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 (Date of earliest event reported): April 26, 1996
Champion Enterprises, Inc.
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(Exact name of registrant as specified in its charter)
Michigan
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(State or other jurisdiction of incorporation)
1-9751 38-2743168
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(Commission File Number) (IRS Employer Identification No.)
2701 University Drive, Suite 320, Auburn Hills, Michigan 48326
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810)340-9090
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On April 26, 1996 HLI Acquisition Corp. ("HLI Acquisition"),
a wholly-owned subsidiary of Champion Enterprises, Inc. (the
"Company"), acquired all the outstanding common stock of Homes of
Legend, Inc. and purchased substantially all of the assets and
assumed certain liabilities of Legend Realty, Inc., a related
party. Homes of Legend, Inc. and Legend Realty, Inc. are
collectively referred to herein as the "Legend Companies." In
connection with the transaction, HLI Acquisition changed its name
to Homes of Legend, Inc. The acquisitions were completed pursuant
to the Stock and Asset Purchase Agreement, dated as of April 3,
1996, by and among the Company, HLI Acquisition Corp., Legend
Realty, Inc., Homes of Legend, Inc., and the shareholders of
Homes of Legend, Inc. The Stock and Asset Purchase Agreement (the
"Purchase Agreement") is attached hereto as Exhibit 2.1.
The combined cash purchase price for this transaction is $26
million, subject to adjustments as set forth in the Purchase
Agreement, which will be financed from available cash and bank
borrowings under the Registrant's revolving credit facility with
Comerica Bank. The acquired assets were used by the Legend
Companies to manufacture and assemble manufactured housing. The
Company expects to continue to operate the acquired business and
use the acquired assets as they had been prior to the purchase.
Prior to the execution of the Purchase Agreement, there was
no material relationship between the Company and the Legend
Companies or between any officers or directors of the Company and
the officers, directors or shareholders of the Legend Companies.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
It is impractical at this time to provide financial
statements of the businesses acquired. Financial statements of
the businesses acquired will be filed within sixty (60) days.
(b) Pro Forma Financial Information
It is impractical at this time to provide pro forma
financial information. Pro forma financial information will be
filed within sixty (60) days.
Exhibit
Number
2.1 Stock and Asset Purchase Agreement, dated April 3,
1996, by and among Champion Enterprises, Inc., HLI
Acquisition Corp., Legend Realty, Inc., Homes of
Legend, Inc., and the shareholders of Homes of
Legend, Inc., omitting exhibits and schedules.
The Registrant agrees to furnish a copy of any
omitted exhibit or schedule to the Commission upon
request.
99.1 Press Release issued April 29, 1996.
99.2 Press Release issued April 4, 1996, filed as
Exhibit 99.1 to the Registrant's Current Report on
Form 8-K dated April 4, 1996 and incorporated
herein by reference.
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.
CHAMPION ENTERPRISES, INC.
/S/ A. JACQUELINE DOUT
-----------------------------------
A. Jacqueline Dout
Executive Vice President
and Chief Financial Officer
May 10, 1996
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
2.1 Stock and Asset Purchase Agreement, dated April 3,
1996, by and among Champion Enterprises, Inc., HLI
Acquisition Corp., Legend Realty, Inc., Homes of
Legend, Inc., and the shareholders of Homes of
Legend, Inc., omitting exhibits and schedules.
The Registrant agrees to furnish a copy of any
omitted exhibit or schedule to the Commission upon
request.
99.1 Press Release issued April 29, 1996.
99.2 Press Release issued April 4, 1996,
filed as Exhibit 99.1 to the
Registrant's Current Report on Form 8-K
dated April 4, 1996 and incorporated
herein by reference.
EXECUTION COPY
STOCK AND ASSET PURCHASE AGREEMENT
Dated as of April 3, 1996
By and Among
CHAMPION ENTERPRISES, INC.,
HLI ACQUISITION CORP.
LEGEND REALTY, INC.,
HOMES OF LEGEND, INC.
WAYNE SIMS
DON BROWN
KEITH BENNETT
J.R. BENNETT
THOMAS KEVIN SIMS
KAY PALL, AND
DEBORAH B. HARRIS HUMPHRIES
<PAGE>
TABLE OF CONTENTS
Page
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE I - SALE AND PURCHASE OF THE PURCHASED ASSETS . . . 2
1.1 Purchased Assets. . . . . . . . . . . . . . . 2
1.2 Assignment of Rights by Sellers . . . . . . . . 5
1.3 Stockholder Real Estate . . . . . . . . . . . . 6
ARTICLE I(B) - THE STOCK PURCHASE TRANSACTION. . . . . . . . . 6
1.1(B) Agreement of Purchase and Sale of the Purchased
Seller Stock. . . . . . . . . . . . . . . . . . 6
1.2(B) Consideration for Purchased Seller Stock. . . . 6
ARTICLE II(A)- PURCHASE PRICE IN ASSET TRANSACTION; ASSUMPTION OF
CERTAIN LIABILITIES; PURCHASE PRICE FOR
STOCKHOLDER REAL ESTATE . . . . . . . . . . . . 7
2.1 Asset Purchase Price. . . . . . . . . . . . . . 7
2.2 Allocation of Asset Purchase Price. . . . . . . 7
2.3 Assumed Liabilities . . . . . . . . . . . . . . 7
ARTICLE II(B)- CLOSING OF STOCK PURCHASE TRANSACTION . . . . . 8
2.1(B) Closing and Closing Date. . . . . . . . . . . . 8
2.2(B) Payments for Stock Purchase Transaction . . . . 9
2.3(B) Payments - Asset Acquisition. . . . . . . . . . 15
2.4(B) Delivery of Possession. . . . . . . . . . . . . 15
2.5(B) Sales and Transfer Taxes. . . . . . . . . . . . 15
2.6(B) Further Assurances. . . . . . . . . . . . . . . 16
ARTICLE III - ADJUSTMENTS TO PURCHASE CONSIDERATION . . . . . 16
3.1 Definitions . . . . . . . . . . . . . . . . . . 16
3.2 Closing Audit and Audited Closing Balance Sheet 16
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLERS . . . 18
4.1 Organization; Good Standing . . . . . . . . . . 18
4.2 Articles and Bylaws . . . . . . . . . . . . . . 18
4.3 Capitalization. . . . . . . . . . . . . . . . . 18
4.4 Seller Common Stock . . . . . . . . . . . . . . 18
4.5 Subsidiaries. . . . . . . . . . . . . . . . . . 19
4.6 Authorization Relative to this Agreement. . . . 19
4.7 Consents and Approvals; No Violation. . . . . . 19
4.8 Corporate Records . . . . . . . . . . . . . . . 20
4.9 Financial Statements. . . . . . . . . . . . . . 20
4.10 Absence of Undisclosed Liabilities. . . . . . . 21
4.11 Absence of Certain Changes or Events. . . . . . 21
4.12 Contracts and Commitments . . . . . . . . . . . 22
4.13 Real Property . . . . . . . . . . . . . . . . . 25
4.14 Leases of Personal Property . . . . . . . . . . 28
4.15 Licenses. . . . . . . . . . . . . . . . . . . . 28
4.16 Title to Assets . . . . . . . . . . . . . . . . 28
4.17 Taxes . . . . . . . . . . . . . . . . . . . . . 29
4.18 Employees; Benefit Plans. . . . . . . . . . . . 32
4.19 Insurance . . . . . . . . . . . . . . . . . . . 33
4.20 Litigation. . . . . . . . . . . . . . . . . . . 33
4.21 Compliance with Laws. . . . . . . . . . . . . . 34
4.22 Environmental Matters . . . . . . . . . . . . . 34
4.23 Product Liability . . . . . . . . . . . . . . . 36
4.24 Warranties. . . . . . . . . . . . . . . . . . . 37
4.25 Insider and Inter-Company Transactions. . . . . 37
4.26 Bank Accounts and Powers of Attorney. . . . . . 37
4.27 Progress Payments . . . . . . . . . . . . . . . 37
4.28 Information in the HSR Act Notification and
Report Form . . . . . . . . . . . . . . . . . . 37
4.29 Sufficiency of Purchased Assets . . . . . . . . 38
4.30 Guaranties. . . . . . . . . . . . . . . . . . . 38
4.31 Equipment . . . . . . . . . . . . . . . . . . . 38
4.32 Inventory . . . . . . . . . . . . . . . . . . . 38
4.33 Receivables . . . . . . . . . . . . . . . . . . 38
4.34 Patents and Trademarks. . . . . . . . . . . . . 39
4.35 Corporate Minute Books. . . . . . . . . . . . . 39
4.36 Suppliers and Customers . . . . . . . . . . . . 39
4.37 Illegal Payments. . . . . . . . . . . . . . . . 40
4.38 Disclosure. . . . . . . . . . . . . . . . . . . 40
4.39 Selling Stockholder's Equity. . . . . . . . . . 40
4.40 Industrial Development Bonds. . . . . . . . . . 40
4.41 Leased Employees. . . . . . . . . . . . . . . . 42
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER . . 43
5.1 Corporate Existence . . . . . . . . . . . . . . 43
5.2 Authority Relative to this Agreement. . . . . . 43
5.3 Consents and Approvals; No Violation. . . . . . 43
5.4 Litigation. . . . . . . . . . . . . . . . . . . 44
ARTICLE VI - COVENANTS PENDING CLOSING . . . . . . . . . . . 44
6.1 Conduct of Business . . . . . . . . . . . . . . 44
6.2 Certain Changes or Events . . . . . . . . . . . 44
6.3 Access to Information . . . . . . . . . . . . . 47
6.4 Affirmative Covenants . . . . . . . . . . . . . 47
6.5 Seller Stockholders . . . . . . . . . . . . . . 48
6.6 Covenants of All Parties. . . . . . . . . . . . 48
6.7 Communications With Agencies. . . . . . . . . . 49
6.8 Financials. . . . . . . . . . . . . . . . . . . 49
6.9 Environmental Assessment and Remediation. . . . 49
6.10 Waiver of Bulk Sales Compliance . . . . . . . . 49
ARTICLE VII - AGREEMENTS. . . . . . . . . . . . . . . . . . . 49
7.1 Employment Agreements . . . . . . . . . . . . . 49
7.2 Non-Compete Agreements. . . . . . . . . . . . . 49
7.3 Release Agreements and Nonqualified Stock Option
Agreements. . . . . . . . . . . . . . . . . . . 50
7.4 Security Deposits . . . . . . . . . . . . . . . 50
7.5 Power of Attorney . . . . . . . . . . . . . . . 50
ARTICLE VIII - CONDITIONS PRECEDENT. . . . . . . . . . . . . . 51
8.1 Mutual Conditions Precedent . . . . . . . . . . 51
8.2 Conditions to Closing Conditions to Obligations of
Purchaser and Champion. . . . . . . . . . . . . 51
8.3 Conditions to Obligations of Sellers. . . . . . 56
ARTICLE IX - INDEMNIFICATION . . . . . . . . . . . . . . . . 57
9.1 Indemnification by Sellers. . . . . . . . . . . 57
9.2 Representations . . . . . . . . . . . . . . . . 58
9.3 Waiver of Claims Against the Company. . . . . . 58
9.4 Indemnification by Purchaser and Champion . . . 58
9.5 Assertion of Claims . . . . . . . . . . . . . . 59
9.6 Survival. . . . . . . . . . . . . . . . . . . . 60
9.7 Various Matters . . . . . . . . . . . . . . . . 60
9.8 Various Limitations . . . . . . . . . . . . . . 61
ARTICLE X - TERMINATION AND AMENDMENT . . . . . . . . . . . 61
10.1 Termination . . . . . . . . . . . . . . . . . . 61
10.2 Effect of Termination . . . . . . . . . . . . . 62
10.3 Amendment . . . . . . . . . . . . . . . . . . . 62
ARTICLE XI - DEFINITIONS AND ACCOUNTING TERMS. . . . . . . . 62
11.1 Certain Definitions . . . . . . . . . . . . . . 62
Page
11.2 Accounting Terms. . . . . . . . . . . . . . . . 64
11.3 Interpretation. . . . . . . . . . . . . . . . . 64
ARTICLE XII - MISCELLANEOUS . . . . . . . . . . . . . . . . . 64
12.1 Taxes . . . . . . . . . . . . . . . . . . . . . 64
12.2 Name of Company . . . . . . . . . . . . . . . . 65
12.3 Broker. . . . . . . . . . . . . . . . . . . . . 65
12.4 Entire Agreement. . . . . . . . . . . . . . . . 66
12.5 Notices . . . . . . . . . . . . . . . . . . . . 66
12.6 Headings. . . . . . . . . . . . . . . . . . . . 67
12.7 Assignment. . . . . . . . . . . . . . . . . . . 67
12.8 Counterparts. . . . . . . . . . . . . . . . . . 67
12.9 Parties in Interest . . . . . . . . . . . . . . 67
12.10 Waiver. . . . . . . . . . . . . . . . . . . . . 67
12.11 Payment of Expenses . . . . . . . . . . . . . . 67
12.12 Severability. . . . . . . . . . . . . . . . . . 67
12.13 Confidentiality . . . . . . . . . . . . . . . . 68
12.14 Governing Law and Choice of Forum . . . . . . . 68
12.15 Action by Seller. . . . . . . . . . . . . . . . 68
12.16 Guaranty. . . . . . . . . . . . . . . . . . . . 68
EXHIBITS
A
B
C
D
E
<PAGE>
STOCK AND ASSET PURCHASE AGREEMENT
THIS STOCK AND ASSET PURCHASE AGREEMENT ("Agreement") is
made and entered into as of this 3rd day of April, 1996 by and
among CHAMPION ENTERPRISES, INC. ("Champion"), HLI ACQUISITION
CORP., a Michigan corporation ("Purchaser"), LEGEND REALTY, INC.,
an Alabama corporation ("Realty"), HOMES OF LEGEND, INC.
("Legend"; Realty and Legend sometimes individually referred to
as "Company" and collectively as "Companies") and each of the
other persons listed on the signature pages hereto as a "SELLER
STOCKHOLDER" (the foregoing sometimes individually referred to as
"Seller Stockholder" and collectively as "Seller Stockholders");
(each Seller Stockholder and each Company sometimes individually
referred to as a "Seller" and collectively as "Sellers").
BACKGROUND
WHEREAS, this Agreement sets forth the terms and conditions
of the acquisition by Purchaser from the Seller Stockholders of
all the issued and outstanding capital stock of Legend, being
1,200 shares of common stock, $1.00 par value per share ("Seller
Common Stock"); and
WHEREAS, Legend is engaged in the business (the "Business")
of the design, manufacture, sale and service of manufactured
housing; and
WHEREAS, the Seller Stockholders own of record and
beneficially 100% of the outstanding capital stock of both the
Companies and, intending to be parties to the undertakings,
covenants, representations and warranties of Realty contained
herein, have agreed to cause Realty to enter into this Agreement
and consummate the transactions contemplated hereby, and, in
their capacity as shareholders of Realty as well as being
shareholders of Legend, to enter into this Agreement and
consummate the transactions contemplated hereby; and
WHEREAS, the Purchaser desires to purchase from Realty all
of its real estate business (except as hereinafter excluded) (the
"Real Estate Business") and all of its assets (excepting herefrom
the "Excluded Assets") and in that connection will assume certain
specified obligations related to the Real Estate Business on the
terms and conditions set forth herein; and
WHEREAS, the Purchaser desires to purchase from the Seller
Stockholders the Stockholder Real Estate; and
WHEREAS, the Purchaser has agreed to pay to the Seller
Stockholders and to Realty in connection with the consummation of
the transactions contemplated hereby and for the covenants of the
Seller Stockholders contained in the Non-compete Agreements,
subject to the satisfaction of the terms and conditions herein
contained, the following amounts of money: (a) $10,000,000 for
the Seller Common Stock, (b) $3,955,000 for the Real Estate (and,
in connection therewith, to assume certain indebtedness of
Realty), (c) $8,800,000 in Earn Out Payments to all the Seller
Stockholders except J. R. Bennett, (d) $2,200,000 in Earn Out
Payments to J. R. Bennett, (E) $45,000 for the Stockholder Real
Estate, and (f) $1,000,000 for the performance of the obligations
of the Seller Stockholders contained in the Non-compete
Agreements.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants and agreements herein contained, and
other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I - SALE AND PURCHASE OF THE PURCHASED ASSETS FROM
REALTY AND THE STOCKHOLDER REAL ESTATE FROM SELLER STOCKHOLDERS
1.1 Purchased Assets. Subject to the terms and
conditions of this Agreement, and to the accuracy of the
representations and warranties herein contained, on the Closing
Date (as defined in Section 11.1 below), Sellers shall, or shall
cause Realty to, sell, assign, convey, transfer and deliver to
Purchaser, and Purchaser shall purchase, receive and accept, as
they exist on the Closing Date, all of the Real Estate Business
and goodwill of Realty and all of the assets and properties owned
by, leased to or otherwise used by Realty, whether tangible or
intangible, and wherever located (the "Purchased Assets"),
excepting therefrom the Excluded Assets, it being understood that
the Purchased Assets include, and as of the Closing Date shall
include, all of the assets necessary for the conduct by Purchaser
of the Real Estate Business as it is now and on the Closing Date
shall be conducted by Purchaser. The sale of the Purchased
Assets to the Purchaser is sometimes referred to as the "Asset
Acquisition." Without limiting the generality of the foregoing,
the Purchased Assets shall include:
(a) The real property described on Exhibit 1.1(a)
hereto together with all tenements, hereditaments and
appurtenances thereto, and all improvements, buildings and
fixtures thereon, and including, without limitation, all
leasehold interests and purchase options therein (the "Real
Estate").
(b) Contracts, leases, equipment warranties, licenses
and all other agreements necessary to conduct the Real Estate
Business, including those listed on Exhibit 1.1(b) hereto with
respect to Purchased Assets (together with the contracts,
agreements or arrangements referred to in Section 1.1(c) (the
"Contracts and Commitments").
(c) Contracts, agreements or arrangements (whether
written or oral) that are entered into after the date hereof in
accordance with Section 6.1, including those listed on Exhibit
1.1(c) which contracts, agreements or arrangements Purchaser
expressly agrees in writing shall constitute an asset purchased
hereunder.
(d) Except as otherwise expressly set forth herein,
choses in action, causes of action, suits, proceedings, claims
and demands, whether known or unknown, matured or unmatured,
accrued or contingent, against third parties arising in
connection with the Contracts and Commitments.
(e) All equipment (as defined in the Uniform
Commercial Code of the State of Alabama, Sections 7-1-101 et
seq., Code
of Alabama, 1975 (the "UCC")) and, to the extent not otherwise
constituting equipment as defined above, all other items of
tangible personal property, in each case whether or not
capitalized on Realty's books (including, without limitation, the
items listed on Exhibit 1.1(e) hereto) (collectively, the
"Equipment").
(f) All inventory (as defined in the UCC) whether on
hand or in transit and including consigned inventory (the
"Inventory").
(g) All accounts and notes receivable, including
intercompany accounts receivable, chattel paper, documents and
instruments (all as defined in the UCC), including all accrued
interest receivable and also including any security held by
Realty for the payment thereof (including, without limitation,
the items described on Exhibit 1.1(g) hereto) (the "Receivables")
and all general intangibles (as defined in the UCC) of Realty
and, to the extent not otherwise constituting general intangibles
as defined above, any interest of Realty in any and all claims by
Realty against any other person, whether now accrued or hereafter
to accrue, contingent or otherwise, known or unknown, including,
but not limited to, all rights under express or implied
warranties from manufacturers, vendors and suppliers (except as
they may pertain to liabilities of Realty other than the Assumed
Liabilities (as defined in Section 2.3 below)), claims for
collection or indemnity, claims in bankruptcy, and choses in
action.
(h) All cash, cash equivalents and amounts held on
deposit in all savings, checking, money market, investment and
other accounts of any nature or character (including, without
limitation, the accounts listed on Exhibit 1.1(h) hereto).
(i) All right, title, benefit and interest of Realty
in and to (i) all patents, patent rights, patent licenses and
patent applications (including any patents issuing on such
applications), (ii) trademarks, trademark rights, trademark
licenses, trademark registrations and applications (including any
trade marks issuing on such registrations and applications),
(iii) trade names and trade name rights, assumed names and other
forms of business identification, (iv) copyrights, copyright
licenses, copyright registrations and applications (including any
copyrights issuing on such registrations and applications), (v)
inventions, discoveries, improvements, designs and prototypes
(whether patentable or unpatentable), (vi) trade secrets,
manufacturing and engineering drawings, process sheets,
specifications, bills of material, formulae and secret and
confidential processes, know-how, shop rights, technology and
other industrial property, (vii) contracts with employees or
other persons relating in whole or in part to disclosure,
assignment or patenting of any of the items described in (v) and
(vi) above, and (viii) logos, in each case presently owned or
held, in whole or in part, by Realty or as to which Realty has
any interest of any kind (including, without limitation, the
items listed on Exhibit 1.1(i) attached hereto).
(j) All policies of insurance and rights to make
claims and other rights thereunder (whether now or at anytime
heretofore in force and effect and including, without limitation,
all insurance covering Realty, the Real Estate Business, the
Purchased Assets and all keyman and other insurance on the lives
of the Selling Stockholders and any other person in which Realty
has any interest and further including, without limitation, the
policies of insurance listed on Exhibit 1.1(j) hereto), also
including any insurance proceeds paid or payable to Realty on or
after the date of this Agreement as a result of damage to or loss
of any of the Purchased Assets that are to be, or in the absence
of loss otherwise would have been, sold to Purchaser, or as a
result of damage or loss with respect to, or interruption of the
operation of, the Real Estate Business;
(k) All plans, specifications, confidential or
proprietary information and all other documents, and technical
information and trade secrets relating to the design,
construction or operation of the manufacturing facilities of
Legend or Realty.
(l) All books and records which pertain directly or
indirectly, in whole or in part, to the operation of the Real
Estate Business, including without limitation, those relating to
the Purchased Assets, the Assumed Liabilities, customers,
suppliers, advertising, promotional material, sales, services,
delivery, internal organization, employees, accounting and
financial matters and/or operations of Realty.
(m) All security deposits, prepaid expenses, credits
and similar items.
(n) All transferable local, state and federal
franchises, licenses, bonds, permits and similar items pertaining
to the Real Estate Business and/or the Purchased Assets
(including, without limitation, the items described in Exhibit
1.1(n) hereto) (the "Permits").
(o) The Real Estate Business conducted by Realty as a
going concern, including any and all goodwill connected
therewith, telephone and facsimile numbers, yellow page
advertisements, and the Company's right to use the name "Legend
Realty, Inc." and all related names and derivations thereof.
(p) All other property, assets, and rights, real or
personal, tangible or intangible owned by Realty or in which
Realty has any interest of any kind whatsoever.
All Exhibits described in this Section 1.1 (except
1.1(c)), Exhibit 4.12 and Exhibit 4.12(b) shall be updated by
Sellers as of the Closing Date. Exhibit 1.1(c) may be updated by
Sellers as of the Closing Date to add items described in Section
1.1(c). However, Purchaser shall not be obligated to accept any
such Exhibit in substitution for the equivalent one hereto unless
the Purchaser agrees thereto in writing.
1.1.1 Excluded Assets. Notwithstanding anything
herein to the contrary, the Purchased Assets shall not include
(collectively, the "Excluded Assets"):
1.1.1(a) any of the real property identified on
Exhibit 1B.2(b) hereto;
1.1.1(b) contracts, agreements, or arrangements
(whether written or oral) which are entered into after the date
hereof which contracts, agreements or arrangements Purchaser does
not expressly agree in writing shall constitute an asset
purchased hereunder; and
1.1.1(c) the corporate seals, minute books, stock
books, blank share certificates, tax returns and other records
relating to the corporate organization or tax reporting of
Realty.
1.2 Assignment of Rights by Sellers. On the Closing
Date, without limiting the generality of Section 1.1 hereof,
Sellers shall assign, or shall cause Realty to assign, to
Purchaser all of the Sellers' rights under the Contracts and
Commitments (and, as provided in Section 2.3, Purchaser shall
assume and agree to perform the unexecuted portion of the
Company's obligations thereunder).
1.2.1 Absence of Consent. Notwithstanding the
foregoing, there shall not be assigned to Purchaser any Contract
or Commitment if an attempted assignment thereof without the
consent of the other party or parties thereto would constitute a
breach thereof or in any way adversely affect the rights of
Realty thereunder and such consent is not obtained, or if an
attempted assignment would be ineffective or would affect the
rights of Realty thereunder so that Purchaser would not, in fact,
receive the benefits thereof. Sellers covenant and agree that
the beneficial interest in and to any such agreement shall, to
the extent permitted by the relevant agreement and/or by law,
pass to Purchaser, and Sellers covenant and agree: (a) that they
will hold and declare that they hold all such agreements in trust
for the benefit of Purchaser, its successors and assigns, from
and after the Closing Date; (b) to use best efforts to obtain and
secure any and all consents and approvals that may be necessary
to effect such assignment or assignments of the same; (c) to make
or complete such assignment or assignments as soon as reasonably
possible; and (d) to cooperate with Purchaser in any other
reasonable arrangement designed to provide for actions necessary
to enable Realty to fulfill any such agreements until an
effective assignment thereof to Purchaser can be obtained, and
the parties agree to cooperate and take all necessary actions,
including accountings between parties, to assure that Purchaser
shall receive all of such benefits, rights, obligations and
duties under such agreements. The provisions of this Section
1.2.1 do not constitute a waiver of the conditions to Closing
contained in Section 8.2 hereof.
1.3 Stockholder Real Estate. Subject to the terms and
conditions of this Agreement, and to the accuracy of the
representations and warranties herein contained, on the Closing
Date, Sellers shall, or shall cause the Seller Stockholders to,
sell, assign, convey, transfer and deliver to Purchaser, and
Purchaser shall purchase, receive and accept the real property
described on Exhibit 1.3 hereto together with all tenements,
hereditaments and appurtenances thereto, and all improvements,
buildings and fixtures thereon, and including without limitation,
all leasehold interests and purchase options therein (the
"Stockholder Real Estate"; Stockholder Real Estate and Real
Estate sometimes herein referred to as "Total Real Estate") The
sale of the Stockholder Real Estate to the Purchaser is sometimes
herein referred to as the "Stockholder Real Estate Transaction".
ARTICLE I(B) - THE STOCK PURCHASE TRANSACTION
1.1(B) Agreement of Purchase and Sale of the
Purchased Seller Stock. Subject to the terms and subject to the
conditions set forth herein, the Seller Stockholders, jointly and
severally, hereby agree to sell, assign, transfer, set over,
convey and deliver to Purchaser on the Closing Date all of the
issued and outstanding Seller Common Stock (the "Purchased Seller
Stock") free, clear and discharged of and from all Encumbrances
and, based on the Seller Stockholders' representations,
warranties and covenants contained herein, Purchaser agrees to
purchase the Purchased Seller Stock from the Seller Stockholders.
The sale of the Purchased Seller Stock to the Purchaser is
sometimes herein referred to as the "Stock Purchase Transaction".
1.2(B) Consideration for Purchased Seller Stock. In
consideration of the receipt of the Purchased Seller Stock from
the Seller Stockholders, Purchaser will pay to the Seller
Stockholders $10,000,000.00 (the "Stock Purchase Price") subject
to adjustment as set forth herein, in the manner and at the time
specified in Section 2.2(B) hereof. In addition, subject to the
terms and conditions hereof, including without limitation of the
generality of the foregoing, strict and complete compliance with
those terms and conditions set forth in Section 2.2.2(B) hereof,
the Purchaser shall pay to the Seller Stockholders the Earn Out
Payments specified in Section 2.2.2(B) hereof as set forth
therein in the amount specified therein.
ARTICLE II(A) - PURCHASE PRICE IN ASSET TRANSACTION;
ASSUMPTION OF CERTAIN LIABILITIES;
PURCHASE PRICE FOR STOCKHOLDER REAL ESTATE
2.1 Asset Purchase Price. The purchase price for the
Purchased Assets (the "Asset Purchase Price") to be paid to
Realty in connection with the Asset Transaction shall, in
addition to the Assumed Liabilities, be an amount equal to
$3,955,000.00. The purchase price to be paid to the Seller
Stockholders for the Stockholder Real Estate shall be in an
amount equal to $45,000. ("Real Estate Purchase Price").
2.2 Allocation of Asset Purchase Price. The
allocation of the Asset Purchase Price among the Purchased Assets
shall be allocated as set forth on Exhibit 2.2 hereto. Purchaser
and Realty will at the Closing execute and deliver duplicate IRS
Forms 8594, with an allocation of the Asset Purchase Price in
accordance with such allocation as set forth on said Exhibit and
will file all other returns and reports in a manner consistent
with the allocations in this Section.
2.3 Assumed Liabilities.
2.3.1 On the Closing Date, and subject to the
terms and conditions of this Agreement, Purchaser shall assume
the Assumed Liabilities. Sellers agree that, except only for the
Assumed Liabilities pursuant to this Section 2.3.1, neither
Purchaser nor Champion is assuming any liabilities of any of the
Sellers, whether accrued, absolute, contingent, known or unknown,
or otherwise, and whether due or to become due.
2.3.2 For the purposes of this Agreement, the
"Assumed Liabilities" shall include only (a) the obligations of
Realty arising under the Bond Documents as described in Section
4.40 hereof, (b) those obligations arising under the Contracts
and Commitment and (c) those obligations listed on, and in amount
not exceeding that set forth on, Exhibit 2.3.2 hereof. For
purposes of clarity, and without limiting Section 2.3.3, it is
agreed that neither Purchaser nor Champion is assuming any
obligation or liability of any Selling Stockholder or any Taxes
(or liability therefor) (except the Real Estate Transfer Taxes as
set forth herein) of any of the Sellers.
2.3.3 Neither Purchaser nor Champion shall assume
or have any liability or obligation whatsoever for any
liabilities or obligations whatsoever of Realty, whether accrued,
absolute, contingent, known or unknown, or otherwise, and whether
due or to become due, other than the Assumed Liabilities pursuant
to the terms and conditions of this Agreement, including but
without limitation Section 2.3.1 (the "Excluded Liabilities").
The Sellers (other than Legend) agree to discharge, promptly when
due, the Excluded Liabilities. For purposes of clarity, neither
Purchaser nor Champion shall assume or have any liabilities or
obligations whatsoever for any liabilities or obligations
whatsoever of any of the Selling Stockholders, whether accrued,
absolute, contingent, known or unknown, or otherwise, and whether
due or to become due (collectively, the "Selling Stockholder
Liabilities"). Each Selling Stockholder agrees to discharge,
promptly when due, such Selling Stockholder's Selling Stockholder
Liabilities.
2.3.4 Any instruments executed and delivered by
Purchaser in connection with the assumption of the Assumed
Liabilities shall contain express and specific provisions to the
effect that in respect of any Assumed Liabilities:
(a) Purchaser shall have the right to resist,
contest, defend against, litigate, compromise and/or
otherwise dispose of any and all Assumed Liabilities to such
extent and in such manner as Purchaser, in its sole
discretion shall deem desirable, advisable, and for its best
interest, and Purchaser shall be deemed to have performed
its obligations pursuant to such instruments notwithstanding
such resistance, contest, defense against, litigation,
compromise or other disposition, so long as, and to the
extent that, Sellers shall not be required to pay, satisfy,
discharge or perform any of the Assumed Liabilities; and
(b) Nothing contained in any such instrument or
in this Agreement shall be construed:
(1) as enlarging or extending in any
manner, or to any extent (i) the statute of
limitations applicable to any of the Assumed
Liabilities or (ii) the rights which any owner,
holder or obligee of any of the Assumed
Liabilities had or may have in respect thereto
against Sellers;
(2) as rendering valid or enforceable
against Purchaser any of the Assumed Liabilities
which, for any reason whatsoever, would not have
been valid and enforceable against Sellers; or
(3) as rendering valid and enforceable
against Purchaser to a greater extent, or in a
different manner, any of the Assumed Liabilities
which would have been valid, or enforceable
against Sellers only partially, conditionally,
contingently or to a limited extent, or in a
limited manner.
ARTICLE II(B) - CLOSING OF STOCK PURCHASE TRANSACTION
AND ASSET ACQUISITION
2.1(B) Closing and Closing Date. The Closing of the
Stock Purchase Transaction, the Stockholder Real Estate
Transaction, and the Asset Acquisition shall occur on the Closing
Date at 10:00 a.m. The Closing shall occur at the offices of
Miller, Canfield, Paddock and Stone, P.L.C., 1400 North Woodward
Avenue, Suite 100, Bloomfield Hills, Michigan 48304, or such
other place as may be mutually agreed upon by Purchaser and
Seller Stockholders.
2.2(B) Payments for Stock Purchase Transaction.
2.2.1(B) Disbursement of Funds at Closing. Each
of the Seller Stockholders shall receive his Pro Rata
Percentage of each payment of the Stock Purchase Price and
of the Earn Out Payments. For each Seller Stockholder, "Pro
Rata Percentage" means the result obtained by dividing the
number of shares of Purchased Seller Stock held of record by
such Seller Stockholder on the Closing Date by the number of
issued and outstanding shares of Purchased Seller Stock on
the Closing Date. The "Pro Rata Percentage" for each of the
Seller Stockholders will be, on the Closing Date, as set
forth on Schedule 2.2.1(B) hereof. Purchaser shall disburse
cash in the following amounts and in the following manner:
(a) Stock Purchase Payments. On the Closing Date
at the Closing, Purchaser shall pay to each Seller
Stockholder his Pro Rata Percentage of the Stock Purchase
Price less the Hold Back Amount (as provided for in Section
2.2.1(B)(b) immediately below) (rounded to the nearest
$1.00), against receipt of the certificates evidencing the
Purchased Seller Stock duly endorsed for transfer or
accompanied by duly executed assignments separate from
certificate, in each case with signature(s) guaranteed by a
national bank and together with the other documents and
instruments contemplated in Section 8.2.2(aa) hereof.
(b) Hold Back Amount. Purchaser shall retain
from the Stock Purchase Price the amount of $2,500,000 (the
"Hold Back Amount") to be applied and paid by Purchaser as
provided in this Section 2.2.1(B) and Section 2.2.3(B).
After McGriff, Dowdy & Associates, P.C. ("Auditors") have
completed and delivered the Audited Closing Balance Sheet
and the calculation of Audited Equity, any disputes with
respect thereto have been finally resolved pursuant to
Section 3.2(B) and either any moneys to be paid to the
Purchaser in accordance with Section 3.2(C) have been paid
to the Purchaser, or, in accordance with said Section, no
moneys are to be paid to the Purchaser by the Sellers,
Purchaser shall pay to each Seller Stockholder, within 30
days after the occurrence of the last of the aforespecified
events to occur, his or her Pro Rata Percentage of (i)
$1,500,000 less (ii) (A) all amounts which the Purchaser
and/or Champion are/is entitled to, and has retained from,
the Hold Back Amount in accordance with this Agreement and
(B) the amount of all claims which the Purchaser and/or
Champion has asserted which claims could result in the
Purchaser and/or Champion retaining all or a portion of the
Hold Back Amount plus, (iii) in the case of all Seller
Stockholders other than a Relevant Seller Stockholder (as
defined in Section 2.2.3(B)(d)) the amount of all Specific
Stockholder Claims (as defined in Section 2.2.3(B)(d)) to
the extent deducted from the aforesaid $1,500,000. On the
first anniversary of the Closing Date, Purchaser shall pay
to each Seller Stockholder his Pro Rata Percentage of the
amount of the Remaining Hold Back Amount. "Remaining Hold
Back Amount" shall mean the amount of the Hold Back Amount
which, at any time of determination, has not been previously
paid to a Seller Stockholder in accordance with this
Agreement less the amount of claims then outstanding which
Purchaser and/or Champion has asserted pursuant to Section
2.2.3(B) hereof and less the amount which the Purchaser
and/or Champion has applied to claims from the Hold Back
Amount in accordance with the terms and conditions hereof
plus, in the case of all Seller Stockholders other than a
Relevant Stockholder the amount of all Specific Stockholder
Claims to the extent deducted from the Hold Back Amount.
From and after the first anniversary of the Closing Date,
as, if and when Remaining Hold Back Amounts arise, the
Purchaser shall pay to the Seller Stockholders his or her
Pro Rata Percentage thereof.
"Final Hold Back Payment" shall mean the amount of the last
payments of the Hold Back Amount paid by the Purchaser to
the Seller Stockholders hereunder up to and including the
amount of $1,000,000.00. The Final Hold Back Payments up to
and including the amount of $1,000,000 shall bear interest
at the rate of 6% per annum from the Closing Date until the
date paid. Any other payments of the Hold Back Amount from
the Purchaser to the Seller Stockholders shall not bear
interest. Such Hold Back Amount shall bear interest only to
the extent that the Purchaser is required to pay such Hold
Back Amount to the Seller Stockholders.
2.2.2(B) Earn-out Payment. In addition to the
foregoing, the Purchaser agrees that:
(a) if, and only if, the Post Closing EBIT of Legend or
Purchaser, as relevant, for the period commencing on, and
including, April 27, 1996 and ending on and including April
26, 1997, is equal to or greater than $7,500,000, Purchaser
shall pay to each Seller Stockholder (other than J. R.
Bennett ("Bennett")) his or her Pro Rata Percentage of
$4,000,000 ($3,200,000 of which $4,000,000 to be distributed
pursuant to this section with the remaining $800,000 to be
distributed pursuant to (d) below of this section) within 30
days after the final determination of such Post Closing EBIT
and resolution of all disputes with respect thereto pursuant
to the further provisions of this Section 2.2.2(B);
(b) if, and only if, the Post Closing EBIT of Legend or
Purchaser, as relevant, for the period commencing on, and
including, April 27, 1996 and ending on and including April
25, 1998, is equal to or greater than $15,500,000, Purchaser
shall pay to each Seller Stockholder (other than Bennett)
his or her Pro Rata Percentage of $3,000,000 ($2,400,000 of
which $3,000,000 to be distributed pursuant to this section
with the remaining $600,000 to be distributed pursuant to
(d) below of this section) within 30 days after the final
determination of such Post Closing EBIT and resolution of
all disputes with respect thereto pursuant to the further
provisions of this Section 2.2.2(B);
(c) if, and only if, the Post Closing EBIT of Legend or
Purchaser, as relevant, for the period commencing on, and
including, April 27, 1996 and ending on and including May 1,
1999, is equal to or greater than $23,500,000, Purchaser
shall pay to each Seller Stockholder (other than Bennett)
his or her Pro Rata Percentage of $4,000,000 ($3,200,000 of
which $4,000,000 to be distributed pursuant to this section
with the remaining $800,000 to be distributed pursuant to
(d) below of this section) within 30 days after the final
determination of such Post Closing EBIT and resolution of
all disputes with respect thereto pursuant to the further
provisions of this Section 2.2.2(B); and
(d) On the third anniversary of the Closing Date, the
Purchaser shall pay to Bennett $2,200,000.
Each of the foregoing payments by the Purchaser set
forth in this Section 2.2.2(B) are sometimes herein referred
to as an "Earn Out Payment" and collectively as the "Earn
Out Payments". Purchaser shall have no obligation to make
any Earn Out Payment whatsoever pursuant to this Section
unless the conditions pertaining to such payment are
completely and strictly met. If the Purchaser is required
to make a payment under this Section 2.2.2(B) to any Seller
Stockholder other than Bennett, then each such payment which
the Purchaser is required to make under this Section
2.2.2(B) shall bear interest on the amount of such payment
at the rate of 6% per annum (on a 366/365 day year basis) as
if it were outstanding from the Closing Date until the date
such amount is paid and such interest shall be due and
payable when the amount to which it pertains is paid. If
the Purchaser is required to make a payment under this
Section 2.2.2(B) to Bennett, then such payment shall bear
interest at a rate of 3% per annum (on a 366/365 day year
basis) as if it were outstanding from the Closing Date until
the date such amount is paid and such interest shall be due
and payable when the amount to which it pertains is paid.
All Earn Out Payments shall be made by check payable to the
applicable Person.
For purposes of this Section 2.2.2(B), "Post Closing
EBIT" means, for any period, earnings before interest and
federal and State of Alabama income taxes and before accrual
of all bonuses under the Employment Agreements referred to
in Section 7.1 hereof for the period in question. In
computing Post Closing EBIT for purposes of this Section
2.2.2(B), there shall be deducted (without limiting other
deductions which are appropriate) workers compensation,
warranty liability, and medical insurance liability but
there shall be no deduction for good will resulting from the
transactions contemplated by this Agreement, the costs and
expenses incurred by Legend or Purchaser in connection with
the negotiation for and closing of the Stock Purchase
Transaction, allocation of corporate overhead of Champion
and its Affiliates (other than Legend's or Purchaser's
corporate overhead), but there shall be deducted any and all
expenses of Purchaser and Legend, as relevant, including
reasonable expenses incurred by Champion on behalf of
Purchaser or Legend, as relevant, and billed by Champion to
Purchaser or Legend, as relevant, for outside accounting and
legal services, and for insurance coverage and for such
similar matters as may be agreed to from time to time by
Champion and Purchaser's or Legend's President, as
appropriate.
Post Closing EBIT shall be determined by the internal
accounting staff of Champion in accordance with GAAP (as
hereinafter defined) from the books and records of Purchaser
and/or Legend as relevant. Seller Stockholders shall have
thirty (30) days after receipt of a calculation of Post
Closing EBIT to deliver to Purchaser and to Champion notice
of any objections to such calculation. Any such notice of
objections shall be in writing and shall state, in
reasonable detail, the basis for each objection and the
amount of adjustment Seller Stockholders believe is required
in respect thereto. In the event that Purchaser, Champion
and Seller Stockholders cannot agree with respect to a
calculation of Post Closing EBIT within thirty (30) days
after the delivery of a notice of objections or such later
date as may be agreed upon by Purchaser, Champion and Seller
Stockholders, the dispute shall be resolved by binding
arbitration by Ernst & Young, L.L.P., or if Ernst & Young,
L.L.P. is unable or unwilling to so serve any other
independent accounting firm agreed upon by Purchaser,
Champion and Seller Stockholders (the "Independent
Accounting Firm"). Any items not in dispute shall be deemed
stipulated by Purchaser, Champion and Seller Stockholders
and shall not be determined by the Independent Accounting
Firm. The determination of the Independent Accounting Firm
shall be binding and conclusive upon the matters determined
thereby and may be entered as a judgment by any court of
competent jurisdiction. All costs and expenses relating to
the services provided by the Independent Accounting Firm
shall be paid equally by Purchaser and Seller Stockholders.
The parties hereto understand and agree that after the
Closing Date Purchaser intends to cause a merger between
itself and Legend, with either Legend or the Purchaser being
the survivor thereof. Notwithstanding anything in this
section to the contrary, "Post Closing EBIT" will be
calculated in regard to Legend prior to such merger being
effective and after such merger being effective be
calculated in regard to the entity which is the surviving
corporation of such merger.
Notwithstanding anything contained herein to the
contrary, it shall be a condition precedent to the
obligation of the Purchaser to pay to a Seller Stockholder
an Earn Out Payment that the Seller Stockholder not be in
default in the performance of his or her duties and
obligations under the Non-compete Agreement to which he or
she is a party and, if such Seller Stockholder is also an
Executive, not be or have been in default of his or her
duties and obligations arising under the Employment
Agreement to which he or she is a party.
LEGEND
THE EARN OUT PAYMENTS HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, THE MICHIGAN UNIFORM SECURITIES ACT, THE
ALABAMA SECURITIES ACT OR THE SECURITIES LAWS OF ANY OTHER STATE
AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OFFERED, PLEDGED OR
OTHERWISE DISTRIBUTED UNLESS SO REGISTERED UNDER THE SECURITIES
ACT OF 1933, THE MICHIGAN UNIFORM SECURITIES ACT, THE ALABAMA
SECURITIES ACT AND THE SECURITIES LAWS OF ANY OTHER APPLICABLE
STATE OR UNLESS PURCHASER RECEIVES AN OPINION OF COUNSEL
(CONCURRED IN BY COUNSEL FOR PURCHASER) STATING THAT SUCH SALE,
ASSIGNMENT, TRANSFER, OFFER, PLEDGE OR OTHER DISTRIBUTION IS
EXEMPT FROM SUCH REGISTRATION REQUIREMENTS.
Nothing contained in this Agreement is intended nor shall be
deemed to be an admission that the Earn Out Payments constitute
securities under any applicable law.
2.2.3(B) Offset and Liquidated Damages.
(a) Subject to the further provisions of this Section
2.2.3 (B), Purchaser and/or Champion shall have the right at
any time and from time to time to apply all or any portion
of the Hold Back Amount and/or the Earn-out Payment against
the amount of any claim Purchaser, Legend or Champion may
have against any of the Sellers (other than Legend) for
indemnification under Section 9.1 hereof or otherwise under
this Agreement or related documents. Purchaser and/or
Champion shall give Sellers' Notice Agent written notice of
the intention to exercise its respective rights under this
Section 2.2.3(B), which notice shall describe, in reasonable
detail, the claim asserted by Purchaser, Legend, and/or
Champion against any or all of the Sellers (other than
Legend) for indemnification under Section 9.1 hereof or
otherwise under this Agreement. Sellers (other than Legend)
shall have forty-five (45) days, or such shorter or longer
period as may be agreed upon by Purchaser, Champion and
Sellers (other than Legend), to fully cure and resolve such
claim to the satisfaction of Purchaser and Champion. If the
claim is so cured and resolved within such time, Purchaser
or Champion, as relevant, shall not exercise its rights
under the first sentence of this Section 2.2.3(B). If the
claim is not so cured and resolved within such time,
Purchaser and/or Champion may exercise such rights. Payment
of the Hold Back Amount and Earn-out Payment by Purchaser
shall be extended during any period in which Purchaser
and/or Champion shall have given a written notice to Sellers
Notice Agent under this Section 2.2.3(B) and for an
additional period of 10 days after the expiration of the
period during which Sellers shall have been afforded the
opportunity to cure and resolve the claim described in such
notice. The rights available to Purchaser and Champion
under this Section 2.2.3(B) shall be supplementary and in
addition to any and all other rights and remedies available
to Purchaser and/or Champion under this Agreement or
otherwise under applicable law.
(b) In addition, in the event that the employment of
any of the Executives (as defined in Section 7.1 hereof)
that is a Seller Stockholder is terminated by Purchaser for
cause (as defined in the applicable Employment Agreement
executed by the applicable Executive pursuant hereto other
than for failure of the Company to achieve EBIT as set forth
in Section 5 (a) of the relevant Employment Agreement) or by
the Executive for any reason (other than as a result of
death or disability as defined in such Employment Agreement)
or in the event that any Seller shall breach any of such
Seller's respective obligations under the Non-Compete
Agreement executed and delivered by such Seller pursuant
hereto, Purchaser may retain the amount of the Hold Back
Amount and the Earn-Out Payment otherwise payable to such
person as partial liquidated damages.
(c) Each of the Sellers acknowledges and agrees that
the execution and delivery by each of the Executives that is
a Seller Stockholder of the Employment Agreements and the
execution and delivery by each of the Sellers of the
Non-Compete Agreements, and the terms thereof, are material
inducements to the willingness of Purchaser and Champion to
execute and deliver this Agreement and to consummate the
transactions contemplated herein. Each of Sellers further
acknowledges and agrees that the termination of employment
of one or more of the Executives by the Company for cause or
by the Executive for any reason (other than death or
disability or as a result of the failure of the Company to
achieve EBIT as set forth in the Employment Agreements)
and/or breach by a Seller of its/his/her obligations under
the Non-Compete Agreements will cause irreparable injury to
Purchaser and to Legend and that money damages, in
themselves, will not provide an adequate remedy.
Accordingly, each of the Sellers further acknowledges and
agrees that the right of Purchaser and/or Champion to retain
the Hold Back Amount and the Earn-Out Payment as provided in
this Section 2.2.3 is reasonable as partial compensation for
the damages and injury that will be suffered by Purchaser in
such events. The rights available to Purchaser under this
Section 2.2.3 shall be supplementary and in addition to any
and all other rights and remedies available to Purchaser
under this Agreement, the Employment Agreements, the
Non-Competition Agreements or otherwise under applicable law in
respect of any of the matters referred to herein.
(d) Notwithstanding anything contained herein to the
contrary, Purchaser and/or Champion may only offset Specific
Stockholder Claims against the Hold Back Amount which would
otherwise be owing to the Relevant Seller Stockholder (eg,
if a Specific Stockholder Claim arose because one Seller
Stockholder breached his/her Non-compete Agreement, the
Seller Stockholders other than such breaching Seller
Stockholder would not be responsible for, and only such
breaching Seller Stockholder would be responsible for, the
Specific Stockholder Claims of Purchaser, Champion, or
Legend arising as a result thereof.). "Specific Stockholder
Claim" shall mean each claim for Damages of, or any claim
arising under this Agreement, an Employment Agreement or a
Non-compete Agreement of, Champion, Legend, or Purchaser
which arises solely because a Seller Stockholder breached
his/her obligations contained in his/her Non-compete
Agreement or, in the case of Executives, his Employment
Agreement. The "Relevant Seller Stockholder" shall mean the
Seller Stockholder who has caused a Specific Stockholder
Claim to arise by his/her breach of the Employment Agreement
(if applicable) and/or Non-compete Agreement to which he/she
is a party.
2.3(B) Payments - Asset Acquisition. The Asset
Purchase Price (exclusive of the Assumed Liabilities) shall be
paid on the Closing Date by certified or cashiers check payable
to Realty or by wire transfer in immediately available funds to
an account designated by Realty in an amount equal to
$3,955,000.00. Each of the Seller Stockholders shall receive his
or her Pro Rata Percentage of the Real Estate Purchase Price.
The Pro Rata Portion of the Real Estate Purchase Price to which
each Seller Stockholder is entitled shall be paid on the Closing
Date by certified or cashiers check payable to the relevant
Seller Stockholder or by wire transfer in immediately available
funds to an account designated by the relevant Seller
Stockholder.
2.4(B) Delivery of Possession. Sellers shall
deliver, or cause to be delivered, possession of the Purchased
Assets and the Stockholder Real Estate to Purchaser on the
Closing Date.
2.5(B) Sales and Transfer Taxes. All applicable
sales, transfer, stamp, documentary, and other similar taxes and
governmental fees, if any, which may be due or payable as a
result of the transactions contemplated hereby shall be borne and
paid by the Persons receiving the consideration to be paid by
Purchaser in connection therewith except for the Real Estate
Transfer Taxes on the Stockholders Real Estate which shall be
paid by the Purchaser.
2.6(B) Further Assurances. From time to time
subsequent to the Closing Date, each of the Sellers shall at the
request and expense of Purchaser execute and deliver such
additional conveyances, deeds, transfers, documents, instruments,
assignments, stock powers, applications, certifications, papers
and other assurances as may be reasonably requested by Purchaser
as necessary, appropriate, convenient, useful or desirable
effectively to carry out the intent of this Agreement.
ARTICLE III - ADJUSTMENTS TO PURCHASE CONSIDERATION
3.1 Definitions. For the purposes of this Agreement, the
following terms shall have the following respective meanings:
"Audited Equity" shall mean stockholders equity as reflected
in the Audited Closing Balance Sheet, as applicable, as the same
may be adjusted upon final resolution of all questions and
disputes with respect thereto as provided in this Agreement.
3.2 Closing Audit and Audited Closing Balance Sheet.
A. The Sellers shall cause the Auditors to prepare a
closing audit ("Closing Audit") of Legend, which shall
consist of a balance sheet as of the Closing Date or such
other date as may have been agreed to by Purchaser (as
adjusted as provided below, the "Audited Closing Balance
Sheet"). The Audited Closing Balance Sheet (i) shall
contain line items substantially consistent with the line
items in the 1995 Audited Balance Sheet (as defined in
Section 4.9.1 hereof), (ii) shall be prepared in accordance
with GAAP (except as modified below), (iii) shall present
fairly the financial condition of Legend as of the Closing
Date and (iv) otherwise shall fully comply with the
representations and warranties with respect to such balance
sheet set forth in Section 4.9 hereof. Notwithstanding the
foregoing, the Audited Closing Balance Sheet will be
adjusted to include as liabilities the following,
notwithstanding the requirements of GAAP: (a) a warranty
liability accural of $1,000,000.00, and (b) an environmental
liability reserve of $100,000.00. In connection with the
preparation of the Audited Closing Balance Sheet, Sellers
shall cause Legend to conduct a physical count of
inventories as of the Closing Date, which inventories shall
be observed by the Auditors. A copy of such inventories
shall be delivered to Purchaser and to Champion with the
Audited Closing Balance Sheet. Purchaser and Champion shall
be entitled to appoint representatives, which may be members
of the internal accounting staff of Champion or Legend or
its independent certified public accountants, to participate
in and observe the preparation of the Audited Closing
Balance Sheet, and such inventories.
B. In preparation of the Closing Audit, Auditors
shall conduct the examination of Legend in accordance with
generally accepted auditing standards. Auditors shall use
their best efforts to complete the Closing Audit not later
than sixty (60) days after the Closing Date and the Audited
Closing Balance Sheet shall be delivered by Auditors to
Purchaser, Champion, and the Seller Stockholders immediately
upon completion thereof, together with its opinion that the
Audited Closing Balance Sheet was prepared in accordance
with this Section, a calculation of the Audited Equity as of
the Closing Date, and copies of their workpapers relating to
the Closing Audit. Purchaser and Champion shall have the
right to appoint representatives (which may be members of
either of their internal financial staff and/or their
independent accountants) at its respective expense to review
the Closing Audit, which representatives shall have full
access to the Auditors personnel who shall have performed
the Closing Audit and to such other financial information as
they may reasonably request. The representatives of
Purchaser and Champion shall complete their review not later
than thirty (30) days after receipt by Purchaser and
Champion of the Audited Closing Balance Sheet, the Auditors'
opinion, the calculation of the Audited Equity as of the
Closing Date and the Auditors' workpapers, and, if Purchaser
and Champion shall have any objections thereto, shall
deliver a written notice to Seller's Notice Agent of any
objections to the Audited Closing Balance Sheet and the
calculation of the Audited Equity of the Company as of the
Closing Date within such time. In the event that Auditors'
and Purchaser's representatives cannot agree with respect to
the Audited Closing Balance Sheet or the calculation of the
Audited Equity as of the Closing Date within fifteen (15)
days after the expiration of the thirty (30) day review
period or such later date as may be agreed upon by
Purchaser, Champion and Seller Stockholders, the disputed
items shall be submitted to binding arbitration to the
Independent Accounting Firm. Any items not in dispute shall
be stipulated by Purchaser, Champion and the Seller
Stockholders and shall not be determined by the Independent
Accounting Firm. The determination of the Independent
Accounting Firm shall be binding and conclusive upon the
matters determined thereby and may be entered as a judgment
by any court of competent jurisdiction. All costs and
expenses relating to the services provided by Independent
Accounting Firm shall be paid equally by Purchaser and
Seller Stockholders.
C. In the event that the Audited Equity as determined
in accordance with this Section is less than $5,700,000,
then the Seller Stockholders shall immediately pay to the
Purchaser the amount by which the Audited Equity is less
than $5,700,000 without regard to the existence of the Hold
Back Amount. Any amounts payable under this subsection
shall be paid in immediately available funds together with
interest thereon at an annual rate equal to 6% from the
Closing Date to the date of payment. Any payments required
to be paid by the Seller Stockholders under this Section
3.2C shall reduce the amount of the Stock Purchase Price.
ARTICLE IV - REPRESENTATIONS AND
WARRANTIES OF SELLERS
The Sellers hereby represent, warrant and agree, as of the
date of this Agreement and as of the Closing Date, as follows,
each of which shall be deemed to be independently material and to
have been relied upon by Purchaser and Champion:
4.1 Organization; Good Standing. Each Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Alabama, has full power and
authority, corporate and other, to own and operate its property
including the operation of leased property), and to carry on the
Business as it is now being conducted, and is duly qualified or
licensed as a foreign corporation to do business and is in good
standing in any other jurisdictions (all of which other
jurisdictions, if any, are listed on Exhibit 4.1 hereto) in which
the character of the property owned or the nature of the Business
or Real Estate Business (as the case may be) transacted by it
makes such qualification or licensing necessary. Except as set
forth on Exhibit 4.1 hereto, Legend and Realty have not used or
assumed any other name in connection with either the Business or
Real Estate Business during the past five years.
4.2 Articles and Bylaws. Exhibit 4.2 hereto contains
true and complete copies of the Charters and Bylaws of each
Company.
4.3 Capitalization. Legend's authorized capital stock
consists solely of 1,200 shares of common stock, $1.00 par value,
of which 1,200 shares of common stock are validly issued and
outstanding, fully paid and non-assessable. Realty's authorized
capital stock consist of 1,200 shares of common stock, $1.00 par
value, of which 1,200 shares of common stock are validly issued,
outstanding, fully paid and non-assessable. The Selling
Stockholders own of record and beneficially 100% of the
outstanding capital stock of each Company in the respective
amounts set forth in Exhibit 4.3 hereto free, clear and
discharged of and from all Encumbrances. There are no
outstanding options, rights, warrants or other commitments
entitling any person to purchase or otherwise subscribe for or
acquire any shares of capital stock of either Company, nor is
there presently outstanding any security convertible into or
exchangeable for shares of capital stock of either Company, nor
has either Company or any Selling Stockholder entered into any
agreement with respect to any of the foregoing.
4.4 Seller Common Stock. Upon delivery of the
Purchased Seller Stock to Purchaser at the Closing endorsed for
transfer or accompanied by executed assignments separate from
certificates, Purchaser will be the absolute owner of the
Purchased Seller Stock free, clear and discharged of and from all
Encumbrances.
4.5 Subsidiaries. Neither Company has any
subsidiaries nor does it own, directly or indirectly, any
interest or investment in any other corporation, partnership or
other entity whatsoever.
4.6 Authorization Relative to this Agreement. The
Sellers have the full legal right and power and all authority and
approval required by law to enter into this Agreement and the
documents and instruments to be executed and delivered by them
pursuant hereto, and to perform fully their obligations hereunder
and thereunder. The execution, delivery and performance by each
Company of this Agreement and the documents and instruments to be
executed and delivered by it pursuant hereto have been duly and
effectively authorized by all requisite corporate action
(including the approval of its board of directors and Selling
Stockholders). No corporate authorization is necessary on the
part of either Company for the entry into this Agreement by the
Selling Stockholders and consummation by the Selling Stockholders
of the transactions contemplated hereby except to the extent
already obtained. This Agreement and the documents and
instruments to be executed and delivered pursuant hereto are and
will be duly executed and delivered by the Sellers and are and
will be the legal, valid and binding obligations of the Sellers,
enforceable against each of them in accordance with their terms,
except to the extent to which enforcement may be limited by
bankruptcy, insolvency, moratorium or similar laws relating to
the enforcement of creditors rights and by general principles of
equity (regardless whether brought in an action at law or in
equity).
4.7 Consents and Approvals; No Violation. Except as
disclosed on Exhibit 4.7 hereto, the execution, delivery and
performance by each and all of the Sellers of this Agreement and
the documents and instruments to be executed and delivered by any
of them pursuant hereto do not and will not: (a) violate any
provision of either Company's articles of incorporation or
by-laws; (b) require any consent, approval, authorization or
action by, notice or disclosure to, or filing or registration
with, or permit of, any governmental body, agency or official,
court or any other person except for the applicable requirements
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the filing of a certificate of
amendment to the articles of incorporation of Realty and other
filings required under the Alabama Business Corporation Act to
change Realty's name as contemplated in Section 12.2 hereof; (c)
contravene or constitute a default under any indenture, mortgage,
lease or other agreement to which the Sellers (or any one of
them) is a party or is bound, or by which any of the properties
or assets of the Sellers (or any one of them) may be bound or
affected; or (d) result in a violation of any law, statute,
ordinance, regulation, judgment, injunction, order, decree or
award of any court or governmental authority or body having
jurisdiction over the Sellers (or any one of them) or is bound,
or by which any of the properties or assets of the Sellers (or
any one of them) may be bound or affected.
4.8 Corporate Records. All corporate actions,
including all stock issuances and transfers, of each Company have
been duly authorized and adopted in accordance with applicable
law and each Company's Charter and Bylaws and, to the extent
required, duly recorded in the appropriate minute books and all
stock issuances and transfers of each Company have been duly
recorded in the appropriate stock transfer books.
4.9 Financial Statements.
4.9.1 Exhibit 4.9 hereto contains (a) the balance
sheets of Legend as of April 30, 1993, April 29, 1994, and
April 28, 1995 (the aforesaid balance sheet the "1995
Audited Balance Sheet"), and the related statements of
income, retained earnings and cash flows for the fiscal
years then ended, together with the notes thereto, each of
the foregoing, audited by the Auditors, certified public
accountants (the foregoing, the "Legend Audited Balance
Sheets"), and (b) the unaudited balance sheet of Legend as
of December 29, 1995 and the unaudited balance sheet of
Legend dated as of February 2, 1996, ("February 2 Balance
Sheet") and the related statement of income for the period
then ended (collectively, the "Legend Financial
Statements"). Exhibit 4.9 hereto contains (a) the balance
sheets of Realty as of December 31, 1994 and December 31,
1995, and the related statements of income, retained
earnings and cash flows for the fiscal years then ended,
together with the notes thereto, each of the foregoing,
compiled by the Auditors, certified public accountants (the
foregoing balance sheets of Realty with related statements
as of December 31, 1995, the "Realty Compiled Statements";
the Realty Compiled Statements and the Legend Audited
Balance Sheets, the "Specified Balance Sheets"), and (b) the
unaudited balance sheet of Realty as of January 31, 1996,
and the unaudited balance sheet of Legend dated as of
February 2, 1996 and the related statement of income for the
period then ended (collectively, the "Realty Financial
Statements"; Realty Financial Statements and Legend
Financial Statements, the "Financial Statements"). The
Specified Balance Sheets are true and correct in all
material respects, have been prepared in conformity with
GAAP applied on a consistent basis throughout the periods
involved (except to the extent set forth on Exhibit 4.9
hereto) and fairly present the financial position of the
relevant Company as of the dates indicated and the results
of its operations for the periods then ended.
4.9.2 The Audited Closing Balance Sheet, when
delivered, will have been prepared in conformity with GAAP
applied on a consistent basis through the periods involved
and will fairly present the financial position of Legend as
of the date thereof and the results of Legend's operations
for the period then ended, except, however, to the extent
the foregoing is modified by Section 3.2 hereof.
4.10 Absence of Undisclosed Liabilities. Except as and
to the extent reflected or reserved against in the Financial
Statements, or disclosed in any Exhibit hereto, neither Company
had any liabilities or obligations, as of the dates thereof
(other than obligations of continued performance under the
Contracts and Commitments and other than commitments and
arrangements incident to the normal conduct of business which are
terminable at will), known or unknown, secured or unsecured
(whether accrued, absolute, contingent or otherwise), including,
without limitation, Tax liabilities due or to become due. Except
as and to the extent reflected or reserved against in the
February 2 Balance Sheet or disclosed in any Exhibit hereto,
Legend will not have incurred any liabilities or obligations
since February 2, 1996, other than current liabilities incurred
in the ordinary course of business or in connection with the
transactions contemplated hereby. Except as and to the extent
reflected or reserved against in the Balance Sheet of Realty as
of December 31, 1995, or disclosed in any Exhibit hereto, to the
best knowledge of Sellers, Realty will not have incurred any
liabilities or obligations since December 31, 1995, other than
current liabilities incurred in the ordinary course of business
or in connection with the transactions contemplated hereby.
4.11 Absence of Certain Changes or Events. Since
December 31, 1995 as to Realty and the Seller Stockholders and
since February 2, 1996 as to Legend, except as described in
Exhibit 4.11 hereto, to the best knowledge of Sellers, there has
not occurred any event or condition which has or may be expected
to have an adverse effect on the properties, assets, liabilities
(whether absolute, contingent, accrued or otherwise), condition
(financial or otherwise), results of operations, business,
affairs or prospects of either of the Companies or on the
Stockholder Real Estate, and, without limiting the generality of
the foregoing, neither Company has (a) incurred any obligation or
liability, secured or unsecured (whether accrued, absolute,
contingent or otherwise), whether due or to become due, except
current liabilities in the ordinary course of business; (b)
discharged or satisfied any lien or encumbrance, or paid any
obligation or liability, except current liabilities becoming due
in the ordinary course of business; (c) mortgaged, pledged, or
subjected to any Encumbrance any of the Purchased Seller Stock or
Purchased Assets; (d) sold, transferred, licensed or otherwise
disposed of any of the Purchased Seller Stock or Purchased Assets
or any of the assets or property of Legend other than in the
ordinary course of business consistent with past practice; (e)
suffered any damage, destruction or loss (whether or not covered
by insurance) adversely affecting either Company or its
respective assets or properties; (f) acquired any capital stock
or other securities of any corporation or any interest in any
business enterprise, or otherwise made any loan or advance to or
investment in any Person; (g) instituted, settled or agreed to
settle any litigation, action or proceeding before any court or
governmental body affecting its financial condition, its property
or its business operations involving a claim in excess of
$10,000; (h) entered into any transaction other than in the
ordinary course of business; (i) changed the authorized or issued
capital stock of either Company, increased its funded
indebtedness, or made any declaration, setting aside or payment
of any dividend or any other distribution in respect of its
capital stock; (j) experienced any labor disturbance; (k) varied,
canceled or allowed to expire any insurance coverage; (l)
terminated or received any notice of termination of any contract,
lease, trademark, patent, copyright or trade name protection or
other agreement; (m) suffered any taking or seizure of all or any
part of its assets or properties by condemnation or eminent
domain; (n) made any change in accounting principles or methods,
or in the manner of keeping books, accounts and records of either
Company, except as may be agreed to in writing by the Purchaser;
(o) failed to maintain its respective assets or properties in the
ordinary course of business consistent with past practice; (p)
made any payment or other distribution or disbursement of moneys
or property to or on behalf of any officer, director or
shareholder of either Company or any member of their immediate
families, or any affiliate thereof, other than payment of
compensation or reimbursement of expenses in accordance with past
practice and other than described in clause (i) above; (q) merged
or consolidated with any other Person; (r) altered or amended its
Charter or Bylaws; (s) entered into, materially amended or
terminated any material contract, agreement, franchise or Permit,
except in the ordinary course of business consistent with past
practices, (t) made or authorized any capital expenditures for
additions to plant or equipment accounts in excess of $50,000.00,
(u) entered into any transaction (including, without limitation,
any contract or other arrangement providing for employment of,
furnishing of services by, rental of real or personal property
from, or otherwise requiring payments to) with any shareholder,
officer or director of the Company, or any member of their
immediate families, except for compensation increases in the
ordinary course of business and consistent with past practices,
(v) instituted or settled any litigation, action or proceeding
before any court or governmental body relating to it or its
property, (w) made any change in any method of accounting or any
accounting practice, or suffered any deterioration in accounting
controls, or (x) entered into any agreement or made any
commitment to do any of the things described in the preceding
subsections (a) through (x) of this Section 4.11.
4.12 Contracts and Commitments.
4.12.1 Exhibit 1.1(b) hereto contains true,
complete and correct lists of all of the Contracts and
Commitments, other than purchase orders placed by or with
Realty covering the payment or receipt by Realty of
$25,000.00 or less or which, regardless of amount, will not
be fully performed within six months of the date of the
purchase order.
Exhibit 4.12(b) hereto contains a true and complete list of
all written and a description of all unwritten contracts,
obligations, agreements, plans, arrangements, and
commitments (each of the foregoing an "Undertaking") of
Legend of any kind or nature whatsoever (the "Legend
Contracts and Commitments"). However, notwithstanding the
foregoing, Exhibit 4.12(b) does not contain a description of
Undertakings which are described in another Exhibit hereto
or a description of orders placed with Legend for the
purchase of inventory.
All Legend Contracts and Commitments and all Contracts and
Commitments ("Total Contracts") are in full force and effect
without amendment thereto (unless such amendments are
clearly noted on Exhibit 4.12(b)) and the Company a party
thereto is and shall be entitled to all benefits thereunder.
On April 2, 1996, Legend had 632 unfilled floor orders.
4.12.2 Concurrent with the delivery of Exhibit
1.1(b) and Exhibit 4.12 hereto, and included as a part of
such Exhibits, Sellers have delivered to Purchaser true,
complete and correct copies of all Total Contracts. All
Total Contracts are the result of bona fide, arms-length
transactions and are legal, valid and binding obligations of
the parties thereto enforceable in accordance with their
respective terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, moratorium and similar
laws relating to the enforcement of creditors rights and by
general principles of equity (whether brought in a
proceeding at law or in equity).
4.12.3 Except as set forth in Exhibit 4.12
hereto, no default or alleged default exists on the part of
either Company, nor, to the best knowledge of Sellers, on
the part of any other party, under any Total Contract and
there exists no state of facts which, after notice or lapse
of time, or both, would constitute a default or breach in
connection with any of the Total Contracts. For purposes of
this subsection, the word "default" includes, but is not
limited to, the failure to comply with any condition
precedent under the provisions of any such Total Contract.
Except as set forth in Exhibit 4.12 hereto, Sellers have
received no information which might reasonably indicate that
any party to a Total Contract is unable or unwilling to
perform under such Total Contract.
4.12.4 Except only as set forth in Exhibits
1.1(b) 4.12(b), or 4.12 or any other Exhibit to this
Agreement, neither Company is a party to any other written
or oral Undertaking, and the Seller Stockholders are not a
party to any Undertaking pertaining to in any manner the
Stockholder Real Estate, or the transactions contemplated
hereby, including, but not limited to, any:
(a) contract not made in the ordinary course of
business other than this Agreement;
(b) employment (including any agreement with
respect to leased employees) or consulting contract which is
not terminable without cost or other liability to either
Company, or any successor thereof, upon notice of thirty
(30) days or less;
(c) contract with any labor union;
(d) bonus, pension, profit-sharing, retirement,
stock purchase, hospitalization, insurance or similar plan
providing for employee benefits or other Plan (as defined in
Section 4.18 below);
(e) lease with respect to any property, real or
personal, whether as lessor or lessee;
(f) contract for the future purchase of
materials, supplies, merchandise or equipment which is in
excess of the requirements of the Business or Real Estate
Business of either Company now booked or the requirements of
such Company for its normal operating inventories;
(g) contract, other than a purchase order placed
by or with either Company, for the performance of services
for or by such Company which is not terminable without cost
or other liability to such Company, or any successor
thereof, upon notice of thirty (30) days or less;
(h) insurance policy or contract;
(i) contract, other than a purchase order placed
by or with either Company, continuing for a period of more
than six (6) months from its date, which is not terminable
by such Company without cost or other liability to such
Company, or any other successor thereof, upon notice of
thirty (30) days or less;
(j) loan agreement or other contract for money
borrowed;
(k) agreement or arrangement for the sale of any
kind of its assets, property or rights or the grant of any
preferential rights to purchase any of its assets,
properties, or rights, including, without limitation,
customer bids and orders, terms and conditions of sale,
warranties, franchises, dealer or distributor agreements or
requiring the consent of any party to the transfer or
assignment of any such assets, property or rights;
(l) agreement restricting in any manner the
conduct of the Business or the Real Estate Business or the
ownership or use of any of its respective assets or
properties;
(m) agency, sales representative or similar
agreement;
(n) warranties relating to the Equipment or any
of its assets or properties;
(o) license agreements (including computer
software licenses), agreements relating to the Intellectual
Property (as defined in Section 4.34) or the intellectual
property of any other person and franchise agreements;
(p) return policy and product warranties relating
to products manufactured or distributed by Legend and
rebate, credit or allowance arrangements;
(q) contracts, agreements or other understandings
or arrangements between either Company and any shareholder,
director, officer or employee, or any member of their
immediate families, or any affiliate thereof, which may
affect the Business, the Real Estate Business, their
respective assets or properties or the Assumed Liabilities;
or
(r) Excluded Liabilities which pertain to Realty
only which are listed on Exhibit 4.12(s).
4.13 Real Property.
4.13.1 Exhibit 1.1(a) (being the Real Estate to
be purchased hereunder by Purchaser) and Exhibit 4.13.1
(being the Leased Real Estate leased by Legend) hereto
contains a true and complete list of all real property that
is owned, leased or subleased by each Company or as to which
each Company has any interest of any kind including, without
limitation, all office, manufacturing and warehouse
facilities, except the Excluded Real Estate. No Person
other than Realty or Legend has or is entitled to any
interests, possessory or otherwise, in or to the Real
Estate; no Person other than Legend and the lessors under
the lease relating to the Leased Real Estate has or is
entitled to any interests, possessory or otherwise, in or to
the Leased Real Estate; and no Person other than the Selling
Stockholders has or is entitled to any interests, possessory
or otherwise, in or to the Stockholder Real Estate, other
than, in the case of Plant Number 2 and Plant Number 3, as
set forth in the Bond Documents. True and complete copies
of all deeds, leases, subleases and other agreements and
instruments relating to the Total Real Estate or to the
Leased Real Estate (including, without limitation, the Bond
Documents) have been delivered to Purchaser. To the best
knowledge of Sellers, all buildings and other improvements
on the Total Real Estate or on the Leased Real Estate are
located within the boundaries of each particular parcel of
Total Real Estate or Leased Real Estate and do not encroach
upon such boundaries. No building or other improvement
situated on any adjacent real estate is encroaching upon any
of the boundaries of the Total Real Estate or the Leased
Real Estate.
4.13.2 All leases, easements, rights of way,
licenses, usufructs and other non-ownership interests that
are included in, or relate to, the Total Real Estate or the
Leased Real Estate, including any of the same that are
granted to or by a Seller Stockholder, Legend or Realty
(individually, a "Real Property Lease," and collectively the
"Real Property Leases"), are valid and in full force and
effect in accordance with their terms and are set forth in
Exhibit 4.13.1 or in Exhibit 4.40 hereto or in another
Exhibit to this Agreement. There is not under any of the
Real Property Leases (i) any default (or, to the knowledge
of Sellers, any claimed default) by Realty, a Seller
Stockholder, or Legend, as the case may be, or any event of
default or event which with notice or lapse of time, or
both, would constitute a default by Realty, Seller
Stockholder, or Legend, as the case may be, and in respect
of which Realty, Seller Stockholder, or Legend, as the case
may be, has not taken adequate steps to prevent a default on
its part from occurring or (ii) to the knowledge of Sellers,
any existing default by any other party to any Real Property
Lease, or any event of default or event which with notice or
lapse of time, or both, would constitute a default by any
other party to any Real Property Lease. Except as set forth
in Exhibit 4.13.2 hereto, the interests of each of Realty,
the Seller Stockholders, and Legend in and under each
respective Real Property Lease is unencumbered and, to the
knowledge of Sellers, is not subject to a present claim,
contest, dispute, action or threatened action at law, in
equity or otherwise.
4.13.3 Each of Legend and Realty are lawfully
in possession of the Real Estate which is the subject of a
Real Property Lease and with respect to which Realty or
Legend is a lessee or has been granted an interest in such
property (the "Leased Real Property"). All conditions
precedent to the obligation of Realty or Legend, as the case
may be, to take possession and continue to occupy all Leased
Real Property have been fulfilled. Except as set forth in
Exhibit 4.13.3 hereof, either Realty or Legend, or both, are
presently occupying the entirety of each parcel of the
Leased Real Property leased by it for the purposes set forth
in the Real Property Lease with respect thereto. Except as
set forth in Exhibit 4.13.3 hereof, no rent or fee has been
paid or received in advance, no security deposit has been
paid or received and no brokerage commission is payable or
receivable by Realty and Legend, or any one of them, with
respect to any Real Property Lease.
4.13.4 Except as set forth in Exhibit 4.13.4
hereto, neither Realty nor Legend has received, nor does
Realty or the Selling Stockholders have any knowledge of,
any notice that the owner of any Real Estate subject to a
Real Property Lease has made any assignment, pledge or
hypothecation of such Real Property Lease or the rents or
fees due thereunder.
4.13.5 Except to the extent, if any, disclosed
elsewhere herein or in an Exhibit hereto, the use of the
Total Real Estate and the Leased Real Estate by each Company
and the conduct therein of its Business (in the case of
Legend) and the Real Estate Business (in the case of
Realty), and the use of the Stockholder Real Estate, have
not violated, and are not expected to violate, in any
material respect, any federal, state or local law,
ordinance, rule or regulation. The Total Real Estate and
the Leased Real Estate has an adequate water supply and
sewage and waste disposal, or facilities therefor, as are
sufficient for the operation of existing business of each
Company and for the use of the Stockholder Real Estate for
the purpose of providing office space.
4.13.6 To the best knowledge of Sellers, the
buildings and improvements located on the Total Real Estate
and on the Leased Real Estate and the ownership, operations
and maintenance thereof as now owned, operated and
maintained, do not (i) contravene in any material respect
any ordinances, statutes, regulations, covenants, or deed
restrictions, including those relating to zoning, building
use, air or water pollution, waste disposal, sanitation and
noise control, or (ii) violate in any material respect any
provision of federal, state or local law. Consummation of
the transactions contemplated herein will not cause the
zoning for any of the Total Real Estate or the Leased Real
Estate to become non-complying by virtue of elimination of a
grandfather clause or for any other reason.
4.13.7 To the best knowledge of Sellers, the
buildings and other improvements on the Total Real Estate
and on the Leased Real Estate, including the plumbing,
electrical, mechanical, water, water pumping and sewage
systems are in good operating condition and repair,
sufficient for the uses intended and not in violation in any
material respect of any applicable governmental rule or
regulation or any other legal requirements, including health
and fire codes and other similar regulations.
4.13.8 To the best knowledge of Sellers, except
as set forth on Exhibit 4.13.8, each of the Total Real
Estate and Leased Real Estate has sufficient and adequate
vehicular and pedestrian access rights to and from public
streets and rights-of-way contiguous to the Total Real
Estate and Leased Real Estate and adequate parking is
available and in compliance with all applicable zoning
ordinances and laws.
4.13.9 There exists no pending or, to the best
knowledge of Sellers, threatened condemnation or similar
proceeding with respect to, or which could affect, the Total
Real Estate or the Leased Real Estate.
4.13.10 Except as described in Exhibit 4.13.10
hereto, Sellers have not contracted for the furnishing of
labor or materials to the Total Real Estate or the Leased
Real Estate which will not be paid in full prior to the
Closing Date.
4.14 Leases of Personal Property. Exhibit 4.14 hereof
describes all personal property that is currently being leased by
each Company and contains true, correct and complete copies of
all personal property leases to which each Company is a party,
except in respect of leases with annual lease payments of less
than $10,000 ("Leased Personal Property"). All Leased Personal
Property is in such condition that upon the return of such Leased
Personal Property in its present condition to its owner, the
Company will not be liable in any material amount to such owner.
All Leased Personal Property is situated at the Real Estate and
is used by each Company in the operation of its business. Each
of the leases relating to the Leased Personal Property is in full
force and effect and there are no existing defaults or events of
default, real or claimed, or events which with notice or lapse of
time or both would constitute defaults of either Company or, to
the best knowledge of Seller Stockholders, any other Person. The
continuation, validity and effectiveness of such leases will in
no way be affected by the transactions contemplated by this
Agreement. Except as listed in Exhibit 4.14 hereto, no consent
or approval of any other Person under such leases or subleases is
required with respect to or on account of the transactions
contemplated by this Agreement.
4.15 Licenses. Except as disclosed on Exhibit 4.15,
each Company possesses all patents, franchises, permits,
licenses, certificates, authorizations, and consents required
from any governmental authority or any other person necessary to
enable Legend and Realty to carry on, respectively, its Business
or Real Estate Business (as the case may be) as now conducted and
to own and operate its properties (including leased property) as
now owned and operated and all such patents, franchises, permits,
licenses, certificates, authorizations, and consents will remain
in full force and effect following consummation of the
transactions contemplated by this Agreement. Attached hereto as
Exhibit 4.15 is a true and complete list of all patents,
franchises, permits, licenses, certificates, authorizations, and
consents used in connection with or applicable to either of the
Business or the Real Estate Business.
4.16 Title to Assets. Except as disclosed on Exhibit
4.16 hereto, each Company has good and marketable title to all of
its assets and properties, free, clear and discharged of and from
all mortgages, liens, security interests, pledges, demands,
claims, charges, leases, subleases, licenses, easements or other
rights of use or occupancy of another person and other
encumbrances whatsoever ("Encumbrances"); each Seller Stockholder
has good and marketable title to the Purchased Seller Stock which
such Seller Stockholder states herein that he or she owns and the
Seller Stockholders have good and marketable title to the
Stockholder Real Estate and the Seller Stockholders between them
own all the Purchased Seller Stock and the Stockholder Real
Estate, in each case, free, clear and discharged of and from any
Encumbrances, and the sale to Purchaser of the Purchased Seller
Stock, the Stockholder Real Estate and Purchased Assets will not
give rise to any Encumbrance thereon. At the Closing, Purchaser
will receive good and marketable title to the Purchased Seller
Stock, the Stockholder Real Estate and Purchased Assets free,
clear and discharged of and from all Encumbrances other than any
Encumbrances that Purchaser may grant to its lenders.
4.17 Taxes.
4.17.1 For the purposes hereof, "Tax" or "Taxes"
shall mean all federal, state, county, local, and other
taxes (including, without limitation, income taxes, premium
taxes, single business taxes, excise taxes, sales taxes, use
taxes, value added taxes, gross receipts taxes, franchise
taxes, ad valorem taxes, severance taxes, capital levy
taxes, transfer taxes, stamp taxes, employment, unemployment
and payroll related taxes, withholding taxes, governmental
charges and assessments), and includes interest, additions
to tax and penalties with respect thereto.
4.17.2 Legend is a "C" Corporation. Legend has
paid in full all Taxes which were due prior to the date
hereof and will have paid, on or before the Closing, all
Taxes which will have been due on or before the Closing
Date. Realty has made a valid election pursuant to section
1362(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code") to which the persons who were shareholders of
Realty on the date of that election have made valid consents
pursuant to section 1362(a)(2) of the Code, effective not
later than the taxable year of Realty commencing January 1,
1995 (the "First S Year"), to be treated as an S Corporation
within the meaning of section 1361(a)(1) of the Code, and
Realty and its shareholders have made a similarly effective
election and consents under the comparable provisions of the
laws of the State of Alabama (the "S State"). For the First
S Year and all subsequent taxable years of Realty, Realty at
all times qualified as an S Corporation and incurred no
liability for federal income tax (including under sections
1374 and 1375 of the Code) and no liability for any tax of
the S State based on income.
4.17.3 Each of the Sellers (a) has filed all
federal, state and local Tax returns required by law in the
legally prescribed time and manner, and paid all Taxes due
and payable; (b) has made all payments required by any
governmental program of workers' social security or
unemployment compensation; (c) has withheld and paid over to
the appropriate governmental authority all amounts required
by law to be withheld from the wages or salaries of
employees; (d) is not liable for any arrears of wages or any
Taxes or penalties for failure to comply with any of the
foregoing; and (e) has paid or will pay over to the
appropriate governmental authority all sales or use Taxes
referable to such Seller, and has made or will make
provisions for payment of all such Taxes accrued as of such
date, but not yet due. There are no claims pending or, to
the best knowledge of Sellers, threatened against any of the
Sellers for past due Taxes, nor are there any outstanding
waivers or agreements by any of the Sellers for the
extension of the time for the assessment of any Tax. No
election has been made by any of the Sellers under section
341(f) of the Code.
4.17.4 To the best knowledge of Sellers, the sale
by the relevant Sellers of the Purchased Seller Stock, the
Stockholder Real Estate, and the Purchased Assets and the
acquisition thereof by Purchaser, are exempt from, and will
not result in the imposition of or liability for, any sales,
use, transfer or similar Taxes except in connection with the
transfer of any motor vehicles constituting a portion of the
Purchased Assets and except for the Alabama real estate
privilege tax in the amounts for each parcel of Total Real
Estate, set forth on Exhibit 4.17.4 hereto ("Real Estate
Transfer Taxes"). Sellers acknowledge and agree that if for
any reason the sale of all or any portion of the Purchased
Seller Stock, Stockholder Real Estate, and the Purchased
Assets (other than any motor vehicles and other than the
Real Estate Transfer Taxes) is determined not to be exempt
from such Taxes, the Purchase Price includes and is
inclusive of any and all such Taxes and that Purchaser has
paid such Taxes to Sellers and Sellers have collected such
Taxes from Purchasers.
4.17.5 Within the time required by applicable
law, Sellers shall file Tax returns with the Internal
Revenue Service, the State of Alabama and all other taxing
authorities and shall pay any Taxes that are due. Sellers
shall request confirmation from the Tax Commissioner of the
State of Alabama, or the Commissioner's designated
representative, to the effect that all Tax returns required
to be filed by each Company have been filed and all Taxes
shown on such returns have been paid. Sellers shall
promptly deliver the original copy of such confirmation to
Purchaser.
4.17.6 The Sellers hereby waive all
confidentiality regarding any Taxes that are payable to the
State of Alabama by either Company and agree that the Tax
Commissioner of the State of Alabama may release to
Purchaser either Company's known Tax liability. The Sellers
agree to execute any separate waivers of confidentiality as
may be required by Purchaser or the Tax Commissioner to
implement the terms of this paragraph.
4.17.7 None of the assets of either Company is
property that is required to be treated as being owned by
any other Person pursuant to the so-called safe harbor lease
provisions of former Section 168(f)(8) of the Code.
4.17.8 None of the assets of either Company
directly or indirectly secures any debt the interest on
which is tax-exempt under Section 103(a) of the Code except
as set forth on Exhibit 4.17.8 hereto.
4.17.9 None of the assets of either Company is
"tax-exempt use property" within the meaning of Section
168(h) of the Code.
4.17.10 None of the Seller Stockholders is a
person other than a United States person within the meaning
of the Code except as set forth on Exhibit 4.17.10 hereto.
4.17.11 The transaction contemplated herein is
not subject to the tax withholding provisions of Section
3406 of the Code, or of Subchapter A of Chapter 3 of the
Code or of any other provision of law.
4.17.12 Except as set forth in Exhibit 4.17.12
hereto, no recapture of previously claimed Tax benefits
(such as depreciation or other tax credits) has yet occurred
as a result of either Company's position as the lessor of
certain equipment listed in Exhibit 4.17.12.
4.17.13 All tax-sharing agreements or similar
agreements with respect to or involving either of the
Companies shall be terminated prior to the Closing Date,
and, thereafter, such Company shall not be bound thereby or
have any liability thereunder for amounts due in respect of
periods ending on or before the Closing Date.
4.17.14 No new elections with respect to Taxes
or any changes in current elections with respect to Taxes
affecting either of the Companies shall be made after the
date of this Agreement without prior written consent of
Purchaser.
4.17.15 As a condition precedent to the
consummation of the transactions contemplated by this
Agreement, the Seller Stockholders shall provide Purchaser a
clearance certificate or similar document(s) that may be
required by any state taxing authority in order to relieve
Purchaser of any obligation to withhold any portion of any
amounts described herein but only if the obtaining of such a
certificate or similar document is so required to relieve
the Purchaser of an obligation to so withhold.
4.18 Employees; Benefit Plans.
4.18.1 Attached hereto as Exhibit 4.18 is a true
and complete list of the names and current compensation
rates of all present directors, officers and employees of
each Company whose annual compensation is $75,000.00 or
more, together with a summary showing as to each such person
the salary, bonuses, additional compensation and other like
benefits, if any, paid or payable to such persons for the
year ended December 31, 1995.
4.18.2 Exhibit 4.18 also contains a true and
complete list of all bonus, profit sharing, stock purchase,
stock option, pension, retirement, health, welfare,
severance pay or any other current or deferred remuneration
or compensation plan, arrangement or practice (sometimes
herein collectively called the "Plans") for the employees of
each Company, salaried and nonsalaried, union and non-union,
including any formal or informal plans, and the funding
arrangements with regard thereto. Accurate and complete
descriptions of all Plans have been provided to Purchaser.
Except as described in the Financial Statements, or as
disclosed on Exhibit 4.18, neither Company has any Plan
currently in existence which is subject to the requirements
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). No retired employee of either Company is
receiving or is entitled to receive any payments, health or
other benefits from the Company.
4.18.3 To the best knowledge of Sellers, neither
Company's employees is covered by a collective bargaining
agreement and there is no union or other organization
seeking or claiming to represent any such employees.
4.18.4 There is not now, nor has there been in
the past, any strike, lock-out, sit-down, slow-down,
grievance or other labor dispute or trouble of any nature
whatsoever pending or threatened against either Company. To
the best knowledge of Sellers, each Company is and has been
in compliance in all material respects with all laws
regulating wages and/or hours and other conditions of
employment of employees.
4.18.5 To the best knowledge of Sellers, all
accrued obligations of each Company relating to employees
and agents of each Company, whether arising by operation of
law, by contract, or by past service, for payments to trusts
or other funds or to any governmental agency, or to any
individual employee or agent (or his heirs, legatees, or
legal representatives) with respect to unemployment
compensation benefits, profit sharing or retirement
benefits, or social security or other benefits have been
paid by such Company. All obligations of each Company as an
employer or principal relating to employees or agents,
whether arising by operation of law, by contract, or by past
practice, for vacation and holiday pay (but excepting
herefrom vacation and holiday pay which has accrued since
January 1, 1996 which vacation and holiday pay is properly
shown as accrued on the Financial Statements and the Audited
Closing Balance Sheet), bonuses, and other forms of
compensation which are or may become payable to such
employees or agents prior to the Closing Date, have been and
will be paid by them prior to the Closing Date.
4.18.6 Except as listed in Exhibit 4.18.6
hereto, all employees of each Company are employees-at-will,
may be terminated at any time for any lawful reason or for
no reason and have no entitlement to employment by virtue of
any oral or written contract, employer policy, or otherwise.
Also included in Exhibit 4.18.6 is a true and complete list
of the names of all retired employees, if any, of each
Company who are receiving or are entitled to receive any
payments, health or other benefits from any of them, their
ages, and their current annual funded and unfunded pension
benefits.
4.19 Insurance. Attached hereto as Exhibit 4.19 is a
true and complete list of all insurance policies in force with
respect to the assets and properties of each Company, including
the Purchased Assets, and the Business of Legend and the Real
Estate Business of Realty and the annual premiums payable
thereon. True and complete copies of such insurance policies
have been delivered to Purchaser. All such policies are adequate
to insure the risks covered thereby. Legend has in force
adequate insurance for all claims which would be public liability
claims and which may be based in whole or in part on events which
occurred or occur prior to the Closing Date. Neither Company is
in default in any respect under any such policy, including,
without limitation, the payment of any premiums thereon.
4.20 Litigation. Except as disclosed on Exhibit 4.20
hereto, there are no legal actions, suits, arbitrations, or other
legal or administrative proceedings or investigations before any
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, pending or,
to the best knowledge of Sellers, threatened against or otherwise
affecting the Sellers or their respective assets (including the
Purchased Seller Stock and the Stockholder Real Estate) or
involving any properties, assets or business of either Company
(including the Purchased Assets). To the best knowledge of
Sellers, there is no fact or facts existing which might result
in, nor is there any basis for, any such action, suit,
arbitration, or other proceeding or investigation. None of the
Sellers is a party to or subject to any order, writ, injunction,
decree, judgment or other restriction of any federal, state,
municipal or other governmental department, commission, board,
bureau, agency, or instrumentality which has or could have an
adverse effect on the Purchased Seller Stock, the Business, the
Real Estate Business, the Purchased Assets, and the Stockholder
Real Estate or the Assumed Liabilities or on any of the Sellers'
ability to enter into this Agreement or consummate the
transactions contemplated hereby.
4.21 Compliance with Laws. Except as disclosed in this
Agreement or in any Exhibit hereto, to the best of Sellers'
knowledge each Company and each Seller Stockholder has complied
with and is in compliance with, and has not received notice of
any violation of, any and all applicable laws, rules, regulations
and ordinances regulating or relating to such Company's Business
or Real Estate Business (as the case may be), the Purchased
Assets, the Assumed Liabilities or the Stockholder Real Estate in
effect from time to time. All of Legend's products are and have
been, at the time of sale, in compliance with all construction,
safety and other standards imposed on the Business by statute,
rule or regulation of any governmental authority (federal, state
or local) or industry association.
4.22 Environmental Matters.
(a) The following terms used in this Section 4.22 have
the meanings set forth below:
(i) "Environmental Laws" means the (1) Toxic
Substance Control Act, 15 U.S.C. Sections 2601 et seq., (2)
National Historic Preservation Act, 16 U.S.C. Sections 470
et seq., (3) Coastal Zone Management Zone Act of 1972, 16
U.S.C. Sections 1451 et seq., (4) Rivers and Harbors Act of
1899, 33 U.S.C. Sections 401 et seq., (5) Clean Water Act,
33 U.S.C. Sections 1251 et seq., (6) Flood Disaster
Protection Act, 42 U.S.C. Sections 4001 et seq.,
(7) National Environmental Policy Act, 42 U.S.C. Sections
4321 et seq., (8) Resource Conservation and Recovery Act
of 1976, 42 U.S.C. Sections 6901 et seq. ("RCRA"), (9) Clean
Air Act, 42 U.S.C. Sections 7401 et seq., (10) Comprehensive
Environmental Response Compensation and Liability Act, 42
U.S.C. Sections 9601 et seq. ("CERCLA"); (11) Hazardous
Materials Transportation Act, 49 U.S.C. Sections 1801 et
seq., (12) Safe Drinking Water Act, 42 U.S.C. Sections 300f
et seq., (13) Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. Sections 11001 et seq., (14) Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
Sections 136 et seq., (15) Occupational Safety and Hygiene
Act, 29 U.S.C. Sections 685 et seq., and (16) all other
federal, state, county, municipal and local, foreign and
other statutes, laws, regulations and ordinances which
relate to or deal with protection of human health or the
environment, all as may be from time to time amended.
(ii) "Hazardous Substance(s)" means (1) any
flammable or combustible substance, explosive, and/or
radioactive material, hazardous waste, toxic substance,
pollutant, contaminant and/or any related materials or
substance identified in and/or regulated by any of the
Environmental Laws, and (2) asbestos, polychlorinated
biphenyls, urea formaldehyde, chemicals and/or chemical
wastes, explosives, known carcinogens, petroleum products
and by-products (including fraction thereof) and radon.
(iii) "Property" means (a) the Stockholder Real
Estate and (b) any parcel of real estate (including but not
limited to the Real Estate) now or heretofore owned by each
Company or in which each Company has or had any interest,
including any lessee's interest, any interest held as
security for an obligation and all Formerly Owned Property.
(iv) "Formerly Owned Property" means all Property
owned, leased or operated by each Company or any of their
respective Subsidiaries at any time in the past, but not
owned as of the Closing Date. A true and correct list,
including the address and the county in which such property
is located, is set forth in Exhibit 4.22 hereto.
(b) Except as described in Exhibit 4.22 hereto, each
Company is now and has at all times been in compliance with
all Environmental Laws. Except as described in Exhibit 4.22
hereto, to the best knowledge of Sellers, no Hazardous
Substances have been released, emitted or disposed of, or
otherwise deposited, on or in the Property. A true and
correct list of all Hazardous Substances now or heretofore
used or generated by the Company is set forth in Exhibit
4.22 hereto.
(c) Except as described in Exhibit 4.22 hereto, no
activity has been undertaken on the Property that would
cause or contribute to:
(i) the Property becoming a treatment, storage or
disposal facility within the meaning of RCRA or any similar
state law or local ordinance;
(ii) a release or threatened release of any
Hazardous Substances; or
(iii) the discharge of pollutants or effluents into
any water source or system or into the air, or the dredging
or filling of any waters, that would require a permit under
the Federal Water Pollution Control Act, 33 U.S.C. Sections
1251 et seq., the Clean Air Act, as amended, 42 U.S.C.
Sections 7401 et seq., or any similar foreign or state law
or local ordinance.
(d) Except as described in Exhibit 4.22 hereto, there
are no substances or conditions in or on the Property that
may support a claim or cause of action under any
Environmental Law.
(e) Except as described in Exhibit 4.22 hereto, there
are not, and never have been, any underground storage tanks
located in or under the Property.
(f) Each Company, and in the case of the Stockholder
Real Estate, the Seller Stockholders each, has obtained all
material Permits required by all applicable Environmental
Laws, and all such Permits are in full force and effect.
Except as described in Exhibit 4.22 hereto, each Company and
each Seller Stockholder is and has at all times been in
compliance in all material respects with all such Permits.
(g) Except as described in Exhibit 4.22 hereto,
neither Company nor its directors, officers, employees or
agents have generated or transported any Hazardous
Substances at any time which have been transported to or
disposed of in any landfill, waste processing facility or
other facility, which transportation or disposal could
create liability to any unit of government or any third
party. Neither Company has received any request for
response action, administrative or other order (or request
therefor), judgment, complaint, claim, investigation,
request for information or other request for relief in any
form relating to any facility where Hazardous Substances
generated or transported by such Company have been disposed
of, placed or located. A true and correct list of all
transporters, landfills and other facilities now or
heretofore used by each Company and its directors, officers,
employees or agents is set forth in Exhibit 4.22. In
addition, each Company has provided Purchaser or its agents
copies of, or access to, all manifests and records
maintained by each Company relating to such transporters,
landfills and other facilities.
(h) Except as described in Exhibit 4.22 hereto, there
are no pending or threatened claims, investigations,
administrative proceedings, litigation, regulatory hearings
or requests or demands for remedial or response actions or
for compensation, with respect to the Property, alleging
noncompliance with or violation of any Environmental Law or
seeking relief under any Environmental Law.
(i) Except as described in Exhibit 4.22, the Property
is not and never has been listed on the United States
Environmental Protection Agency's National Priorities List
of Hazardous Waste Sites or any other list, schedule, log,
inventory or record of hazardous waste sites maintained by
any federal, state or local agency.
(j) Sellers have disclosed and delivered to Purchaser
all environmental reports and investigations which Sellers
have ever obtained or ordered with respect to the Property.
4.23 Product Liability. Each Company has adequate
insurance against loss or damage arising out of product liability
or similar claims, copies of the insurance policies of which have
been delivered to Purchaser and are listed on Exhibit 4.23
hereto. Such insurance covers all incidents of loss which have
occurred prior to the date hereof or which may occur resulting
from products sold by either Company prior to the Closing. Each
claim made against either Company (whether or not covered by
insurance) for loss or damage arising out of product liability or
similar claims for the period from and including April, 1992 to
the date hereof and which individually is $10,000 or more is
described in Exhibit 4.23.
4.24 Warranties. There are no oral or written
warranties on the products sold by Legend, whether express or
implied, other than as set forth or described in Exhibit 4.24
hereto and any implied warranties that may be imposed by
operation of law.
4.25 Insider and Inter-Company Transactions.
(a) A true and complete list and brief description of
all contracts or other transactions involving each Company
with respect to which any officer, director, employee or
Selling Stockholder, any member of their immediate families,
or any affiliate thereof, has any interest is set forth in
Exhibit 4.25 hereto.
(b) Except as set forth in Exhibit 4.25 hereto neither
Company is indebted to any of its officers, directors,
employees or Selling Stockholders, or any member of their
immediate families, or any affiliate thereof, except for
amounts due as normal salary, bonuses, wages, commissions,
reimbursements of ordinary business expenses or ordinary
business advances of such Company in accordance with past
practice.
4.26 Bank Accounts and Powers of Attorney. Exhibit
4.26 hereto contains a true and complete list of the names and
locations of all banks or other financial institutions which are
depositories of funds of each Company, the names of all persons
authorized to draw or sign checks or drafts upon such accounts
and the number of such accounts and the names and locations of
any institutions in which each Company has safe deposit boxes and
the names of the individuals having access thereto, and all
outstanding powers of attorney granted by or on behalf of each
Company.
4.27 Progress Payments. Exhibit 4.27 hereto contains a
true and complete list and description of all security deposits,
progress payments, credits and the like either Company has
received relating in any way to any purchase orders, leases or
other agreements which are part of its assets and properties,
including but not limited to the Purchased Assets.
4.28 Information in the HSR Act Notification and Report
Form. None of the information supplied (or to be supplied) by
any of the Sellers for inclusion or incorporation by reference in
the Notification and Report Form to be filed with the Federal
Trade Commission ("FTC") and the Department of Justice ("DOJ") in
connection with the transactions contemplated hereby (the "HSR
Form") will, at the time the HSR Form is filed with the FTC and
DOJ and at all relevant times thereafter, contain any untrue
statement of a material fact or omit to state any material fact
or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The
HSR Form will comply in all material respects with the HSR Act
and the rules and regulations thereunder.
4.29 Sufficiency of Purchased Assets. The assets and
properties of Legend, together with the Purchased Assets,
constitute all of the property and assets, real, personal and
mixed, tangible and intangible, as are used or useful in or are
necessary for the conduct of the Business and the Real Estate
Business in accordance with present practices.
4.30 Guaranties. There are no outstanding guaranties
of either Company except those listed in Exhibit 4.30, nor any
current recourse liabilities or obligations under any of the
repurchase or floor plan financing agreements identified in
Exhibit 4.30, and no claims have been made, and neither Company
is aware of any basis for any claims to be made, against such
Company pursuant thereto.
4.31 Equipment. To the best of Sellers' knowledge, the
Equipment is in good operating condition and in a state of good
repair sufficient for the conduct of normal operations without
the necessity of any known capital expenditure in excess of
$100,000.00 in the aggregate. Each Company's assets and
properties (including leased property) are adequate to enable
each Company to conduct its Business or the Real Estate Business
as relevant, as now being conducted. Sellers are not aware of
any major capital expenditure that will be required on the part
of either Company within one year from the date of this
Agreement.
4.32 Inventory. To the best of Sellers' knowledge, the
Inventory of each Company shown on the latest of the Financial
Statements and the Inventory that will be shown on the Audited
Closing Balance Sheet in the case of Legend consists and will
consist of raw materials, work in process, and finished goods of
a quality and quantity usable or salable in the normal course of
the Business (in the case of Legend) or Real Estate (in the case
of Realty) (as the case may be) of each Company, except for any
slow moving, obsolete inventory or inventory of below-standard
quality all of which has been written off or written down to
realizable value. The valuation at which the Inventory is
carried reflects and will reflect the normal inventory valuation
policy of such Company of stating inventory at the lower of cost
(first-in-first-out-method) or market and its regular costing
standards with respect to work in process and finished goods
inventory.
4.33 Receivables. The Receivables shown on the latest
of the Financial Statements and which will be shown on the
Audited Closing Balance Sheet result from and will result from
bona fide sales made by the relevant Company in the ordinary
course of business and have been collected or will be collectible
in the ordinary course after provision for doubtful accounts as
shown on the latest of the Financial Statements and to be shown
on the Audited Closing Balance Sheet. The amounts due, or to
become due, in respect of the Receivables are not in dispute and
there are no and will not be any setoffs or counterclaims
asserted against any of the Receivables except to the extent that
such setoffs or counterclaims are shown as liabilities on the
Audited Closing Balance Sheet or the latest of the Financial
Statements, as relevant.
4.34 Patents and Trademarks. Attached hereto as
Exhibit 4.34 is a true and complete list of all trademarks,
trademark applications, service marks, and the United States
Federal or State registrations thereof and any such foreign
registrations, trade names, United States and foreign patents and
patent applications, and copyrights (the "Intellectual Property")
used in connection with the Business or the Real Estate Business
of the Companies owned by or licensed to such Company, all of
which are in full force and effect. Patent applications, if any,
shall be disclosed to Purchaser on a separate confidential list.
Except as disclosed on Exhibit 4.34, (a) each Company is the sole
and exclusive owner or licensee of the Intellectual Property
pertaining to it shown on Exhibit 4.34 and has the sole and
exclusive right to use such Intellectual Property on or with
respect to the products of such Company in the same manner in
which they have been or are now being used, (b) there are no
claims, demands or proceedings pending, or to the best knowledge
of Sellers, threatened, that pertain to or challenge the right of
such Company to use such Intellectual Property, and (c) neither
Company has granted any licenses or other rights and has no
obligation to grant licenses or other rights with respect
thereto.
4.35 Corporate Minute Books. The minute books of each
Company (true copies of which have been provided to Purchaser)
contain complete and accurate records of all meetings and other
corporate actions of its stockholders and directors and
committees of directors (if any).
4.36 Suppliers and Customers.
4.36.1 A true and complete list of all suppliers
or vendors of products or services to each Company
aggregating more than $500,000.00 (at cost) annually for
calendar years 1994 and 1995, the address of each such
supplier or vendor, and the amount sold to each Company
during such period is set forth in Exhibit 4.36 hereto.
4.36.2 A true and complete list of each customer
of each Company aggregating more than $500,000.00 in
revenues annually during calendar years 1994 and 1995, the
address of each such customer, and the amount purchased by
each such customer from such Company during such periods are
set forth in Exhibit 4.36 hereto. True and correct copies
of all dealer and other agreements relating to such
customers have been delivered to Purchaser.
4.36.3 To the best knowledge of Sellers, none of
the customers or suppliers of either Company described in
Exhibit 4.36 hereof intends to cease purchasing from,
selling to or dealing with such Company, alter in any
material respect the amount of such purchases, sales or the
extent of dealings with such Company or alter in any
material respect the amount of such purchases, sales or
dealings in the event of the consummation of the
transactions contemplated hereby.
4.37 Illegal Payments. Neither Company nor any of its
directors, officers, agents, or employees, or other persons
acting on behalf of such Company have, directly or indirectly,
(a) used any corporate funds of such Company for unlawful
contributions, gifts, entertainment, or other unlawful expenses
relating to political activity, (b) made any unlawful payments on
behalf of the Company to foreign or domestic government officials
or employees or to foreign or domestic political parties or
campaigns from corporate funds, (c) violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, (d) knowingly
made any false or fictitious entry on the books or records of
such Company, or (e) made any bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment on behalf of such
Company.
4.38 Disclosure. To the best of Sellers' knowledge,
neither this Agreement nor any Exhibit hereto, nor any schedule,
certificate, statement, writing, financial statement or document
furnished or to be furnished to the Purchaser, its agents or
representatives, by or on behalf of the Sellers in connection
with this Agreement or any of the transactions contemplated
hereby contains or will contain, as of the date thereof, any
untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements therein,
in light of the circumstances in which they are made, not false
or misleading. No fact is known to any of the Sellers which
materially and adversely affects the Stockholder Real Estate, or
either Company's Business or Real Estate Business (as the case
may be) or any of either Company's assets which has not been set
forth in the Exhibits hereto. The Sellers shall from time to
time, up to and including the Closing, promptly provide to the
Purchaser any and all information concerning the Business or the
Real Estate Business which might materially affect the accuracy
or completeness of information contained herein or otherwise
furnished to the Purchaser.
4.39 Selling Stockholder's Equity. The equity of the
Selling Stockholders in Legend, determined in accordance with
GAAP (but adjusted in accordance with Section 3.2 hereof) will
be, on the Closing Date, not less than $4,200,000.00.
4.40 Industrial Development Bonds.
(a) Exhibit 4.40 hereto sets forth all agreements,
instruments and other documents (collectively, the "Bond
Documents") under which either Legend or Realty is
obligated, or to which either Legend or Realty is a party,
related to or in connection with (i) the $850,000 in
original aggregate principal amount of revenue bonds
designated "The Industrial Development Board of the City of
Boaz, Alabama Industrial Development Revenue Bonds (Homes of
Legend Project) Series 1993 (the "1993 Bonds"), and (ii) the
$800,000 in original aggregate principal amount of revenue
bonds designated "The Industrial Development Board of the
City of Boaz, Alabama Industrial Development Revenue Bonds
(Legend Realty Project) Series 1995 (the "1995 Bonds").
(b) To the best of Sellers' knowledge, no default or
event of default has occurred under the 1993 Bonds or the
1995 Bonds (collectively, the "Bonds") or under any of the
Bond Documents, and no event has occurred which, with the
giving of notice or passage of time, or both, would
constitute a default or an event of default under the Bonds
or under any of the Bond Documents.
(c) Realty has made all payments required under the
Bond Documents through the date hereof, and, between the
date hereof and the Closing, Realty will make all payments
required.under the Bond Documents.
(d) The aggregate original authorized face amount of
the 1993 Bonds (that is, $850,000), when added to the
outstanding "tax-exempt facility-related bonds" (as defined
in Section 144(a)(10)(B) of the IRC) of any "test-period
beneficiary" (as defined in Section 144(a)(10)(D) of the
IRC), does not exceed $40,000,000.
(e) As of the date hereof, there is not outstanding
any issue of "qualified small issue bonds" (as that term is
used in Section 144(a)(1) of the IRC), whether issued by the
Industrial Development Board of the City of Boaz, Alabama
(the "Board") or any other issuer, the proceeds of which are
being used or will be used in whole or in part with respect
to any facilities (i) located within the geographical
boundaries of the City of Boaz, Alabama (or located in any
adjacent county or political subdivision and integrated with
or contiguous to such facilities located within the
geographical boundaries of the City of Boaz, Alabama), and
(ii) which facilities are used or will be used in whole or
in part by Legend, Realty or any "related person" (as
defined in Section 144(a)(3) of the IRC) to Legend or
Realty, other than the 1993 Bonds.
(f) Legend and Realty acknowledge that the 1993 Bonds
were issued by the Board pursuant to Section 144(a)(1) of
the IRC. From the date of issuance of the Bonds through the
date of this Agreement, Legend and Realty have been the only
"principal users" (as described in Section 144(a) of the
IRC) of the facilities financed with the 1993 Bonds.
(g) No portion of the net proceeds of the 1993 Bonds
was used for the acquisition of any property (or any
interest therein) unless the first use of such property was
pursuant to such acquisition.
(h) Neither Legend nor Realty has permitted the use of
any proceeds of the 1993 Bonds, or taken or omitted to take
any other action, or permitted any action to be taken, which
has caused or will cause the interest on the 1993 Bonds to
be or become subject to federal income taxes under the IRC.
4.41 Leased Employees. Neither of the Companies has
utilized the services of a Leased Employee or entered into any
contract with another Person to obtain the services of a Leased
Employee. A "Leased Employee" shall mean a person ("Employee")
who performs services for another Person ("Lessor") for which the
Lessor pays not the Employee but the entity which purports to
employ such Employee.
The Seller Stockholders hereby represent, warrant and agree,
as of the date of this Agreement and as of the Closing Date, as
follows, each of which shall be deemed to be independently
material and to have been relied upon by Purchaser and Champion:
1. Investment Intent. (a) That he or she is acquiring his
or her interest in the Earn Out Payments for investment
and for his or her own account and not as nominee or on
behalf of any other person who may be deemed to be a
separate purchaser or offeree and not with a view to
resale or other distribution, (b) that the Earn Out
Payments have not been registered under the Securities
Act of 1933, the Michigan Uniform Securities Act, the
Alabama Securities Act or the securities laws of any
other state and the Earn Out Payments may not and will
not be sold, assigned, transferred, offered, pledged or
otherwise distributed unless so registered under the
Securities Act of 1933, the Michigan Uniform Securities
Act, the Alabama Securities Act and the securities laws
of any other applicable state or unless Purchaser
receives an opinion of counsel for the Seller
Stockholders (concurred in by counsel for the
Purchaser) stating that such sale, assignment,
transfer, offer, pledge or other distribution is exempt
from such registration requirements. A notation to the
foregoing effect will be placed in the records of
Purchaser.
2. Economic Condition. Each Seller Stockholder has either
personal income before taxes in excess of $100,000 for
his or her last fiscal year or latest 12 month period
and is capable of bearing the economic risk of the Earn
Out Payments, or net worth in excess of $1,000,000; and
such Seller Stockholder has such knowledge and
experience in financial matters and business matters
that he or she is capable of evaluating the merits and
risks of an investment in the Earn Out Payments or has
obtained the advice of an attorney, certified public
accountant or registered investment advisor under the
Investment Advisors Act with respect to the merits and
risks of the prospective investment.
ARTICLE V - REPRESENTATIONS AND
WARRANTIES OF PURCHASER
Purchaser and Champion, jointly and severally, represent and
warrant to the Sellers (other than Legend):
5.1 Corporate Existence. Purchaser and Champion are
each a corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan.
5.2 Authority Relative to this Agreement. Purchaser
and Champion each have the full legal right and power and all
authority and approval required by law to enter into this
Agreement and the documents and instruments to be executed and
delivered by it pursuant hereto, and to perform fully their
respective obligations hereunder and thereunder. The execution
and delivery of this Agreement and the documents and instruments
to be executed and delivered by it pursuant hereto have been duly
authorized by all necessary corporate action on the part of
Purchaser and Champion. This Agreement and the documents and
instruments to be executed and delivered by it pursuant hereto
are and will be the legal, valid and binding obligations of
Purchaser and Champion, enforceable against each of them in
accordance with their terms, except to the extent to which
enforcement may be limited by laws relating to bankruptcy and
insolvency, moratorium and similar laws relating to the
enforcement of creditors rights and by general principles of
equity (regardless of whether in an action at law or in equity).
5.3 Consents and Approvals; No Violation. The
execution, delivery and performance by Purchaser and Champion of
this Agreement and the documents and instruments to be executed
and delivered by it pursuant hereto will not: (a) violate any
provision of Purchaser's or Champion's articles of incorporation
or by-laws; (b) contravene or constitute a default under any
indenture, mortgage, lease or other agreement to which Purchaser
or Champion is a party or is bound, or by which any of the
properties or assets of Purchaser or Champion may be bound or
affected; or (c) result in a violation of any law, statute,
ordinance, regulation, judgment, injunction, order, decree or
award of any court or governmental authority or body having
jurisdiction over Purchaser or by which either of them is bound.
On or before the Closing, Purchaser and Champion shall cause or
effect any action by, or notice or disclosure to, or filing or
registration with, any governmental body, agency or official as
Purchaser or Champion may be required by law to do in connection
with the transactions contemplated hereby.
5.4 Litigation. There are no legal actions, suits,
arbitrations, or other legal or administrative proceedings or
investigations before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, pending or, to the best knowledge of Purchaser
and Champion, threatened against or affecting Purchaser or
Champion which, if adversely determined, would materially affect
the Purchaser's and Champion's (considered together) ability to
perform its obligations under this Agreement.
ARTICLE VI - COVENANTS PENDING CLOSING
6.1 Conduct of Business. From the date hereof until
the Closing, Sellers, jointly and severally, shall conduct, or
shall cause to be conducted, the Business and the Real Estate
Business, and the operations of both the Companies in accordance
with its respective past practice and in the ordinary course of
its respective business, shall maintain, or cause to be
maintained, each Company's current business organization and
goodwill, shall use their respective best efforts to continue to
retain the services of each Company's present officers, employees
and consultants, shall preserve each Company's relationships with
dealers, customers, suppliers and others having business dealings
with such Company, and shall not enter into any transaction or
perform any act which would constitute a breach of the
representations, warranties, covenants and agreements contained
herein. Sellers, jointly and severally, will, consistent with
this Section 6.1 and Section 6.2, continue to conduct, or cause
to be conducted, the business of each Company only in the
ordinary course in accordance with past practice and will take
no, and will not permit to be taken any, action which could
reasonably be expected to result in the Purchased Assets not
fully reflecting the earnings of Realty for such period or which
would cause the assets of Legend, at the time of the Closing, not
fully to reflect the earnings of Legend for such period.
6.2 Certain Changes or Events. From the date hereof
until the Closing, except as specifically provided herein, as
described in Exhibit 6.2 or with the prior written consent of
Purchaser and Champion, the Sellers, jointly and severally,
covenant that neither of the Companies shall:
(a) take any action to amend either Company's articles
of incorporation or by-laws,
(b) issue, sell or otherwise dispose of any of
Realty's authorized but unissued capital stock,
(c) permit Realty's or Legend's corporate existence
and good standing in its jurisdiction of incorporation and
in each jurisdiction in which it is qualified to do business
to lapse,
(d) issue any capital stock or declare or pay any
dividend or other distribution of any nature on or in
respect of any of the capital stock of either Company, nor
will either of the Companies, directly or indirectly, issue,
redeem, retire, purchase or otherwise acquire any of its
shares of capital stock, or any security exercisable or
exchangeable for or convertible into any shares of capital
stock or any instrument having any voting rights,
(e) acquire or dispose of any capital assets having an
initial cost of $50,000 or more, nor will either of Company
discharge or satisfy any Encumbrance or pay or perform any
obligation or liability other than (i) liabilities and
obligations or liens secured thereby listed on Exhibit
6.2(e) and (ii) current liabilities and obligations incurred
in the ordinary course of business and consistent with past
practice since February 2, 1996, and, in either case, only
as required by the express terms of the agreement or other
instrument pursuant to which the obligation or liability was
incurred,
(f) merge or consolidate with or into any corporation,
(g) make or become liable for any wage or salary
increase, bonus (but excepting non-Seller Stockholder
employee bonuses paid consistent with past practice and
excepting a Post Closing Bonus), profit-sharing or
incentive payment to any of its officers, directors,
employees or stockholders,
(h) sell or otherwise dispose of or encumber any of
its properties or assets other than in sales or dispositions
in the ordinary course of business or in connection with
normal repairs, renewals and replacements,
(i) modify, amend or cancel any of its existing leases
or enter into any commitments, contracts, agreements,
leases, warranties, guarantees or understandings other than
in the ordinary course of business or incur any indebtedness
for borrowed money (other than pursuant to revolving credit
borrowings under existing financing arrangements),
(j) fail to operate the Business or the Real Estate
Business in the customary manner and in the ordinary and
regular course of business and to maintain in good condition
its respective business premises, plant, fixtures, furniture
and equipment, reasonable wear and tear excepted,
(k) cancel or compromise any debt or claim related to
its respective assets, other than in the ordinary course of
business,
(l) waive or release any rights of value relating to
its respective assets, other than in the ordinary course of
business,
(m) transfer or grant any rights in or under any
concessions, leases, licenses, agreements, patents,
inventions, trademarks, trade names, service marks, brand
marks, brand names or copyrights, or with respect to any
know-how, processes or formulas, relating to its assets,
other than in the ordinary course of business,
(n) enter into any employment contract with any
officer or employee, or make any loan to, or enter into any
transaction of any other nature with any of its directors,
officers or employees, the Seller Stockholders or any member
of their immediate families or any affiliate thereof,
(o) enter into any transaction, contract or commitment
with respect to its respective assets, other than in the
ordinary course of business,
(p) suffer any casualty loss or damage (whether or not
such loss or damage shall have been covered by insurance) of
$500,000.00 or more singly or in the aggregate for all
casualty losses and damage,
(q) suffer any material adverse change in its
financial condition, its assets, results of operations, the
Purchased Assets, liabilities or business prospects,
(r) take any other action which might adversely affect
the interest of Purchaser hereunder or diminish the value of
either of the Companies as a going concern,
(s) alter the manner of keeping either of the
Companies' books, accounts or records or the accounting
practices therein reflected, including any change in the
costing standards reflected in the Financial Statements,
(t) fail to maintain the corporate existence of either
of the Companies,
(u) fail to maintain in full force and effect all
policies of insurance now in effect,
(v) fail to duly and timely file all reports and
returns required to be filed with any governmental agency
and promptly pay all Taxes unless diligently contested in
good faith by appropriate proceedings,
(w) alter the physical contents or character of any of
its inventories so as to affect the nature of the Business
or the Real Estate Business or result in a change in the
total dollar valuation thereof or otherwise take any action
or refrain from taking action as would result in any change
in the Purchased Assets or the Assumed Liabilities other
than in the ordinary course of business consistent with past
practice, or
(x) enter into any contract, agreement or commitment
with respect to, or propose or authorize, any of the actions
described in the foregoing clauses (a) through (w).
6.3 Access to Information. Between the date hereof
and the Closing Date, Sellers shall (i) afford Purchaser,
Champion and their representatives access, during normal business
hours, to all of each of the Companies' business operations,
properties, financial statements, books, past and present
insurance policies, files, records, work papers, schedules,
financial data and all financial information and documents
furnished to each of the Companies' auditors in connection with
the audits of the each of the Companies' Financial Statements,
(ii) cooperate with Purchaser and Champion and their
representatives in the examination thereof, (iii) furnish
Purchaser, Champion and their representatives with all
information with respect to the Business, the Real Estate
Business, the Purchased Assets, the Stockholder Real Estate, and
the Assumed Liabilities as Purchaser or Champion may reasonably
request, and (iv) furnish Purchaser, Champion and their
representatives with copies of such documents as may be
reasonably requested. The Sellers shall cause each of the
Companies' auditors to give to Champion's auditors, Price
Waterhouse L.L.P., full access to all work papers, schedules,
financial data and all financial information and documents
relating to the audits of the each of the Companies' Financial
Statements and the Audited Closing Financial Statements.
Purchaser, Champion and their representatives shall have the
right to discuss the affairs of each of the Companies with the
directors, officers, employees, consultants, auditors, advisors
and agents of the respective Company. No such examination,
however, shall constitute a waiver or relinquishment by Purchaser
or Champion of their rights to rely upon Sellers'
representations, warranties, covenants and agreements as made
herein or pursuant hereto.
6.4 Affirmative Covenants. Each Company will:
(i) duly and timely file all reports and returns
required to be filed with any governmental agency and will
promptly pay when due all taxes, assessments and
governmental charges including interest and penalties levied
or assessed, unless diligently contested in good faith by
appropriate proceedings and disclosed to the Purchaser and
Champion in writing;
(ii) maintain and keep in good order, consistent
with past practice, all buildings, offices, shops and other
structures, and keep all machinery, tools, equipment,
fixtures and other property in good condition, repair and
working order;
(iii) maintain in full force and effect all
policies of insurance now in effect;
(iv) not do any act or omit any act or permit any
omission to act which will cause a material breach or
default in any of its contracts, commitments or obligations.
6.5 Seller Stockholders.
A. Seller Stockholders shall not take any action
or omit to take any action, and shall cause the Companies to
not take any action or omit to take any action, to the
extent such action or omission might result in any of the
representations or warranties of the Sellers set forth in
this Agreement being inaccurate or incorrect on and as of
the Closing Date.
B. The Sellers will not, and will not authorize
or permit any of the officers, directors or employees of
either of the Companies or any investment banker, financial
advisor, attorney, accountant or other representative or
agent retained by it or either Company to, solicit or
encourage the making of, or agree to or endorse any Takeover
Proposal (as defined below), or participate in any
discussions or negotiations, or provide third parties with
any nonpublic information, relating to any such proposal.
The Sellers will promptly advise Purchaser and Champion
orally or in writing of any such proposals. As used in this
Agreement, "Takeover Proposal" shall mean any tender or
exchange offer, proposal for a merger, consolidation or
other business combination involving either of the Companies
or any proposal or offer to acquire in any manner any equity
interest in, or any portion of the assets (other than in the
ordinary course of business consistent with past practice)
of either or both of the Companies other than the
transactions contemplated or permitted by this Agreement.
C. The Sellers shall use commercially reasonable
efforts to cause all conditions set forth in Article VIII
hereof within their control (or the control of either of the
Companies) to be satisfied as promptly as practicable under
the circumstances.
6.6 Covenants of All Parties. Not later than the next
Business Day following the date of this Agreement, Purchaser and
the ultimate parent entity of the Companies, and the Seller
Stockholders shall cause the ultimate parent entity of the
Companies to, file premerger notification under the H/S/R Act and
any supplemental information which may be reasonably requested in
connection therewith pursuant to the H/S/R Act, and such
notification filings shall be accompanied by a request for early
termination of the applicable waiting periods under the H/S/R
Act. Purchaser and the ultimate parent entity of the Company
shall (and the Seller Stockholders shall cause the ultimate
parent entity of the Company to) cooperate and use reasonable
efforts to have such waiting periods terminated on the earliest
practicable date.
6.7 Communications With Agencies. Sellers will
promptly transmit to Purchaser and Champion copies of any
communications with any federal or state regulatory agencies
received after the date hereof which relate to the Business, the
Total Real Estate, or the Real Estate Business.
6.8 Financials. Sellers shall cause to be prepared
and will deliver to Purchaser and Champion promptly after the
same are prepared the monthly financial statements of each
Company. All such monthly statements shall be prepared on a
basis consistent with the Financial Statements.
6.9 Environmental Assessment and Remediation. The
Sellers agree that they shall permit the Purchaser to have
performed (and shall assist Purchaser therewith), within 30 days
from the date of this Agreement with respect to the Total Real
Estate and the Leased Real Estate, Phase I environmental
assessments (the "Environmental Assessments") and updates
thereof, by environmental consultants chosen by the Purchaser,
the scope of which Environmental Assessments is also to be
satisfactory to Purchaser. The Sellers further agree that if
such Environmental Assessments disclose matters that Purchaser,
in its sole discretion, determines require remediation to avoid
the imposition of any liability on Purchaser or Legend under any
Environmental Law, the Purchaser may, at its sole option,
terminate this Agreement if the maximum estimated cost in the
aggregate of all such remediation exceeds $100,000.00 (and, to
determine the foregoing, if a range of costs is given, the
highest amount in the range shall be used). Purchaser agrees to
bear the expense of such Environmental Assessment.
6.10 Waiver of Bulk Sales Compliance. Purchaser and
Realty hereby waive compliance with the bulk sales laws of any
applicable jurisdiction, and Sellers hereby jointly and severally
agree to indemnify and hold harmless Purchaser from and against
any claims arising out of or due to the failure to comply with
such bulk sales laws.
ARTICLE VII - AGREEMENTS
7.1 Employment Agreements. At the Closing, the Seller
Stockholders will cause Wayne Sims, Don Brown, Keith Bennett and
Thomas Kevin Sims (each of the foregoing, an "Executive") to
enter into an employment agreement with the Company in the form
and substance of Exhibit 7.1 hereto (each, an "Employment
Agreement" and collectively the "Employment Agreements").
7.2 Non-Compete Agreements. Each of the Selling
Stockholders will enter into a Non-Compete Agreement in the form
and substance of Exhibit 7.2(1) hereto, and Realty Inc. will
enter into a Non-Compete Agreement in the form and substance of
Exhibit 7.2 (2) hereto (each of the foregoing a "Non-compete
Agreement" and collectively the "Non-compete Agreements") at the
Closing on the Closing Date.
7.3 Release Agreements and Nonqualified Stock Option
Agreements. At the Closing, the Sellers (other than Legend) will
execute and deliver, and will cause each of the officers and
directors of Legend to execute and deliver, to Legend a release
agreement (each a "Release Agreement" and collectively the
"Release Agreements") in the form and substance of Exhibit 7.3
hereto. At the Closing, Champion and the Executives shall
execute and deliver a Nonqualified Stock Option Agreement in the
form and substance of Exhibit 7.3(A) hereto in the case of Wayne
Sims and in the form and substance of Exhibit 7.3(B) in the case
of the other Executives.
7.4 Security Deposits. All security deposits,
progress payments, credits and the like which Realty has received
pursuant to any purchase orders, leases or agreements assigned to
or assumed by Purchaser pursuant to this Agreement shall be paid
to Purchaser at the Closing. All security deposits which have
been paid by Purchaser to third parties under any leases or
agreements assigned to or assumed by Purchaser pursuant to this
Agreement are a part of the Purchased Assets and at the Closing
shall become the property of Purchaser for the payment of no
additional consideration.
7.5 Power of Attorney. Without limitation of any
provision of this Agreement, effective upon the Closing, Realty
constitutes and appoints each of Purchaser and Champion and their
respective successors and assigns the true and lawful attorney of
Realty, with full power of substitution, in the name of Purchaser
or in the name of Realty, but for the benefit of Purchaser, (i)
to collect for the account of Purchaser all items transferred or
intended to be transferred to Purchaser hereunder, (ii) to
institute and prosecute all proceedings which Purchaser may deem
proper in order to collect, assert or enforce any claim, right or
title of any kind in or to the Purchased Assets, and to do all
such acts and things in relation thereto as Purchaser shall deem
advisable; and (iii) to take all actions which Purchaser may deem
proper in order to provide to Purchaser the benefits under any
claims, contracts, agreements, arrangements, licenses, leases,
commitments, sales orders, purchase orders or other documents or
instruments of the Company transferred or intended to be
transferred to Purchaser hereunder. Each of the Sellers
acknowledges that these powers are coupled with an interest and,
upon the Closing, shall not be revocable in any manner or for any
reason. Purchaser shall be entitled to retain for its own
account any amounts collected pursuant to the foregoing power,
including any amount payable as interest in respect thereof.
ARTICLE VIII - CONDITIONS PRECEDENT
8.1 Mutual Conditions Precedent. The obligations of
Purchaser, Champion and the Sellers to consummate the
transactions contemplated by this Agreement on the Closing Date
are subject to the satisfaction, prior to the Closing Date, of
the following condition, the failure of which shall excuse each
such party from consummating such transactions unless any such
conditions are waived (in whole or in part) by such party in
writing:
The waiting period imposed under the H/S/R Act
shall have expired or been terminated, and no statute, rule,
regulation or order of any court or administrative agency
shall be in effect which prohibits Purchaser, Champion and
the Sellers from consummating the transactions contemplated
in this Agreement and the Ancillary Documents.
8.2 Conditions to Closing
Conditions to Obligations of Purchaser and
Champion. The obligations of Purchaser and Champion to close the
transactions contemplated by this Agreement are subject to the
prior fulfillment of each of the following conditions; provided;
however, that Purchaser and Champion may waive any one or more of
such conditions:
(a) Sellers shall have complied with and performed all
the terms, covenants and conditions of this Agreement required to
be complied with and performed by Sellers on or prior to the
Closing Date, and shall have made all of the deliveries required
to have been made hereunder by Sellers on or prior to the Closing
Date.
(b) All of the representations and warranties made by
Sellers contained in this Agreement shall be true and correct on
the Closing Date, as if made on the Closing Date.
(c) All necessary governmental approvals and consents
of third parties to the transactions contemplated by this
Agreement shall have been obtained and the same shall be in form
and substance reasonably acceptable to Purchaser and Champion and
the applicable waiting period under the HSR Act shall have
expired or been terminated.
(d) Sellers shall have delivered to Purchaser and
Champion the resolutions of each Company's Board of Directors and
Selling Stockholders authorizing the execution, delivery and
performance by such Company of this Agreement and the
transactions contemplated hereby, certified by the Secretary
thereof.
(e) Sellers shall have furnished Purchaser and
Champion with a favorable opinion, dated the Closing Date, of
Messrs. Gullahorn & Hare, counsel for the Selling Stockholders
and the Companies, addressed to Purchaser, in form and substance
customary for transactions of the character contemplated in this
Agreement and otherwise reasonably acceptable to Purchaser and
Champion.
(f) Sellers shall have furnished Purchaser and
Champion with a certificate, executed by the President of the
Company and by the Selling Stockholders, certifying that each of
the conditions set forth in Section 8.2(a), (b), (c), (j), (k),
(q), (v) and (x) has been satisfied.
(g) All legal matters in connection with this
Agreement and the Closing hereunder shall be approved by Messrs.
Miller, Canfield, Paddock and Stone, P.L.C., counsel for
Purchaser and Champion; and there shall have been furnished to
such counsel by the Sellers such corporate and other records and
information as they may reasonably have requested for such
purpose.
(h) Purchaser and Champion shall have received
assurances from their auditors, Price Waterhouse L.L.P., that the
Financial Statements referred to in Section 3.6.1(a) comply with
the requirements of the Securities Act of 1933, as amended (the
"1933 Act") and the Securities Exchange Act of 1934, as amended
(the "1934 Act") and the rules promulgated thereunder with
respect to the financial statements of the relevant Company which
would be required to be included in registration statements or
reports that may be filed or are required to be filed by
Champion, Purchaser, the relevant Company or any of their
respective affiliates under the 1933 Act or the 1934 Act.
(i) Purchaser and Champion shall have received all
permits necessary in Purchaser's opinion to operate, or for
Legend to operate, the Business and the Real Estate Business,
after the Closing.
(j) Prior to the Closing Date, neither Company shall
have incurred, or be threatened with, a material liability or
casualty which would materially impair the value of the Purchased
Assets or of Legend.
(k) No action, suit, proceeding or investigation shall
have been instituted before any court or governmental body by any
governmental agency, to restrain or prevent the carrying out of
the transactions contemplated by this Agreement or which might
affect the right of Purchaser to own, operate and control the
Real Estate Business, the Total Real Estate, or the Purchased
Assets after the Closing Date or for Legend (or the Purchaser,
after the merger of Legend and Purchaser) to own, operate and
control the Business after the Closing.
(l) Purchaser and Champion shall have received written
report(s) of site assessments and environmental audits, in scope,
form and substance, and prepared by an independent, competent and
qualified engineer, satisfactory to Purchaser and Champion, and
any updates thereof deemed necessary or appropriate by Purchaser
and Champion, and Purchaser and Champion shall be satisfied, in
their sole and absolute discretion, that there will not be at and
after the Closing any basis for the imposition on Purchaser,
Legend or Champion of any liability under any Environmental Law.
(m) Sellers shall have provided to Purchaser or
Champion confirmation from the State Department of Revenue of the
State of Alabama showing that all Tax returns and reports
required to be filed by either of the Companies prior to the
Closing have been filed and that all Taxes shown on such returns
have been paid.
(n) Sellers shall have provided to Purchaser and
Champion a statement certified by the Commissioner of the Alabama
Department of Industrial Relations certifying the status of the
Company's contribution liability under the Alabama Industrial
Relations Act.
(o) Purchaser and Champion shall have received Uniform
Commercial Code lien searches with respect to the Purchased
Assets, Stockholder Real Estate, the assets of Legend, and
A.L.T.A. commitments for owner's policies of title insurance (or
in the case of Leased Real Estate, lessee's policies which shall
also insure Purchaser's right to purchase and in the case of the
Leased Real Estate, a lessee's policy) without exceptions (other
than exceptions acceptable to Purchaser in its unfettered
discretion) for the Total Real Estate and the Leased Real Estate
(the "Title Commitments") from reputable title companies
acceptable to Purchaser, and an A.L.T.A. survey of the Total Real
Estate, and the Leased Real Estate all in form and content
satisfactory to Purchaser and Champion. At the time of Closing,
the title companies issuing the Title Commitments shall issue to
Purchaser their final owners' or lessee's policies of Title
Insurance insuring the interest of Purchaser (or Legend in the
case of the Leased Real Estate as to which it is the lessee)
therein in the condition required hereunder, subject only to
those encumbrances as shall be acceptable to Purchaser and
Champion. The amount of insurance with regard to each Title
Commitment shall be determined by Purchaser and Champion without
regard to the Purchase Price allocated to the Asset Acquisition.
(p) Purchaser and Champion shall have reviewed,
investigated, ascertained and verified to their sole, complete
and unfettered satisfaction all aspects of the financial
statements, business, properties, assets, contracts, past and
present insurance arrangements, employment arrangements (leased
or otherwise), customer and dealer relations and affairs of each
Company, the Purchased Assets, the Total Real Estate, the assets
of Legend, the Assumed Liabilities, the Excluded Liabilities, all
facts, information, and other matters regarding either of the
Companies referred to in this Agreement or given or provided in
connection with this Agreement, and other due diligence reviews
and investigations of the Companies and the Sellers as Purchaser
and Champion may deem advisable or appropriate, and the results
of such investigations shall be completely satisfactory to
Purchaser and Champion in all respects in each of their sole,
complete and unfettered discretion.
(q) No fire or other casualty shall have destroyed (i)
$250,000.00 or more in replacement cost of the Purchased Assets,
the Stockholder Real Estate, or of the assets of Legend, or (ii)
any part of the Purchased Assets, the Stockholder Real Estate, or
of the Assets of Legend, in either case which would have an
adverse effect on the Business (whether or not in excess of
$250,000.00) whether or not such casualty is covered by
insurance, and no event shall have occurred which has or
reasonably may have an adverse effect upon the Business or the
Real Estate Business, the Purchased Assets, the Total Real
Estate, the assets of Legend, the Assumed Liabilities or business
prospects of the Business and of the Real Estate Business.
(r) Sellers shall have provided to Purchaser and
Champion the requisite certification required under Code Section
1445 relating to foreign sellers of U.S. real estate.
(s) Sellers shall have delivered to Purchaser and
Champion an affidavit, in form acceptable to the title company
issuing the Title Commitments certifying that the real property
is free from claims for mechanic, materialmen and laborer's liens
or any other liens or assessments.
(t) The Executives shall have executed and delivered
to Purchaser and Champion the Employment Agreements.
(u) The Sellers (other than Legend) shall have
executed and delivered to Purchaser and Champion the
Noncompetition Agreements and the Sellers shall have executed and
delivered, and caused each officer and director of Legend to have
executed and delivered, Release Agreements as required hereby.
(v) Sellers shall have taken such corporate action as
may be appropriate to change the name of Realty to a name which
is not confusingly similar to its present name and shall have
delivered such instruments as may be required to be filed with
all governmental authorities to so change Realty's name.
(w) Purchaser and Champion shall be satisfied in their
sole discretion with the amount of the potential liability
associated with any litigation threatened or existing against
either or both of the Companies.
(x) Purchaser shall have received all necessary
approvals and consents of third parties, including, without
limitation, all appropriate governmental authorities,
commissions, agencies and bodies (including The Industrial
Development Board of the City of Boaz, Alabama (the "IDB") and
the Alabama Department of Revenue) so that Purchaser receives, no
later than the Closing Date, all of the benefits intended to be
obtained under the Bond Documents and all of those tax abatement
benefits previously received by the Companies, in amounts not
less than those received by the Company or to be received by the
Companies, pursuant to the issuance of bonds by the IDB in
connection with the facilities operated by the Companies,
including, without limitation, an abatement of noneducational ad
valorem taxes on industrial development property. Further,
Purchaser shall have received such assurance as shall be required
by Purchaser that upon satisfaction in full of the indebtedness
provided in the Bond Documents, that Purchaser shall thereafter
have the right and option to purchase the Real Estate subject to
the Bond Documents which is described on Exhibit 1.1(a) hereto as
"Plant Number 2" and the Real Estate which is described on
Exhibit 1.1(a) hereto as "Plant Number 3" for respectively the
full sum of $4,250 and $4,000, plus in each case, the payment of
certain fees and administrative and termination costs.
(y) Each Executive shall have executed and delivered
the Nonqualified Stock Option Agreement.
(z) Each director and officer of Legend shall have
delivered to Purchaser resignations from such positions and any
other positions held in, or by appointment by or from, Legend.
(aa) The Seller Stockholders shall have delivered to
Purchaser certificates representing all of the Purchased Seller
Stock registered in the name of the Seller Stockholders (without
any restrictive legend thereon or together with such instruments
and items as shall permit, in the reasonable opinion of
Purchaser's counsel, the sale and transfer of such shares free,
clear and discharged of and from any such legend), duly endorsed
in blank or with accompanying assignments separate from
certificate duly signed, in either such case with signatures
guaranteed by a national banking association, or a state banking
corporation and such other instruments or documents as shall, in
the reasonable opinion of the Purchaser's counsel, be reasonably
required to vest good and marketable title in Purchaser to the
Purchased Seller Stock free, clear and discharged of and from any
and all Encumbrances.
(bb) Realty shall convey to Purchaser the Purchased
Assets, and Seller Stockholders shall convey to Purchaser the
Stockholder Real Estate, in each case free and clear of any and
all liens, claims, charges and encumbrances, other than the
Permitted Encumbrances, and in furtherance thereof shall deliver
to Purchaser General Warranty Deeds, a General Bill of Sale and
Assignment and Assignment and Assumption Agreements in form and
substance satisfactory to Purchaser and Champion, together with
such other deeds, bills of sale, assignments, certificates of
title, documents and other instruments of transfer and conveyance
as Purchaser and its legal counsel shall reasonably request.
(cc) Prior to the Closing Date, Legend shall not have
incurred, or be threatened with, a material liability or casualty
which would materially impair the value of Legend, its stock,
Business or assets.
(dd) There shall be no legal actions, suits,
arbitrations, or other legal or administrative proceeds or
investigations before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, pending which, if adversely determined, would
materially affect the Sellers ability to perform their
obligations under this Agreement.
8.3 Conditions to Obligations of Sellers. The
obligations of Sellers to close the transaction contemplated by
this Agreement are subject to the prior fulfillment of each of
the following conditions; provided, however, that the Seller may
waive any one or more of such conditions:
(a) Purchaser and Champion shall have complied with
and performed all the terms, covenants and conditions of this
Agreement required to be complied with and performed by Purchaser
and Champion on or prior to the Closing Date, and shall have made
all of the deliveries required to have been made hereunder by
Purchaser and Champion on or prior to the Closing Date.
(b) All of the representations and warranties made by
Purchaser and Champion contained in this Agreement shall be true
and correct on the Closing Date, as if made on the Closing Date.
(c) All necessary governmental approvals and consents
of third parties to the transactions contemplated by this
Agreement shall have been obtained, and the waiting period under
the HSR Act shall have expired or been terminated.
(d) Purchaser and Champion shall have delivered to
Sellers the resolutions of its respective Board of Directors
authorizing the execution, delivery and performance by Purchaser
and Champion of this Agreement and the transactions contemplated
hereby, certified by the Secretaries of Purchaser and Champion.
(e) Purchaser and Champion shall have furnished
Sellers with a favorable opinion, dated the Closing Date, of
counsel for Purchaser and Champion, addressed to Sellers, in form
and substance customary for transactions of the character
contemplated in this Agreement and otherwise reasonably
acceptable to Realty.
(f) Purchaser and Champion shall have furnished
Sellers with a certificate, executed by the president of
Purchaser and of Champion, certifying that each of the conditions
set forth in Section 8.2(a) and (b) has been satisfied.
(g) All legal matters in connection with this
Agreement and the Closing hereunder shall be approved by Messrs.
Gullahorn & Hare, counsel for the Sellers; and there shall be
furnished to such counsel for the Sellers such corporate and
other records and information as they may reasonably have
requested for such purposes.
(h) Purchaser, Legend, and Champion, as applicable,
shall have executed and delivered the Employment Agreements, the
Nonqualified Stock Option Agreements, and the Noncompetition
Agreements to be executed by them.
(i) There shall be no legal actions, suits,
arbitrations, or other legal or administrative proceeds or
investigations before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, pending which, if adversely determined, would
materially affect Purchaser and Champion's ability (considered
together) to perform their obligations under this Agreement.
ARTICLE IX - INDEMNIFICATION
9.1 Indemnification by Sellers. If the Closing shall
occur, each of the Sellers (other than Legend), jointly and
severally, shall defend, indemnify and hold harmless each of
Purchaser and Champion and their respective directors, officers
employees, shareholders (in each case, other than the Sellers)
and Affiliates ("Purchaser Indemnified Parties") from and against
any and all costs, losses, claims, judgments, liabilities, fines,
diminution in value, expenses, penalties, and direct, indirect,
incidental, consequential and exemplary damages (including
interest, legal and accounting fees, court costs and fees and
costs on appeal, costs of arbitration and disbursements of
counsel) of any kind or character whatsoever ("Damages"), arising
out of or in any manner incident, relating or attributable to:
A. Any agreements, contracts, negotiations or other
dealings by any Seller, or any Person on any of their
behalf, with any other Person with respect to the sale of
either or both of the Companies, their assets, their stock,
or their business, (whether by sale of assets, stock or by
merger or otherwise) to such other Person.
B. Any failure by any of the Sellers to perform or
observe, or to have performed or observed, or to cause, or
have caused either or both of the Companies to perform or
observe, in full any covenant, agreement or condition to be
performed by any of them under this Agreement (but excluding
herefrom the Non-compete Agreements and Employment
Agreements).
C. Any fraud by any of the Sellers, either in
connection herewith, or otherwise.
D. All debts, liabilities and obligations of any of
the Sellers (other than Legend to the extent disclosed
herein) whether accrued, absolute, contingent, known or
unknown, or otherwise, including, without limitation, the
Excluded Liabilities and excluding only the Assumed
Liabilities.
E. Any inaccuracy in any of the representations or
breach of any of the warranties contained herein or in a
related document hereto which are made by any of the
Sellers.
If the Closing shall occur, each of the Sellers (other than
Legend), severally but not jointly, shall defend, indemnify and
hold harmless each of Purchaser Indemnified Parties and Legend
from and against any and all Damages arising out of or in any
manner incident, relating or attributable to (a) the Employment
Contract to which such Seller is a party if the Seller is also an
Executive, and (b) the Non-compete Agreement to which such Seller
is a party.
9.2 Representations. Any investigation or examination
by Purchaser or Champion of the business, properties or affairs,
of the Sellers shall not affect the representations and
warranties of the Sellers herein contained. Purchaser and
Champion shall be deemed to have relied on each and every
representation and warranty of the Sellers contained herein,
notwithstanding any investigation done by the Purchaser or
Champion and notwithstanding any facts or information which the
Purchaser and Champion may obtain or have obtained prior to or at
the Closing. Any investigation or examination by any Seller of
the business, properties or affairs, of the Purchaser or Champion
shall not affect the representations and warranties of the
Champion and Purchaser herein contained. Each Seller shall be
deemed to have relied on each and every representation and
warranty of the Purchaser and Champion contained herein,
notwithstanding any investigation done by any Seller and
notwithstanding any facts or information which a Seller may
obtain or have obtained prior to or at the Closing.
9.3 Waiver of Claims Against the Company. Each Seller
Stockholder and Realty irrevocably waives any, and agrees that
it, he or she will make no, claim against Legend of any kind or
character whatsoever, whether by way of subrogation, indemnity,
contribution, breach of contract, or any other theory whatsoever
regarding any claim made by Purchaser or Champion or any other
Purchaser Indemnified Party under this Article IX or otherwise
against Sellers, or any of them, and each Sellers irrevocably
releases and discharges Legend from any such claim.
9.4 Indemnification by Purchaser and Champion. If the
Closing shall occur, Purchaser and Champion, jointly and
severally, shall indemnify, defend and hold Seller Stockholders
and Realty ("Seller Indemnified Parties") harmless from and
against any and all Damages incurred by Seller Stockholders
arising out of or resulting from:
(a) Any inaccuracy in any representation or breach of
any warranty of Purchaser or Champion contained in this Agreement
or in a related document hereto made by either Purchaser or
Champion.
(b) Any failure by Purchaser or Champion to perform or
observe, or to have performed or observed, in full any covenant,
agreement or condition to be performed or observed by it under
this Agreement.
(c) Any fraud by either Purchaser or Champion in
connection herewith, or otherwise.
(d) Any federal income tax imposed on Realty as a
result of the Asset Purchase Transaction as it relates to the
Real Estate, plus interest and penalties thereon (collectively,
"Realty Taxes"). To fully compensate the Sellers Stockholders
and Realty for any incidental and consequential damages which the
Seller Stockholders and Realty might suffer in connection with
the Realty Taxes as well as to compensate them for the Realty
Taxes, which incidental and consequential damages are difficult
to ascertain, and to limit the maximum amount of potential
liabilty of Purchaser and Champion under this Section 9.4(d),
Sellers, Purchaser and Champion agree that, solely for the
purposes of this Section 9.4(d) only, the Damages which are
suffered by the Seller Stockholders will be deemed to be, and the
maximum claim which the Sellers could have under this Section
9.4(d) will be, equal to 150% of the amount of Realty Taxes, but
not in any event to exceed $300,000.00 (any Damages arising under
this Section 9.4(d) herein and any claim arising under this
Section 9.4(d) called the "Tax Damages").
9.5 Assertion of Claims. No claim shall be brought by
a Purchaser Indemnified Party under Section 9.1 or by a Seller
Indemnified Party under Section 9.4 and no respective indemnitee
shall be entitled to receive any payment with respect thereto,
unless the party seeking indemnity under the appropriate
aforesaid section (each such party so seeking indemnity when it
is seeking indemnity the "Indemnitee") shall give to the party
from whom it is seeking indemnitee (the "Indemnitor") written
notice of the existence of any such claim, specifying in
reasonable detail the basis therefor, prior to the expiration of
the applicable Survival Period (as defined in Section 9.6
hereof). If the respective Indemnitee (or Indemnities if
appropriate) and Indemnitor (or Indemnitors if appropriate), fail
to reach a mutually acceptable resolution of such claim within
thirty (30) days after the giving of such notice, the respective
Indemnitee (or Indemnities if appropriate) shall have the right
to commence legal proceedings for the enforcement of their
respective rights hereunder, and, in the case of the Purchaser or
Champion being the Indemnitee, exercising such rights as it has
hereunder, including without limitation those set forth in
Section 2.2.3(B) hereof.
If a suit, action or proceeding has been commenced against
an Indemnitee which, in the reasonable opinion of such Indemnitee
would likely give rise to a claim for indemnity under this
Agreement, such Indemnitee shall give notice of such suit, action
or proceeding to the relevant Indemnitor(s). Failure to give the
aforesaid notice shall not relieve the relevant Indemnitor(s)
from any liability except to the extent that the Indemnitor has
been prejudiced by such failure. The Indemnitor (or the
Indemnitors acting together) shall have the right to participate
in the choice of counsel in the relevant suit, action or
proceeding, provided that such Indemnitor(s) pay the fees and
expenses of such counsel as and when due and to participate in
the defense of such suit, action, or proceeding. If more than
one Indemnitor has the aforesaid rights to participate, such
Indemnitors must select one Person to be their representative in
order to exercise their rights hereunder.
9.6 Survival. The representations, warranties,
covenants, agreements and indemnifications of the parties
contained herein (other than those of Legend) or in any writing
delivered pursuant to the provisions hereof shall survive the
Closing and continue in full force and effect for the period (the
"Survival Period") beginning on the date hereof and continuing
until the fourth anniversary of the Closing Date; provided
however, that the Survival Period shall be extended automatically
to include any time period necessary to resolve a specific claim
for indemnification which was made before the expiration of the
Survival Period but not resolved prior to its expiration; and
provided further than any such extension shall apply only as to
claims asserted and not so resolved within the Survival Period.
The representations, warranties, covenants, agreements and
indemnification of Legend shall not survive the Closing.
Notwithstanding anything contained herein to the contrary,
including the foregoing, the Survival Period shall not apply to
the representations, warranties, covenants, agreements and
indemnifications set forth in Sections 4.3, 4.4, 4.16, 4.17, 4.18
and 4.22 hereof, and the indemnifications set forth in this
Article to the extent they pertain thereto, which shall survive
without temporal limitation.
9.7 Various Matters. The parties hereto expressly
intend and agree that each and every liability, covenant,
obligation, representation and warranty which are stated to be
of, or made by, the Sellers under this Agreement shall be joint
and several (excepting herefrom Legend after the occurrence of
the Closing) with the intention that the Purchaser and Champion
may recover the entire amount of damages, or enforce this
Agreement in its entirely against, and/or obtain other remedies
that may be available under applicable law in connection
therewith from any one or more of the Sellers (other than Legend
after the Closing occurs) in their discretion without any
requirement to join or to otherwise proceed against any other
Seller. The parties hereto expressly intend and agree that each
and every liability, covenant, obligation, representation and
warranty which are stated to be of, or made by, the Seller
Stockholders under this Agreement (but excepting herefrom those
which arise under the Non-compete Agreement or an Employment
Agreement which are intended to be the several obligation of the
Seller Stockholder a party thereto only) shall be joint and
several with the intention that the Purchaser and Champion may
recover the entire amount of damages, or enforce this Agreement
in its entirely against, and/or obtain other remedies that may be
available under applicable law in connection therewith from any
one or more of the Seller Stockholders in their discretion
without any requirement to join or to otherwise proceed against
any other Seller Stockholder.
9.8 Various Limitations. An Indemnitor shall not have
liability to an Indemnitee under this Article 9 unless and until
the aggregate amount of all claims of such Indemnitee under this
Article 9 exceed $100,000.00 (in which case the respective
Indemnitor or Indemnitors shall be obligated for all claims of
the Indemnitee without regard to, and without reduction for, the
aforesaid $100,000.00); provided however that such minimum shall
not apply to any loss suffered by the Purchaser or Champion, or
claim of the Purchaser or Champion arising from, Sections 2.2,
4.3, 4.4, 4.16, 4.25 and 12.3 hereof, or arising from any of the
Excluded Liabilities which losses and claims shall be paid by the
relevant Indemnitors hereunder from the first amount of loss.
Notwithstanding anything to the contrary contained herein, the
Purchaser and Champion shall not be liable to the Sellers in the
aggregate in an amount greater than $300,000.00 for Tax Damages.
Notwithstanding anything contained herein to the contrary, the
Sellers shall not be liable to the Purchaser or Champion under
this Article 9 for any claims or losses in an aggregate amount
greater than the amount of the Purchase Price plus the aggregate
amount of the Earn Out Payments plus the amount of the Asset
Purchase Price (the foregoing, the "Aggregate Claim Limitation"),
and the Purchaser and Champion shall not together be liable to
the Sellers, individually and jointly, in an aggregate amount
greater than the Aggregate Claim Amount; provided however that
the foregoing limitations set forth in this sentence shall not
apply to any loss suffered by the Purchaser or Champion or claim
made by the Purchaser or Champion as a result of a breach of the
provisions of Sections 4.17, 4.18 or 4.22 hereof, or attributable
to a knowing misrepresentation or a knowing non-disclosure.
ARTICLE X - TERMINATION AND AMENDMENT
10.1 Termination. This Agreement may be terminated at
any time prior to the Closing Date as follows:
A. by mutual consent of Purchaser, Champion and the
Sellers Stockholders in a written instrument;
B. by either the Sellers or Purchaser and Champion if
the Closing does not occur on or before 11:59 p.m., local
time, on July 30, 1996, provided that such period may be
extended by mutual agreement of the Sellers, Purchaser and
Champion;
C. by any of the Sellers or Purchaser or Champion if
there shall have been a material breach of any of the
representations or warranties set forth in this Agreement on
the part of Champion or Purchaser in the case of the Sellers
terminating or on the part of a Seller in the case of
Champion or Purchaser terminating, which breach by its
nature cannot be cured prior to the Closing;
D. by any of the Sellers on the one hand or Purchaser
or Champion on the other hand if there shall have been a
material breach of any of the covenants or agreements set
forth in this Agreement on the part of the other, which
breach shall not have been cured within ten Business Days
following receipt by the breaching party or parties of
written notice of such breach from the other party.
10.2 Effect of Termination. In the event of
termination of this Agreement as provided in Section 10.1, this
Agreement shall forthwith become void and have no effect except
that Sections 10.2, 10.3, 12.8, 12.10, 12.12 and 12.13 shall
expressly survive any termination of this Agreement.
Notwithstanding the foregoing, the termination of this Agreement
pursuant to any provision hereof shall not relieve any party of
any liability for a breach of any representation or warranty, or
nonperformance of any covenant or obligation hereunder, and any
such termination shall not be deemed to be a waiver of any
available remedy for any such breach or nonperformance.
10.3 Amendment. This Agreement may not be amended
except by an instrument in writing signed on behalf of Purchaser
and Sellers, subject to Section 12.16 hereof.
ARTICLE XI - DEFINITIONS AND ACCOUNTING TERMS
11.1 Certain Definitions. Where used herein or in any
amendment, exhibit or disclosure schedule hereto, the following
capitalized terms shall have the following meanings,
respectively:
"Affiliate" shall mean, with respect to any Person, any
other Person controlling, controlled by or under common control
with, directly or indirectly through one or more intermediaries,
such Person.
"Agreement" shall mean this Stock and Asset Purchase
Agreement, including the exhibits and schedules hereto, as the
same may be amended from time to time as permitted herein.
"Ancillary Documents" shall mean the Employment
Agreements, the Non-Compete Agreements, Release Agreements and
all other agreements, instruments and other documents to be
executed and delivered by any of the Sellers in connection with
the transactions contemplated in this Agreement, whether
heretofore or hereafter executed and delivered by any of them.
"Best knowledge of Sellers" shall mean such knowledge
as each of the Sellers knows, should know or should have known
after due inquiry as to the matter in question (including due
inquiry of the other Sellers and of officers and employees of
both of the Companies) and "best knowledge of Seller
Stockholders" shall mean such knowledge as each of the Seller
Stockholders knows, should know, or should have known after due
inquiry as to the matter in question (including due inquiry of
the other Sellers and of officers and employees of both of the
Companies).
"Business Day" shall mean a day that is not a Saturday
or Sunday on which banks are generally open for business in
Auburn Hills, Michigan.
"Charter" shall mean the certificate of incorporation
or articles of incorporation pursuant to which a corporation was
formed or is subsisting or comparable instruments in the case of
other Persons.
"Closing" shall mean the consummation of the Stock
Purchase Transaction and the Asset Acquisition pursuant to the
terms and conditions of this Agreement.
"Closing Date" shall mean the date on which the Closing
occurs, which shall be a Business Day designated by Purchaser but
not sooner than five Business Days after the satisfaction or
waiver of the last to occur of the conditions specified in
Article VIII hereof and not later than July 30, 1996, unless
another date and/or time is agreed to in writing by Purchaser and
Sellers, in which case it shall be such other date and/or time.
"Encumbrance" shall mean any pledge, lien, security
interest, encumbrance, mortgage, claim, obligation, charge,
option, equity interest, proxy, voting agreement or trust,
demand, lease, sublease, tenancy, license, easement, other rights
of occupancy or use by another or any other interest whatsoever.
"Material Adverse Effect" means, with respect to a
Seller Stockholder or a Company or Purchaser, as the case may be,
a material adverse effect on the condition (financial or
otherwise), properties, assets, liabilities, business, operations
or prospects of such entity taken as a whole, or on the ability
of such party to perform its obligations hereunder or to
consummate the transactions contemplated hereby.
"Person" shall mean any entity, whether an individual,
trustee, corporation, partnership, joint stock company, trust,
unincorporated organization, business association or firm, joint
venture, a government or any agency, instrumentality or political
subdivision thereof, or otherwise.
"Post Closing Bonus" shall mean a bonus declared by
Legend (but not to be paid until after the determination of
Audited Equity in accordance with Article III hereof) to the
Seller Stockholders in their capacity as employees and/or
officers of Legend consistent with its past practice in an amount
not greater than the Audited Equity Difference. "Audited Equity
Difference" shall mean (a) if Audited Equity on the Closing Date
is greater than $5,700,000, the difference between Audited Equity
on the Closing Date and $5,700,000, and (b) if Audited Equity on
the Closing Date is equal to or less than $5,700,000, Zero ($0)
Dollars.
"Subsidiary" when used (a) with respect to a Company
means any corporation of which the Company directly or indirectly
owns or controls at least a majority of the securities having by
their terms ordinary voting power to elect a majority of the
board of directors with respect to such corporation and (b) with
respect to any other Person means any corporation of which such
Person directly or indirectly owns or controls at least a
majority of the securities having by their terms ordinary voting
power to elect a majority of the board of directors with respect
to such corporation.
11.2 Accounting Terms. All accounting terms, not
otherwise defined herein shall be construed in accordance with
GAAP.
11.3 Interpretation. Where the context herein
requires, the singular number shall be deemed to include the
plural, and vice versa. References in this Agreement to
articles, sections, paragraphs and clauses are to articles,
sections, paragraphs and clauses of this Agreement unless
otherwise indicated. Use of the terms "herein," "hereof,"
"hereby" and "hereunder" shall be deemed to be references to this
Agreement and not to the article, section, paragraph or clause in
which such term appears unless the context clearly indicates
otherwise.
ARTICLE XII - MISCELLANEOUS
12.1 Taxes. Sellers shall duly and timely file all
federal, state and other Tax returns required to be filed by any
of them with respect to the operation of the Real Estate Business
or the Business prior to the Closing (and, in the case of the
Business, were required to be filed prior to the Closing (without
regard to any extensions in connection therewith)) and shall pay
and discharge, and shall indemnify and hold Purchaser harmless
with respect to, all federal, state and local income, franchise
and similar Tax liabilities for Taxes (but excluding herefrom the
federal income tax liability referenced in Section 9.4(d) hereof)
based on income (including specifically, but not limited to, any
such Taxes of Realty as a result of an invalid or termination of
election to be treated as an S Corporation under the Code or the
laws of the S State or "built in gains" or similar Taxes arising
as a result of the fact that the Company did not elect to be
treated as an S Corporation until the First S Year) arising out
of (a) the operation of the Real Estate Business and (b) the
transactions provided for as contemplated by this Agreement. The
indemnity obligations of this Section shall not be subject to any
limitations contained in this Agreement. Any such indemnity
obligation relating to personal Tax liability of any Selling
Stockholder shall be borne solely by such Selling Stockholder.
12.2 Name of Company. Immediately after the Closing,
Realty shall change its name to another name not confusingly
similar to its present name.
12.3 Broker. Each of the Sellers represent and
warrant to Purchaser and Champion that none of the Sellers has
dealt with any broker, advisor (other than lawyers, environmental
consultants, and certified public accountants acting in their
respective professional capacity as lawyers, environmental
consultants, and certified public accountants) or finder in
connection with the transactions (or any part of the
transactions) contemplated hereby. Each of the Sellers (including
in the foregoing Legend until the Closing occurs and excluding
Legend therefrom after the Closing occurs) hereby each agree to
indemnify and hold harmless Purchaser and Champion and Legend
(but, in the case of Legend, only after the Closing occurs) from
and against all liabilities (including but not limited to
reasonable attorneys' fees), incurred by Purchaser or Champion or
Legend (but, in the case of Legend only after the Closing occurs)
by reason of any claims or suits by any person or persons for
brokerage commission, finder's fees, advisor's fees, or other
compensation on account of the transactions contemplated herein
which claims or suits are based, in whole or in part, on actions
or inactions, or asserted actions or inactions, of any or all of
the Sellers.
Each of Champion and Purchaser represent and warrant to each
Seller that neither of them has dealt with any broker, advisor
(other than lawyers, environmental consultants, and certified
public accountants acting in their respective professional
capacity as lawyers, environmental consultants, and certified
public accountants) or finder in connection with the transactions
(or any part of the transactions) contemplated hereby. Each of
Purchaser and Champion hereby each agree to indemnify and hold
harmless each of the Sellers (but excluding from the foregoing
Legend after the Closing occurs) from and against all liabilities
(including but not limited to reasonable attorneys' fees),
incurred by any Seller (but, in the case of Legend only until the
Closing occurs) by reason of any claims or suits by any person or
persons for brokerage commission, advisors fees, finder's fees or
other compensation on account of the transactions contemplated
herein which claims or suits are based, in whole or in part, on
actions or inactions, or asserted actions or inactions, of either
or both Purchaser and Champion.
The indemnity obligations of this Section shall not be
subject to any limitations contained herein.
12.4 Entire Agreement. This Agreement and the attached
exhibits, schedules and other documents delivered hereunder
contain the entire agreement between the parties with respect to
the matters described herein and are a completely integrated and
exclusive statement as to the terms thereof and supersede all
previous agreements.
12.5 Notices. All notices, requests, demands and other
communication which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been
duly given if personally delivered, forwarded by overnight air
express and receipted for by the recipient or an agent of the
recipient or mailed by registered or certified United States
mail, postage prepaid and return receipt requested, or sent by
facsimile transmission, to the following addresses (or to such
other address of a party as shall have been specified to the
other parties to this Agreement by notice):
If to a Seller:
Mr. Wayne Sims ("Sellers' Notice Agent")
410 Henderson Road
P.O. Box 699
Boaz, Alabama 35957
Facsimile No. (205) 593-0284
with a copy to:
Charles R. Hare, Esq.
Gullahorn & Hare
310 West Main
P.O. Box 1669
Albertville, Alabama 35950
Facsimile No. (205) 878-1965
If to Purchaser or to Champion:
2701 University Drive
Suite 320
Auburn Hills, Michigan 48326-2566
Facsimile No. (810) 340-9345
Attention: President and Chief Executive Officer
with a copy to:
John J. Collins, Jr., Esq.
Miller, Canfield, Paddock and Stone, P.L.C.
Post Office Box 2014
Bloomfield Hills, Michigan 48303-2014
Facsimile No. (810) 258-3036
All notices to a Seller Stockholder shall be deemed
delivered personally to such Seller Stockholder if it is
delivered personally to the Sellers' Notice Agent.
12.6 Headings. The Background section and all Article,
Section and paragraph headings contained herein are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.7 Assignment. No Party shall assign, transfer,
pledge, hypothecate or encumber this Agreement, or any interest
herein or hereunder, without the prior written consent of the
other parties, except that Purchaser may assign any or all of its
rights hereunder to any Affiliate without the consent of any
other party.
12.8 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
12.9 Parties in Interest. This Agreement shall inure
to the benefit of and be binding upon the parties named herein
and their respective successors and permitted assigns and to no
other Person whatsoever (except that Article IX shall inure to
the benefit of the indemnified parties), provided that any
assignment of this Agreement or the rights hereunder by any party
hereto except as permitted hereunder without the written consent
of the other shall be void.
12.10 Waiver. The failure of any party at any time
to require performance by any other party of any provision of
this Agreement shall not be deemed a continuing waiver of that
provision or a waiver of any other provision of this Agreement
and shall in no way affect the full right to require such
performance from the other party at any time thereafter.
12.11 Payment of Expenses. Except as otherwise
specifically set forth herein, each of the parties shall pay all
of the costs which each incurs incident to the preparation,
execution and delivery of this Agreement and the performance of
the obligations hereunder, including, without limitation, the
fees and disbursements of counsel, accountants and consultants,
whether or not the transactions contemplated by this Agreement
shall be consummated, except that the Seller Stockholders shall
pay (or reimburse Legend for) all the fees and expenses of
counsel and certified public accountants to Legend incurred in
connection herewith or otherwise prior to and on the Closing Date
and all other fees and expenses of Legend in connection with this
Agreement. Purchaser shall pay the filing fee required under the
H/S/R Act and the Real Estate Transfer Taxes. In addition
Purchaser shall pay for the surveys of the Total Real Estate, and
the title insurance and commitments in connection therewith.
12.12 Severability. If any term or provision of
this Agreement, or the application thereof to any circumstances,
shall, to any extent and for any reason, be held invalid or
unenforceable, the remainder of this Agreement, or the
application of such term or provision to circumstances other than
those to which it is held to be invalid or unenforceable, shall
not be affected thereby and shall be construed as if such invalid
or unenforceable term or provision had never been contained
herein, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
12.13 Confidentiality. Prior to the Closing,
neither party to this Agreement shall directly or indirectly make
or cause to be made any public announcement or issue any public
notice in any form with respect to this Agreement or the
transactions contemplated hereby, without the consent of the
other party except if in the opinion of either party's counsel it
is required by law to make such disclosure. If the Closing of
the transactions contemplated hereby does not occur for any
reason, Purchaser shall return to the Sellers all reports,
documents, work papers and other materials obtained from the
Sellers (and all copies of summaries and extracts thereof) and
will keep the same confidential and not disclose their contents
to anyone but its attorneys, accountants and executive officers.
12.14 Governing Law and Choice of Forum. This
Agreement shall be governed by and construed under and pursuant
to the internal laws of the State of Michigan (other than
principles of conflicts of laws). Any and all actions concerning
any dispute arising under this Agreement shall be filed and
maintained only in a state or federal court sitting in the State
of Michigan. THE PURCHASER AND EACH SELLER STOCKHOLDER HEREBY
SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING
IN THE STATE OF MICHIGAN AND EACH WAIVES ANY RIGHT TO TRIAL BY
JURY AND ANY OBJECTION TO VENUE BASED ON FORUM NON CONVENIENS.
12.15 Action by Seller. In each place in this
Agreement where consent or agreement of the Seller (including,
without limitation, any amendment or waiver to this Agreement) is
required or permitted, such consent or agreement (including,
without limitation, any amendment or waiver to this Agreement)
shall be deemed for all purposes to be effective if Realty,
Legend and the Seller Stockholders owning a majority of the
issued and outstanding Seller Common Stock as of the date the
consent or agreement is to be effective (or if to be effective
after the Closing Date, as of the Closing Date) shall so consent
and/or agree.
12.16 Guaranty. Champion hereby guarantees the
performance by Purchaser of its obligations contained herein.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
Signed and Delivered
in the Presence of:
HLI ACQUISITION CORP.
By
Its
(PURCHASER)
CHAMPION ENTERPRISES, INC.
By
Its
("CHAMPION")
WAYNE SIMS
(SELLER STOCKHOLDER)
DON BROWN
(SELLER STOCKHOLDER)
KEITH BENNETT
(SELLER STOCKHOLDER)
J.R. BENNETT
(SELLER STOCKHOLDER)
THOMAS KEVIN SIMS
(SELLER STOCKHOLDER)
KAY PALL
(SELLER STOCKHOLDER)
DEBORAH B. HARRIS HUMPHRIES
(SELLER STOCKHOLDER)
LEGEND REALTY, INC.
By
Its
("REALTY")
HOMES OF LEGEND, INC.
By
Its
("LEGEND")
Investor Contacts: Press Contact:
Jacqueline Dout Elizabeth Higashi Jeff Caponigro
Exec. Vice President Investor Relations Media Relations
&CFO
(810) 340-9090 (847) 304-1655 (810) 355-3200
CHAMPION ENTERPRISES, INC. ANNOUNCES
2-FOR-1 STOCK SPLIT, ACQUISITION OF
HOMES OF LEGEND, INC. AND
ANNUAL MEETING HIGHLIGHTS
Auburn Hills, Mich., April 29, 1996 -- Champion Enterprises,
Inc. (NYSE:CHB) announced today that the Board of Directors has
approved a 2-for-1 stock split effective May 31, 1996 for
shareholders of record on May 16, 1996. Following the split, the
company will have approximately 30.8 million shares outstanding
and 33.2 million weighted average shares for computations of
earnings per share amounts. The announcement was made today by
Walter R. Young, Jr., chairman, president and chief executive
officer, at Champion Enterprises' annual meeting of shareholders.
"The company's Common Stock was last split in May 1995. The
1996 2-for-1 split underscores our company's continued record of
outstanding earnings growth and market penetration in both the
manufactured housing and mid-size bus industries. Since our
market capitalization now exceeds $500 million and continues to
grow strong, along with our larger base of institutional
investors, the split will help broaden our shareholder base as
well as increase the liquidity of our shares," Young said.
Homes of Legend Acquisition Completed
At today's annual meeting Young also announced that on April
26, 1996 the company officially completed its acquisition of
Alabama-based Homes of Legend, Inc. and Legend Realty, Inc. (a
related party). On March 29, 1996 Grand Manor, Inc., located in
Georgia, was acquired. The cost of these transactions was
approximately $33 million. The cash portion of the transaction
value paid in 1996 was approximately $18.5 million. The balance,
which is primarily contingent upon future performance, will be
paid over the next three years.
Young commented, "These acquisitions will strengthen
Champion's presence in key Southeastern states, such as Alabama,
Georgia, and Florida, which are among the fastest growing for
manufactured housing. On a pro forma basis, these acquisitions
would have added $91 million to net sales and $6.2 million to
earnings before interest and taxes in 1995. Their 4,500 homes
sold last year combined with our 29,398 homes sold in 1995 make
our pro forma U.S. market share 9.8 percent.
"Homes of Legend and Grand Manor add four manufactured
housing plants to Champion's 23. In addition, we expect the
three previously announced new plants in Texas, Alabama and
Indiana to be in operation by mid-year, and will add another
plant to Grand Manor's capacity in Thomasville, Georgia. Thus,
we will have a total of 31 manufacturing plants operating by year
end 1996, an increase of 35 percent," added Young.
1996 Outlook Strong
Reiterating the company's positive outlook for 1996, Young
said, "We are off to an excellent start with our record first
quarter results, which increased 27 percent to 47 cents per
share. Assuming the economy stays strong, we expect our recent
acquisitions will add 14 cents to 1996 earnings per share, which
combined with internal growth should lead to another outstanding
year for Champion.
"The popularity of manufactured homes as a cost effective
and high quality alternative to site-built homes continues to
grow," Young added. "Manufactured homes now represent 34 percent
of all new single family homes sold, up from 25 percent in 1991.
We currently expect 1996 industry shipments to increase
approximately 6-8 percent over the previous year.
"With our strong cash flow, we expect to have virtually no
debt by year end and continue to seek value-adding acquisitions
with the more than $100 million of investment capacity still
available. We are committed to our goal of increasing earnings
per share at a compound annual growth rate of 20 percent over the
next three years. Enhancing shareholder value is our number one
priority," Young concluded.
Other Annual Meeting Highlights
At today's annual meeting Champion Enterprises' shareholders
re-elected its Board of Directors: Walter R. Young, Jr., Robert
W. Anestis, Selwyn Isakow, George R. Mrkonic, Johnson S.
Savary and Carl L. Valdiserri. In addition, they approved an
amendment to the company's Restated Articles of Incorporation to
increase the number of authorized shares of Common Stock to 75
million from 30 million and approved amendments to the 1995 Stock
Option and Incentive Plan.
Champion Enterprises, Inc., headquartered in Auburn Hills,
Mich., is one of the fastest growing companies in the
manufactured housing industry and is number two in U.S. market
share. Since 1992 Champion's revenues have more than tripled,
while net income has increased more than 11 times. For the year
ended December 30, 1995, sales were $798 million and earnings per
share were $2.02, up 53 percent compared with the prior year's
fully taxed earnings from continuing operations. In 1995
manufactured housing accounted for about 93 percent of company
revenues, and its principal housing subsidiaries are Champion
Home Builders Co., Moduline International, Inc., Dutch Housing,
Inc., Chandeleur Homes, Inc., Crest Ridge Homes, Inc., Grand
Manor, Inc. and Homes of Legend, Inc. Its commercial vehicles
business, Champion Motor Coach, Inc., is the nation's second
largest producer of mid-size buses.
