP's board of
directors, by a majority vote of disinterested directors on November 15, 1994,
approved the terms of the Purchase Agreement and JMP's acquisition of CWH.
The consideration for the Purchased Shares was $3,500,000 in cash and a
$2,500,000 promissory note issued to Wilson by JMP. The cash portion of the
payment was provided out of readily available funds of JMP and were not
borrowed.
There are no material relationships between any officers or directors of JMP
and Wilson or CWH.
ITEM 7. Financial Statements, Proforma Financial Information and Exhibits.
The following Consolidated Financial Statements and Proforma Financial
Information are included under this item:
Consolidated Proforma Balance Sheet of J.M. Peters Company, Inc. and
Subsidiaries as of August 31, 1994.
Consolidated Proforma Statements of Operations of J.M. Peters Company, Inc.
and Subsidiaries with Clark Wilson Homes, Inc. for the Year Ended February 28,
1994 and for the Six Months Ended August 31, 1994.
Notes to Consolidated Proforma Financial Statements.
Balance Sheets of Clark Wilson Homes, Inc. as of August 31, 1994 and December
31, 1993.
Statements of Income of Clark Wilson Homes, Inc. for the Eight Months Ended
August 31, 1994 and 1993.
Statements of Cash Flows of Clark Wilson Homes, Inc. for the Eight Months
Ended August 31, 1994 and 1993.
Notes to Financial Statements.
Report of Independent Accountants.
Balance Sheets of Clark Wilson Homes, Inc. as of December 31, 1993 and 1992.
Statements of Income of Clark Wilson Homes, Inc. for the Years Ended December
31, 1993 and 1992.
<PAGE> 3
Statements of Cash Flows of Clark Wilson Homes, Inc. for the Years Ended
December 31, 1993 and 1992.
Notes to Financial Statements of December 31, 1993 and 1992.
EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
Exhibit 2.1 Purchase and Sale Agreement dated November 17, 1994 by and
between JMP, Wilson and CWH
</TABLE>
<PAGE> 4
J. M. PETERS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA BALANCE SHEET
August 31, 1994
(UNAUDITED)
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
Purchase
Accounting Pro Forma
J.M. Peters Clark Wilson Adjustments Combined
----------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 25,875 $ 56 $(10,952)(A) $ 14,979
Restricted cash 1,483 - 1,483
Accounts and notes receivable 2,824 709 3,533
Residential inventory 158,388 10,431 620 (B) 169,439
Prepaid expenses and other asset 11,888 691 12,579
Goodwill - - 3,635 (A) 3,635
--------- ------- -------- ---------
$ 200,458 $11,887 $ (6,697) $ 205,648
========= ======= ======== =========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C> <C>
Notes Payable $ 111,950 $ 7,452 $(4,952)(A) $ 114,450
Accounts payable and accrued
liabilities 21,376 2,690 24,066
--------- ------- -------- ---------
Total liabilities 133,326 10,142 (4,952) 138,516
--------- ------- -------- ---------
Minority Interest in Joint
Ventures 5,739 - 5,739
Stockholders' equity:
Clark Wilson Homes equity - 1,745 (1,745)(A) -
JMP Common stock, par value
$.10 per share, 60,000,000
shares authorized; 14,995,000
issued and outstanding 1,500 - 1,500
Additional paid in capital 211,888 - 211,888
Retained earnings (deficit) (151,995) - (151,995)
--------- ------- -------- ---------
Total Stockholders' equity 61,393 1,745 (1,745) 61,393
--------- ------- -------- ---------
$ 200,458 $11,887 $(6,697) $ 205,648
========= ======= ======= =========
</TABLE>
<PAGE> 5
J. M. PETERS COMPANY, INC. AND SUBSIDIARIES WITH CLARK WILSON HOMES, INC.
CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands except per share data)
<TABLE>
<CAPTION>
J.M. Peters Clark Wilson
Six Months Six Months Pro Forma Pro Forma
August 31, 1994 August 31, 1994 Adjustments Combined
--------------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Sales of homes and land $63,930 $21,493 $85,423
Interest and other income 2,092 4 $(159)(C) 1,937
------- ------- ----- -------
66,022 21,497 (159) 87,360
------- ------- ----- -------
Costs and expenses:
Cost of homes and land 51,513 17,041 217(D,E) 68,771
Selling, general and
administrative 9,154 3,145 363 (F) 12,662
Minority interest in income 3,433 - 3,433
------- ------- ----- -------
64,100 20,186 580 84,866
------- ------- ----- -------
Income (loss) before provision (benefit) for
income taxes and extraordinary gain 1,922 1,311 (739) 2,494
Provision for income taxes 699 0 217 (G) 916
------- ------- ----- -------
Income (loss) before extraordinary gain 1,223 1,311 (956) 1,578
Extraordinary Gain 3,075 3,075
------- ------- ----- -------
Net income (loss) $ 4,298 $ 1,311 $(956) $ 4,653
======= ======= ===== =======
Net income (loss) per common share:
Before extraordinary gain $ 0.08 $ 0.10
Extraordinary gain 0.21 0.21
------- -------
Net income (loss) $ 0.29 $ 0.31
======= =======
Weighted average number of shares 14,995 14,995
======= =======
</TABLE>
<PAGE> 6
J. M. PETERS COMPANY, INC. AND SUBSIDIARIES WITH CLARK WILSON HOMES, INC.
CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(In thousands except per share data)
<TABLE>
<CAPTION>
J.M. Peter Clark Wilson
Year Ended Year Ended Pro Forma Pro Forma
February 28, 1994 December 31, 1993 Adjustmenents Combined
(Audited) (Audited) (Unaudited) (Unaudited)
----------------- ----------------- ------------- -----------
<S> <C> <C> <C> <C>
Sales of homes and land $88,140 $19,841 $107,981
Interest and other income 2,926 10 $ (318)(C) 2,618
------- ------- ------- --------
91,066 19,851 (318) 110,599
------- ------- ------- --------
Costs and expenses:
Cost of homes and land 73,348 15,888 (659)(D,E) 88,577
Selling, general and
administrative 12,322 3,035 727 (F) 16,084
Minority interest in income 4,332 - 4,332
Interest expense 418 418
------- ------- ------- --------
90,420 18,923 68 109,411
------- ------- ------- --------
Income (loss) before provision (benefit) for
income taxes and extraordinary gain 646 928 (386) 1,188
Provision for income taxes 0 0 206(G) 206
------- ------- ------- --------
Income (loss) before extraordinary gain 646 928 (592) 982
Extraordinary Gain 4,268 4,268
------- ------- ------- --------
Net income (loss) $ 4,914 $ 928 $ (592) $ 5,250
======= ======= ======= ========
Net income (loss) per common share:
Before extraordinary gain $0.04 $ 0.06
Extraordinary gain 0.30 0.30
------- --------
Net income (loss) $0.34 $ 0.36
======= ========
Weighted average number of shares 14,488 14,488
======= ========
</TABLE>
(A) To effect the purchase of Clark Wilson Homes, the Company paid $3.5 million
in cash and issued a note payable in the amount of $2.5 million with
interest at 8% annually. Payments on the note payable and interest are
contingent on Clark Wilson achieving specifed earnings goals. Additionally,
the Company retired the notes payable of Clark Wilson of approximately
$7.5 million. The total purchase price exceeds the estimated fair value
of the net assets resulting in goodwill of approximately $3.6 million.
(B) To adjust to fair value of residential inventories acquired.
(C) To reduce the estimated interest earned by J M Peters on the total cash
distributed of $11.0 million.
(D) To reduce cost of homes sold by the interest savings on the net debt
reduction.
(E) The increase in cost of sale due to the adjustment to fair value of
inventories.
(F) To reflect the amortization of goodwill over a five year period.
(G) To accrue taxes at the statutory federal and state rates.
<PAGE> 7
The pro forma data has been prepared assuming that the acquisition had
occurred on the pro forma balance sheet date or, for the pro forma statements of
operations, March 1, 1993. The pro forma adjustments are based upon
available information and certain assumptions that management believes are
reasonable. The pro forma financial information does not purport to represent
what the Company's financial position or results of operations would actually
have been had the acquisition in fact occurred on the assumed date or at the
beginning of the period indicated or to project the Company's financial
position or results of operations for any future date or period.
<PAGE> 8
CLARK WILSON HOMES, INC.
BALANCE SHEETS
AUGUST 31, 1994 AND DECEMBER 31, 1993
ASSETS
<TABLE>
<CAPTION>
August 31,
1994 December 31,
(unaudited) 1993
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 56,000 $ 498,000
Accounts Receivable 709,000 136,000
Residential inventories 10,431,000 5,595,000
Property and equipment, net 361,000 254,000
Prepaid expenses and other assets 330,000 129,000
----------- ----------
Total assets $11,887,000 $6,612,000
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Notes payable $ 7,452,000 $4,167,000
Accounts payable 1,806,000 904,000
Accrued and other liabilities 884,000 487,000
----------- ----------
Total liabilities 10,142,000 5,558,000
----------- ----------
Stockholder's equity:
Common stock, par value $1.00;
100,000 shares authorized;
1,176 shares issued and outstanding; 1,000 1,000
Paid in capital 384,000 384,000
Retained earnings 1,360,000 669,000
----------- ----------
Total stockholder's equity 1,745,000 1,054,000
----------- ----------
Total liabilities and stockholder's equity $11,887,000 $6,612,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE> 9
CLARK WILSON HOMES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1994 & 1993
<TABLE>
<CAPTION>
Eight months ended August 31,
-------------------------------
1994 1993
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Revenues:
Sales $26,342,000 $10,370,000
Other, net 5,000 7,000
----------- -----------
26,347,000 10,377,000
----------- -----------
Costs and expenses:
Cost of sales 20,824,000 8,408,000
Selling, general and administrative 3,929,000 1,556,000
----------- -----------
24,753,000 9,964,000
----------- -----------
Net income 1,594,000 413,000
----------- -----------
Retained earnings, beginning of period 669,000 (141,000)
Distributions to stockholder (903,000) (24,000)
----------- -----------
Retained earnings, end of period $ 1,360,000 $ 248,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE> 10
CLARK WILSON HOMES, INC.
STATEMENTS OF CASH FLOWS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1994 & 1993
<TABLE>
<CAPTION>
Eight months ended August 31,
------------------------------
1994 1993
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,594,000 $ 413,000
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 58,000 25,000
Change in assets and liabilities:
Increase in accounts receivable (573,000) (274,000)
Increase in residential inventories (4,836,000) (3,154,000)
Increase in prepaid expenses and other
assets (201,000) (66,000)
Increase in accounts payable 903,000 768,000
Increase in accrued and other liabilities 397,000 125,000
----------- -----------
Net cash used in operating activities (2,658,000) (2,163,000)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (165,000) (120,000)
----------- -----------
Net cash used in investing activities (165,000) (120,000)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Distribution to shareholder (903,000) (24,000)
Net borrowings from financial institutions 3,284,000 1,990,000
----------- -----------
Net cash provided by financing activities 2,381,000 1,966,000
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (442,000) (317,000)
Cash at beginning of period 498,000 482,000
----------- -----------
Cash at end of period $ 56,000 $ 165,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE> 11
CLARK WILSON HOMES, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Clark Wilson Homes, Inc. (the "Company") was incorporated on May 12, 1992.
The Company's principal line of business is the design, construction,
and marketing and sales of single family residential homes in Austin, Texas.
Revenue Recognition
Revenue from sales of homes is recognized at the time of closing when
title, possession, and other attributes of ownership have been transferred
to the home buyer.
Property and Equipment
Property and equipment, consisting primarily of office furniture and fixtures
and model home furniture, are carried at cost and depreciated using the
straight-line method over the estimated useful lives of three to ten years.
Residential Inventories
Residential inventories are carried at the lower of cost (using the specific
identification method) or net realizable value and include lots, construction
costs, and certain related indirect costs and expenditures. Interest on
indebtedness and real estate taxes are capitalized during the development
and construction period to the point of substantial completion of construction.
Interest
A summary of home building interest capitalized, incurred, expensed, included
in cost of homes sold and paid as of August 31, 1994 and December 31, 1993
is as follows:
<TABLE>
<CAPTION>
August 31,
1994 December 31,
(unaudited) 1993
----------- -----------
<S> <C> <C>
Interest capitalized, beginning of year $ 72,000 $ 39,000
Interest incurred 551,000 388,000
Interest expensed (6,000) (6,000)
Interest included in cost of homes sold (517,000) (349,000)
--------- ---------
Interest capitalized, end of year $ 100,000 $ 72,000
========= =========
Interest paid $ 551,000 $ 388,000
========= =========
</TABLE>
<PAGE> 12
CLARK WILSON HOMES, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Income Taxes
The Company has elected Subchapter S Corporation filing status for federal
income tax purposes. As such, no provision for income taxes is necessary in
these financial statements because, as an S Corporation, the Company is
not subject to federal income tax and the tax effect of its activities
accrues to its stockholders.
2. LOT ACQUISITION
The Company aquires lots is by means of option contracts, some of which
require specific performance by the Company. Option contracts generally
require the payment of a cash deposit for the rights to acquire lots during
a specified period of time at a certain price. The aggregate purchase price
of all lots under option contracts was $6,290,000 and $4,590,000 at August
31, 1994 and December 31, 1993, respectively.
3. NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
August 31,
1994 December 31,
(unaudited) 1993
----------- -----------
<S> <C> <C>
Interim construction notes payable
to financial institutions bearing
interest at prime plus 1%-3 1/2%,
interest payable monthly and at closing,
collateralized by first liens on homes
under construction, all notes maturing
within nine months. $6,305,000 $3,330,000
Interim construction notes payable to
related parties bearing interest at
10%, interest payable monthly and at
closing, collateralized by first liens
on homes under construction, all notes
maturing within six months. 1,064,000 811,000
Other equipment notes payable 83,000 27,000
---------- ----------
Total $7,452,000 $4,168,000
========== ==========
</TABLE>
Substantially all interim construction notes payable to financial institutions
have been personally guaranteed by the Company's stockholder.
<PAGE> 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholder of Clark Wilson Homes, Inc.:
We have audited the accompanying balance sheets of Clark Wilson Homes, Inc. (a
Texas corporation) as of December 31, 1993 and 1992, and the related statements
of operations and retained earnings and cash flows for the year ended December
31, 1993 and the period from inception to December 31, 1992. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects the financial position of Clark Wilson Homes, Inc. as of
December 31, 1993 and 1992, and the results of its operations and its cash
flows for the year ended December 31, 1993 and the period from inception to
December 31, 1992 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Orange County, California
November 4, 1994
<PAGE> 14
CLARK WILSON HOMES, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
December 31
--------------------------------
1993 1992
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 497,516 $ 482,600
Accounts receivable 136,562 29,297
Residential inventories 5,595,114 1,522,549
Property and equipment, at cost, net of accumulated depreciation 254,262 114,145
of $8,380 and $56,967 as of December 31, 1992 and December 31,
1993, respectively
Prepaid expenses and other assets 128,929 62,578
---------- ----------
Total assets $6,612,383 $2,211,169
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $4,167,694 $1,460,082
Accounts payable 903,922 328,977
Accrued and other liabilities 486,725 178,469
---------- ----------
Total liabilities 5,558,341 1,967,528
---------- ----------
Stockholders' equity:
Common stock, par value $1.00 per share, 100,000 shares authorized,
1,176 shares issued and outstanding 1,176 1,176
Paid-in-capital 383,824 383,824
Retained earnings (accumulated deficit) 669,042 (141,359)
---------- ----------
Total stockholder's equity 1,054,042 243,641
---------- ----------
$6,612,383 $2,211,169
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE> 15
CLARK WILSON HOMES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
For the period
Year ended from inception
December 31, to December 31,
1993 1992
------------ ---------------
<S> <C> <C>
Revenues:
Sales $19,841,213 $1,314,311
Other, net 10,142 23,053
----------- ----------
19,851,355 1,337,364
----------- ----------
Cost of sales 15,888,027 1,059,223
Selling, general, and administrative expense 3,035,593 419,500
----------- ----------
Net income (loss) 927,735 (141,359)
----------- ----------
Retained earnings (deficit) at beginning of period (141,359) 0
Distributions to shareholder (117,334) 0
----------- ----------
Retained earnings (deficit) at end of period $ 669,042 $ (141,359)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE> 16
CLARK WILSON HOMES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 927,735 $ (141,359)
Adjustments to reconcile net income (loss) to net cash
used in operating activities
Depreciation and amortization 48,587 8,380
Change in assets and liabilities:
Increase in accounts receivable (107,265) (29,297)
Increase in residential inventories (4,072,565) (1,522,549)
Increase in prepaid expenses and other assets (66,351) (62,578)
Increase in accounts payable 574,945 328,977
Increase in accrued and other liabilities 308,256 178,469
----------- -----------
Net cash used in operating activities (2,386,658) (1,239,957)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (188,704) (122,525)
----------- -----------
Net cash used in investing activities (188,704) (122,525)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of stock 0 1,176
Paid in capital 0 383,824
Distributions to shareholder (117,334) 0
Net borrowings from financial institutions 2,707,612 1,460,082
----------- -----------
Net cash provided by financing activities 2,590,278 1,845,082
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 14,916 482,600
Cash at beginning of period 482,600 0
----------- -----------
Cash at end of period 497,516 482,600
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE> 17
CLARK WILSON HOMES, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Organization
Clark Wilson Homes, Inc. (the "Company") was incorporated on May 12, 1992.
The Company's principal line of business is the design, construction,
marketing and sale of single family resident homes in Austin, Texas.
Revenue Recognition
Revenue from sales of homes is recognized at the time of closing when title,
possession, and other attributes of ownership have been transferred to the
home buyer.
Property and Equipment
Property and equipment, consisting primarily of office furniture and fixtures
and model home furniture, are carried at cost and depreciated using the
straight-line method over the estimated useful lives of three to ten years.
Inventories
Inventories are carried at the lower of cost (using the specific
identification method) or net realizable value and include lots, construction
costs, and certain related indirect costs and expenditures. Interest on
indebtedness and real estate taxes are capitalized during the development and
construction period to the point of substantial completion of construction.
Interest
A summary of home building interest capitalized, incurred, expensed, included
in cost of homes sold, and paid for the years ended December 31 is as
follows:
<TABLE>
<CAPTION>
1993 1992
--------- --------
<S> <C> <C>
Interest capitalized, beginning of year $ 38,511 $ 0
Interest incurred 388,415 57,864
Interest expensed (6,059) (2,421)
Interest included in cost of homes sold (348,881) (16,932)
--------- --------
Interest capitalized, end of year $ 71,986 $ 38,511
========= ========
Interest paid $ 388,415 $ 57,864
========= ========
</TABLE>
<PAGE> 18
CLARK WILSON HOMES, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Income Taxes
The Company has elected Subchapter S Corporation filing status for federal
income tax purposes. As such, no provision for income taxes is necessary in
these financial statements because, as an S Corporation, the Company is not
subject to federal income tax and the tax effect of its activities accrues to
its stockholders.
2. LOT AQUISITION:
The Company aquires lots by means of option contracts, some of which require
specific performance by the Company. Option contracts generally require the
payment of a cash deposit for the rights to acquire lots during a specified
period of time at a certain price. The aggregate purchase price of all lots
under option contracts was $4,590,000 and $2,428,000 at December 31, 1993
and 1992, respectively.
3. NOTES PAYABLE:
Notes payable consist of the following:
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Interim construction notes payable to financial
institutions bearing interest at prime plus 1%-31/2%,
interest payable monthly and at closing, collateralized
by first lien on homes under construction, all notes
maturing within nine months $3,329,414 $1,035,601
Interim construction notes payable to related parties
bearing interest at 10%, interest payable monthly
and at closing, collateralized by first lien on
homes under construction, all notes maturing within
six months 811,392 424,481
Other equipment notes payable 26,888 0
---------- ----------
Total $4,167,694 $1,460,082
========== ==========
</TABLE>
Substantially all interim construction notes payable to financial
institutions have been personally guaranteed by the Company's stockholder.
<PAGE> 19
SIGNATURES
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.
<TABLE>
<S> <C> <C>
J.M. PETERS COMPANY, INC.
Dated: November 30, 1994 By: /S/ GREGORY R. PETERSEN
-----------------------
Gregory R. Petersen
Vice President, Chief
Financial Officer and
Secretary
</TABLE>
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Number Description Page Number
- -------------- ----------- -----------
<S> <C> <C>
Exhibit 2.1 Purchase and Sale Agreement
dated November 17, 1994, by
and between JMP and Wilson
and CWH.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
<PAGE> 2
PURCHASE AGREEMENT
BETWEEN
J.M. PETERS COMPANY, INC.
AND
CLARK WILSON AND AUDREY WILSON
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Deliveries by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Simultaneous Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Payment to Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Representations and Warranties of Seller and the Company . . . . . . . . . . . . . 3
(a) Authority and Enforceability . . . . . . . . . . . . . . . . . . . . . . 3
(b) Organization of the Company . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Charter Documents; No Conflicts . . . . . . . . . . . . . . . . . . . . . 3
(d) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(e) Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(f) Title to the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(g) Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(h) Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(i) Violations of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(j) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(k) No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(l) Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(m) No Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . 6
(n) Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(o) No Adverse Developments . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . 7
(a) Authority and Enforceability . . . . . . . . . . . . . . . . . . . . . . 7
(b) No Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Remaking and Survival of Representations and Warranties . . . . . . . . . . . . . 8
ARTICLE IV - ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Purchaser's Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Continued Operation of the Company . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Non-Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Tax Elections and Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Indemnity by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 Payoff of Company's Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.7 Covenants Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.8 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 Employment of Clark Wilson . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.4 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.5 Governing Law and Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.7 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.8 Cooperation and Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.9 Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.10 Captions and References to Articles and Sections . . . . . . . . . . . . . . . . . . 16
5.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.12 Joint and Several Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
EXHIBIT A - Promissory Note
EXHIBIT B - Stock Pledge Agreement
EXHIBIT C - Irrevocable Proxy
EXHIBIT D - Articles of Incorporation and Bylaws of the Company
EXHIBIT E - List of the Company's Assets
EXHIBIT F - Liens and Claims Against the Company's Assets
EXHIBIT G - List of Defaults and Violations of Law
EXHIBIT H - Litigation List
EXHIBIT I - Financial Statements
EXHIBIT J - List of the Company's Loans
</TABLE>
ii
<PAGE> 5
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is entered into
effective as of November 10, 1994, by and between CLARK N. WILSON and AUDREY
WILSON, each as an individual (collectively, "Seller"), J.M. PETERS COMPANY,
INC., a Delaware corporation, together with any assignee thereof pursuant to
Section 5.4 below ("Purchaser"), and Clark Wilson Homes, Inc., a Texas
corporation (the "Company").
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of Shares. Subject to the terms
and conditions of this Agreement, Purchaser agrees to purchase and acquire from
Seller, and Seller agrees to sell, assign, transfer and deliver to Purchaser,
100% of the outstanding capital stock of the Company and 100% of the
outstanding capital stock of Fairway Financial Corp., a Texas corporation
("Fairway Financial") (the shares of the Company and the shares of Fairway
Financial are referred to collectively in this Agreement as the "Shares").
1.2 Purchase Price. In consideration for the Shares,
Purchaser shall pay Seller an aggregate purchase price (the "Purchase Price"),
payable as follows:
(i) In cash, the sum of Three Million Five
Hundred Thousand Dollars ($3,500,000) (the "Cash Portion"); and
(ii) A nonrecourse Promissory Note in the amount
of Two Million Five Hundred Thousand Dollars ($2,500,000) in the form
attached hereto as Exhibit A (the "Note"). The Note shall be secured
by a Stock Pledge Agreement in the form attached hereto as Exhibit B,
encumbering the shares (the "Stock Pledge Agreement").
ARTICLE II
CLOSING
2.1 Closing. Subject to Purchaser's rights under Section
4.1, the consummation of the transactions contemplated by this Agreement (the
"Closing") shall occur on or before December 27, 1994, subject to Purchaser's
right to close earlier at any time immediately upon written notice upon at
least 48 hours' written notice from Purchaser to Seller. Seller and Purchaser
acknowledge that the Purchase Price has been calculated based upon the
financial position of the Company on September 1, 1994, as reflected in the
Financial Statements (as defined in
<PAGE> 6
Section 3.1(l), and that the intent of Seller's indemnity in Section 4.5 as to
the representations and warranties set forth in Section 3.1(l) is, among other
things, to accomplish an accounting cutoff of September 1, 1994 or such later
date on or before the Closing Date as Purchaser shall elect (such election to
be made within 180 days after the Closing Date). Accordingly, although the
Closing will occur on a later date, the parties agree that for accounting
purposes, Purchaser's acquisition of the Shares shall be deemed to be effective
as of September 1, 1994 or such later date on or before the Closing Date as
Purchaser shall elect (such election to be made within 180 days after the
Closing Date) on the basis that Purchaser effectively gained control of the
Company on or about September 1, 1994. In addition, Purchaser's acquisition of
the Shares shall be deemed to be effective for tax purposes as of September 1,
1994 or such later date on or before the Closing as Purchaser shall elect (such
election to be made within 180 days after the Closing Date), which date may be
different from the effective date for accounting and other purposes elected by
Purchaser pursuant to the foregoing provisions of this Section. The Closing
shall take place at the Company's offices at 1717 West Sixth Street, Suite 140,
Austin, Texas 78703-4775. The date upon which the Closing occurs is referred
to in this Agreement as the "Closing Date." At the Closing on the Closing
Date, the following shall occur:
(a) Deliveries by Purchaser. Purchaser shall
deliver to Seller:
(i) the sum of Three Million Five
Hundred Thousand Dollars ($3,500,000) as the Cash Portion of the
Purchase Price, by cashier's check or wire transfer;
(ii) the Note, executed by Purchaser and
dated as of the Closing Date;
(iii) the Stock Pledge Agreement, executed
by Purchaser and dated as of the Closing Date; and
(iv) the certificate required of Purchaser
pursuant to Section 3.3.
(b) Deliveries by Seller. Seller shall deliver
(and, as appropriate, shall cause the Company to deliver) to Purchaser:
(i) one or more stock certificates
representing the Shares, endorsed by Seller in blank or accompanied by
stock powers endorsed by Seller in blank and dated as of the Closing
Date;
(ii) such resignations of the officers
and directors of the Company and Fairway Financial as Purchaser may
request dated as of the Closing Date;
2
<PAGE> 7
(iii) the Irrevocable Proxy in the form
attached hereto as Exhibit C (and another for Fairway Financial in
substantially identical form), executed by Seller and dated as of the
Closing Date;
(iv) the certificate required of Seller
and the Company pursuant to Section 3.3; and
(v) such other documents as are
reasonably required of Seller to effect the transactions contemplated
by this Agreement.
(c) Simultaneous Delivery. All proceedings to
take place on the Closing Date shall be considered to take place
simultaneously, and no delivery or payment shall be considered to have been
made on such date until all deliveries, payments and proceedings due to occur
under this Agreement on such Closing Date have been completed.
2.2 Payment to Brokers. Purchaser agrees to pay to the
brokers described in Section 3.1(k) and 3.2(k) in the shares directed by such
brokers the sum of $69,000 if and when the Closing occurs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller and the
Company. Seller and the Company and Fairway Financial jointly and severally
represent and warrant to Purchaser as follows:
(a) Authority and Enforceability. All actions on
the part of Seller and the Company necessary for the authorization, execution
and delivery of this Agreement and for the consummation of the transactions
contemplated hereby, have been duly and validly taken. This Agreement has been
duly executed and delivered by Seller and the Company and constitutes a valid
and legally binding obligation of Seller and the Company enforceable against
Seller and the Company in accordance with its terms.
(b) Organization of the Company. Each of the
Company and Fairway Financial is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas.
(c) Charter Documents; No Conflicts. True and
complete copies of the Company's Articles of Incorporation and Bylaws, as in
effect on the date hereof, are attached hereto as Exhibit D. Neither the
execution and delivery of this Agreement, nor consummation of the transactions
contemplated hereby, nor compliance with any of the provisions hereof, will
conflict with
3
<PAGE> 8
or result in the breach or violation of, or default under, or give any other
party any right to modify, accelerate or cancel, any of the terms, conditions
or provisions of the Company's or Fairway Financial's Articles of Incorporation
or Bylaws or any note, bond, mortgage, indenture, license, lease, loan
agreement, judgment, order, decree, law, regulation or other agreement or
instrument or obligation to which Seller or the Company or Fairway Financial is
a party or by which Seller or the Company or Fairway Financial or any of their
properties or assets is bound.
(d) Capitalization. There are 1,176 shares of
common stock of the Company issued and outstanding, and all of the Shares are
duly and validly authorized and issued to Seller and are fully paid and
nonassessable. No options, warrants or other rights to purchase or otherwise
acquire any shares of the Company's or Fairway Financial's capital stock are
outstanding.
(e) Title to Assets. The Company has good and
marketable title to all of the real and personal property reflected in the
Financial Statements (as defined in Section 3.1(l) below) or described in
attached Exhibit E (collectively, the "Company Assets"), and no other person or
entity has any right, title or interest in or to the Company Assets, and all of
the assets of the Company are free and clear of any claims, liens (including
tax liens), encumbrances, security agreements, leases and other restrictions,
except as otherwise set forth in attached Exhibit F. None of the assets of the
Company or Fairway Financial is subject to any pending or threatened
condemnation, attachment, enforcement or similar proceedings, except as set
forth in the Exhibits to this Agreement.
(f) Title to the Shares. Seller (i.e., Clark N.
Wilson and Audrey Wilson, as community property) is the sole legal and
beneficial owner of the Shares. No other person or entity has any right,
title, or interest, beneficially or of record, in or to the Shares. The Shares
are free and clear of any claims, liens (including tax liens), encumbrances,
security agreements, equities, options, charges or restrictions (subject to
applicable securities laws) except for purchase-money liens to certain of
Seller's family members which will be fully released prior to the Closing (with
reasonably satisfactory evidence of such release being delivered to Purchaser
prior to the Closing), and can be delivered and surrendered to Purchaser
pursuant to this Agreement without obtaining the consent or approval of any
other person or governmental authority. Upon the transfer and delivery of the
Shares to Purchaser in accordance with this Agreement, Purchaser will become
the owner and holder of the Shares, free and clear of all liens, encumbrances,
pledges, claims, charges and restrictions on transfer. Seller is not a party
to any voting trust, proxy or other agreement or understanding with respect to
the voting of any of the Shares except
4
<PAGE> 9
for the irrevocable proxy to be granted to Purchaser pursuant to this
Agreement.
(g) Payment of Taxes. Each of Seller, the
Company and Fairway Financial has paid all federal, state and local income,
franchise, employment, workers' compensation, property and other taxes as
required pursuant to applicable law and has filed all tax returns required
under applicable law. Neither Seller nor the Company nor Fairway Financial has
been advised that any of its federal, state or local tax returns have been or
are being audited nor has either received notice of any delinquent payment or
disputed amount of taxes or similar imposition owing. Since its inception,
each of the Company and Fairway Financial has been a corporation duly qualified
and classified as a "Subchapter S" corporation under Section 1361 et seq. of
the Internal Revenue Code, and all filings and other actions have been properly
taken, each within the time periods required under law, in order to establish
and preserve the Company's and Fairway Financial's "Subchapter S" status since
its inception.
(h) Default. Except as otherwise disclosed in
attached Exhibit G, neither the Company nor Fairway Financial is in default
under any contract, commitment or agreement to which it is a party or to which
any of its assets may be subject or bound, and there is no default or event
that, with notice or lapse of time, or both, would constitute a default by any
party to any such agreement, nor does Seller or the Company have knowledge of
any fact which reasonably can be expected to cause either company to be in
default under any such agreement in the future.
(i) Violations of Law. Except as otherwise set
forth in attached Exhibit G, each of the Company and Fairway Financial holds
all licenses, franchises, permits, authorizations and other governmental
approvals and other approvals necessary for the lawful conduct of its business.
To the respective knowledge of Seller and the Company, neither the Company nor
Fairway Financial nor their respective assets are in violation of any
applicable statutes, laws, ordinances, rules, regulations (including, but not
limited to, any of the foregoing related to employment discrimination,
occupational safety, environmental condition or hazardous or toxic substances,
conservation, natural resources, zoning, land use, building codes, antitrust,
unfair competition, labor practices or corrupt practices) of any federal,
state, local or foreign governmental body, agency or subdivision having,
asserting or claiming jurisdiction over the Company or Fairway Financial or any
of their respective assets or operations, and neither has received any notice
of any such actual or alleged violation, existing or in the past.
5
<PAGE> 10
(j) Litigation. Except as described in attached
Exhibit F, there are no claims, disputes, actions, proceedings or
investigations of any nature pending or, to the knowledge of Seller or the
Company, threatened against or involving Seller or the Company or Fairway
Financial or their respective assets, and neither Seller nor the Company has
any knowledge of any basis for any such claim, dispute, action, proceeding or
investigation.
(k) No Brokers. Except for Barry Clark and Bill
Kochwelp, no person or any other entity is entitled to any brokerage
commission, finder's fee or like payment in connection with the transactions
contemplated by this Agreement due to any agreement, engagement or
representation made by or on behalf of Seller or the Company or Fairway
Financial.
(l) Financial Information. The unaudited balance
sheets of the Company as at August 31, 1994 and as of September 30, 1994, the
unaudited balance sheet of the Company for the year ending December 31, 1993,
the statements of income and cash flow of the Company for the periods ending
August 31, 1994 and September 30, 1994 and for certain other periods during
1994, and the unaudited statement of income and cash flow for the year ending
December 31, 1993 each are attached to this Agreement as Exhibit I. The
foregoing described financial statements and other documents attached as
Exhibit I, together with all financial statements of the Company for prior
dates and periods that have been provided to Purchaser (collectively, the
"Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
period indicated (except as specifically disclosed therein), fairly present the
financial condition of the Company at the dates thereof and the results of
operations of the Company for the periods indicated, respectively, and are true
and correct in all material respects and did not omit any liability or
contingent liability of the Company at the dates thereof, respectively. The
amount of reserves for expenses specified in the Financial Statements contained
in Exhibit I (which amount is zero) are sufficient to cover all expenses of the
Company allocable to periods prior to August 31, 1994. There has been no
adverse change in the business, financial condition, operations, results of
operations or future prospects of the Company since August 31, 1994.
(m) No Employment Agreements. Except for the
Company's contract with Administaff pursuant to which the Company "leases"
Administaff's employees, there are no employment agreements to which the
Company or Fairway Financial is a party or is otherwise bound, and all persons
employed for the Company's account can be terminated at the Company's election
given to Administaff. Except as disclosed in the Schedule of Expenses included
in attached Exhibit I, neither the Company nor Fairway Financial is subject to
any agreements or arrangements which may obligate the Company or Fairway
Financial for the payment of any
6
<PAGE> 11
bonuses, incentives or other amount to Administaff's employees or other persons
engaged in work on the Company's or Fairway Financial's account.
(n) Projections. The parties acknowledge that
representatives of the Company and Seller have prepared certain financial
plans, models and projections regarding the future performance of the Company,
which have been delivered to Purchaser (the "Projections"). The Company and
Seller have used their best efforts to prepare the Projections based upon what
they believe in good faith after diligent inquiry to be accurate factual
information and reasonable assumptions. The Projections represent the
Company's and Seller's good faith, best estimates as to the future performance
of the Company.
(o) No Adverse Developments. Except as described
in the Exhibits to this Agreement, neither Seller nor the Company has any
knowledge of any fact, circumstance, condition or event which has or may have
an adverse affect on the Company or Fairway Financial or their current or
contemplated business or business plan.
For the purposes of this Section, "knowledge of" as to Seller means the actual
knowledge of Clark N. Wilson or Audrey Wilson, together with the knowledge that
either would have after diligent inquiry regarding the matter in question, and
"knowledge of" as to the Company means the actual knowledge of any of the
current corporate officers of the Company together with the knowledge that any
of them would have after diligent inquiry regarding the matter in question.
3.2 Representations and Warranties of Purchaser.
Purchaser represents and warrants to Seller as follows:
(a) Authority and Enforceability. Upon the
Closing, all actions on the part of Purchaser necessary for the authorization,
execution and delivery of this Agreement and for the consummation of the
transactions contemplated hereby, will have been duly and validly taken. This
Agreement has been duly executed and delivered by Purchaser and constitutes a
valid and legally binding obligation of such Purchaser enforceable against
Purchaser in accordance with its terms.
(b) No Registration. Purchaser understands that
the Shares have not been, and will not be at the Closing, registered under the
Securities Act of 1933 or any state securities laws, and are being transferred
to Purchaser in reliance upon federal and state exemptions for transactions not
involving any public offering.
(c) No Brokers. Except for Barry Clark and Bill
Kochwelp, no person or any other entity is entitled to any brokerage
commission, finder's fee or like payment in connection
7
<PAGE> 12
with the transactions contemplated by this Agreement, due to any agreement,
engagement or representation made by or on behalf of Purchaser.
3.3 Remaking and Survival of Representations and
Warranties. Each of the representation and warranties of the parties set forth
in this Article III shall be remade on the Closing Date by a certificate
delivered by Seller to Purchaser as to the representations and warranties set
forth in Section 3.1, and a certificate by Purchaser to Seller as to the
representations and warranties set forth in Section 3.2. Seller shall not take
any action or refrain from taking any action that will cause any of Seller's
representations or warranties set forth in Section 3.1 to be untrue or
inaccurate at any time from the date of this Agreement to the Closing. The
representations and warranties of the parties set forth in this Article III
shall survive the Closing.
ARTICLE IV
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 Purchaser's Due Diligence. Seller and the Company
shall provide Purchaser and its agents with full access to all of the Company's
books, records, property, employees and agents for the Purchaser's purposes of
investigating and conducting due diligence regarding the Company's assets,
liabilities and business operations, and Seller and the Company and its
employees and agents shall fully cooperate with Purchaser in its
investigations, both before and after the Closing Date. In connection with
Purchaser's due diligence, Purchaser shall be entitled to conduct a full audit
of the Company since its inception by Arthur Andersen or another certified
public accountancy firm selected by Purchaser and reasonably acceptable to
Seller, and Seller and the Company agree to cause all of its employees and
agents to cooperate fully in connection with such audit. The cost of the audit
shall be paid by Purchaser; provided, however, that if the Closing occurs,
one-half of the cost of the audit shall be borne by Seller and one-half by the
Company, and if the audit reveals that the net income of the Company for any
year, as reflected in the Financial Statements, is inaccurate by more than five
percent (5%), Seller shall pay the entire cost of the audit. If Purchaser
discovers during its investigations of the Company matters which may be of
concern to Purchaser in its sole and absolute discretion, Purchaser may give
Seller written notice of termination of this Agreement at any time prior to the
Closing, in which event neither Seller nor Purchaser shall have any further
rights or obligations under this Agreement except as to breaches or other
matters occurring prior to such termination. Purchaser's obligations under
this Agreement are expressly contingent upon approval of this Agreement and all
transactions contemplated hereby by Purchaser's Board of Directors in its sole
and absolute discretion.
8
<PAGE> 13
4.2 Continued Operation of the Company. Seller shall not
permit the Company to undergo any material change in its operations,
indebtedness or other liabilities and shall not permit the Company to transfer
any assets or any right or interest therein except for cash sales of homes
individually in the ordinary course of business. In addition, since September
1, 1994 Seller has not accepted, and Seller shall not accept, any payments from
the Company, whether by the way of dividends, repayments of debt, salary or
otherwise, or permit the Company to make any payments to any other party,
except for continued payments of regular salaries to existing employees
(provided that Clark Wilson's salary shall not exceed $20,000 per month after
September 1, 1994) and required payments to lenders, subcontractors, material
suppliers and other vendors of the Company under existing agreements, in each
case, as they become due and payable, all as set forth in the Schedule of
Expenses included in attached Exhibit I.
4.3 Non-Dilution. Prior to the earlier of the Closing or
December 1, 1994, Seller shall not, voluntarily, involuntarily or by operation
of law, assign or transfer any of the Shares, and Seller and the Company shall
not permit the Company to issue any additional stock or other equity interest
in the Company or otherwise take any steps which would dilute the Shares. In
any event, 100% of the stock or other equity interest in the Company and in
Fairway Financial shall be subject to this Agreement and Purchaser's rights
hereunder to acquire all of the stock and other equity interest in the Company
and in Fairway Financial at the Closing for the Purchase Price.
4.4 Tax Elections and Reporting. Purchaser shall have
the right to make the election under Internal Revenue Code Section 338(h)(10)
(which election shall be effective as of any date from September 1, 1994
through the Closing Date as elected by Purchaser within the time period
permitted by applicable law or regulation) to treat this transaction as an
asset sale for tax purposes, and Seller agrees to join in any federal or state
elections or other documents relating thereto and otherwise cooperate as
reasonably requested by Purchaser in order to give effect to such election.
Purchaser and Seller agree and acknowledge that, upon the Closing, the purchase
and sale between Seller and Purchaser shall be recorded in the books and
records of the Company utilizing push-down accounting (including all
consideration being considered inter-company debt). The excess of the Purchase
Price over the net assets acquired (i.e., goodwill) will be amortized ratably
over a five-year period. Seller and Purchaser further acknowledge that, after
the Closing, the net income of the Company for all purposes under this
Agreement shall be determined under generally accepted accounting principles
("GAAP") after giving effect to the push-down accounting described above.
Seller specifically acknowledges that the tax elections described above will
have the effect of increasing state and federal income and franchise taxes, at
both
9
<PAGE> 14
the Company and Seller level, above what would otherwise be owing if such
elections were not made, and that Seller agrees to pay all such amounts.
4.5 Indemnity by Seller. The parties acknowledge that
the Company currently has (and has had in the past) projects in various stages
of completion, including lots subject to option but not yet purchased, owned
lots, units under construction, completed units in inventory, completed units
subject to reservations or purchase agreements and units already sold and
subject to warranty claims and other potential claims for defects in materials
and workmanship, breaches of contracts, etc. (collectively, "Sales Claims").
Seller hereby agrees to indemnify Purchaser and the Company and Fairway
Financial and their respective officers, employees, directors and other agents,
and hold them harmless and defend them (by counsel selected by them reasonably
acceptable to Seller) from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses, including,
but not limited to, attorneys' fees and court costs actually and reasonably
incurred by Purchaser and arising out of (i) Sales Claims relating to any
dwelling unit sold by the Company prior to the Closing Date or any transaction
relating to any such dwelling unit, (ii) any breach of the representations,
warranties, covenants or agreements of Seller or the Company or Fairway
Financial contained in this Agreement, specifically including refund of any
amounts received by Seller in violation of Section 4.2 and the representations
as to the adequacy of reserves (i.e., zero reserves) as set forth in the
Company's August 31, 1994 financial statements (even if the damaged party knew,
had reason to know or is deemed to know of any such breach at the time of the
Closing Date), (iii) any federal, state or local income, franchise, employment,
workers' compensation, property or other tax or similar imposition against
Seller or the Company or Fairway Financial required to be paid or withheld, but
not so paid or withheld, prior to the Closing Date or payable by Seller in
connection with the transactions under this Agreement (including the increased
taxes described at the end of Section 4.4), (iv) any disputes or claims,
whether in contract or tort or otherwise, pertaining to the Company or Fairway
Financial any asset or liability of the Company or Fairway Financial occurring,
or arising out of any event occurring, prior to the Closing Date, including,
but not limited to, all claims of contractors, subcontractors, materials
suppliers, governmental entities or agencies, neighboring landowners,
predecessors in interest, employees, former employees, employees of
Administaff, utilities companies, consultants and others, (v) any claims which
may arise out of any substance, material or waste which is or becomes
designated, classified or regulated as being "toxic" or "hazardous" or a
"pollutant" under any applicable federal, state or local law or regulation
(specifically including, but not limited to, asbestos, petroleum, and petroleum
products, PCBs and radioactive substances) which may be located in, on or under
any
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<PAGE> 15
property owned by the Seller or the Company or Fairway Financial as of the
Closing Date (or after the Closing Date but due to events occurring prior to
the Closing Date), and (vi) any other liability or obligation of the Company or
Fairway Financial or Seller relating to the Company or Fairway Financial
accruing, or arising out of any event occurring, prior to the Closing Date,
except for liabilities contained in the Financial Statements or described in
attached Exhibits F, G or H attached hereto. Since it is possible that a claim
indemnified pursuant to the provisions of this Section may not be known prior
to the Closing Date, Seller and Purchaser specifically acknowledge that, in
addition to Purchaser's rights to collect damages or pursue other remedies
available under applicable law, Purchaser will have a right to offset against
amounts otherwise owing under the Note any amount that may become owing by
Seller to Purchaser pursuant to this Section or otherwise under this Agreement
(specifically including any amounts by which the reserves specified in the
Addendum to the Financial Statements are not sufficient to cover the expenses
and liabilities identified in the Financial Statements and Addendum). Such
right of offset by Purchaser shall not limit the extent of Seller's liability
under this Section or any other provision of this Agreement.
4.6 Payoff of Company's Indebtedness. Seller and
Purchaser acknowledge that the Company is a borrower under several loans
described in Exhibit J attached hereto ("the Project Loans"). Seller and
Purchaser agree that, upon the Closing, Purchaser shall make loans to the
Company as necessary to repay in full all of the Project Loans, each of which
loans by Purchaser (the "Purchaser Loans") shall be on substantially identical
terms and conditions as the corresponding existing Project Loan (including
first-priority deeds of trust and other security), except that (i) the loan
terms may be modified at Purchaser's option as may be determined by Purchaser's
Executive Committee to be appropriate to make such terms consistent or
coordinate with the existing or contemplated future operations or indebtedness
of Purchaser or its other affiliates (ii) the interest rate under each
Purchaser Loan (and all other advances of the Company to Purchaser or its
affiliates from time to time) shall be 13.5%, (iii) without limiting Seller's
obligations pursuant to this Agreement, Seller shall not be required to give
any guaranty or indemnities with respect to the Purchaser Loans, and (iv)
notwithstanding the repayment schedules under the Project Loans, repayment of
each Purchaser Loan shall be accomplished by payment of all net proceeds from
sales of units within the corresponding project until such Purchaser Loan is
repaid in full (subject to earlier payment required as a condition to
enforcement of remedies under the Stock Pledge Agreement as set forth in the
Stock Pledge Agreement). Concurrently with the Closing, the Company shall use
the Purchaser Loans to repay in full all of the Project Loans. To the extent
the Purchaser Loans are not evidenced by loan documents at the time of the
Closing, Purchaser shall have the
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<PAGE> 16
right to cause the Company to enter into documents thereafter to carry out the
provisions of this Section.
4.7 Covenants Not to Compete. Without the prior written
consent of Purchaser, neither Clark Wilson nor Audrey Wilson shall directly or
indirectly (whether through any partnership which Clark Wilson or Audrey Wilson
is a partner, as a consultant, through a trust of which Clark Wilson or Audrey
Wilson is a beneficiary or trustee, through a corporation or other association
in which Clark Wilson or Audrey Wilson has any interest, legal or equitable, or
as an employee or in any other capacity whatsoever) engage in the businesses of
acquisition, ownership, development, construction or sale of dwelling units in
any county in the United States in which Purchaser or the Company may conduct
business from time to time. Clark Wilson's and Audrey Wilson's covenants not
to compete shall extend for five (5) years as to Travis, Williamson, Hays,
Harris, Montgomery, Liberty, Waller, Brazoria, Fort Bend, Dallas, Tarrant,
Denton, Collin, Ellis, Rockwall or Bexar County, Texas, and for three (3) years
as to any other county in the United States in which Purchaser or the Company
conducts business from time to time, such period as to each of Clark Wilson and
Audrey Wilson being measured from the date on which he or she, respectively,
ceases to be engaged by the Company or Purchaser or any affiliates as an
employee or independent contractor and continuing until three or five years (as
specified above) after the date on which both Clark Wilson and Audrey Wilson
and all affiliated parties (i.e., any member of Clark Wilson's or Audrey
Wilson's immediate family or any partnership, corporation, trust or other
association in which Clark Wilson or Audrey Wilson or any member of their
immediate family has a legal or equitable interest) are no longer engaged by
the Company or Purchaser or any affiliates as an employee or independent
contractor. In addition to the foregoing, during the same periods neither
Clark Wilson nor Audrey Wilson shall hire, solicit for hire, or otherwise
engage in any business transaction with, any current or future employee of the
Company, whether as an employee, associate, partner, consultant or other
business relation. Clark Wilson and Audrey Wilson and Purchaser agree that
the duration and area as to which Clark Wilson's and Audrey Wilson's covenant
not to compete and nonsolicitation covenant are to be effective are reasonable
and directly relate to providing Purchaser with the reasonable benefits of its
bargain as to the value of the Shares and to the Company's ability to be
reasonably profitable in the future. In the event that any court determines
that Clark Wilson's or Audrey Wilson's covenant not to compete or
nonsolicitation covenant is unreasonable and unenforceable as to time period or
area, or both, Clark Wilson and Audrey Wilson and Purchaser agree that Clark
Wilson's and Audrey Wilson's covenants shall remain in full force and effect
for the greatest time period and in the greatest area that does not render the
covenants unenforceable. Clark Wilson and Audrey Wilson and Purchaser intend
that Clark Wilson's and Audrey Wilson's covenant not to compete and
nonsolicitation
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<PAGE> 17
covenant each shall be deemed to be a series of separate covenants, one for
each and every county described above in this Section.
4.8 Confidentiality. Except as otherwise required by
law, Seller and the Company and all of their respective agents and employees
and the Company shall keep strictly confidential all information and
documentation relating to the transactions contemplated by this Agreement
(including the fact that such transactions are contemplated), and shall not
disclose any information or documentation relating to such transactions to any
person or entity other than those employees or agents of the Company to the
extent that such disclosure is necessary to permit the consummation of the
transactions contemplated by this Agreement. If the Closing does not occur,
the foregoing provisions of this Section will continue in force in perpetuity.
Upon the Closing, if it occurs, the form and content of all press releases or
other public communications by or on behalf of Seller or the Company shall be
subject to the approval of Purchaser, and, except as otherwise required by law,
Seller and the Company and their respective agents and employees shall continue
to keep the terms and conditions of the transactions contemplated by this
Agreement strictly confidential and shall not disclose them to any person or
entity other than private communications to Seller's or the Company's
attorneys, accountants and other parties to the extent they reasonably need to
know such information.
4.9 Employment of Clark Wilson. Purchaser agrees that,
upon the Closing, the Company shall employ or shall cause Administaff to employ
Clark Wilson as the President of the Company to serve in such capacity at the
pleasure of the Board of Directors of the Company on a month-to-month basis for
so long as the Board desires. Clark Wilson's employment shall be full-time
employment, and Seller shall not engage in any business activities during such
employment that require Seller to expend more than five (5) hours per week of
Seller's time. Further, so long as either Seller or Audrey Wilson is employed
for the Company's account, neither Seller nor Audrey Wilson shall become a
partner, shareholder, member, officer, director, agent, consultant or other
independent contractor in, or otherwise invest in, or lend money to, any
enterprise engaged in residential development, building, lending, brokerage,
sales or leasing or any business in which the Company or Purchaser or its
affiliates may be engaged from time to time. The employment of Clark Wilson
shall be on a strictly at-will basis, and neither this Agreement nor any other
written or oral communication shall be interpreted to be an employment
agreement or any commitment by Purchaser or the Company to continue the
employment of Clark Wilson for any period of time. Until the Board of
Directors of the Company shall determine otherwise, Clark Wilson shall be paid
$20,000 per month in salary. The other terms and conditions of Clark Wilson's
employment, including benefits, hours, vacation,
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<PAGE> 18
policies and procedures, etc., shall be consistent with those of other Company
executives from time to time. In addition, so long as Clark Wilson is employed
as the President of the Company, then (i) until the Note is paid in full, the
Company shall allocate 3% of its before-tax net income (calculated as set forth
in Section 4.4) for each fiscal year to a bonus pool to be distributed among
the employees (other than Clark Wilson) engaged for the Company's account as
determined in the reasonable discretion of Clark Wilson, as President, and (ii)
after the Note is paid in full, the Company shall allocate 10% of its
before-tax net income (calculated as set forth in Section 4.4) for each fiscal
year to a bonus pool to be distributed among the employees (including Clark
Wilson) engaged for the Company's account as determined in the reasonable
discretion of Clark Wilson, as President. The provisions of this Section are
intended for the mutual benefit of Buyer and Seller, and no past, present or
future employee of the Company or Administaff (or any other person or entity
engaged in work for the Company) shall be considered a third-party beneficiary
to the provisions of this Section or any other provision of this Agreement.
ARTICLE V
GENERAL PROVISIONS
5.1 Entire Agreement; Amendment. This Agreement,
together with all exhibits hereto, sets forth the entire understanding of the
parties, and supersedes all prior arrangements and communications, whether oral
or written, with respect to the subject matter hereof, specifically including
the letter of intent sent by Seller to Purchaser, dated September 14, 1994.
5.2 Severability. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the other
provisions of this Agreement, and this Agreement shall be construed in all
respects as if the invalid or unenforceable provision were omitted.
5.3 Notices. All notices, demands and communications
hereunder shall be in writing and shall be deemed to be duly given upon
personal delivery or five (5) days after being mailed from the State of
California or the State of Texas by registered or certified United States
mail, postage pre-paid, return receipt requested, addressed to the parties at
the addresses herein set forth, or at such other address as any party shall
have furnished to the other parties in writing:
<TABLE>
<S> <C>
If to Seller: Clark Wilson
1717 West Sixth Street
Suite 140
Austin, TX 78703-4775
</TABLE>
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<PAGE> 19
<TABLE>
<S> <C>
If to the Company: Clark Wilson Homes, Inc.
1717 West Sixth Street
Suite 140
Austin, TX 78703-4775
Attention: Clark Wilson
If to Purchaser: J.M. Peters Company, Inc.
3501 Jamboree Road, Suite 200
Newport Beach, CA 92660
Attention: Hadi Makarechian
With a copy to: Hewitt & McGuire
3501 Jamboree Road, Suite 250
Newport Beach, CA 92660
Attention: Jay F. Palchikoff
And a copy to: Wiley, Rein & Fielding
1776 K Street N.W.
Washington, DC 20006
Attention: Dag Wilkinson
</TABLE>
5.4 Assignment. This Agreement shall not be assignable
by Seller or the Company. Purchaser shall have the right to assign its rights
and obligations under this Agreement to another person or entity to whom title
of the Shares will be transferred upon the Closing, provided such assignee is
majority owned or controlled, directly or indirectly, by Purchaser or Capital
Pacific Homes, Inc. or its majority shareholder(s). The undersigned initial
Purchaser shall be relieved of its obligations under this Agreement upon such
assumption by the assignee. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
5.5 Governing Law and Venue. This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
construed in accordance with the internal laws, but not the laws pertaining to
conflict or choice of laws, of the State of Texas. The exclusive forum for the
determination of any action relating to this Agreement shall be either an
appropriate court of the State of Texas in Travis County or the appropriate
court of the United States in the State of California.
5.6 Attorneys' Fees. If either party to this Agreement
brings an action against the other party to interpret or enforce this
Agreement, the prevailing party shall be entitled to recover its costs and
expenses, including without limitation attorneys' fees and costs actually and
reasonably incurred in connection with such action, including any appeal of
such action.
5.7 No Waiver. No waiver of any provision of this
Agreement or any rights or obligations of any party hereunder shall be
effective, except pursuant to a written instrument
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<PAGE> 20
signed by the party or parties waiving compliance, and any such waiver shall be
effective only in the specific instance and for the specific purpose stated in
such writing.
5.8 Cooperation and Further Assurances. Seller shall,
and shall cause the Company to, fully cooperate with Purchaser in good faith to
execute any and all reasonable documents and to perform all actions reasonably
necessary or appropriate to effect the consummation of the transactions
contemplated by this Agreement, both before or after the Closing.
5.9 Incorporation of Exhibits. Each of the Exhibits
referred to in this Agreement is incorporated into this Agreement by this
reference.
5.10 Captions and References to Articles and Sections.
The titles of the articles and sections to this Agreement are for convenience
only and are not a part of this Agreement and do not in any way limit, amplify
or explain any of the provisions of this Agreement. All uses of the words
"Article" and "Section" in this Agreement are references to articles and
sections of this Agreement, unless otherwise specified.
5.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.12 Joint and Several Liability. All obligations and
liability of Seller under this Agreement or any related instrument shall be the
joint and several obligations and liability of Clark Wilson and Audrey Wilson.
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<PAGE> 21
IN WITNESS WHEREOF, each of the parties hereto have executed
this Agreement as of the date first written above.
<TABLE>
<S> <C>
"Seller"
/s/ CLARK WILSON
------------------------------------
Clark Wilson, an individual
/s/ AUDREY WILSON
------------------------------------
Audrey Wilson, an individual
"PURCHASER"
J.M. Peters Company, Inc.,
a Delaware corporation
By: /s/ HADI MAKARECHIAN
--------------------------------
Hadi Makarechian,
Chairman of the Board
"COMPANY"
Clark Wilson Homes Inc., a Texas
corporation
By: /s/ CLARK WILSON
--------------------------------
Clark Wilson, President
</TABLE>
17
