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EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
SCHULER HOMES, INC.,
a Delaware corporation,
APOLLO REAL ESTATE INVESTMENT FUND, L.P.,
a Delaware limited partnership,
BLACKACRE WPH, LLC,
a Delaware limited liability company,
HIGHRIDGE PACIFIC HOUSING INVESTORS, L.P.,
a California limited partnership,
AP WP PARTNERS, L.P.,
a Delaware limited partnership,
AP WESTERN GP CORPORATION,
a Delaware corporation,
AP LHI, INC.,
a California corporation
and
LAMCO HOUSING, INC.,
a California corporation
DATED AS OF SEPTEMBER 12, 2000
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RECITALS ...........................................................................................1
ARTICLE I DEFINITIONS................................................................................2
1.1 Certain Defined Terms..........................................................................2
1.2 Other Defined Terms............................................................................8
ARTICLE II REORGANIZATION.............................................................................8
2.1 Formation of Newco; Effective Time.............................................................8
2.2 Merger A.......................................................................................9
2.3 Effect of Merger A on Securities of Schuler, Merger Sub and Newco...........................10
2.4 Dividends, Etc................................................................................10
2.5 WP Partners' and WP LLC's Contribution........................................................11
2.6 Merger B......................................................................................12
ARTICLE III CLOSING...................................................................................12
3.1 Closing.......................................................................................12
3.2 WP Partners' Obligations at Closing...........................................................12
3.3 Schuler Obligations at Closing................................................................13
3.4 Newco Obligations at Closing..................................................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE WP PARTNERS.........................................14
4.1 WP Partners and WP Parents....................................................................14
4.2 Subsidiaries..................................................................................15
4.3 Authorization.................................................................................16
4.4 Non-Contravention.............................................................................17
4.5 Financial Statements; No Undisclosed Liabilities..............................................17
4.6 Absence of Certain Changes....................................................................18
4.7 Title to Assets...............................................................................18
4.8 Real Property.................................................................................19
4.9 Intellectual Property.........................................................................21
4.10 Litigation....................................................................................21
4.11 Employee Benefit Matters......................................................................22
4.12 Taxes.........................................................................................24
4.13 Compliance With Law...........................................................................25
4.14 Contracts and Commitments.....................................................................26
4.15 Permits and Other Operating Rights............................................................26
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4.16 Labor Matters.................................................................................27
4.17 Environmental Matters.........................................................................27
4.18 Warranty Obligations..........................................................................28
4.19 Homeowner Associations........................................................................29
4.20 Assets Necessary to the WP Business...........................................................29
4.21 Accuracy of Information Furnished.............................................................29
4.22 No Brokers....................................................................................29
4.23 Disclaimer....................................................................................30
4.24 LLC...........................................................................................30
4.25 Non-Controlled WP Entities....................................................................31
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SCHULER.................................................31
5.1 Schuler Organization..........................................................................31
5.2 Subsidiaries..................................................................................31
5.3 Authorization.................................................................................32
5.4 Non-Contravention.............................................................................33
5.5 SEC Filings; Financial Statements; No Undisclosed Liabilities.................................33
5.6 Absence of Certain Changes....................................................................34
5.7 Title to Assets...............................................................................35
5.8 Real Property.................................................................................35
5.9 Intellectual Property.........................................................................37
5.10 Litigation....................................................................................38
5.11 Employee Benefit Matters......................................................................38
5.12 Taxes.........................................................................................40
5.13 Compliance With Law...........................................................................42
5.14 Contracts and Commitments.....................................................................42
5.15 Permits and Other Operating Rights............................................................43
5.16 Labor Matters.................................................................................43
5.17 Environmental Matters.........................................................................43
5.18 Warranty Obligations..........................................................................44
5.19 Homeowner Associations........................................................................45
5.20 Assets Necessary to the Schuler Business......................................................45
5.21 Accuracy of Information Furnished.............................................................45
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5.22 No Brokers....................................................................................46
5.23 Disclaimer....................................................................................46
5.24 Non-Controlled Schuler Entities...............................................................46
ARTICLE VI CERTAIN COVENANTS.........................................................................46
6.1 Access to Information.........................................................................46
6.2 Conduct of Businesses Pending Closing.........................................................47
6.3 No Solicitation of Transactions...............................................................50
6.4 Authorizations................................................................................50
6.5 Contribution to WP LLC........................................................................51
6.6 Acknowledgements..............................................................................51
6.7 Public Announcements..........................................................................52
6.8 Registration Statement........................................................................52
6.9 Schuler Stockholder Meeting...................................................................53
6.10 Listing Application...........................................................................53
6.11 Affiliate Letters.............................................................................53
6.12 Non-Disclosure of Proprietary Data............................................................53
6.13 Section 341(f) Consent........................................................................53
6.14 Newco Stock Option Plan.......................................................................54
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF SCHULER..................................................54
7.1 Accuracy of Representations and Warranties....................................................54
7.2 Performance...................................................................................54
7.3 HSR Act.......................................................................................54
7.4 Absence of Governmental Orders................................................................54
7.5 Officers' Certificates........................................................................54
7.6 Certain Agreements............................................................................55
7.7 Stockholder Approval..........................................................................55
7.8 Form S-4......................................................................................55
7.9 Listing.......................................................................................55
7.10 WP Required Consents..........................................................................55
7.11 FIRPTA Matters................................................................................55
7.12 Employment Agreement..........................................................................55
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ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF THE WP PARTNERS..........................................55
8.1 Accuracy of Representations and Warranties....................................................55
8.2 Performance...................................................................................56
8.3 HSR Act.......................................................................................56
8.4 Absence of Governmental Orders................................................................56
8.5 Officers' Certificates........................................................................56
8.6 Certain Agreements............................................................................56
8.7 Stockholder Approval..........................................................................56
8.8 Form S-4......................................................................................56
8.9 Listing.......................................................................................56
8.10 Schuler Required Consents.....................................................................56
8.11 Employment Agreement..........................................................................56
ARTICLE IX INDEMNIFICATION...........................................................................56
9.1 Survival of Representations and Warranties....................................................56
9.2 Indemnification by the WP Partners............................................................57
9.3 Indemnification by Schuler....................................................................57
9.4 General Indemnification Provisions............................................................57
9.5 Limitations on Indemnification................................................................59
9.6 Stock Indemnification Payments................................................................59
ARTICLE X [INTENTIONALLY OMITTED]...................................................................60
ARTICLE XI TERMINATION...............................................................................60
11.1 Termination...................................................................................60
11.2 Written Notice................................................................................61
11.3 Effect of Termination.........................................................................61
11.4 Waiver........................................................................................61
ARTICLE XII GENERAL PROVISIONS........................................................................61
12.1 Expenses, Taxes, Etc..........................................................................61
12.2 Notices.......................................................................................62
12.3 Disclosure Schedules..........................................................................63
12.4 Interpretation................................................................................63
12.5 Severability..................................................................................64
12.6 Assignment....................................................................................64
12.7 No Third-Party Beneficiaries..................................................................64
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12.8 Amendment.....................................................................................64
12.9 No Other Remedies.............................................................................64
12.10 Further Assurances............................................................................64
12.11 Mutual Drafting...............................................................................65
12.12 Governing Law.................................................................................65
12.13 Dispute Resolution............................................................................65
12.14 Consent to Jurisdiction; Waivers..............................................................66
12.15 Waiver of Jury Trial..........................................................................66
12.16 Counterparts..................................................................................66
12.17 Entire Agreement..............................................................................66
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EXHIBITS:
EXHIBIT A ..................................................................Non-Competition Agreements
EXHIBIT B ...............................................................Registration Rights Agreement
EXHIBIT C ......................................................................Stockholders Agreement
EXHIBIT D .................................................................Charter and Bylaws of Newco
EXHIBIT E ............................................................Charter and Bylaws of Merger Sub
EXHIBIT F .........................................................................Merger A Agreement
EXHIBIT G ...................................................................Schuler Affiliate Letter
EXHIBIT H ...........................................................................WP LLC Assignment
EXHIBIT I ........................Opinion of Morgan, Lewis & Bockius LLP and other WP Partners counsel
EXHIBIT J ...............................................Opinion of Orrick, Herrington & Sutcliffe LLP
EXHIBIT K .........................................................................WP Affiliate Letter
EXHIBIT L ..........................................................James Schuler Employment Agreement
EXHIBIT M ...............................................................Form of Indemnity Calculation
SCHEDULES:
2.1(b) .............................................................Directors and Officers of Newco
12.4(a) ............................................WP Partnership and WP Entities Knowledge Persons
12.4(b) ...................................................................Schuler Knowledge Persons
WP DISCLOSURE SCHEDULE:
SECTION 1.1 ..........................................................................Financing Consents
SECTION 4.1 ..................................................................WP Partners and WP Parents
SECTION 4.2 ................................................................................Subsidiaries
SECTION 4.3(c) ...............................................................................Authorization
SECTION 4.4 ...........................................................................Non-Contravention
SECTION 4.5(a) ........................................................................Financial Statements
SECTION 4.6 ..................................................................Absence of Certain Changes
SECTION 4.7 .............................................................................Title to Assets
SECTION 4.8(a) .......................................................................Leased Real Property
SECTION 4.8(b) .........................................................................Owned Real Property
SECTION 4.8(c) ..............................................................................Land Contracts
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SECTION 4.8(d) .........................................................Other Real Property Representations
SECTION 4.9 .......................................................................Intellectual Property
SECTION 4.10 ..................................................................................Litigation
SECTION 4.11 ....................................................................Employee Benefit Matters
SECTION 4.12 .......................................................................................Taxes
SECTION 4.14 ...................................................................Contracts and Commitments
SECTION 4.15 ..........................................................Permits and Other Operating Rights
SECTION 4.16 ...............................................................................Labor Matters
SECTION 4.17 .......................................................................Environmental Matters
SECTION 4.18 ........................................................................Warranty Obligations
SECTION 4.19 ......................................................................Homeowner Associations
SECTION 4.20 .........................................................Assets Necessary to the WP Business
SECTION 4.25 ..................................................................Non-Controlled WP Entities
SECTION 6.2 .........................................................Conduct of Business Pending Closing
SCHULER DISCLOSURE SCHEDULE:
SECTION 1.1 ..........................................................................Financing Consents
SECTION 5.2 ................................................................................Subsidiaries
SECTION 5.3(b) ...............................................................................Authorization
SECTION 5.4 ...........................................................................Non-Contravention
SECTION 5.6 ..................................................................Absence of Certain Changes
SECTION 5.7 .............................................................................Title to Assets
SECTION 5.8(a) ........................................................................Leased Real Property
SECTION 5.8(b) .........................................................................Owned Real Property
SECTION 5.8(c) ..............................................................................Land Contracts
SECTION 5.8(d) .........................................................Other Real Property Representations
SECTION 5.9 .......................................................................Intellectual Property
SECTION 5.10 ..................................................................................Litigation
SECTION 5.11 ....................................................................Employee Benefit Matters
SECTION 5.12 .......................................................................................Taxes
SECTION 5.14 ...................................................................Contracts and Commitments
SECTION 5.15 ..........................................................Permits and Other Operating Rights
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SECTION 5.16 ...............................................................................Labor Matters
SECTION 5.17 .......................................................................Environmental Matters
SECTION 5.18 ........................................................................Warranty Obligations
SECTION 5.19 ......................................................................Homeowner Associations
SECTION 5.20 ....................................................Assets Necessary to the Schuler Business
SECTION 5.24 .............................................................Non-Controlled Schuler Entities
SECTION 6.2 .........................................................Conduct of Business Pending Closing
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of
September 12, 2000, by and among Schuler Homes, Inc., a Delaware corporation
("Schuler"), Apollo Real Estate Investment Fund, L.P., a Delaware limited
partnership ("Apollo"), Blackacre WPH, LLC, a Delaware limited liability
company ("Blackacre"), Highridge Pacific Housing Investors, L.P., a
California limited partnership ("Highridge"), AP WP Partners, L.P., a
Delaware limited partnership ("APWP"), AP Western GP Corporation, a Delaware
corporation ("AP Western"), AP LHI, Inc., a California corporation ("APLHI"),
and Lamco Housing, Inc., a California corporation ("Lamco" and, together with
Apollo, Blackacre, Highridge, APWP, AP Western and APLHI, the "WP Partners").
RECITALS
A. The WP Partners hold all of the partnership interests in
Western Pacific Housing Development Limited Partnership, a California limited
partnership ("WPHD"), and Western Pacific Development II Limited Partnership,
a California limited partnership ("WPHD II"), and all of the membership
interests in WPH-Porter, LLC, a Delaware limited liability company ("WPHL"
and, together with WPHD and WPHD II, the "WP Parents"; the respective
partnership and membership interests in the WP Parents are referred to herein
as the "WP Interests").
B. The WP Partners and the Board of Directors of Schuler
have approved, and deem it advisable and in the best interests of their
respective companies, stockholders, partners and members to consummate the
reorganization (the "Reorganization") provided for herein, pursuant to which,
among other things, Schuler Holdings, Inc. ("Newco"), will acquire (i) all of
the common stock of Schuler through the merger of Merger Sub (as defined
below) with Schuler and (ii) all of the WP Interests through the contribution
of the WP Interests from the WP Partners to WPH-Schuler, LLC, a Delaware
limited liability company to be wholly owned by certain of the WP Partners
("WP LLC"), and the contribution of the WP Interests from WP LLC to Newco in
exchange for shares of Newco.
C. For federal income tax purposes, it is intended that the
transfers by WP LLC pursuant to the Reorganization qualify as an exchange
under the provisions of Section 351 of the Code (as defined below) and Merger
A and Merger B (both as defined below), as applicable, qualify as a
"reorganization" within the meaning of Section 368(a) of the Code.
D. In order to induce the WP Partners to enter into this
Agreement, The James and Patricia Schuler Foundation, a Hawaii non-profit
corporation (the "Foundation"), and James K. Schuler, as sole trustee for the
James K. Schuler Revocable Living Trust and the James K. Schuler 1998
Qualified Annuity Trust (collectively with the Foundation, "James Schuler"),
is concurrently herewith entering into a Voting Agreement with Apollo,
Blackacre and Highridge pursuant to which James Schuler will agree to vote
his Schuler shares in favor of the Reorganization at the meeting of the
stockholders of Schuler held in connection with the Reorganization (the
"Schuler Stockholder Meeting").
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E. In order to induce the parties hereto to enter into this
Agreement, the WP Partners and Schuler have provided for the execution and
delivery of certain ancillary agreements, including Non-Competition
Agreements, and a Stockholders Agreement and Registration Rights Agreement
providing for certain voting and other restrictions with respect to the
shares of Newco Common Stock (as defined below) to be beneficially owned by
James Schuler, WP LLC and the WP Partners.
F. The WP Partners and Schuler desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing, and of
the representations, warranties, covenants and agreements contained herein,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such definitions to be
equally applicable to both the singular and plural forms of the terms
defined):
"ACTION" means any claim, action, suit or arbitration, or
any other proceeding, in each instance by or before any Governmental
Authority or any nongovernmental arbitration, mediation or other nonjudicial
dispute resolution body.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations under the Exchange Act.
"AGREEMENT" means this Agreement and Plan of
Reorganization, including all schedules and exhibits hereto, as it may be
further amended from time to time as herein provided.
"AGREEMENT DATE" means September 12, 2000.
"ANCILLARY AGREEMENTS" means, collectively, the
Non-Competition Agreements, the Stockholders Agreement, the Registration
Rights Agreement, the WP LLC Assignment and the GP Assignments.
"APLHI" has the meaning specified in the Recitals.
"ANTITRUST AUTHORITIES" has the meaning specified in
Section 6.4(c).
"APOLLO" has the meaning specified in the Recitals.
"AP WESTERN" has the meaning specified in the Recitals.
"APWP" has the meaning specified in the Recitals.
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"BANKERS TRUST" means Bankers Trust Company, a New York
banking corporation.
"BLACKACRE" has the meaning specified in the Recitals.
"BOOKS AND RECORDS" means all of the following which
pertain to the conduct of the WP Business or Schuler Business, as applicable:
books, records, manuals and other materials, accounting books and records,
continuing property records for property, plant and equipment, files,
computer tapes, disks, other storage media and records, advertising matter,
catalogues, price lists, correspondence, mailing lists, lists of customers
and suppliers, distribution lists, photographs, production data, sales and
promotional materials and records, purchasing materials and records,
personnel records, credit records, manufacturing and quality control records
and procedures, blueprints, research and development files, data and
laboratory books, patent and trademark files and disclosures, media materials
and plates, sales order files, litigation files, deeds, easements and other
instruments relating to the Real Property, any Tax Returns filed by the WP
Entities, including all work papers and calculations in support of such Tax
Returns, and any comparable information with respect to predecessors of the
WP Entities to the extent available.
"BYLAWS" means a corporation's bylaws, code of regulations
or equivalent document.
"CHARTER" means a company's certificate of formation,
operating agreement, partnership agreement, articles of association, articles
of incorporation, certificate of incorporation, or equivalent organizational
documents.
"CLOSING" means the closing of the transactions
contemplated by this Agreement as specified in Section 3.1.
"CLOSING DATE" has the meaning specified in Section 3.1.
"CODE" means the United States Internal Revenue Code of
1986, as amended, and any successor statute thereto, and the rules and
regulations of the IRS thereunder.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality
Agreement, dated May 1, 2000, between Schuler and WPHD.
"CONTRIBUTION" has the meaning specified in Section 2.5.
"EFFECTIVE TIME" has the meaning specified in Section 2.1.
"ENCUMBRANCE" means any interest (including any security
interest), pledge, mortgage, lien, charge, adverse claim or other right of
third Persons.
"ENVIRONMENTAL LAWS" means all laws, regulations,
ordinances, codes, policies, Governmental Orders and consent decrees
currently in effect, and any judicial and administrative interpretations
thereof, of Governmental Authorities, or any common law doctrines, in effect
from time to time relating to pollution or protection of the environment and
natural resources,
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including those relating to emissions, discharges, Releases or threatened
Releases of Hazardous Material into the environment (including ambient air,
surface water, groundwater or land), or otherwise relating to the
manufacture, processing, distribution, use, possession, treatment, storage,
disposal, transport or handling of Hazardous Material.
"ENVIRONMENTAL PERMITS" means all permits, approvals,
identification numbers, licenses and other authorizations required under any
applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute thereto, and the rules and
regulations thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, and any successor statute thereto, and the rules and regulations
of the SEC thereunder.
"FINANCIAL STATEMENTS" has the meaning specified in
Section 4.5(a).
"FORM S-4" has the meaning specified in Section 6.8.
"GAAP" means U.S. generally accepted accounting principles,
unless expressly described otherwise.
"GOVERNMENTAL AUTHORITY" means any international, national,
Federal, state, municipal or local government, governmental authority,
regulatory or administrative agency, governmental commission, department,
board, bureau, agency or instrumentality, court, tribunal, arbitrator or
arbitral body.
"GOVERNMENTAL ORDER" means any order, writ, rule, judgment,
injunction, decree, stipulation, determination or award entered by or with
any Governmental Authority.
"GP ASSIGNMENTS" has the meaning specified in
Section 3.2(d).
"HAZARDOUS MATERIAL" means any substance, pollutant,
material or waste which is regulated or shall become regulated under any
applicable Environmental Law, including any such materials regulated as
hazardous or toxic substances or material, and including without limitation
any crude oil or fraction thereof and petroleum products.
"HIGHRIDGE" has the meaning specified in the Recitals.
"HSR ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, Section 7A of the Clayton Act,
15 U.S.C. Section 18A, and the regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"LAMCO" has the meaning specified in the Recitals.
"LIABILITIES" means any and all debts, liabilities and
obligations of any nature whatsoever, whether accrued or fixed, absolute or
contingent or mature or unmatured.
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"MATERIAL ADVERSE EFFECT" means any event(s) with respect
to, change(s) in, or effect(s) on, a Person which, individually or in the
aggregate, is reasonably likely to be adverse to the business, results of
operations or financial condition of such Person in a manner that is material
to such Person.
"MERGER A" has the meaning specified in Section 2.2.
"MERGER A AGREEMENT" has the meaning specified in
Section 2.2.
"MERGER B" has the meaning specified in Section 2.6.
"MERGER SUB" has the meaning specified in Section 2.2.
"NEWCO" has the meaning specified in the recitals.
"NEWCO CLASS A COMMON STOCK" has the meaning specified in
Section 2.1.
"NEWCO CLASS B COMMON STOCK" has the meaning specified in
Section 2.5.
"NEWCO COMMON STOCK" means, collectively, Newco Class A
Common Stock and Newco Class B Common Stock.
"NON-COMPETITION AGREEMENTS" means the Non-Competition
Agreements between Newco and each of Eugene Rosenfeld, Craig Manchester and
James Schuler, substantially in the form of Exhibit A.
"PERMITTED LIENS" means any (a) mechanics', carriers',
workers' and other similar liens arising in the ordinary course of business
which are not delinquent and which in the aggregate are not material in
amount, and do not interfere with the present use of the assets of the WP
Entities or the Schuler Entities, as applicable, to which they apply;
(b) liens for current Taxes and assessments not yet due and payable; (c)
usual and customary non-monetary real property Encumbrances that do not and
will not interfere with the operation of that portion of the WP Business or
Schuler Business, as applicable, currently conducted on such property or the
Business as a whole; and (d) all applicable zoning ordinances and land use
restrictions.
"PERSON" shall include any individual, trustee, firm,
corporation, partnership, limited liability company, Governmental Authority
or other entity, whether acting in an individual, fiduciary or any other
capacity.
"PROXY STATEMENT/PROSPECTUS" has the meaning specified in
Section 6.8.
"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement among Newco, James Schuler, WP LLC, Apollo, Blackacre and
Highridge, substantially in the form of Exhibit B.
"RELEASE" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment (including
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the abandonment or discarding of barrels, containers and other closed
receptacles containing any Hazardous Material).
"REORGANIZATION" has the meaning specified in the Recitals.
"SCHULER" has the meaning specified in the Recitals.
"SCHULER BALANCE SHEET" has the meaning specified in
Section 5.5(b).
"SCHULER BUSINESS" means the Schuler Entities' business of
designing, constructing, marketing and selling single-family homes, townhomes
and condominiums in Arizona, California, Colorado, Hawaii, Oregon and
Washington.
"SCHULER COMMITMENTS" has the meaning specified in
Section 5.14.
"SCHULER COMMON STOCK" has the meaning specified in
Section 2.3.
"SCHULER DISCLOSURE SCHEDULE" means the Disclosure Schedule
dated as of the Agreement Date, as amended in accordance with this Agreement,
as delivered to the WP Partners by Schuler and forming a part of this
Agreement.
"SCHULER ENTITIES" means, collectively, Schuler and the
Schuler Subsidiaries.
"SCHULER INDEMNIFIED PARTIES" has the meaning specified in
Section 9.2.
"SCHULER INTELLECTUAL PROPERTY" has the meaning specified
in Section 5.9.
"SCHULER LEASED REAL PROPERTY" has the meaning specified in
Section 5.7(b).
"SCHULER LOSS" has the meaning specified in Section 9.2.
"SCHULER OWNED REAL PROPERTY" has the meaning specified in
Section 5.8(b).
"SCHULER REAL PROPERTY" has the meaning specified in
Section 5.8(b).
"SCHULER REQUIRED CONSENTS" means those consents, waivers,
approvals, orders and authorizations of, notices to, and registrations,
declarations, designations, qualifications and filings with, Governmental
Authorities and third Persons, domestic or foreign, (a) set forth in Schuler
Disclosure Schedule Section 5.3(b), (b) required in order to eliminate the
items set forth in Schuler Disclosure Schedule Section 5.4 from such section,
(c) that otherwise are necessary in order to make the representations and
warranties set forth in Sections 5.3(b) and 5.4 true and correct as of the
Closing Date and (d) with respect to financings of the Schuler Entities, set
forth on Schuler Disclosure Schedule Section 1.1.
"SCHULER STOCKHOLDER MEETING" has the meaning specified in
the Recitals.
"SCHULER SUBSIDIARIES" means, collectively, the Persons in
which Schuler has a direct or indirect equity or ownership interest in excess
of 10%.
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"SEC" means the United States Securities and Exchange
Commission.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, and any successor statute thereto, and the rules and regulations of
the SEC thereunder.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
between Newco, James Schuler, WP LLC, Apollo, Blackacre and Highridge,
substantially in the form of Exhibit C.
"TAX" means any federal, state, local, or foreign income,
gross receipts, license, payroll, parking, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated tax, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not, including such item for which Liability arises as a
transferee, successor-in-interest or by contract, or as a result of being a
member of an affiliated or combined group.
"TAX RETURN" means any return, declaration, report, claim
for refund, information return or statement relating to Taxes, including any
schedules or attachments thereto, and including any amendment thereof.
"TAXING AUTHORITY" means any Governmental Authority
responsible for the imposition or collection of any Tax.
"WPHD" has the meaning specified in the Recitals.
"WPHD II" has the meaning specified in the Recitals.
"WPHI" has the meaning specified in Section 2.1.
"WPHL" has the meaning specified in the Recitals.
"WP BALANCE SHEET" has the meaning specified in
Section 4.5(b).
"WP BUSINESS" means the WP Entities' business of designing,
constructing, marketing and selling single-family homes, townhomes and
condominiums in California.
"WP COMMITMENTS" has the meaning specified in Section 4.14.
"WP DISCLOSURE SCHEDULE" means the Disclosure Schedule
dated as of the Agreement Date, as amended in accordance with this Agreement,
as delivered to Schuler by the WP Partners and forming a part of this
Agreement.
"WP ENTITIES" means, collectively, the WP Parents and the
WP Subsidiaries.
"WP INTELLECTUAL PROPERTY" has the meaning specified in
Section 4.9.
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"WP INTERESTS" has the meaning specified in the Recitals.
"WP LEASED REAL PROPERTY" has the meaning specified in
Section 4.7(b).
"WP LLC" has the meaning specified in the Recitals.
"WP LLC ASSIGNMENT" has the meaning specified in
Section 3.2.
"WP OWNED REAL PROPERTY" has the meaning specified in
Section 4.8(b).
"WP PARENTS" has the meaning specified in the Recitals.
"WP PARTNERS" has the meaning specified in the Recitals.
"WP PARTNERS INDEMNIFIED PARTIES" has the meaning specified
in Section 9.3.
"WP PARTNERS LOSS" has the meaning specified in Section 9.3.
"WP REAL PROPERTY" has the meaning specified in
Section 4.8(b).
"WP REQUIRED CONSENTS" means those consents, waivers,
approvals, orders and authorizations of, notices to, and registrations,
declarations, designations, qualifications and filings with, Governmental
Authorities and third Persons, domestic or foreign, (a) set forth in WP
Disclosure Schedule Section 4.3(c), (b) required in order to eliminate the
items set forth in WP Disclosure Schedule Section 5.4 from such section, (c)
that otherwise are necessary in order to make the representations and
warranties set forth in Sections 4.3(c) and 4.4 true and correct as of the
Closing Date and (d) with respect to financings of the WP Entities, set forth
on WP Disclosure Schedule Section 1.1.
"WP SUBSIDIARIES" means, collectively, the Persons in which
any WP Parent has a direct or indirect equity or ownership interest in excess
of 10%.
1.2 OTHER DEFINED TERMS. In addition to the terms defined
in Section 1.1, certain other terms are defined elsewhere in this Agreement
and, whenever such terms are used in this Agreement, they shall have their
respective defined meanings.
ARTICLE II
REORGANIZATION
2.1 FORMATION OF NEWCO; EFFECTIVE TIME.
(a) NEWCO. Immediately following the Agreement Date,
Schuler and the WP Partners shall form Newco as a corporation under the laws
of the State of Delaware. The Charter and Bylaws of Newco shall be
substantially in the forms set forth in Exhibit D. In connection with such
formation, each of Schuler and Western Pacific Housing, Inc. ("WPHI") shall
purchase 100 shares of Class A common stock, par value $0.001 per share, of
Newco ("Newco Class A Common Stock"), which shares shall be issued to each of
Schuler and WPHI at a price of $1.00 per share.
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(b) DIRECTORS AND OFFICERS OF NEWCO. The directors and
officers of Newco shall be the Persons set forth on Schedule 2.1(b). Each
such officer and director shall remain in office until his or her successors
are duly appointed or elected in accordance with applicable law.
(c) EFFECTIVE TIME. The term "Effective Time" shall mean
the time and date which is the date and time of the filing of the certificate
of merger relating to Merger A with the Secretary of State of the State of
Delaware (or such other date and time as may be specified in such certificate
as may be permitted by law) or such other time and date as Schuler and the
WP Partners may agree upon.
2.2 MERGER A.
(a) ORGANIZATION OF MERGER SUB. Immediately prior to the
Closing Date, Schuler and the WP Partners shall cause Newco to form Schuler
Reorganization Sub, Inc. as a corporation under the laws of the State of
Delaware and as a wholly owned subsidiary of Newco ("Merger Sub"). Merger Sub
shall be organized for the sole purpose of effectuating Merger A as
contemplated herein. The Charter and Bylaws of Merger Sub shall be
substantially in the forms set forth in Exhibit E. The authorized capital
stock of Merger Sub shall consist of 100 shares of common stock, par value
$0.001 per share, all of which shall be issued to Newco at a price of
$1.00 per share.
(b) ACTIONS OF DIRECTORS AND OFFICERS. Immediately prior
to the Closing Date, Schuler and the WP Partners shall cause (i) Newco to
elect the directors of Newco as the directors of Merger Sub, (ii) the
directors of Merger Sub to elect the officers of Schuler as the officers of
Merger Sub, (iii) the directors of Newco to ratify and approve this Agreement
and the Agreement and Plan of Merger substantially in the form of Exhibit F
(the "Merger A Agreement"), (iv) the Merger A Agreement to be executed on
behalf of the parties thereto, and (v) the directors and officers of Merger
Sub to take such steps as may be necessary or appropriate to complete the
organization of the Merger Sub and to approve the Merger A Agreement.
(c) ACTIONS OF NEWCO AND MERGER SUB. Immediately prior to
the Closing Date, Schuler and the WP Partners shall cause Newco to ratify and
approve this Agreement, and shall cause Newco, as the sole shareholder of
Merger Sub, to adopt the Merger A Agreement. Schuler and the WP Partners
shall cause Newco and Merger Sub to perform their respective obligations
under this Agreement and the Merger A Agreement.
(d) MERGER A. Upon the terms and subject to the
conditions herein set forth and in the Merger A Agreement, Merger Sub shall
be merged with and into Schuler ("Merger A") in accordance with the
applicable provisions of the laws of the State of Delaware. Schuler shall be
the surviving corporation in Merger A and shall continue its corporate
existence under the laws of the State of Delaware. As a result of Merger A,
Schuler shall become a wholly owned subsidiary of Newco. The effects and
consequences of Merger A shall be as set forth in the Merger A Agreement.
(e) NAME CHANGES. Concurrently with the Effective Time,
Schuler and the WP Partners shall cause Schuler to file with the Secretary of
State of Delaware an amendment to
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its Charter to change its name to Schuler Residential, Inc. and shall cause
Newco to file with the Secretary of State of Delaware an amendment to its
Charter to change its name to Schuler Homes, Inc.
2.3 EFFECT OF MERGER A ON SECURITIES OF SCHULER, MERGER
SUB AND NEWCO.
(a) MERGER SUB STOCK. At the Effective Time of Merger A,
each share of the common stock of Merger Sub outstanding immediately prior to
the Effective Time shall be converted into and shall become one share of
common stock of the surviving corporation of Merger A.
(b) CONVERSION OF SCHULER STOCK. (i) Subject to
Section 2.3(b)(ii), at the Effective Time, each share of common stock, par
value $0.01 per share, of Schuler ("Schuler Common Stock") issued and
outstanding at the Effective Time shall be converted into one share of Newco
Class A Common Stock. Upon such conversion, all such shares of Schuler Common
Stock shall be cancelled and cease to exist, and each certificate theretofore
representing any such shares shall, without any action on the part of the
holder thereof, be deemed to represent an equivalent number of shares of
Newco Class A Common Stock.
(ii) At the Effective Time, each share
of Schuler Common Stock which is held in the treasury of Schuler
immediately prior to the Effective Time shall, by virtue of Merger
A, cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor.
(iii) At the Effective Time, each
outstanding option to purchase shares of Schuler Common Stock
issued pursuant to the Schuler Homes, Inc. Amended and Restated
1992 Stock Option Plan and 1998 Employee Stock Purchase Plan (each,
a "Schuler Option") shall be assumed by Newco in such manner that
it is converted into an option to purchase shares of Newco Class A
Common Stock, with each such Schuler Option to otherwise be
exercisable upon the same terms and conditions as then are
applicable to such Schuler Option, including the number of shares
and exercise price provided thereby. At the Effective Time, Newco
shall assume all rights and obligations of Schuler under such plan
as in effect at the Effective Time and shall continue such plan in
accordance with its terms.
(c) NEWCO STOCK HELD BY SCHULER. At the Effective Time of
Merger A, the 100 shares of Newco Class A Common Stock issued to each of
Schuler and WPHI pursuant to Section 2.1 shall be redeemed by Newco and cease
to be outstanding in consideration of a $100 payment by Newco to each of
Schuler and WPHI.
2.4 DIVIDENDS, ETC. (a) Notwithstanding any other
provisions of this Agreement, no dividends or other distributions declared
after the Effective Time on Newco Class A Common Stock shall be paid with
respect to any shares of Schuler Common Stock, until a certificate
representing such shares of Schuler Common Stock (a "Schuler Certificate") is
surrendered for exchange as provided herein. Subject to the effect of
applicable laws, following surrender of any such Schuler Certificate, there
shall be paid to the holder of the Newco Class A Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender,
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the amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Newco
Class A Common Stock and not paid, less the amount of any withholding taxes
which may be required thereon, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Newco Class A Common
Stock, less the amount of any withholding taxes which may be required thereon.
(b) At or after the Effective Time, there shall be no
transfers on the stock transfer books of Schuler of the shares of Schuler
Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, certificates representing any such shares are
presented to the surviving corporation of Merger A or Newco, they shall be
cancelled and exchanged for certificates for the consideration, if any,
deliverable in respect thereof pursuant to this Agreement and the Merger A
Agreement in accordance with the procedures set forth in this Article II.
Schuler Certificates surrendered for exchange by any person constituting an
Affiliate of Schuler, shall not be exchanged until Newco has received an
Affiliate Letter from such Person substantially in the form of Exhibit G.
(c) None of Schuler, Newco, the surviving corporation of
Merger A or any other Person shall be liable to any former holder of shares
of Schuler Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(d) In the event that any Schuler Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Schuler Certificate to be lost, stolen or
destroyed and, if required by Newco, the posting by such person of a bond in
such reasonable amount as Newco may direct as indemnity against any claim
that may be made against it with respect to such Schuler Certificate, Newco
will issue in exchange for such lost, stolen or destroyed Schuler Certificate
the unpaid dividends and distributions on shares of Newco Class A Common
Stock as provided in Section 2.4(a), deliverable in respect thereof pursuant
to this Agreement and the Merger A Agreement.
2.5 WP PARTNERS' AND WP LLC'S CONTRIBUTION. Upon the
terms and subject to the conditions herein set forth, on the business day
immediately following the date of the Effective Time, the WP Partners shall
cause WP LLC to contribute, transfer, convey, assign and deliver to Newco,
and Newco shall accept and acquire from WP LLC, free and clear of all
Encumbrances, all of the rights, title and interest of WP LLC in and to the
WP Interests (the "Contribution"). In consideration of the Contribution, WP
LLC and Bankers Trust shall receive an aggregate number of shares of Class B
common stock, par value $0.001 per share, of Newco ("Newco Class B Common
Stock) equal to the number of shares of Newco Class A Common Stock to be
issued as of the Effective Time pursuant to the terms of Section 2.3. From
such aggregate number of shares of Newco Class B Common Stock, Bankers Trust
shall receive the amount determined in accordance with that certain Amended
and Restated Loan Agreement, dated as of ____, 1998, by and among WPHD,
Bankers Trust and the other parties named therein, and WP LLC shall receive
the remainder.
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2.6 MERGER B.
(a) PRIVATE LETTER RULING. Schuler and the WP Partners
shall jointly submit to the IRS as soon as practicable a private letter
ruling request (the "Ruling Request") with respect to the Merger B
transaction structure described and defined in this Section 2.6. In the event
that Schuler and the WP Partners receive a ruling by the IRS in connection
with the Ruling Request that the Contribution qualifies as an exchange under
Section 351 of the Code in connection with Merger B (a "Favorable Ruling"),
then the parties, upon the terms and subject to the conditions herein set
forth, shall implement Merger B as soon as practicable after the Closing.
Schuler and the WP Partners shall cooperate in good faith with respect to the
preparation and submission of the Ruling Request and any dealings with the
IRS with respect thereto with a view to obtaining a Favorable Ruling as
promptly as practicable (whether before or after the Closing). All
communications with the IRS shall be held jointly with the representatives of
Schuler and the WP Partners identified in the Ruling Request and all
representations and factual statements and information in the Ruling Request
shall be true, correct and complete in all material respects. Schuler and the
WP Partners agree that the receipt of a Favorable Ruling shall not constitute
a condition to Closing.
(b) MERGER B. As soon as practicable after receipt of a
Favorable Ruling (but in no event prior to the Closing), Schuler and the WP
Partners shall cause Schuler to be merged with and into Newco ("Merger B") in
accordance with Section 253 of the Delaware General Corporation Law ("Section
253"). Newco shall be the surviving corporation in Merger B and shall
continue its corporate existence under the laws of the State of Delaware. The
effects and consequences of Merger B shall be as set forth in Section 253. If
a Favorable Ruling is not received or the Ruling Request is withdrawn, then
upon the occurrence of such event this Section 2.6(b) shall have no further
force and effect and Merger B shall not occur.
ARTICLE III
CLOSING
3.1 CLOSING. Subject to the fulfillment or waiver of the
conditions precedent set forth in Articles VII and VIII, the consummation of
the transactions contemplated by this Agreement and the Merger A Agreement
(the "Closing") shall begin at the offices of Orrick, Herrington & Sutcliffe
LLP, San Francisco, California, at 8:00 a.m., local time, (a) on the last
business day of the month in which all such conditions are fulfilled or
waived, effective as of 11:59 p.m. as of the last calendar day of such month,
or (b) at such other date, time or place as the parties hereto may agree upon
in writing. The date on which the transactions contemplated by Section 2.5
hereof are consummated is referred to herein as the "Closing Date."
3.2 WP PARTNERS' OBLIGATIONS AT CLOSING. At the Closing,
the WP Partners shall deliver or cause to be delivered to Schuler and Newco:
(a) An assignment, in substantially the form of Exhibit
H, evidencing the Contribution (the "WP LLC Assignment");
(b) Certificates of duly authorized officers of the WP
Partners, each dated the Closing Date, certifying as to the matters requested
by Schuler pursuant to Section 7.5;
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(c) Each Ancillary Agreement, duly executed by WP LLC,
the WP Partner and/or officer thereof indicated therein as a signatory
thereto;
(d) Assignments to Newco or a newly-formed Person
wholly-owned by Newco, free and clear of any Encumbrances and without any
charges, and the assumption by Newco or such newly-formed Person of the
duties thereunder as of the Closing, of the general partner and managing
member interests in the WP Entities not otherwise included in the
Contribution (the "GP Assignments");
(e) The Charter and Bylaws, as amended to date, of each
WP Entity, and all corporate seals, minute books, stock transfer books or
equivalent company records, of each WP Entity; and
(f) The opinion or opinions of Morgan, Lewis & Bockius
LLP and other WP Partners counsel, as applicable, substantially in the form
of Exhibit I-1.
3.3 SCHULER OBLIGATIONS AT CLOSING. At the Closing,
Schuler shall deliver or cause to be delivered to the WP Partners:
(a) Certificates of duly authorized officers of Schuler,
each dated the Closing Date, certifying as to the matters requested by the WP
Partners pursuant to Section 8.5;
(b) Each Ancillary Agreement to which Newco and/or James
Schuler is a party, duly executed by Newco and/or James Schuler, as
applicable; and
(c) The opinion of Orrick, Herrington & Sutcliffe LLP
substantially in the form of Exhibit J.
3.4 NEWCO OBLIGATIONS AT CLOSING. At the Closing, Newco
shall deliver or cause to be delivered to WP LLC and Bankers Trust
certificates representing the Newco Class B Common Stock in the respective
amounts determined in accordance with Section 2.5 and registered in the name
of WP LLC and Bankers Trust, respectively. At the Closing, Newco shall
deliver to Schuler and the WP Partners a certificate to the effect that Newco
(a) is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full power and authority to
own its assets and properties and to conduct its business as and where it is
then being conducted and (b) has full power and authority to enter into the
Ancillary Agreements to which it is a party and to consummate the
transactions contemplated hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE WP PARTNERS
Each of the WP Partners, jointly and severally, represents
and warrants to Schuler as follows.
4.1 WP PARTNERS AND WP PARENTS. (a) WP PARTNERS
ORGANIZATION. Apollo is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full power and authority to own its assets and properties and to conduct its
business as and where it is now being conducted. Blackacre is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and has full power and authority to own its
assets and properties and to conduct its business as and where it is now
being conducted Highridge is limited partnership duly organized, validly
existing and in good standing under the laws of the State of California and
has full power and authority to own its assets and properties and to conduct
its business as and where it is now being conducted. APWP is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full power and authority to own its
assets and properties and to conduct its business as and where it is now
being conducted AP Western is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
power and authority to own its assets and properties and to conduct its
business as and where it is now being conducted. APLHI is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California and has full power and authority to own its assets and
properties and to conduct its business as and where it is now being
conducted. Lamco is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has full power
and authority to own its assets and properties and to conduct its business as
and where it is now being conducted.
(b) WP PARENTS ORGANIZATION. Each of WPHD and WPHD II is
a limited partnership duly organized, validly existing and in good standing
under the laws of the State of California and has full power and authority to
own its assets and properties and to conduct its business as and where it is
now being conducted. WPHL is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full power and authority to own its assets and properties and to
conduct its business as and where it is now being conducted.
(c) TRANSACT BUSINESS. Each WP Partner and WP Parent is
duly qualified to transact business as a foreign Person and is in good
standing in every jurisdiction in which the character of its properties,
owned or leased, or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect on the WP Entities or the WP
Business.
(d) CHARTER AND BYLAWS. The WP Partners have delivered to
Schuler complete and correct copies of the Charter and Bylaws of each WP
Partner and WP Parent as in effect as of the Agreement Date.
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(e) WP INTERESTS CAPITALIZATION. WP Disclosure Schedule
Section 4.1 contains an accurate and complete list of the WP Parents, the
percentage of each class of ownership interests owned therein and the names
and percentage ownership of all partners and members therein. Except as set
forth in WP Disclosure Schedule Section 4.1, (i) all WP Interests are owned
directly by the WP Partners, free and clear of any Encumbrance, (ii) there
are no voting trusts, voting agreements or similar understandings applicable
to such WP Interests and there are no options, warrants or other rights,
agreements or commitments (other than this Agreement) obligating the WP
Partners or any WP Parent to issue, sell or transfer any shares of capital
stock, ownership interests or other securities (equity or otherwise) of any
WP Parent. All of the outstanding WP Interests are duly authorized, validly
issued, fully paid, nonassessable (except for the WP Interests constituting
general partner interests) and are without, and were not issued in violation
of, preemptive rights or any applicable law. Upon delivery to Newco of the WP
Interests pursuant to the Contribution, the WP Interests will have been
transferred to Newco, free and clear of any Encumbrances. None of the
WP Partners has received any notice of any adverse claim to their respective
title to the WP Interests.
(f) NO BENEFICIAL OWNERSHIP IN SCHULER. No WP Partner or
Affiliate thereof beneficially owns any shares of Schuler Common Stock.
4.2 SUBSIDIARIES. (a) ORGANIZATION. Each WP Subsidiary is
an entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has full power and authority to
own its assets and properties and to conduct its business as and where it is
now being conducted.
(b) TRANSACT BUSINESS. Each WP Subsidiary is duly
qualified to transact business as a foreign Person and is in good standing in
every jurisdiction in which the character of its properties, owned or leased,
or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified or in good standing would not have a
Material Adverse Effect on the WP Entities or the WP Business.
(c) CHARTER AND BYLAWS. The WP Partners have delivered to
Schuler complete and correct copies of the Charter and Bylaws each WP
Subsidiary as in effect as of the Agreement Date.
(d) WP SUBSIDIARIES CAPITALIZATION. WP Disclosure
Schedule Section 4.2 contains an accurate and complete list of: (i) the name
of each WP Subsidiary; (ii) the name of each other partnership, limited
liability company, corporation, joint venture or other Person in which any of
the WP Parents has, directly or indirectly, any material equity interest;
(iii) in the case of each corporation specified in clauses (i) and (ii)
above, (A) the jurisdiction of its incorporation; (B) the capitalization
thereof and the percentage of each class of voting capital stock owned
directly or indirectly by each of the WP Parents and (C) the names and
percentage ownerships of all Persons known by the WP Partners to be record or
beneficial owners of shares of capital stock of each such corporation; and,
(iv) in the case of each unincorporated entity specified in clauses (i) and
(ii) above, the equivalent of the information provided pursuant to the
preceding clause (iii) with respect to corporate entities. Except as set
forth in WP Disclosure Schedule Section 4.2, (i) all shares of capital stock
of each corporation and ownership interests of each unincorporated entity
identified in the preceding sentence are owned directly or
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indirectly by the WP Parents, free and clear of any Encumbrance, (ii) there
are no voting trusts, voting agreements or similar understandings applicable
to such shares of capital stock or ownership interests and there are no
options, warrants or other rights, agreements or commitments (other than this
Agreement) obligating the WP Partners or any WP Entity to issue, sell or
transfer any shares of capital stock, ownership interest or other securities
(equity or otherwise) of any WP Subsidiary. All of the outstanding capital
stock, partnership interests, membership interests and other interests of
each WP Subsidiary is duly authorized, validly issued, fully paid,
nonassessable (except for such interests constituting general partner
interests) and is without, and was not issued in violation of, preemptive
rights or any applicable law. Except as listed on WP Disclosure Schedule
Section 4.2, neither WP Partner nor any Affiliate thereof beneficially owns
any capital stock, partnership interest, membership interest or other equity
interest in any WP Subsidiary.
4.3 AUTHORIZATION. (a) Each of the WP Partners has full
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby by
each of the WP Partners has been duly authorized by all necessary corporate,
partnership or company action, as the case may be, on the part of the WP
Partners. This Agreement has been duly executed and delivered by the WP
Partners. This Agreement constitutes a legal, valid and binding obligation of
each of the WP Partners, enforceable against each of the WP Partners in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(b) Each WP Partner has full power and authority to enter
into the Ancillary Agreements to which it is a party and to consummate the
transactions contemplated thereby. The execution and delivery of the
Ancillary Agreements and the consummation of the transactions contemplated
thereby by the WP Partners who are parties thereto have been duly authorized
by all necessary corporate, partnership or company action, as the case may
be, on the part of such WP Partner. Each Ancillary Agreement to which a WP
Partner is a party, when executed and delivered by such WP Partner, will
constitute a legal, valid and binding obligation of such WP Partner,
enforceable against such WP Partner in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
(c) Except (i) for compliance with the notification,
filing and waiting period requirements of the HSR Act or (ii) as otherwise
set forth in WP Disclosure Schedule Section 4.3(c), no consent, waiver,
approval, order or authorization of, notice to, or registration, declaration,
designation, qualification or filing with, any Governmental Authority or
third Person, domestic or foreign, is or has been or will be required on the
part of any WP Partner or WP Entity in connection with the execution and
delivery of this Agreement or any Ancillary Agreement or the consummation by
the WP Partners of the transactions contemplated hereby or thereby, other
than where the failure to obtain such consents, waivers, approvals, orders or
authorizations or to make or effect such registrations, declarations,
designations, qualifications or filings will not (x) prevent or materially
delay consummation of the transactions contemplated by
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this Agreement and the Ancillary Agreements, (y) prevent such WP Partner from
performing its obligations under this Agreement and the Ancillary Agreements
or (z) result in a Material Adverse Effect on the WP Entities or the WP
Business.
4.4 NON-CONTRAVENTION. Except as set forth in WP
Disclosure Schedule Section 4.4, neither the execution and delivery of this
Agreement or any Ancillary Agreement by any WP Partner, nor the consummation
by any of them of the transactions contemplated hereby or thereby, will
violate or conflict with, or result in the acceleration of rights, benefits
or payments under, (a) any provision of the Charter or Bylaws of any WP
Partner or WP Entity, (b) any statute, law, regulation or Governmental Order
to which any WP Partner or WP Entity or any of its assets or properties may
be bound or subject, (c) any debt, note, bond, indenture, Encumbrance, lease,
license, instrument, contract, commitment or other agreement to which any WP
Partner or WP Entity is a party or by which it or any of its assets or
properties may be bound or subject, except, with respect to clauses (b) and
(c), for such violations and conflicts which will not (i) prevent or
materially delay consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, (ii) prevent such WP Partner from
performing its obligations under this Agreement and the Ancillary Agreements
or (iii) result in a Material Adverse Effect on the WP Entities or the WP
Business.
4.5 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.
(a) WP Disclosure Schedule Section 4.5(a) sets forth (i) the audited combined
consolidated balance sheet for the WP Parents as at March 31, 2000 and March
31, 1999, (ii) the unaudited combined consolidated balance sheet for the
WP Parents as at June 30, 2000 and June 30, 1999, (iii) the audited combined
consolidated statements of income, partners' capital and cash flows including
the footnotes thereto of the WP Partners for each of the three fiscal years
ended March 31, 2000 and (iv) the unaudited combined consolidated statements
of income, partners' capital and cash flows including the footnotes thereto
of the WP Partners for the quarters ended June 30, 2000 and June 30, 1999
(collectively, the "Financial Statements"). Except as set forth in WP
Disclosure Schedule Section 4.5(a), the Financial Statements have been
prepared from the books and records of the WP Entities in accordance with
GAAP applied on a basis consistent with prior periods, and the audited
Financial Statements have been examined and are accompanied by the
unqualified reports of Ernst & Young LLP, independent certified public
accountants. Except as set forth in WP Disclosure Schedule Section 4.5(a),
the balance sheets included in the Financial Statements present fairly, in
all material respects, the financial condition of the WP Entities as at the
dates thereof, and the income statements included in the Financial Statements
present fairly, in all material respects, the results of operations of the WP
Entities for the periods covered thereby. The books and records of the WP
Entities from which the Financial Statements were prepared were complete and
accurate in all material respects at the time of such preparation and
accurately reflect all material transactions of the WP Entities when taken as
a whole. The WP Entities have accounting controls sufficient to ensure that
such transactions are (x) executed in accordance with management's general or
specific authorization and (y) are recorded in conformity with GAAP so as to
maintain accountability of assets.
(b) The WP Entities have no Liabilities, except for
Liabilities (i) reflected in the balance sheet as at June 30, 2000 included
in the Financial Statements (the "WP Balance Sheet"), (ii) incurred by the WP
Entities in the ordinary course of business and consistent with past
practices since the date of the Balance Sheet, (iii) which in the aggregate
are less than
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$2,000,000 or (iv) otherwise disclosed in the WP Disclosure Schedule. As used
in this Section 4.5(b), the term "Liabilities" excludes any Liabilities under
permits, licenses, orders, approvals, authorizations, contracts, agreements
or commitments for future payments or performance where the applicable WP
Entity is not currently in violation of or default under any provision
thereof.
4.6 ABSENCE OF CERTAIN CHANGES. Except as set forth in WP
Disclosure Schedule Section 4.6, since the date of the WP Balance Sheet:
(a) The WP Entities, taken as a whole, have not suffered
any damage or destruction adversely affecting the WP Business or the tangible
assets owned or leased by the WP Entities that has had or is reasonably
likely to result in a loss, cost or expense to the WP Entities, taken as a
whole, in excess of $2,000,000;
(b) Except pursuant to debt agreements existing on the
date of the WP Balance Sheet, no WP Entity has incurred, assumed or become
subject to any additional indebtedness for money borrowed or purchase money
indebtedness, including capitalized leases;
(c) No WP Entity has made any change in the compensation
levels of the senior executives of such WP Entity (i.e., vice presidents and
above), any change in the manner in which other employees of such WP Entity
generally are compensated, or any provision of additional or supplemental
benefits for employees of such WP Entity generally, except normal periodic
increases, promotions or payments under compensation plans effected in the
ordinary course of business and consistent with past practices;
(d) No WP Entity has entered into any transaction not in
the ordinary course of business, except as contemplated by this Agreement or
any Ancillary Agreement;
(e) Except for changes affecting the single-family home,
townhome and/or condominium construction industry generally (nationwide or in
specific locales), no Material Adverse Effect has occurred;
(f) There have been no Encumbrances on the assets or
properties of any WP Entity, other than Permitted Liens;
(g) None of the WP Entities have made any material change
in its accounting principles; and
(h) No WP Entity has agreed, whether in writing or
otherwise, to take any action described in this Section 4.6.
4.7 TITLE TO ASSETS. Except as set forth in WP Disclosure
Schedule Section 4.7, each WP Entity has good title to all of the assets and
properties (including WP Owned Real Property) used in the conduct of the WP
Business (including those reflected on the WP Balance Sheet), except for
assets and properties sold, consumed or otherwise disposed of in the ordinary
course of business and consistent with past practices since the date of the
WP Balance Sheet, free and clear of any Encumbrance, other than Permitted
Liens.
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4.8 REAL PROPERTY.
(a) LEASED REAL PROPERTY. Except for real property leases
and subleases the failure of which to possess or hold would not in the
aggregate result in a WP Partners Loss in the aggregate in excess of
$2,000,000 or which are part of the WP Entities' model home leaseback
program, WP Disclosure Schedule Section 4.8(a) contains an accurate and
complete list of all real property leased or subleased to the WP Entities as
of the Agreement Date (the "WP Leased Real Property" and, together with the
WP Owned Real Property, the "WP Real Property"). All leases and subleases of
such WP Leased Real Property by the WP Entities (x) are legal, valid and
binding obligations of the WP Entities, enforceable against the WP Entities
in accordance with their terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity), and are in full force and
effect, and (y) originals or copies of which that were accurate and complete
as of the date provided have been made available to Schuler for review.
Except as disclosed in WP Disclosure Schedule Section 4.8(a), the WP Entities
enjoy peaceful and undisturbed possession under all leases and subleases of
WP Leased Real Property, and, to the knowledge of the WP Partners and the
WP Entities, all lessors under any lease or sublease of WP Leased Real
Property (1) are not (with or without notice or the lapse of time, or both) in
material breach or default thereunder, (2) have performed all material
obligations required to be performed by it thereunder, and (3) have not given
written notice to the WP Partners or the WP Entities of their intent to
terminate such lease or sublease of WP Leased Real Property.
(b) OWNED REAL PROPERTY. WP Disclosure Schedule Section
4.8(b) contains an accurate and complete list and brief description of all
real property in which the WP Entities own an interest as of August 31, 2000
(except for the WP Land Contract Property and WP Option Real Property (as
such terms are defined below) and WP Leased Real Property). Such real
property, together with all such real property in which the WP Entities own
an interest as of the Agreement Date, is referred to herein as the "WP Owned
Real Property." Except as set forth on WP Disclosure Schedule Section 4.8(b),
the WP Owned Real Property has all (i) appropriate zoning, (ii) preliminary
plan approval, (iii) utilities (or utilities are able to be timely obtained)
and (iv) necessary access to and from public highways, streets and roads for
construction and residential purposes (or such access will be timely
obtained).
(c) LAND CONTRACTS. WP Disclosure Schedule Section 4.8(c)
contains an accurate and complete list and brief description of all written
agreements, arrangements, contracts, and commitments as of September 7, 2000
to which any of the WP Entities is a party or entered into on behalf thereof
pursuant to which any of the WP Entities (i) is obligated to purchase any
developed or undeveloped real property, whether or not such obligation is
subject to conditions (the "WP Land Contract Property") as of the Agreement
Date or (ii) possesses an option to acquire any developed or undeveloped real
property (the "WP Option Real Property"). In addition, WP Disclosure Schedule
Section 4.8(c) contains an accurate and complete list of all deposits or
other moneys that would be forfeited or paid as a result of a failure to
exercise the option on any such WP Option Real Property.
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(d) OTHER REAL PROPERTY REPRESENTATIONS.
(i) NO CONDEMNATION. No condemnation,
eminent domain, or similar Action is pending or, to the knowledge
of the WP Partners or the WP Entities, is threatened with respect
to any WP Real Property which would, if successful, have a Material
Adverse Effect on the WP Business.
(ii) COMPLIANCE WITH LAWS. To the
knowledge of the WP Partners and the WP Entities, the buildings and
improvements on the developed WP Owned Real Property and the WP
Leased Real Property and the subdivision of and improvements on the
undeveloped WP Owned Real Property do not violate (A) any
applicable law, including any building, set-back, or zoning law,
ordinance, regulation, or statute, or Governmental Order or (B) any
enforceable restrictive covenant affecting any such property,
except for any violations which, individually or in the aggregate,
will not have a Material Adverse Effect on the WP Business.
(iii) SITE OBLIGATIONS. Except as set
forth on WP Disclosure Schedule Section 4.8(d), to the knowledge of
the WP Partners and the WP Entities, no WP Real Property is subject
to any condition or obligation to any Governmental Authority or
other Person requiring the owner or any transferee thereof to
donate or otherwise transfer for less than fair value land or any
interest therein, money or other property or to make off-site
public improvements, other than obligations that would not have a
Material Adverse Effect on the WP Business.
(iv) ASSESSMENTS. No material
development fees, in-lieu fees, school fees or charges or other
developer-related charges or assessments by any Governmental
Authority or any other Person for public facilities or improvements
or otherwise made against the developed WP Owned Real Property or
any lots included therein are past due and unpaid (other than those
set forth on the WP Balance Sheet or on WP Disclosure Schedule
Section 4.8(d)).
(v) SUBDIVISION STANDARDS. Except as
set forth on WP Disclosure Schedule Section 4.8(d), to the
knowledge of the WP Partners and the WP Entities, the developed WP
Owned Real Property and all lots included therein conform in all
material respects to the appropriate Governmental Authority's
subdivision standards, subdivision maps and any conditions of
approval or recordation thereof and there is no material impediment
to subdivision approval or issuance and recordation of subdivision
maps for the undeveloped WP Owned Real Property, such approval to
allow development of the undeveloped WP Owned Real Property for
construction and sale of single-family homes, townhomes and/or
condominiums at the density and materially in the manner currently
anticipated by any of the WP Entities.
(vi) MORATORIA. Except as set forth on
WP Disclosure Schedule Section 4.8(d), to the knowledge of the WP
Partners and the WP Entities, there is no moratorium applicable to
any of the WP Owned Real Property to the extent any of the WP
Entities plans further development thereof on (A) the issuance of
building permits for the construction of houses, or certificates of
occupancy therefor, or (B) the purchase or
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issuance of sewer or water taps or permits, to the extent any of the
WP Entities plans or is required to rely on public water or sewer
facilities.
(vii) ENVIRONMENTAL MATTERS AND
WETLANDS. Except as set forth on WP Disclosure Schedule
Section 4.8(d), (A) none of the WP Real Property on which any of
the WP Entities intends to construct residential dwellings is
located within a "habitat for threatened or endangered plants or
animals" or a "critical," "preservation," "conservation" or similar
type of area which will materially affect any of the WP Entities'
present development plans therefor, (B) no portion of the WP Real
Property which any of the WP Entities has developed or intends to
develop for residential lots and dwellings is situated within a
"noise cone" such that the Federal Housing Administration will not
approve mortgages due to the noise level classification of such
Real Property and (C) no wetlands exist which are reasonably likely
to restrict development of any of the WP Real Property as currently
contemplated by any of the WP Entities.
(viii) NO FOREIGN WP PARTNERS. No
WP Partner is a "foreign person" within the meaning of Sections 1445
and 7701 of the Code.
(ix) ZONING AND UTILITIES. No
WP Entities own or have any interest in, or are contractually
obligated to acquire or obtain any interest in, any real property
which does not have, or will not have prior to such acquisition or
obtaining of interest, residential zoning under any applicable
general, special or specific plans and under any applicable zoning
laws and regulations and the provision of potable water, sewage and
other utilities available to the boundary of the land.
4.9 INTELLECTUAL PROPERTY. WP Disclosure Schedule Section
4.9 contains an accurate and complete list of (a) all patents throughout the
world, (b) all trademarks, trade names and service marks and applications
therefor throughout the world, (c) all copyrights and applications therefor
throughout the world, (d) all software and computer programs, and (e) all
licenses relating to patents, patent rights, know how, trade secrets,
trademarks, trade names, service marks, software and computer programs or
other intellectual property, in each case issued to or used or held for use
by the WP Entities in the operation of the WP Business (collectively, the
"WP Intellectual Property"; provided, however, that WP Disclosure Schedule
Section 4.9 need not contain any WP Intellectual Property consisting of
"off-the shelf" software or computer programs). Except as set forth in
WP Disclosure Schedule Section 4.9, the WP Entities are the sole and exclusive
owner or licensee of, with all right, title and interest in and to (free and
clear of any Encumbrances, other than Permitted Liens), the WP Intellectual
Property. To the knowledge of the WP Partners and the WP Entities, the use of
any such WP Intellectual Property in the conduct of the WP Business as
presently conducted does not violate any rights of any third Person, the
violation of which would result in losses, costs or expenses in the aggregate
in excess of $2,000,000. The WP Entities have not received written notice
that the use of any such WP Intellectual Property in the conduct of the
WP Business as presently conducted violates any rights of any third Person the
violation of which would result in losses, costs or expenses in the aggregate
in excess of $2,000,000.
4.10 LITIGATION. Except as described in WP Disclosure
Schedule Section 4.10, there is no Action pending or, to the knowledge of the
WP Partners and the WP Entities,
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threatened against the WP Entities, whether at law or in equity, or before or
by any Governmental Authority which (a) seeks damages or other monetary
relief in excess of $2,000,000, (b) seeks injunctive relief which if granted
could have a Material Adverse Effect on the WP Business or (c) relates to the
transactions contemplated by this Agreement or any Ancillary Agreement.
Except as described in WP Disclosure Schedule Section 4.10, none of the WP
Entities nor any of their properties or assets currently are subject to or
bound by any Governmental Order (other than any Governmental Order that may
be applicable generally to the industry in which the WP Business operates).
4.11 EMPLOYEE BENEFIT MATTERS. (a) WP Disclosure
Schedule Section 4.11 sets forth an accurate and complete list of (i) each
"employee benefit plan" (as defined in Section 3(3) of ERISA) that is
maintained by any WP Partner, WP Entity or other person or entity that,
together with any WP Partner or WP Entity, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code (each such other person or
entity, an "ERISA WP Affiliate") for the benefit of any current or former
employees of any WP Partner or WP Entity or any of the ERISA WP Affiliates
(the "WP Employees"); (ii) to the extent not disclosed pursuant to the
preceding clause (i), each plan, contract, program, policy, practice or
arrangement, whether written or oral, funded or unfunded, providing stock
options, stock ownership, stock purchase or award, phantom stock, stock
appreciation rights, deferred compensation, retirement, insurance, flexible
spending, dependent care, fringe benefit, vacation pay, holiday pay, sick
pay, workers compensation, severance or termination pay, supplemental
unemployment benefits, employee loans, severance, educational assistance,
incentive, bonus, or other profit-sharing arrangements for the benefit of the
WP Employees (all plans, programs or arrangements described in the preceding
clause (i) and this clause (ii) being collectively referred to as
"WP Employee Plans"); and (iii) an accurate and complete list of all
employment, managerial, advisory, or consulting agreements, employee
confidentiality agreements, employee severance agreements and all other
material agreements, policies or arrangements maintained by the WP Partners
or WP Entities or any of the ERISA WP Affiliates with respect to the
WP Employees or individuals who are independent contractors providing
services to any WP Partner or WP Entity or any of the ERISA WP Affiliates
(all agreements, policies or arrangements described in this clause
(iii) being collectively referred to as "WP Employee Agreements"). The
WP Partners have delivered or made available to Schuler copies, which were
accurate and complete as of the date so delivered, of all such (1) documents
and (if applicable) summary plan descriptions as comprise, describe or
similarly relate to the WP Employee Plans and WP Employee Agreements
(including the most recent annual report on Form 5500, if applicable), and
(2) summary description(s) of any such WP Employee Plans and WP Employee
Agreements not otherwise in writing, and except as described in WP Disclosure
Schedule Section 4.11, there have been no changes to such documents as of the
Agreement Date.
(b) Except as disclosed in WP Disclosure Schedule
Section 4.11, (i) each WP Employee Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified in form and operation in all
material respects, and nothing has occurred which could adversely affect the
qualified status of any such WP Employee Plan; (ii) each WP Employee Plan and
WP Employee Agreement has been operated or administered in accordance with
its provisions and in material compliance with the statutes, rules and
regulations governing such WP Employee Plan or WP Employee Agreement;
(iii) no "disqualified person" or "party in interest" (as defined in
Section 4975 of the Code and Section 3(14) of ERISA, respectively) has
engaged in any
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"prohibited transaction" (as defined in Section 4975(c) of the Code or
Section 406 of ERISA, respectively) which could subject the WP Partners, the
WP Entities, the ERISA WP Affiliates, any WP Employee Plan (or their related
trusts) or Schuler or Newco, to any material liability under Section 4975 of
the Code or Section 502(i) or (l) of ERISA; (iv) with respect to each WP
Employee Plan, no event has occurred and there has been no failure to act
upon the part of any WP Partner, any WP Entity or any fiduciary or "plan
official" (as defined in Section 412 of ERISA) with respect to such
WP Employee Plan that could subject the WP Partners, the WP Entities, the
ERISA WP Affiliates, any WP Employee Plan or Schuler or Newco, to the
imposition of any material Tax or penalty; (v) there are no Actions or
audits, investigations or examinations by any Governmental Authority pending
(other than routine claims for benefits) regarding any WP Employee Plan or
WP Employee Agreement; (vi) no WP Employee Plan is subject to Section 412 of
the Code or Title IV of ERISA, and no WP Partner, WP Entity or ERISA WP
Affiliate has maintained or been obligated to make contributions to any such
WP Employee Plan during the six-year period ending on the Agreement Date;
(vii) no steps have been taken by any WP Partner, WP Entity or ERISA
WP Affiliate to terminate any WP Employee Plan; (viii) each WP Employee Plan
that is a "group health plan" (as defined in Section 5000(b)(1) of the Code)
has been operated and administered in compliance with the continuation
coverage requirements of Section 4980B of the Code and Part 6 of Title I of
ERISA and the Medicare secondary payor provisions of Section 1826(b) of the
Social Security Act, and the regulations promulgated thereunder; (ix) no
WP Partner, WP Entity or ERISA WP Affiliate currently contributes to any
"multiemployer plan" (as defined in Section 3(37) of ERISA), and there has
not been any complete or partial withdrawal from or termination of
participation in any such WP Employee Plan that could result in withdrawal
liability or similar liability for the WP Partners, the WP Entities, the
ERISA WP Affiliates, the Schuler Entities, their Affiliates or Newco, whether
directly or as a result of controlled group liability; and (x) all
contributions, premiums and other payments that would normally be made or
paid with respect to any WP Employee Plan on behalf of the WP Business or the
WP Employees by the Closing Date will have been made by the Closing Date.
(c) Except as set forth in this Agreement or
WP Disclosure Schedule Section 4.11, the execution of, and performance of the
transactions contemplated by, this Agreement will not (either together with
or upon the occurrence of any additional or subsequent events) constitute an
event under any WP Employee Plan or WP Employee Agreement that could result
in any payment (whether severance pay or otherwise), acceleration, vesting or
increase in benefits with respect to any current or former employee of any
WP Partner or WP Entity or any of the ERISA WP Affiliates, whether or not any
such payment would be an "excess parachute payment"" (as defined in
Section 280G of the Code).
(d) No WP Partner or WP Entity nor any of the ERISA
WP Affiliates is required to maintain, contribute to or make payments under
any WP Employee Plan or WP Employee Agreement by the law or applicable custom
or rule of any jurisdiction outside of the United States.
(e) Each WP Employee Plan and WP Employee Agreement
complies with all applicable requirements of (i) the Age Discrimination in
Employment Act of 1967, as amended, and the regulations thereunder;
(ii) Title VII of the Civil Rights Act of 1964, as amended, and the
regulations thereunder; and (iii) all other applicable laws. All amendments
and actions required
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to bring each of the WP Employee Plans and WP Employee Agreements into
conformity with all applicable provisions of the Code, ERISA and other
applicable laws have been made or taken, except to the extent that such
amendments or actions are not required by law to be made or taken until a
date after the Closing Date and are disclosed in WP Disclosure Schedule
Section 4.11.
(f) Except as set forth in WP Disclosure Schedule
Section 4.11, upon Closing Schuler or Newco or one or more of their
Affiliates, as applicable, may terminate any WP Employee Plan or WP Employee
Agreement or may cease contributions to or making payments under any WP
Employee Plan or WP Employee Agreement without incurring any liability, other
than a benefit liability accrued in accordance with the terms of such Plan or
Agreement immediately prior to such termination or cessation of contributions.
(g) All individuals who are or were performing consulting
or other services for any WP Partner or WP Entity or any of the ERISA
WP Affiliates are or were correctly classified by the such WP Partner,
WP Entity or ERISA WP Affiliate as either "independent contractors" or
"employees," as the case may be, and, at the Closing Date, will qualify for
such classification.
4.12 TAXES. (a) Except as set forth in WP Disclosure
Schedule Section 4.12, (i) the WP Entities have timely filed or caused to be
timely filed (or will timely file or cause to be timely filed) with the
appropriate Taxing Authorities all Tax Returns required to be filed on or
prior to the Closing Date (taking into account all extensions of due dates)
by or with respect to the WP Entities and have timely paid or adequately
provided for (or will timely pay or adequately provide for) all Taxes owed by
the WP Entities (whether or not shown on any Tax Return) for the period up to
and including the Closing Date, except where the failure to file such Tax
Returns or pay any such Taxes would not, or could not reasonably be expected
to, in the aggregate result in losses, costs or expenses to the WP Entities,
taken as whole, in excess of $2,000,000 after the Closing Date, (ii) all such
Tax Returns were or will be correct and complete in all material respects,
and (iii) all withholding Tax requirements imposed on or with respect to the
WP Entities have been or will be satisfied in full in all respects. No
written claim has been made to the WP Partners or the WP Entities by any
Taxing Authority in any jurisdiction where the WP Entities do not file Tax
Returns asserting that any of them are required to file a Tax Return.
(b) Except as set forth in WP Disclosure Schedule Section
4.12, (i) there have been no examinations or audits with respect to any Tax
Return of, or which included, the WP Entities, and (ii) no assessment,
deficiency or adjustment for any Taxes has been asserted in writing or, to
the knowledge of the WP Partners and the WP Entities, is proposed with
respect to any Tax Return of, or which includes, the WP Entities.
(c) Except as set forth in WP Disclosure Schedule Section
4.12, there is not in force any extension of time with respect to the due
date for the filing of any Tax Return of or with respect to or which includes
the WP Entities or any waiver or agreement for any extension of time for the
assessment or payment of any Tax of or with respect to or which includes the
WP Entities.
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(d) The WP Balance Sheet fully accrues all actual and
contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with GAAP. The WP Entities will establish, in the
ordinary course of business and consistent with its past practices, reserves
adequate for the payment of all Taxes (other than income taxes) for the
period from June 30, 2000 through the Closing Date.
(e) All Tax allocation or sharing agreements or
arrangements with respect to the WP Entities have been or will be cancelled
on or prior to the Closing Date. No payments are or will become due by the WP
Entities after the Closing Date pursuant to any such agreement or arrangement.
(f) Except as set forth in WP Disclosure Schedule Section
4.12, none of the property of the WP Entities is held in an arrangement for
which partnership Tax Returns are required to be filed, no WP Entity owns an
interest in a partnership and no WP Entity owns any interest in any
controlled foreign corporation (as defined in Section 957 of the Code) or
passive foreign investment company (as defined in Section 1296 of the Code).
(g) Except as set forth in WP Disclosure Schedule
Section 4.12, none of the property of the WP Entities is subject to a
safe-harbor lease (pursuant to Section 168(f)(8) of the Internal Revenue Code
of 1954 as in effect after the Economic Recovery Act of 1981 and before the
Tax Reform Act of 1986) or is "tax-exempt use property" (within the meaning
of Section 168(h) of the Code) or "tax-exempt bond financed property" (within
the meaning of Section 168(g)(5) of the Code).
(h) Except as set forth in WP Disclosure Schedule Section
4.12, none of the WP Entities will be required to include any amount in
income for any taxable period beginning after the Closing Date as a result of
a change in accounting method for any taxable period ending on or before the
Closing Date or pursuant to any agreement with any Taxing Authority with
respect to any such taxable period.
(i) No WP Entity has consented to have the provisions of
Section 341(f)(2) of the Code apply with respect to a sale of its stock.
(j) Except as set forth in WP Disclosure Schedule
Section 4.12, none of the WP Entities will, as a result of the transactions
contemplated by this Agreement, be obligated to make a payment to an
individual that would be a "parachute payment" as defined in Section 280G of
the Code without regard to whether such payment is reasonable compensation
for personal services performed or to be performed in the future.
(k) Except as set forth in WP Disclosure Schedule
Section 4.12, no power of attorney has been granted with respect to any
matter relating to Taxes of the WP Entities which is currently in force.
(l) Except as set forth in WP Disclosure Schedule
Section 4.12, each WP Entity is taxed as a partnership for income tax
purposes.
4.13 COMPLIANCE WITH LAW. Except with respect to
Environmental Laws (which are covered separately in Section 4.17), since
December 31, 1996, no WP Entity has
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violated any law, statute, rule, regulation or Governmental Order which has
subjected it to fines or penalties in excess of $2,000,000 in the aggregate.
As of the Agreement Date, each WP Entity is in compliance in all material
respects with all laws, statutes, rules, regulations and Governmental Orders
applicable to such WP Entity or by which the properties or assets of such
WP Entity are bound or subject, except where the noncompliance with which
would not, in the aggregate, result in the imposition on the WP Entities,
taken as a whole, of fines or penalties in excess of $2,000,000.
4.14 CONTRACTS AND COMMITMENTS. WP Disclosure Schedule
Section 4.14 contains an accurate and complete list as of the Agreement Date
of each contract, agreement or commitment of the WP Entities (a) to which any
WP Entity or any of its assets or properties is bound and which requires
total payments to or by a WP Entity of at least $2,000,000 annually; (b) to
which any WP Entity or any of its assets or properties is bound or subject
and which has a remaining term longer than one year, which requires total
payments by the WP Entities, taken as a whole, of at least $2,000,000 during
such term and which is not terminable on 30 or fewer days' notice without
penalty; (c) containing covenants limiting the freedom of any WP Entity to
compete in any line of business or with any Person in any geographical area;
(d) calling for the proposed acquisition of any operating business or any
assets outside the ordinary course of business and with a purchase price in
excess of $2,000,000; (e) relating to the proposed purchase or sale of any
material assets or properties of the WP Entities, taken as a whole; (f) to
which any WP Entity is a party or by which any of its assets or properties
are bound relating to indebtedness for borrowed money, including capital
leases, security agreements relating thereto and any amendment or waiver
thereof, and (g) with the WP Partners or any Affiliate thereof (collectively,
the "WP Commitments;" PROVIDED, that WP Commitments shall not include (i)
contracts granting any WP Entity an option to purchase land, (ii) conditions,
covenants and restrictions for real property owned by any WP Entity, or (iii)
agreements between any WP Entity and any contractor or developer made in the
ordinary course of business). Each WP Commitment is a legal, valid and
binding obligation of the applicable WP Entity, enforceable against such WP
Entity in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). Except as set forth in WP
Disclosure Schedule Section 4.14, no WP Entity is, nor to the knowledge of
the WP Partners or the WP Entities is any other party thereto, in default
under any of the WP Commitments where such default would result, in the
aggregate, in a Liability in excess of $2,000,000. Except as set forth in WP
Disclosure Schedule Section 4.14, since December 31, 1998, no WP Partner or
WP Entity has received written notice of cancellation or termination of any
WP Commitment from any other party thereto.
4.15 PERMITS AND OTHER OPERATING RIGHTS. Except as set
forth in WP Disclosure Schedule Section 4.15 and except with respect to
Environmental Permits (which are covered separately in Section 4.17), all
permits, licenses, orders, approvals and authorizations required by any
applicable law, statute, regulation or Governmental Order, or by the property
and contract rights of third Persons, reasonably necessary to permit the
operation of the WP Business in the manner currently conducted by the WP
Entities and to permit the current occupancy of the WP Real Property by the
WP Entities have been obtained or are reasonably expected to be obtained by
the WP Entities, except where the failure to possess such permit,
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license, order, approval, authorization or rights would not result in a
Material Adverse Effect on the WP Entities or the WP Business. No WP Partner
or WP Entity has received written notice from any Governmental Authority that
any such permit, license, order, approval or authorization has been, or will
be, revoked or terminated.
4.16 LABOR MATTERS. No employee of the WP Entities is
covered under any collective bargaining agreement. Except to the extent set
forth in WP Disclosure Schedule Section 4.16: (a) there is no unfair labor
practice complaint against any of the WP Entities pending or, to the
knowledge of the WP Partners and the WP Entities, threatened before the
National Labor Relations Board or any comparable state or local Governmental
Authority, (b) there is no labor strike, slowdown or work stoppage actually
pending or, to the knowledge of the WP Partners and the WP Entities,
threatened against or directly affecting any of the WP Entities, and (c) no
grievance or any Action arising out of or under collective bargaining
agreements is pending or, to the knowledge of the WP Partners and the
WP Entities, threatened against any WP Entities.
4.17 ENVIRONMENTAL MATTERS. Except as set forth in
WP Disclosure Schedule Section 4.17, to the knowledge of the WP Partners and
the WP Entities:
(a) the WP Entities have not used, generated, treated,
stored or disposed of any Hazardous Material at any properties owned, leased
or operated by the WP Entities, other than Hazardous Material customarily
used, generated, treated, stored or disposed of in connection with businesses
similar to the WP Business;
(b) the WP Entities have not caused the release,
discharge, spillage, loss, seepage or filtration of any Hazardous Material
and no such occurrence is threatened on, under, about or from such properties;
(c) the WP Entities have not engaged in, and are not
engaged in, the use, generation, production, manufacture, treatment, storage,
disposal or transportation of Hazardous Material, other than those Hazardous
Materials customarily used, generated, produced, manufactured, treated,
stored, disposed or transported in connection with businesses similar to the
WP Business;
(d) to the knowledge of the WP Partners and the
WP Entities, none of the properties owned, leased or operated by the
WP Entities contains or has contained any underground or above-ground tanks
for the storage of Hazardous Material and has not been remediated;
(e) the WP Entities have disposed of all wastes,
including those containing any Hazardous Material, in substantial compliance
with all applicable Environmental Laws and Environmental Permits, and, to the
knowledge of the WP Partners and the WP Entities, the WP Entities have never
received any written notice or claim of Liability for any off-site
contamination;
(f) Environmental Permits have been obtained and are in
full force and effect, or are in the process of being obtained, for the
operations conducted at all properties owned, leased or operated by the
WP Entities;
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(g) none of the properties owned, leased or operated by
the WP Entities are listed or, to the knowledge of the WP Partners and the
WP Entities, proposed for listing on the National Priorities List under
CERCLA or on the CERCLIS or any similar state list of sites requiring
investigation or cleanup;
(h) the WP Entities and each property owned, leased or
operated by the WP Entities has been and is in substantial compliance with
all, and is not in violation of any, Environmental Laws and Environmental
Permits, and there are no Governmental Orders outstanding, no claims with
respect to Environmental Laws have been instituted or filed, and none are
pending or, to the knowledge of the WP Partners and the WP Entities,
threatened relating to the WP Entities or their business, operations, assets
or properties, owned, leased or operated; and
(i) the WP Partners have provided or made available to
Schuler true, accurate and complete copies of any written information in the
possession of the WP Partners and the WP Entities (other than where such
disclosure would result in the loss of the attorney-client privilege) which
pertains to the environmental history of all the properties owned, leased or
operated by the WP Entities.
4.18 WARRANTY OBLIGATIONS.
(a) Except as set forth on WP Disclosure Schedule
Section 4.18, none of the WP Entities, to the knowledge of the WP Partners
and the WP Entities, has any warranty claims that are not covered by
Homebuyers Warranty Corporation, National Home Insurance Company or
warranties from subcontractors that materially exceed the amounts reserved
therefor on the WP Balance Sheet or any aggregate amounts properly accrued on
the books and records of any of the WP Entities since the date of the
WP Balance Sheet.
(b) Except as set forth on WP Disclosure Schedule
Section 4.18, to the knowledge of the WP Partners and the WP Entities, no
product manufactured, sold, leased or delivered by any of the WP Entities
(except pursuant to applicable law) is subject to any material guaranty,
warranty, or other indemnity beyond the applicable standard terms and
conditions of sale or lease.
(c) To the knowledge of the WP Partners and the
WP Entities, except as set forth on WP Disclosure Schedule Section 4.18, none
of the WP Entities has any material Liability not fully covered by insurance
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any product manufactured, sold, leased or
delivered by any of the WP Entities.
(d) All sales by the WP Entities have been made in
accordance with all federal and state consumer disclosure laws and
regulations, including, if applicable, the California Subdivided Lands Act
and the regulations enacted thereunder.
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4.19 HOMEOWNER ASSOCIATIONS.
(a) WP Disclosure Schedule Section 4.19 contains an
accurate and complete list of all homeowner associations (the "WP Homeowner
Associations") in which any of the WP Entities has or has had declarant
rights.
(b) Except as set forth on WP Disclosure Schedule Section
4.19, to the knowledge of the WP Partners and the WP Entities, (i) all
restrictive covenants and other documents used by any of the WP Entities in
connection with the creation and operation of the WP Homeowner Associations
(A) in which any of the WP Entities previously had declarant rights complied
in all material respects with applicable laws at the time the same were
promulgated, and (B) in which any of the WP Entities currently has declarant
rights currently comply in all material respects with applicable laws, and
(ii) all material disclosures and deliveries of information and documents
required by applicable laws as to such WP Homeowner Associations and their
creation and operation have been materially complied with.
(c) To the knowledge of the WP Partners and the
WP Entities, WP Disclosure Schedule Section 4.19 contains an accurate and
complete list of all amounts in excess of $2,000,000 owing between the
WP Homeowners Associations and any of the WP Entities.
(d) To the knowledge of the WP Partners and the
WP Entities, no other claims exist by a WP Homeowner Association against any
of the WP Entities, and to the knowledge of the WP Partners and the
WP Entities, each WP Homeowner Association has been operated, so long as any
of the WP Entities has participated therein, in accordance with applicable
laws.
4.20 ASSETS NECESSARY TO THE WP BUSINESS. Except as set
forth in WP Disclosure Schedule Section 4.20, immediately before the
Effective Time the WP Entities will hold or have the right to use in the
WP Business all of the assets and properties (including all licenses and
agreements) currently being used (except those disposed of in the ordinary
course of business or otherwise as contemplated or permitted by this
Agreement) or which are reasonably necessary to permit the operation of the
WP Business in the manner currently conducted by the WP Entities.
4.21 ACCURACY OF INFORMATION FURNISHED. No representation
or warranty made by the WP Partners in this Article IV and the related
WP Disclosure Schedule contains any untrue statement of material fact or
omits to state, in light of the circumstances under which it has been made, a
material fact necessary to make such representation or warranty not
misleading; PROVIDED, HOWEVER, that no representation or warranty is made as
to projections, forecasts or other forward looking information furnished by
any WP Partner or WP Entity to Schuler.
4.22 NO BROKERS. None of the WP Partners, WP Entities nor
any of their directors, officers, employees, partners or members has employed
any broker, finder or investment banker (other than Donaldson, Lufkin &
Jenrette Securities Corporation) or incurred any Liability for any brokerage
fees, commissions, finders' fees or similar fees in connection with the
transactions contemplated by this Agreement or any Ancillary Agreement (other
than
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the fees and expenses of Donaldson, Lufkin & Jenrette Securities Corporation
and certain fees payable to Bankers Trust).
4.23 DISCLAIMER. Except as otherwise expressly set forth
in this Article IV, the WP Partners expressly disclaim any representations or
warranties of any kind or nature, express or implied, as to the condition,
value or quality of the assets or properties currently or formerly used,
operated, owned, leased, controlled, possessed, occupied or maintained by the
WP Entities. THE WP PARTNERS SPECIFICALLY DISCLAIM ANY REPRESENTATION OR
WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE WITH RESPECT TO SUCH ASSETS OR PROPERTIES, OR ANY PART THEREOF, OR AS
TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER
LATENT OR PATENT, IT BEING UNDERSTOOD THAT SUCH ASSETS AND PROPERTIES ARE
BEING ACQUIRED THROUGH THE CONTRIBUTION "AS IS, WHERE IS" ON THE CLOSING
DATE, AND IN THEIR PRESENT CONDITION, WITH ALL FAULTS, AND THAT SCHULER SHALL
RELY ON ITS OWN EXAMINATION AND INVESTIGATION THEREOF.
4.24 LLC. At the time of the formation of Newco pursuant
to Section 2.2 and at the Closing Date:
(a) WP LLC shall (i) be a limited liability company duly
organized, validly existing and in good standing under the laws of the State
of Delaware with full power and authority to own its assets and properties
and to conduct its business, (b) be duly qualified to transact business as a
foreign Person and shall be in good standing in every jurisdiction in which
the character of its properties, owned or leased, or the nature of its
activities makes such qualification necessary, except where the failure to be
so qualified or in good standing would not have a Material Adverse Effect on
WP LLC, the WP Entities or the WP Business and (c) have full power and
authority to enter into the Ancillary Agreements to which it is a party and
to consummate the transactions contemplated thereby.
(b) The execution and delivery of the Ancillary
Agreements to which it is a party and the consummation of the transactions
contemplated thereby by the WP LLC shall have been duly authorized by all
necessary company action on the part of WP LLC, and each Ancillary Agreement
to which WP LLC is a party, when executed and delivered by WP LLC, will
constitute a legal, valid and binding obligation of WP LLC, enforceable
against WP LLC in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights
generally and general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(c) No consent, waiver, approval, order or authorization
of, notice to, or registration, declaration, designation, qualification or
filing with, any Governmental Authority or third Person, domestic or foreign,
which shall not have been obtained prior to the Closing is or has been or
will be required on the part of WP LLC in connection with the execution and
delivery of any Ancillary Agreement or the consummation by WP LLC of the
transactions contemplated hereby or thereby, other than where the failure to
obtain such consents, waivers, approvals, orders or authorizations or to make
or effect such registrations, declarations,
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designations, qualifications or filings will not (x) prevent or materially
delay consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, (y) prevent WP LLC from performing its obligations
under the Ancillary Agreements or (z) result in a Material Adverse Effect on
WP LLC, the WP Entities or the WP Business.
(d) Neither the execution and delivery of any Ancillary
Agreement by WP LLC, nor the consummation by it of the transactions
contemplated hereby or thereby, will violate or conflict with, or result in
the acceleration of rights, benefits or payments under, (i) any provision of
the Charter or Bylaws of WP LLC, (ii) any statute, law, regulation or
Governmental Order to which WP LLC or any of its assets or properties may be
bound or subject, (c) any debt, note, bond, indenture, Encumbrance, lease,
license, instrument, contract, commitment or other agreement to which WP LLC
is a party or by which it or any of its assets or properties may be bound or
subject, except, with respect to clauses (ii) and (iii), for such violations
and conflicts which will not (A) prevent or materially delay consummation of
the transactions contemplated by this Agreement and the Ancillary Agreements,
(B) prevent WP LLC from performing its obligations under the Ancillary
Agreements or (iii) result in a Material Adverse Effect on WP LLC, the
WP Entities or the WP Business.
4.25 NON-CONTROLLED WP ENTITIES. WP Disclosure Schedule
Section 4.25 contains an accurate and complete list of all WP Entities in
which neither the WP Partners, the WP Parents nor any Affiliates thereof hold
a general partner or managing member interest (the "Non-Controlled
WP Entities"). Notwithstanding anything to the contrary herein, all
representations and warranties made by the WP Partners pursuant to this
Article IV with respect to the Non-Controlled WP Entities are made only to
the knowledge of the WP Partners and the WP Entities (other than the
Non-Controlled WP Entities).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SCHULER
5.1 SCHULER ORGANIZATION. (a) ORGANIZATION. Schuler is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and corporate
authority to own its assets and properties and to conduct its business as and
where it is now being conducted.
(b) TRANSACT BUSINESS. Schuler is duly qualified to
transact business as a foreign corporation and is in good standing in every
jurisdiction in which the character of its properties, owned or leased, or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified or in good standing would not have a Material
Adverse Effect on Schuler and the Schuler Subsidiaries taken as a whole.
5.2 SUBSIDIARIES. (a) ORGANIZATION. Each Schuler
Subsidiary is an entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has full power and
authority to own its assets and properties and to conduct its business as and
where it is now being conducted.
(b) TRANSACT BUSINESS. Each Schuler Subsidiary is duly
qualified to transact business as a foreign Person and is in good standing in
every jurisdiction in which the character
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of its properties, owned or leased, or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified or
in good standing would not have a Material Adverse Effect on Schuler and the
Schuler Subsidiaries taken as a whole.
(c) CHARTER AND BYLAWS. Schuler has delivered to the
WP Partners complete and correct copies of the Charter and Bylaws of Schuler
and each Schuler Subsidiary as in effect as of the Agreement Date.
(d) SCHULER SUBSIDIARIES CAPITALIZATION. Schuler
Disclosure Schedule Section 5.2 contains an accurate and complete list of:
(i) the name of each Schuler Subsidiary; (ii) the name of each other
partnership, limited liability company, corporation, partnership or other
entity in which Schuler has, directly or indirectly, any material equity
interest; (iii) in the case of each corporation specified in clauses (i) and
(ii) above, (A) the jurisdiction of its incorporation; (B) the capitalization
thereof and the percentage of each class of voting capital stock owned
directly or indirectly by Schuler and (C) the names and percentage
ownership's of all Persons known by Schuler to be record or beneficial owners
of shares of capital stock of each such corporation; and, (iv) in the case of
each unincorporated entity specified in clauses (i) and (ii) above, the
equivalent of the information provided pursuant to the preceding clause
(iii) with respect to corporate entities. Except as set forth in Schuler
Disclosure Schedule Section 5.2, (i) all shares of capital stock of each
corporation and ownership interests of each unincorporated entity identified
in the preceding sentence are owned directly or indirectly by Schuler, free
and clear of any Encumbrance, (ii) there are no voting trusts, voting
agreements or similar understandings applicable to such shares of capital
stock or ownership interests and there are no options, warrants or other
rights, agreements or commitments (other than this Agreement) obligating
Schuler to issue, sell or transfer any shares of capital stock, ownership
interest or other securities (equity or otherwise) of any Schuler Subsidiary.
All of the outstanding capital stock and ownership interest of each Schuler
Subsidiary is duly authorized, validly issued, fully paid, nonassessable
(except for such ownership interests constituting general partner interests)
and is without, and was not issued in violation of, preemptive rights or any
applicable law.
5.3 AUTHORIZATION. (a) Schuler has full corporate power
and corporate authority to enter into this Agreement and to consummate the
transactions contemplated hereby and thereby. Subject only to the approval of
this Agreement and the transactions contemplated hereby by the holders of a
majority of the outstanding shares of Schuler Common Stock, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and thereby by Schuler have been duly authorized by all
necessary corporate action on the part of Schuler. This Agreement has been
duly executed and delivered by Schuler. This Agreement constitutes a legal,
valid and binding obligation of Schuler, enforceable against Schuler in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(b) Except (i) for compliance with the applicable
requirements, if any, of the Exchange Act, the Securities Act, and applicable
state securities or "Blue Sky" laws, (ii) for the filing and recordation of
appropriate merger and similar documents as required by Delaware law,
(iii) for compliance with the notification, filing and waiting period
requirements of the HSR Act,
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(iv) the approval of this Agreement and the transactions contemplated hereby
by the holders of a majority of the outstanding shares of Schuler Common
Stock, or (v) as otherwise set forth in Schuler Disclosure Schedule
Section 5.3(b), no consent, waiver, approval, order or authorization of,
notice to, or registration, declaration, designation, qualification or filing
with, any Governmental Authority or third Person, domestic or foreign, is or
has been or will be required on the part of Schuler in connection with the
execution and delivery of this Agreement or the consummation by Schuler of
the transactions contemplated hereby or thereby, other than where the failure
to obtain such consents, waivers, approvals, orders or authorizations or to
make or effect such registrations, declarations, designations, qualifications
or filings is not reasonably likely to (x) prevent or materially delay
consummation of the transactions contemplated by this Agreement, (y) prevent
Schuler from performing its obligations under this Agreement or (z) result in
a Material Adverse Effect on Schuler and the Schuler Subsidiaries taken as a
whole.
5.4 NON-CONTRAVENTION. Except as set forth in Schuler
Disclosure Schedule Section 5.4, neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate or conflict with, or result in the acceleration of rights, benefits
or payments under, (a) any provision of Schuler's Charter or Bylaws, (b) any
statute, law, regulation or Governmental Order to which Schuler or the assets
or properties of Schuler are bound or subject or (c) any agreement, contract
or commitment to which Schuler is a party or by which it or any of its
properties may be bound or subject, except, with respect to clause (b) and
(c), for such violations and conflicts which are not reasonably likely to
(i) prevent or materially delay consummation of the transactions contemplated
by this Agreement, (ii) prevent Schuler from performing its obligations under
this Agreement or (iii) result in a Material Adverse Effect on Schuler and
the Schuler Subsidiaries taken as a whole.
5.5 SEC FILINGS; FINANCIAL STATEMENTS; NO UNDISCLOSED
LIABILITIES. (a) Schuler has filed and made available to the WP Partners all
forms, reports, documents and other information required to be filed by
Schuler with the SEC pursuant to the Exchange Act, since December 31, 1996
(collectively, the "Schuler SEC Reports"). The Schuler SEC Reports (i) at the
time filed complied as to form in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations thereunder and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the Agreement Date, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in the Schuler SEC Reports or necessary in order to
make the statements in the Schuler SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of the Schuler
Subsidiaries is required to file any forms, reports or other documents with
the SEC.
(b) Each of the consolidated financial statements
(including, in each case, any related notes) contained in the Schuler SEC
Reports, including any Schuler SEC Reports filed after the Agreement Date
through the Closing, complied or will comply as to form in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, was or will be prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited
statements, as permitted for presentation in Quarterly Reports on Form 10-Q),
and fairly presented or will fairly present the consolidated financial
position of Schuler and the Schuler Subsidiaries taken as a whole as at the
respective dates and the consolidated results of its
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operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount with respect to Schuler and the Schuler Subsidiaries taken
as a whole. The unaudited balance sheet of Schuler as at June 30, 2000
included in the Schuler SEC Reports is referred to herein as the "Schuler
Balance Sheet."
(c) Schuler and the Schuler Subsidiaries have no
Liabilities, except for Liabilities (i) reflected in the Schuler Balance
Sheet, (ii) incurred by Schuler and/or the Schuler Subsidiaries in the
ordinary course of business and consistent with past practices since the date
of the Schuler Balance Sheet, (iii) which in the aggregate are less than
$2,000,000 or (iv) otherwise disclosed in the Schuler Disclosure Schedule. As
used in this Section 5.5, the term "Liabilities" excludes any Liabilities
under permits, licenses, orders, approvals, authorizations, contracts,
agreements or commitments for future payments or performance where Schuler
and/or the Schuler Subsidiary is not currently in violation of or default
under any provision thereof.
5.6 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schuler Disclosure Schedule Section 5.6, since the date of the Schuler
Balance Sheet:
(a) Schuler and the Schuler Subsidiaries, taken as a
whole, have not suffered any damage or destruction adversely affecting the
Schuler Business or the tangible assets owned or leased by the Schuler
Entities that has had or is reasonably likely to result in a loss, cost or
expense to the Schuler Entities, taken as a whole, in excess of $2,000,000;
(b) Except pursuant to debt agreements existing on the
date of the Schuler Balance Sheet, no Schuler Entity has incurred, assumed or
become subject to any additional indebtedness for money borrowed or purchase
money indebtedness, including capitalized leases;
(c) No Schuler Entity has made any change in the
compensation levels of the senior executives of such Schuler Entity (i.e.,
vice presidents and above), any change in the manner in which other employees
of such Schuler Entity generally are compensated, or any provision of
additional or supplemental benefits for employees of such Schuler Entity
generally, except normal periodic increases, promotions or payments under
compensation plans effected in the ordinary course of business and consistent
with past practices;
(d) No Schuler Entity has entered into any transaction
not in the ordinary course of business, except as contemplated by this
Agreement;
(e) Except for changes affecting the single-family home,
townhome and/or condominium construction industry generally (nationwide or in
specific locales), no Material Adverse Effect has occurred;
(f) There have been no Encumbrances on the assets or
properties of any Schuler Entity, other than Permitted Liens;
(g) None of the Schuler Entities have made any material
change in its accounting principles; and
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(h) No Schuler Entity has agreed, whether in writing or
otherwise, to take any action described in this Section 5.6.
5.7 TITLE TO ASSETS. Except as set forth in Schuler
Disclosure Schedule Section 5.7, each Schuler Entity has good title to all of
the assets and properties (including Schuler Owned Real Property) used in the
conduct of the Schuler Business (including those reflected on the Schuler
Balance Sheet), except for assets and properties sold, consumed or otherwise
disposed of in the ordinary course of business and consistent with past
practices since the date of the Schuler Balance Sheet, free and clear of any
Encumbrance, other than Permitted Liens.
5.8 REAL PROPERTY. (a) LEASED REAL PROPERTY. Except for
real property leases and subleases the failure of which to possess or hold
would not in the aggregate result in a Schuler Loss in the aggregate in
excess of $2,000,000 or which are part of the Schuler Entities' model home
leaseback program, Schuler Disclosure Schedule Section 5.8(a) contains an
accurate and complete list of all real property leased or subleased to the
Schuler Entities as of the Agreement Date (the "Schuler Leased Real Property"
and, together with the Schuler Owned Real Property, the "Schuler Real
Property"). All leases and subleases of such Schuler Leased Real Property by
the Schuler Entities (x) are legal, valid and binding obligations of the
Schuler Entities, enforceable against the Schuler Entities in accordance with
their terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity), and are in full force and effect, and (y)
originals or copies of which that were accurate and complete as of the date
provided have been made available to the WP Partners for review. Except as
disclosed in Schuler Disclosure Schedule Section 5.8(a), the Schuler Entities
enjoy peaceful and undisturbed possession under all leases and subleases of
Schuler Leased Real Property, and, to the knowledge of the Schuler Entities,
all lessors under any lease or sublease of Schuler Leased Real Property (1)
are not (with or without notice or the lapse of time, or both) in material
breach or default thereunder, (2) have performed all material obligations
required to be performed by it thereunder, and (3) have not given written
notice to the Schuler Entities of their intent to terminate such lease or
sublease of Schuler Leased Real Property.
(b) OWNED REAL PROPERTY. Schuler Disclosure Schedule
Section 5.8(b) contains an accurate and complete list and brief description
of all real property in which the Schuler Entities own an interest as of
September 11, 2000 (except for the Schuler Land Contract Property and Schuler
Option Real Property (as such terms are defined below) and Schuler Leased
Real Property). Such real property, together with all such real property in
which the Schuler Entities own an interest as of the Agreement Date, is
referred to herein as the "Schuler Owned Real Property." Except as set forth
on Schuler Disclosure Schedule Section 5.8(b), the Schuler Owned Real
Property has all (i) appropriate zoning, (ii) preliminary plan approval,
(iii) utilities (or utilities are able to be timely obtained) and (iv)
necessary access to and from public highways, streets and roads for
construction and residential purposes (or such access will be timely
obtained).
(c) LAND CONTRACTS. Schuler Disclosure Schedule Section
5.8(c) contains an accurate and complete list and brief description of all
written agreements, arrangements,
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contracts, and commitments as of September 10, 2000 to which any of the
Schuler Entities is a party or entered into on behalf thereof pursuant to
which any of the Schuler Entities (i) is obligated to purchase any developed
or undeveloped real property, whether or not such obligation is subject to
conditions (the "Schuler Land Contract Property") as of the Agreement Date or
(ii) possesses an option to acquire any developed or undeveloped real
property (the "Schuler Option Real Property"). In addition, Schuler
Disclosure Schedule Section 5.8(c) contains an accurate and complete list of
all deposits or other moneys that would be forfeited or paid as a result of a
failure to exercise the option on any such Schuler Option Real Property.
(d) OTHER REAL PROPERTY REPRESENTATIONS.
(i) NO CONDEMNATION. No condemnation,
eminent domain, or similar Action is pending or, to the knowledge
of the Schuler Entities, is threatened with respect to any Schuler
Real Property which would, if successful, have a Material Adverse
Effect on the Schuler Business.
(ii) COMPLIANCE WITH LAWS. To the
knowledge of the Schuler Entities, the buildings and improvements
on the developed Schuler Owned Real Property and the Schuler Leased
Real Property and the subdivision of and improvements on the
undeveloped Schuler Owned Real Property do not violate (A) any
applicable law, including any building, set-back, or zoning law,
ordinance, regulation, or statute, or Governmental Order or (B) any
enforceable restrictive covenant affecting any such property,
except for any violations which, individually or in the aggregate,
will not have a Material Adverse Effect on the Schuler Business.
(iii) SITE OBLIGATIONS. Except as set
forth on Schuler Disclosure Schedule Section 5.8(d), to the
knowledge of the Schuler Entities, no Schuler Real Property is
subject to any condition or obligation to any Governmental
Authority or other Person requiring the owner or any transferee
thereof to donate or otherwise transfer for less than fair value
land or any interest therein, money or other property or to make
off-site public improvements, other than obligations that would not
have a Material Adverse Effect on the Schuler Business.
(iv) ASSESSMENTS. No material
development fees, in-lieu fees, school fees or charges or other
developer-related charges or assessments by any Governmental
Authority or any other Person for public facilities or improvements
or otherwise made against the developed Schuler Owned Real Property
or any lots included therein are past due and unpaid (other than
those set forth on the Schuler Balance Sheet or on Schuler
Disclosure Schedule Section 5.8(d)).
(v) SUBDIVISION STANDARDS. Except as
set forth on Schuler Disclosure Schedule Section 5.8(d), to the
knowledge of the Schuler Entities, the developed Schuler Owned Real
Property and all lots included therein conform in all material
respects to the appropriate Governmental Authority's subdivision
standards, subdivision maps and any conditions or approval or
recordation thereof and there is no material impediment to
subdivision approval or issuance and recordation of subdivision
maps for the undeveloped Schuler Owned Real Property, such approval
to allow development of the
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undeveloped Schuler Owned Real Property for construction and sale of
single-family homes, townhomes and/or condominiums at the density and
materially in the manner currently anticipated by any of the
Schuler Entities.
(vi) MORATORIA. Except as set forth on
Schuler Disclosure Schedule Section 5.8(d), to the knowledge of the
Schuler Entities, there is no moratorium applicable to any of the
Schuler Owned Real Property to the extent any of the Schuler
Entities plans further development thereof on (A) the issuance of
building permits for the construction of houses, or certificates of
occupancy therefor, or (B) the purchase or issuance of sewer or
water taps or permits, to the extent any of the Schuler Entities
plans or is required to rely on public water or sewer facilities.
(vii) ENVIRONMENTAL MATTERS AND
WETLANDS. Except as set forth on Schuler Disclosure Schedule
Section 5.8(d), (A) none of the Schuler Real Property on which any
of the Schuler Entities intends to construct residential dwellings
is located within a "habitat for threatened or endangered plants or
animals" or a "critical," "preservation," "conservation" or similar
type of area which will materially affect any of the Schuler
Entities' present development plans therefor, (B) no portion of the
Schuler Real Property which any of the Schuler Entities has
developed or intends to develop for residential lots and dwellings
is situated within a "noise cone" such that the Federal Housing
Administration will not approve mortgages due to the noise level
classification of such Schuler Real Property and (C) no wetlands
exist which are reasonably likely to restrict development of any of
the Real Property as currently contemplated by any of the Schuler
Entities.
(viii) NO FOREIGN SCHULER ENTITIES. No Schuler
Entity is a "foreign person" within the meaning of Sections 1445
and 7701 of the Code.
(ix) ZONING AND UTILITIES. No Schuler
Entities own or have any interest in, or are contractually
obligated to acquire or obtain any interest in, any real property
which does not have, or will not have prior to such acquisition or
obtaining of interest, residential zoning under any applicable
general, special or specific plans and under any applicable zoning
laws and regulations and the provision of potable water, sewage and
other utilities available to the boundary of the land.
5.9 INTELLECTUAL PROPERTY. Schuler Disclosure Schedule
Section 5.9 contains an accurate and complete list of (a) all patents
throughout the world, (b) all trademarks, trade names and service marks and
applications therefor throughout the world, (c) all copyrights and
applications therefor throughout the world, (d) all software and computer
programs, and (e) all licenses relating to patents, patent rights, know how,
trade secrets, trademarks, trade names, service marks, software and computer
programs or other intellectual property, in each case issued to or used or
held for use by the Schuler Entities in the operation of the Schuler Business
(collectively, the "Schuler Intellectual Property"; provided, however, that
Schuler Disclosure Schedule Section 5.9 need not contain any Schuler
Intellectual Property consisting of "off-the shelf" software or computer
programs). Except as set forth in Schuler Disclosure Schedule Section 5.9,
the Schuler Entities are the sole and exclusive owner or licensee of, with
all right, title and interest in and to (free and clear of any Encumbrances,
other than Permitted Liens), the
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Schuler Intellectual Property. To the knowledge of the Schuler Entities, the
use of any such Schuler Intellectual Property in the conduct of the Schuler
Business as presently conducted does not violate any rights of any third
Person, the violation of which would result in losses, costs or expenses in
the aggregate in excess of $2,000,000. The Schuler Entities have not received
written notice that the use of any such Schuler Intellectual Property in the
conduct of the Schuler Business as presently conducted violates any rights of
any third Person the violation of which would result in losses, costs or
expenses in the aggregate in excess of $2,000,000.
5.10 LITIGATION. Except as described in Schuler Disclosure
Schedule Section 5.10, there is no Action pending or, to the knowledge of the
Schuler Entities, threatened against the Schuler Entities, whether at law or
in equity, or before or by any Governmental Authority which (a) seeks damages
or other monetary relief in excess of $2,000,000, (b) seeks injunctive relief
which if granted could have a Material Adverse Effect on the Schuler Business
or (c) relates to the transactions contemplated by this Agreement. Except as
described in Schuler Disclosure Schedule Section 5.10, none of the Schuler
Entities nor any of their properties or assets currently are subject to or
bound by any Governmental Order (other than any Governmental Order that may
be applicable generally to the industry in which the Schuler Business
operates).
5.11 EMPLOYEE BENEFIT MATTERS. (a) Schuler Disclosure
Schedule Section 5.11 sets forth an accurate and complete list of (i) each
"employee benefit plan" (as defined in Section 3(3) of ERISA) that is
maintained by any Schuler Entity or other person or entity that, together
with any Schuler Entity, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code (each such other person or entity, an
"ERISA Schuler Affiliate") for the benefit of any current or former employees
of any Schuler Entity or any of the ERISA Schuler Affiliates (the "Schuler
Employees"); (ii) to the extent not disclosed pursuant to the preceding
clause (i), each plan, contract, program, policy, practice or arrangement,
whether written or oral, funded or unfunded, providing stock options, stock
ownership, stock purchase or award, phantom stock, stock appreciation rights,
deferred compensation, retirement, insurance, flexible spending, dependent
care, fringe benefit, vacation pay, holiday pay, sick pay, workers
compensation, severance or termination pay, supplemental unemployment
benefits, employee loans, severance, educational assistance, incentive,
bonus, or other profit-sharing arrangements for the benefit of the Schuler
Employees (all plans, programs or arrangements described in the preceding
clause (i) and this clause (ii) being collectively referred to as "Schuler
Employee Plans"); and (iii) an accurate and complete list of all employment,
managerial, advisory, or consulting agreements, employee confidentiality
agreements, employee severance agreements and all other material agreements,
policies or arrangements maintained by the Schuler Entities or any of the
ERISA Schuler Affiliates with respect to the Schuler Employees or individuals
who are independent contractors providing services to any Schuler Entity or
any of the ERISA Schuler Affiliates (all agreements, policies or arrangements
described in this clause (iii) being collectively referred to as "Schuler
Employee Agreements"). Schuler has delivered or made available to the WP
Partners copies, which were accurate and complete as of the date so
delivered, of all such (1) documents and (if applicable) summary plan
descriptions as comprise, describe or similarly relate to the Schuler
Employee Plans and Schuler Employee Agreements (including the most recent
annual report on Form 5500, if applicable), and (2) summary description(s) of
any such Schuler Employee Plans and Schuler Employee Agreements not otherwise
in writing, and except
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as described in Schuler Disclosure Schedule Section 5.11, there have been no
changes to such documents as of the Agreement Date.
(b) Except as disclosed in Schuler Disclosure Schedule
Section 5.11, (i) each Schuler Employee Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified in form and operation in all
material respects, and nothing has occurred which could adversely affect the
qualified status of any such Schuler Employee Plan; (ii) each Schuler
Employee Plan and Schuler Employee Agreement has been operated or
administered in accordance with its provisions and in material compliance
with the statutes, rules and regulations governing such Schuler Employee Plan
or Schuler Employee Agreement; (iii) no "disqualified person" or "party in
interest" (as defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively) has engaged in any "prohibited transaction" (as defined in
Section 4975(c) of the Code or Section 406 of ERISA, respectively) which
could subject the Schuler Entities, the ERISA Schuler Affiliates, any Schuler
Employee Plan (or their related trusts) or Schuler or Newco, to any material
liability under Section 4975 of the Code or Section 502(i) or (l) of ERISA;
(iv) with respect to each Schuler Employee Plan, no event has occurred and
there has been no failure to act upon the part of any Schuler Entity or any
fiduciary or "plan official" (as defined in Section 412 of ERISA) with
respect to such Schuler Employee Plan that could subject the Schuler
Entities, the ERISA Schuler Affiliates, any Schuler Employee Plan or the WP
Entities or Newco, to the imposition of any material Tax or penalty;
(v) there are no Actions or audits, investigations or examinations by any
Governmental Authority pending (other than routine claims for benefits)
regarding any Schuler Employee Plan or Schuler Employee Agreement; (vi) no
Schuler Employee Plan is subject to Section 412 of the Code or Title IV of
ERISA, and no Schuler Entity or ERISA Schuler Affiliate has maintained or
been obligated to make contributions to any such Schuler Employee Plan during
the six-year period ending on the Agreement Date; (vii) no steps have been
taken by any Schuler Entity or ERISA Schuler Affiliate to terminate any
Schuler Employee Plan; (viii) each Schuler Employee Plan that is a "group
health plan" (as defined in Section 5000(b)(1) of the Code) has been operated
and administered in compliance with the continuation coverage requirements of
Section 4980B of the Code and Part 6 of Title I of ERISA and the Medicare
secondary payor provisions of Section 1826(b) of the Social Security Act, and
the regulations promulgated thereunder; (ix) no Schuler Entity or ERISA
Schuler Affiliate currently contributes to any "multiemployer plan" (as
defined in Section 3(37) of ERISA), and there has not been any complete or
partial withdrawal from or termination of participation in any such Schuler
Employee Plan that could result in withdrawal liability or similar liability
for the WP Partners, the WP Entities, their Affiliates, the Schuler Entities,
the ERISA Schuler Affiliates or Newco, whether directly or as a result of
controlled group liability; and (x) all contributions, premiums and other
payments that would normally be made or paid with respect to any Schuler
Employee Plan on behalf of the Schuler Business or the Schuler Employees by
the Closing Date will have been made by the Closing Date.
(c) Except as set forth in this Agreement or Schuler
Disclosure Schedule Section 5.11, the execution of, and performance of the
transactions contemplated by, this Agreement will not (either together with
or upon the occurrence of any additional or subsequent events) constitute an
event under any Schuler Employee Plan or Schuler Employee Agreement that
could result in any payment (whether severance pay or otherwise),
acceleration, vesting or increase in benefits with respect to any current or
former employee of any Schuler Entity or any
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of their ERISA Schuler Affiliates, whether or not any such payment would be
an "excess parachute payment"" (as defined in Section 280G of the Code).
(d) No Schuler Entity nor any of their ERISA Schuler
Affiliates is required to maintain, contribute to or make payments under any
Schuler Employee Plan or Schuler Employee Agreement by the law or applicable
custom or rule of any jurisdiction outside of the United States.
(e) Each Schuler Employee Plan and Schuler Employee
Agreement complies with all applicable requirements of (i) the Age
Discrimination in Employment Act of 1967, as amended, and the regulations
thereunder; (ii) Title VII of the Civil Rights Act of 1964, as amended, and
the regulations thereunder; and (iii) all other applicable laws. All
amendments and actions required to bring each of the Schuler Employee Plans
and Schuler Employee Agreements into conformity with all applicable
provisions of the Code, ERISA and other applicable laws have been made or
taken, except to the extent that such amendments or actions are not required
by law to be made or taken until a date after the Closing Date and are
disclosed in Schuler Disclosure Schedule Section 5.11.
(f) Except as set forth in Schuler Disclosure Schedule
Section 5.11, upon Closing Schuler or Newco or one or more of their
Affiliates, as applicable, may terminate any Schuler Employee Plan or Schuler
Employee Agreement or may cease contributions to or making payments under any
Schuler Employee Plan or Schuler Employee Agreement without incurring any
liability, other than a benefit liability accrued in accordance with the
terms of such Plan or Agreement immediately prior to such termination or
cessation of contributions.
(g) All individuals who are or were performing consulting
or other services for any Schuler Entity or any of their ERISA Schuler
Affiliates are or were correctly classified by the such Schuler Entity or
ERISA Schuler Affiliate as either "independent contractors" or "employees,"
as the case may be, and, at the Closing Date, will qualify for such
classification.
5.12 TAXES. (a) Except as set forth in Schuler Disclosure
Schedule Section 5.12, (i) the Schuler Entities have timely filed or caused
to be timely filed (or will timely file or cause to be timely filed) with the
appropriate Taxing Authorities all Tax Returns required to be filed on or
prior to the Closing Date (taking into account all extensions of due dates)
by or with respect to the Schuler Entities and have timely paid or adequately
provided for (or will timely pay or adequately provide for) all Taxes owed by
the Schuler Entities (whether or not shown on any Tax Return) for the period
up to and including the Closing Date, except where the failure to file such
Tax Returns or pay any such Taxes would not, or could not reasonably be
expected to, in the aggregate result in losses, costs or expenses to the
Schuler Entities, taken as whole, in excess of $2,000,000 after the Closing
Date, (ii) all such Tax Returns were or will be correct and complete in all
material respects, and (iii) all withholding Tax requirements imposed on or
with respect to the Schuler Entities have been or will be satisfied in full
in all respects. No written claim has been made to the Schuler Entities by
any Taxing Authority in any jurisdiction where the Schuler Entities do not
file Tax Returns asserting that any of them are required to file a Tax Return.
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(b) Except as set forth in Schuler Disclosure Schedule
Section 5.12, (i) there have been no examinations or audits with respect to
any Tax Return of, or which included, the Schuler Entities, and (ii) no
assessment, deficiency or adjustment for any Taxes has been asserted in
writing or, to the knowledge of the Schuler Entities, is proposed with
respect to any Tax Return of, or which includes, the Schuler Entities.
(c) Except as set forth in Schuler Disclosure Schedule
Section 5.12, there is not in force any extension of time with respect to the
due date for the filing of any Tax Return of or with respect to or which
includes the Schuler Entities or any waiver or agreement for any extension of
time for the assessment or payment of any Tax of or with respect to or which
includes the Schuler Entities.
(d) The Schuler Balance Sheet fully accrues all actual
and contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with GAAP. The Schuler Entities will establish,
in the ordinary course of business and consistent with its past practices,
reserves adequate for the payment of all Taxes for the period from June 30,
2000 through the Closing Date.
(e) All Tax allocation or sharing agreements or
arrangements with respect to the Schuler Entities have been or will be
cancelled on or prior to the Closing Date. No payments are or will become due
by the Schuler Entities after the Closing Date pursuant to any such agreement
or arrangement.
(f) Except as set forth in Schuler Disclosure Schedule
Section 5.12, none of the property of the Schuler Entities is held in an
arrangement for which partnership Tax Returns are required to be filed, no
Schuler Entity owns an interest in a partnership and no Schuler Entity owns
any interest in any controlled foreign corporation (as defined in Section 957
of the Code) or passive foreign investment company (as defined in Section
1296 of the Code).
(g) Except as set forth in Schuler Disclosure Schedule
Section 5.12, none of the property of the Schuler Entities is subject to a
safe-harbor lease (pursuant to Section 168(f)(8) of the Internal Revenue Code
of 1954 as in effect after the Economic Recovery Act of 1981 and before the
Tax Reform Act of 1986) or is "tax-exempt use property" (within the meaning
of Section 168(h) of the Code) or "tax-exempt bond financed property" (within
the meaning of Section 168(g)(5) of the Code).
(h) Except as set forth in Schuler Disclosure Schedule
Section 5.12, none of the Schuler Entities will be required to include any
amount in income for any taxable period beginning after the Closing Date as a
result of a change in accounting method for any taxable period ending on or
before the Closing Date or pursuant to any agreement with any Taxing
Authority with respect to any such taxable period.
(i) No Schuler Entity has consented to have the
provisions of Section 341(f)(2) of the Code apply with respect to a sale of
its stock.
(j) Except as set forth in Schuler Disclosure Schedule
Section 5.12, none of the Schuler Entities will, as a result of the
transactions contemplated by this Agreement, be obligated to make a payment
to an individual that would be a "parachute payment" as defined in
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Section 280G of the Code without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future.
(k) Except as set forth in Schuler Disclosure Schedule
Section 5.12, no power of attorney has been granted with respect to any
matter relating to Taxes of the Schuler Entities which is currently in force.
(l) Except as set forth in Schuler Disclosure Schedule
Section 5.12, each Schuler Entity is taxed as a partnership for income tax
purposes.
5.13 COMPLIANCE WITH LAW. Except with respect to
Environmental Laws (which are covered separately in Section 5.17), since
December 31, 1996, no Schuler Entity has violated any law, statute, rule,
regulation or Governmental Order which has subjected it to fines or penalties
in excess of $2,000,000 in the aggregate. As of the Agreement Date, each
Schuler Entity is in compliance in all material respects with all laws,
statutes, rules, regulations and Governmental Orders applicable to such
Schuler Entity or by which the properties or assets of such Schuler Entity
are bound or subject, except where the noncompliance with which would not, in
the aggregate, result in the imposition on the Schuler Entities, taken as a
whole, of fines or penalties in excess of $2,000,000.
5.14 CONTRACTS AND COMMITMENTS. Schuler Disclosure
Schedule Section 5.14 contains an accurate and complete list as of the
Agreement Date of each contract, agreement or commitment of the Schuler
Entities (a) to which any Schuler Entity or any of its assets or properties
is bound and which requires total payments to or by a Schuler Entity of at
least $2,000,000 annually; (b) to which any Schuler Entity or any of its
assets or properties is bound or subject and which has a remaining term
longer than one year, which requires total payments by the Schuler Entities,
taken as a whole, of at least $2,000,000 during such term and which is not
terminable on 30 or fewer days' notice without penalty; (c) containing
covenants limiting the freedom of any Schuler Entity to compete in any line
of business or with any Person in any geographical area; (d) calling for the
proposed acquisition of any operating business or any assets outside the
ordinary course of business and with a purchase price in excess of
$2,000,000; (e) relating to the proposed purchase or sale of any material
assets or properties of the Schuler Entities, taken as a whole; (f) to which
any Schuler Entity is a party or by which any of its assets or properties are
bound relating to indebtedness for borrowed money, including capital leases,
security agreements relating thereto and any amendment or waiver thereof, and
(g) with Schuler or any Affiliate thereof (collectively, the "Schuler
Commitments"; PROVIDED, that Schuler Commitments shall not include
(i) contracts granting any Schuler Entity an option to purchase land,
(ii) conditions, covenants and restrictions for real property owned by any
Schuler Entity, or (iii) agreements between any Schuler Entity and any
contractor or developer made in the ordinary course of business). Each
Schuler Commitment is a legal, valid and binding obligation of the applicable
Schuler Entity, enforceable against such Schuler Entity in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or
in equity). Except as set forth in Schuler Disclosure Schedule Section 5.14,
no Schuler Entity is, nor to the knowledge of the Schuler Entities is any
other party thereto, in default under any of the Schuler Commitments where
such default would result, in the aggregate,
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in a Liability in excess of $2,000,000. Except as set forth in Schuler
Disclosure Schedule Section 5.14, since December 31, 1998, no Schuler Entity
has received written notice of cancellation or termination of any Schuler
Commitment from any other party thereto.
5.15 PERMITS AND OTHER OPERATING RIGHTS. Except as set
forth in Schuler Disclosure Schedule Section 5.15 and except with respect to
Environmental Permits (which are covered separately in Section 5.17), all
permits, licenses, orders, approvals and authorizations required by any
applicable law, statute, regulation or Governmental Order, or by the property
and contract rights of third Persons, reasonably necessary to permit the
operation of the Schuler Business in the manner currently conducted by the
Schuler Entities and to permit the current occupancy of the Schuler Real
Property by the Schuler Entities have been obtained or are reasonably
expected to be obtained by the Schuler Entities, except where the failure to
possess such permit, license, order, approval, authorization or rights would
not result in a Material Adverse Effect on the Schuler Entities or the
Schuler Business. No Schuler Entity has received written notice from any
Governmental Authority that any such permit, license, order, approval or
authorization has been, or will be, revoked or terminated.
5.16 LABOR MATTERS. No employee of the Schuler Entities
is covered under any collective bargaining agreement. Except to the extent
set forth in Schuler Disclosure Schedule Section 5.16: (a) there is no unfair
labor practice complaint against any of the Schuler Entities pending or, to
the knowledge of the Schuler Entities, threatened before the National Labor
Relations Board or any comparable state or local Governmental Authority,
(b) there is no labor strike, slowdown or work stoppage actually pending or,
to the knowledge of the Schuler Entities, threatened against or directly
affecting any of the Schuler Entities, and (c) no grievance or any Action
arising out of or under collective bargaining agreements is pending or, to
the knowledge of the Schuler Entities, threatened against any Schuler
Entities.
5.17 ENVIRONMENTAL MATTERS. Except as set forth in Schuler
Disclosure Schedule Section 5.17, to the knowledge of the Schuler Entities:
(a) the Schuler Entities have not used, generated,
treated, stored or disposed of any Hazardous Material at any properties
owned, leased or operated by the Schuler Entities, other than Hazardous
Material customarily used, generated, treated, stored or disposed of in
connection with businesses similar to the Schuler Business;
(b) the Schuler Entities have not caused the release,
discharge, spillage, loss, seepage or filtration of any Hazardous Material
and no such occurrence is threatened on, under, about or from such properties;
(c) the Schuler Entities have not engaged in, and are not
engaged in, the use, generation, production, manufacture, treatment, storage,
disposal or transportation of Hazardous Material, other than Hazardous
Material customarily used, generated, produced, manufactured, treated,
stored, disposed or transported in connection with businesses similar to the
Schuler Business;
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(d) to the knowledge of the Schuler Entities, none of the
properties owned, leased or operated by the Schuler Entities contains or has
contained any underground or above-ground tanks for the storage of Hazardous
Material and has not been remediated;
(e) the Schuler Entities have disposed of all wastes,
including those containing any Hazardous Material, in substantial compliance
with all applicable Environmental Laws and Environmental Permits, and, to the
knowledge of the Schuler Entities, the Schuler Entities have never received
any written notice or claim of Liability for any off-site contamination;
(f) Environmental Permits have been obtained and are in
full force and effect, or are in the process of being obtained, for the
operations conducted at all properties owned, leased or operated by the
Schuler Entities;
(g) none of the properties owned, leased or operated by
the Schuler Entities are listed or, to the knowledge of the Schuler Entities,
proposed for listing on the National Priorities List under CERCLA or on the
CERCLIS or any similar state list of sites requiring investigation or cleanup;
(h) the Schuler Entities and each property owned, leased
or operated by the Schuler Entities has been and is in substantial compliance
with all, and is not in violation of any, Environmental Laws and
Environmental Permits, and there are no Governmental Orders outstanding, no
claims with respect to Environmental Laws have been instituted or filed, and
none are pending or, to the knowledge of the Schuler Entities, threatened
relating to the Schuler Entities or their business, operations, assets or
properties, owned, leased or operated; and
(i) Schuler has provided or made available to the
WP Partners true, accurate and complete copies of any written information in
the possession of the Schuler Entities (other than where such disclosure
would result in the loss of the attorney-client privilege) which pertains to
the environmental history of all the properties owned, leased or operated by
the Schuler Entities.
5.18 WARRANTY OBLIGATIONS.
(a) Except as set forth on Schuler Disclosure Schedule
Section 5.18, none of the Schuler Entities, to the knowledge of the Schuler
Entities, has any warranty claims that are not covered by Homebuyers Warranty
Corporation, National Home Insurance Company or warranties from
subcontractors that materially exceed the amounts reserved therefor on the
Schuler Balance Sheet or any aggregate amounts properly accrued on the books
and records of any of the Schuler Entities since the date of the Schuler
Balance Sheet.
(b) Except as set forth on Schuler Disclosure Schedule
Section 5.18, to the knowledge of the Schuler Entities, no product
manufactured, sold, leased or delivered by any of the Schuler Entities
(except pursuant to applicable law) is subject to any material guaranty,
warranty, or other indemnity beyond the applicable standard terms and
conditions of sale or lease.
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(c) To the knowledge of the Schuler Entities, except as
set forth on Schuler Disclosure Schedule Section 5.18, none of the Schuler
Entities has any material Liability not fully covered by insurance arising
out of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased or delivered by
any of the Schuler Entities.
(d) All sales by the Schuler Entities have been made in
accordance with all federal and state consumer disclosure laws and
regulations, including, if applicable, the California Subdivided Lands Act
and the regulations enacted thereunder.
5.19 HOMEOWNER ASSOCIATIONS.
(a) Schuler Disclosure Schedule Section 5.19 contains an
accurate and complete list of all homeowner associations (the "Schuler
Homeowner Associations") in which any of the Schuler Entities has or has had
declarant rights.
(b) Except as set forth on Schuler Disclosure Schedule
Section 5.19, to the knowledge of the Schuler Entities, (i) all restrictive
covenants and other documents used by any of the Schuler Entities in
connection with the creation and operation of the Schuler Homeowner
Associations (A) in which any of the Schuler Entities previously had
declarant rights complied in all material respects with applicable laws at
the time the same were promulgated, and (B) in which any of the Schuler
Entities currently has declarant rights currently comply in all material
respects with applicable laws, and (ii) all material disclosures and
deliveries of information and documents required by applicable laws as to
such Schuler Homeowner Associations and their creation and operation have
been materially complied with.
(c) To the knowledge of the Schuler Entities, Schuler
Disclosure Schedule Section 5.19 contains an accurate and complete list of
all amounts in excess of $2,000,000 owing between the Schuler Homeowners
Associations and any of the Schuler Entities.
(d) To the knowledge of the Schuler Entities, no other
claims exist by a Schuler Homeowner Association against any of the Schuler
Entities, and to the knowledge of the Schuler Entities, each Schuler
Homeowner Association has been operated, so long as any of the Schuler
Entities has participated therein, in accordance with applicable laws.
5.20 ASSETS NECESSARY TO THE SCHULER BUSINESS. Except as
set forth in Schuler Disclosure Schedule Section 5.20, immediately before the
Effective Time the Schuler Entities will hold or have the right to use in the
Schuler Business all of the assets and properties (including all licenses and
agreements) currently being used (except those disposed of in the ordinary
course of business or otherwise as contemplated or permitted by this
Agreement) or which are reasonably necessary to permit the operation of the
Schuler Business in the manner currently conducted by the Schuler Entities.
5.21 ACCURACY OF INFORMATION FURNISHED. No representation
or warranty made by Schuler in this Article V and the related Schuler
Disclosure Schedule contains any untrue statement of material fact or omits
to state, in light of the circumstances under which it has been made, a
material fact necessary to make such representation or warranty not
misleading; provided, however, that no representation or warranty is made as
to projections,
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forecasts or other forward looking information furnished by any Schuler
Entity to the WP Partners.
5.22 NO BROKERS. Neither Schuler nor any of its directors,
officers or employees has employed any broker, finder or investment banker
(other than Salomon Smith Barney Inc.) or incurred any Liability for any
brokerage fees, commissions, finders' fees or similar fees in connection with
the transactions contemplated by this Agreement or any Ancillary Agreement
(other than the fees and expenses of Salomon Smith Barney Inc.).
5.23 DISCLAIMER. Except as otherwise expressly set forth
in this Article V, Schuler expressly disclaims any representations or
warranties of any kind or nature, express or implied, as to the condition,
value or quality of the assets or properties currently or formerly used,
operated, owned, leased, controlled, possessed, occupied or maintained by
Schuler and the Schuler Subsidiaries. SCHULER SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH ASSETS OR PROPERTIES, OR ANY
PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS
THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD THAT SUCH ASSETS AND
PROPERTIES ARE BEING ACQUIRED THROUGH THE REORGANIZATION "AS IS, WHERE IS" ON
THE CLOSING DATE, AND IN THEIR PRESENT CONDITION, WITH ALL FAULTS, AND THAT
THE WP PARTNERS SHALL RELY ON ITS OWN EXAMINATION AND INVESTIGATION THEREOF.
5.24 NON-CONTROLLED SCHULER ENTITIES. Schuler Disclosure
Schedule Section 5.24 contains an accurate and complete list of all Schuler
Entities in which neither Schuler nor any Affiliates thereof hold a general
partner or managing member interest (the "Non-Controlled Schuler Entities").
Notwithstanding anything to the contrary herein, all representations and
warranties made by Schuler pursuant to this Article V with respect to the
Non-Controlled Schuler Entities are made only to the knowledge of Schuler and
the Schuler Entities (other than the Non-Controlled Schuler Entities).
ARTICLE VI
CERTAIN COVENANTS
6.1 ACCESS TO INFORMATION. (a) From the Agreement Date
through the Closing Date, but subject to any rights of third Persons, upon
reasonable notice, the WP Partners shall (i) afford the officers, employees
and authorized agents and representatives of Schuler reasonable access during
normal business hours to the offices, properties and Books and Records of the
WP Entities and (ii) furnish to the officers, employees and authorized agents
and representatives of Schuler such additional financial and operating data
and other information regarding the assets, properties and Liabilities of the
WP Entities and the WP Business (or legible copies thereof) as Schuler may
from time to time reasonably request; PROVIDED, HOWEVER, that such
investigation shall not unreasonably interfere with any of the businesses or
operations of the WP Partners or the WP Entities. Without limiting the
generality of the foregoing, the WP Partners shall cooperate fully with
Schuler's investigation of such assets, properties and
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Liabilities and the WP Business and provide copies of such documents in its
possession as Schuler may reasonably request to confirm the title to any and
all properties or assets owned or leased by the WP Entities. No WP Partners
Indemnified Party shall be responsible for any bodily injury suffered by any
of the officers, employees or authorized agents and representatives of
Schuler conducting any investigation of the WP Entities' assets and
properties. No investigation by Schuler shall affect the representations and
warranties of the WP Partners.
(b) From the Agreement Date through the Closing Date, but
subject to any rights of third Persons, upon reasonable notice, Schuler shall
(i) afford the officers, employees and authorized agents and representatives
of the WP Partners reasonable access during normal business hours to the
offices, properties and Books and Records of Schuler and (ii) furnish to the
officers, employees and authorized agents and representatives of the WP
Entities such additional financial and operating data and other information
regarding the assets, properties and Liabilities of Schuler and the Schuler
Business (or legible copies thereof) as the WP Partners may from time to time
reasonably request; PROVIDED, HOWEVER, that such investigation shall not
unreasonably interfere with any of the businesses or operations of Schuler.
Without limiting the generality of the foregoing, Schuler shall cooperate
fully with the WP Partners' investigation of such assets, properties and
Liabilities and the Schuler Business and provide copies of such documents in
its possession as the WP Partners may reasonably request to confirm the title
to any and all properties or assets owned or leased by Schuler. No Schuler
Indemnified Party shall be responsible for any bodily injury suffered by any
of the officers, employees or authorized agents and representatives of the
WP Partners conducting any investigation of Schuler's assets and properties.
No investigation by the WP Partners shall affect the representations and
warranties of Schuler.
6.2 CONDUCT OF BUSINESSES PENDING CLOSING. From the
Agreement Date through the Closing Date, except as set forth in WP Disclosure
Schedule Section 6.2 or Schuler Disclosure Schedule Section 6.2, or as
required by this Agreement or otherwise consented to or approved by the
parties in writing, which consent or approval shall not be unreasonably
withheld:
(a) The WP Partners shall cause the WP Entities to
operate the WP Business only in its usual, regular and ordinary manner and
substantially in the same manner as heretofore conducted. The WP Partners
shall cause the WP Entities to use commercially reasonable efforts to (i)
preserve the WP Business; (ii) keep available to Newco the services of the
present officers, employees, agents and independent contractors of the WP
Entities; (iii) maintain the assets of the WP Business in their current state
of repair, order and condition, usual and ordinary wear and tear excepted and
subject to requirements in the ordinary course of business; and (iv) maintain
in effect insurance upon the assets of the WP Entities and with respect to
the conduct of the WP Business in such amounts and of such kinds comparable
in all material respects to that in effect on the Agreement Date.
(b) The WP Partners shall cause the WP Entities not to:
(i) amend the Charter or Bylaws of any WP
Entities or WP Subsidiaries, except for the purpose of organizing
entities for the purpose of acquiring land in the ordinary course
of business;
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(ii) incur or assume or become subject
to any additional indebtedness for money borrowed or purchase money
indebtedness, except in the ordinary course of business and
consistent with past practices;
(iii) declare or pay any dividend or
make any other distribution to any of the WP Partners, other than
distributions for payment of income Taxes due to the taxable income
of the WP Entities;
(iv) redeem or otherwise acquire any
shares or interest of capital stock or other equity of any WP
Entity or issue any capital stock or other equity of any WP Entity
or any option, warrant or right relating thereto or any securities
exchangeable for or convertible into any such shares or equity;
(v) permit or allow any WP Entities'
assets or properties to be subject to any additional Encumbrance
(other than Permitted Liens) or sell, transfer, lease or otherwise
dispose of any such assets or properties, in each case except in
the ordinary course of business and consistent with past practices;
(vi) grant any increase in salaries or
commissions payable or to become payable to any employee of the
WP Entities, or to any sales agent or representative of the
WP Entities, except normal periodic increases in salaries and
commissions in accordance with the WP Entities' existing
compensation practices;
(vii) make any capital expenditure or
commitment therefor for additions to property, equipment or
facilities in excess of $500,000 in the aggregate per month, other
than land acquisitions and expenditures associated with home
building in the ordinary course of business and consistent with
past practices;
(viii) license, sell, transfer, pledge,
modify, disclose, dispose of or permit to lapse any right under or
respecting, or enter into any settlement regarding the breach or
infringement of, any material WP Intellectual Property;
(ix) terminate, renew, enter into or
amend any WP Commitment or contract or agreement which would
qualify as a WP Commitment;
(x) establish or adopt any severance
pay plan or arrangement with respect to, or for the benefit of,
employees;
(xi) make any change in any method of
accounting or accounting practice or policy, other than those
required by GAAP;
(xii) engage in any transactions with a
WP Entity, other than transactions in the ordinary course and
consistent with past practices; or
(xiii) agree, whether in writing or
otherwise, to do any of the foregoing.
(c) Schuler shall cause the Schuler Entities to operate
the Schuler Business only in its usual, regular and ordinary manner and
substantially in the same manner as heretofore
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conducted. Schuler shall cause the Schuler Entities to use commercially
reasonable efforts to (i) preserve the Schuler Business; (ii) keep available
to Newco the services of the present officers, employees, agents and
independent contractors of the Schuler Entities; (iii) maintain the assets of
the Schuler Business in their current state of repair, order and condition,
usual and ordinary wear and tear excepted and subject to requirements in the
ordinary course of business; and (iv) maintain in effect insurance upon the
assets of the Schuler Entities and with respect to the conduct of the Schuler
Business in such amounts and of such kinds comparable in all material
respects to that in effect on the Agreement Date.
(d) Schuler shall cause the Schuler entities not to:
(i) amend the Charter or Bylaws of any
Schuler Entities, except for the purpose of organizing entities for
the purpose of acquiring land in the ordinary course of business;
(ii) incur or assume or become subject
to any additional indebtedness for money borrowed or purchase money
indebtedness, except in the ordinary course of business and
consistent with past practices;
(iii) declare or pay any dividend or make any other
distribution to any stockholder of Schuler;
(iv) redeem or otherwise acquire any shares or
interest of capital stock or other equity of any Schuler Entity or
issue any capital stock or other equity of any Schuler Entity or
any option, warrant or right relating thereto or any securities
exchangeable for or convertible into any such shares or equity;
(v) permit or allow any Schuler Entities' assets
or properties to be subject to any additional Encumbrance (other
than Permitted Liens) or sell, transfer, lease or otherwise dispose
of any such assets or properties, in each case except in the
ordinary course of business and consistent with past practices;
(vi) grant any increase in salaries or commissions
payable or to become payable to any employee of the Schuler
Entities, or to any sales agent or representative of the Schuler
Entities, except normal periodic increases in salaries and
commissions in accordance with the Schuler Entities' existing
compensation practices;
(vii) make any capital expenditure or commitment
therefor for additions to property, equipment or facilities in
excess of $500,000 in the aggregate per month, other than land
acquisitions and expenditures associated with home building in the
ordinary course of business and consistent with past practices;
(viii) license, sell, transfer, pledge, modify,
disclose, dispose of or permit to lapse any right under or
respecting, or enter into any settlement regarding the breach or
infringement of, any material Schuler Intellectual Property;
(ix) terminate, renew, enter into or amend any
Schuler Commitment or contract or agreement which would qualify as a
Schuler Commitment;
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(x) establish or adopt any severance pay plan or
arrangement with respect to, or for the benefit of, employees;
(xi) make any change in any method of accounting
or accounting practice or policy, other than those required by GAAP;
(xii) engage in any transactions with a Schuler
Entity, other than transactions in the ordinary course and consistent
with past practices; or
(xiii) agree, whether in writing or otherwise, to do
any of the foregoing.
6.3 NO SOLICITATION OF TRANSACTIONS. (a) From the
Agreement Date through the Closing Date, none of the WP Partners nor any of
their representatives, Affiliates, directors, officers, employees,
subsidiaries or agents will solicit, consider, encourage or accept any
inquiries, proposals or offers to acquire, or offer or sell, or agree to
sell, any of the WP Interests or the securities, assets or properties of any
WP Entities (other than sales of properties in the ordinary course of
business consistent with past practices) or assist any third Person in
preparing or soliciting such an inquiry, proposal or offer. The WP Partners
shall not have, and shall cause such representatives, Affiliates, directors,
officers, employees, subsidiaries and agents not to have, any discussions,
conversations, negotiations or other communication with, or provide any
information or data to, any Person(s) expressing an interest in making or
effecting any such inquiry, proposal or offer.
(b) From the Agreement Date through the Closing Date,
neither Schuler nor any of its representatives, Affiliates, directors,
officers, employees, subsidiaries or agents will solicit, consider, encourage
or accept any inquiries, proposals or offers to acquire, or offer or sell, or
agree to sell, any of the securities, assets or properties of Schuler (other
than sales of properties in the ordinary course of business consistent with
past practices or exercises of options or sales of stock of Schuler by
officers or employees of Schuler (other than James Schuler)) or assist any
third Person in preparing or soliciting such an inquiry, proposal or offer.
Schuler shall not have, and shall cause such representatives, Affiliates,
directors, officers, employees, subsidiaries and agents not to have, any
discussions, conversations, negotiations or other communication with, or
provide any information or data to, any Person(s) expressing an interest in
making or effecting any such inquiry, proposal or offer.
6.4 AUTHORIZATIONS. (a) Each of Schuler and the
WP Partners shall cooperate in the preparation of any filing required under
the HSR Act and shall submit such filing within 30 days of the Agreement Date.
(b) Each of Schuler and the WP Partners as promptly as
practicable after the Agreement Date, shall (i) deliver, or cause to be
delivered, all notices and make, or cause to be made, all such declarations,
designations, registrations, filings and submissions under all statutes,
laws, regulations and Governmental Orders applicable to it as may be required
for it to consummate the transactions contemplated hereby and by the
Ancillary Agreements in accordance with the terms of this Agreement and the
Ancillary Agreements; (ii) use commercially reasonable efforts to obtain, or
cause to be obtained, all authorizations, approvals, orders, consents and
waivers from all Persons necessary to consummate the foregoing; and
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(iii) use commercially reasonable efforts to take, or cause to be taken, all
other actions necessary, proper or advisable in order for it to fulfill its
respective obligations hereunder and to carry out the intentions of the
parties expressed herein.
(c) Each party shall use its commercially reasonable
efforts to satisfy the conditions to Closing applicable to it in Articles VII
and VIII as soon as commercially practicable.
(d) Schuler and the WP Partners shall comply
substantially with any additional requests for information, including
requests for production of documents and production of witnesses for
interviews or depositions, by the Antitrust Division of the United States
Department of Justice, the United States Federal Trade Commission or the
antitrust or competition law authorities of any State of the United States
(the "Antitrust Authorities").
(e) Each party shall use its commercially reasonable
efforts, and shall cooperate fully with the other, to prevent the entry in
any Action brought by an Antitrust Authority or any other Person of any
Governmental Order which would prohibit, make unlawful or materially delay
the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements.
6.5 CONTRIBUTION TO WP LLC. Prior to the Closing Date,
the WP Partners shall contribute the WP Interests, or cause the WP Interests
to be contributed, to WP LLC.
6.6 ACKNOWLEDGEMENTS. (a) In order to induce the WP
Partners to enter into and perform this Agreement and the Ancillary
Agreements, Schuler acknowledges and agrees with the WP Partners as follows:
THE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE IV OF THIS AGREEMENT
CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE WP
PARTNERS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND BY THE
ANCILLARY AGREEMENTS. THERE ARE NO REPRESENTATIONS, WARRANTIES, COVENANTS,
UNDERSTANDINGS OR AGREEMENTS, ORAL OR WRITTEN, IN RELATION THERETO AMONG THE
PARTIES OTHER THAN THOSE INCORPORATED HEREIN AND THEREIN. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE IV OF THIS
AGREEMENT, SCHULER DISCLAIMS RELIANCE ON ANY REPRESENTATIONS OR WARRANTIES,
EITHER EXPRESS OR IMPLIED, BY OR ON BEHALF OF THE WP PARTNERS OR ANY
EMPLOYEES, REPRESENTATIVES OR AGENTS OF ANY OF SUCH PERSONS. Nothing in this
Section 6.5 shall be deemed to lessen in any way Schuler's reliance on, and
right to enforce, any covenant or agreement contained in this Agreement.
(b) In order to induce Schuler to enter into and perform
this Agreement, the WP Partners acknowledge and agrees with Schuler as
follows: THE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE V OF THIS
AGREEMENT CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF
SCHULER TO THE WP PARTNERS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED
HEREBY AND BY THE ANCILLARY AGREEMENTS. THERE ARE NO REPRESENTATIONS,
WARRANTIES, COVENANTS, UNDERSTANDINGS OR
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AGREEMENTS, ORAL OR WRITTEN, IN RELATION THERETO AMONG THE PARTIES OTHER THAN
THOSE INCORPORATED HEREIN AND THEREIN. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN ARTICLE V OF THIS AGREEMENT, THE WP
PARTNERS DISCLAIM RELIANCE ON ANY REPRESENTATIONS OR WARRANTIES, EITHER
EXPRESS OR IMPLIED, BY OR ON BEHALF OF SCHULER OR ANY EMPLOYEES,
REPRESENTATIVES OR AGENTS OF ANY OF SUCH PERSONS. Nothing in this Section 6.5
shall be deemed to lessen in any way the WP Partner's reliance on, and right
to enforce, any covenant or agreement contained in this Agreement.
6.7 PUBLIC ANNOUNCEMENTS. Neither Schuler, the WP
Partners nor the representatives of any of them shall make any public
announcement with respect to this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby without the prior written consent
of the other party hereto. The foregoing notwithstanding, any such public
announcement may be made if required by applicable statute, law, regulation,
Governmental Order, the NASD or NASDAQ rule or listing agreement, provided
that the party required to make such public announcement, to the extent
reasonably possible, shall confer with the other party concerning the timing
and content of such public announcement before the same is made.
6.8 REGISTRATION STATEMENT. Schuler and the WP Partners
shall cooperate and promptly prepare and file with the SEC as soon as
practicable a Registration Statement on Form S-4 (the "Form S-4") under the
Securities Act, with respect to the Newco Common Stock issuable in the
Reorganization, a portion of which Registration Statement shall also serve as
the proxy statement with respect to the Schuler Stockholder Meeting (the
"Proxy Statement/Prospectus"). The respective parties will cause the Proxy
Statement/Prospectus and the Form S-4 to comply as to form in all material
respects with the applicable provisions of the Securities Act, the Exchange
Act and the rules and regulations thereunder. Schuler and the WP Partners
shall use all reasonable efforts to have the Form S-4 declared effective by
the SEC as promptly as practicable and to keep the Form S-4 effective as long
as is necessary to consummate the Reorganization. Schuler and the WP Partners
shall, as promptly as practicable, provide copies of any written comments
received from the SEC with respect to the Form S-4 to each other and advise
the WP Partners of any verbal comments with respect to the Form S-4 received
from the SEC. Schuler and the WP Partners shall use their best efforts to
obtain, prior to the effective date of the Form S-4, all necessary state
securities law or "Blue Sky" permits or approvals required to carry out the
transactions contemplated by this Agreement. Schuler agrees that the written
information concerning the Schuler Entities provided by it for inclusion in
that the Proxy Statement/Prospectus and each amendment or supplement thereto
at the time of mailing thereof and at the time of the Schuler Stockholder
Meeting, or, in the case of the Form S-4 and each amendment or supplement
thereto, at the time it is filed or becomes effective, will not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The WP Partners
agree that the written information concerning the WP Partners and the WP
Entities provided by it for inclusion in the Proxy Statement/Prospectus and
each amendment or supplement thereto, at the time of mailing thereof and at
the time of the Schuler Stockholder Meeting, or, in the case of written
information concerning the WP Partners and the WP Entities provided by the
WP Partners for inclusion in
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the Form S-4 or any amendment or supplement thereto, at the time it is filed
or becomes effective, will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. No amendment or supplement to the Proxy
Statement/Prospectus will be made by Schuler or the WP Partners without the
approval of the WP Partners or Schuler, respectively. Schuler and the WP
Partners will advise the WP Partners and Schuler, respectively, promptly
after it receives notice thereof, of the time when the Form S-4 has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of the Newco Common Stock
issuable in connection with the Reorganization for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses
thereto or requests by the SEC for additional information.
6.9 SCHULER STOCKHOLDER MEETING. Schuler will, as soon as
practicable and in no event later than 45 days after the Form S-4 is declared
effective by the SEC, duly call, give notice of, convene and hold the Schuler
Stockholder Meeting. Schuler shall, through its Board of Directors, recommend
to its stockholders adoption and approval of this Agreement and the Merger A
Agreement.
6.10 LISTING APPLICATION. Schuler shall promptly cause
Newco to prepare and submit to NASDAQ a listing application covering the
shares of Newco Common Stock issuable in the Reorganization, and shall use
reasonable efforts to obtain, prior to the Effective Time, approval for the
listing of such Newco Common Stock on The Nasdaq Stock Market, subject to
official notice of issuance.
6.11 AFFILIATE LETTERS. At least 30 days prior to the
Closing Date, the WP Partners shall deliver to Schuler a list of names and
addresses of those persons who were, in the WP Partners' reasonable judgment,
at the record date for the Schuler Stockholder Meeting, Affiliates of the WP
Partners and WP LLC and who will receive any securities in any of the
transactions contemplated hereby. The WP Partners shall use all reasonable
efforts to deliver or cause to be delivered to Newco, prior to the Closing
Date, from each of the Affiliates of the WP Partners and WP LLC identified in
the foregoing list, an Affiliate Letter in the form attached hereto as
Exhibit K. Newco shall be entitled to place legends as specified.
6.12 NON-DISCLOSURE OF PROPRIETARY DATA. Each of the
parties agrees that such party will not, at any time, make use of, divulge or
otherwise disclose, directly or indirectly, any trade secret or other
proprietary data or confidential information concerning the business or
policies of any WP Entity or of Schuler obtained in connection with the
negotiation, execution, or performance of this Agreement or any Ancillary
Agreement. The parties' obligations under this Section 6.12 with respect to
any trade secret or other proprietary data or confidential information of
Schuler or the WP Entities is independent of any obligations under the
Confidentiality Agreement and shall survive the termination of this Agreement
if this Agreement is terminated prior to Closing.
6.13 SECTION 341(f) CONSENT. At any time following the
Contribution, Schuler and the WP Partners shall cause Newco, within five (5)
business days of receipt by Newco of a written request by WP LLC or one or
more of the WP Partners (or their respective successors) to
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file a statement with the IRS stating that Newco consents to have the
provisions of section 341(f) of the Code apply to it (the "Section 341(f)
Consent"). A copy of the Section 341(f) Consent shall be simultaneously
delivered to WP LLC or the requesting WP Partner(s). Notice to the
stockholders of Newco of the filing of the Section 341(f) Consent shall be
provided in a Form 8-K filed by Newco with the SEC at the time Newco files
the Section 341(f) Consent. Schuler and the WP Partners shall cause Newco to
cause any subsidiary corporation it controls to file a statement of consent
under Section 341(f) of the Code, to the extent required by Section 341(f)(6)
of the Code.
6.14 NEWCO STOCK OPTION PLAN. Schuler and the WP Partners
shall cooperate and work in good faith in order for Newco, within a
reasonable time after the Agreement Date, to adopt a stock option plan with
terms and provisions comparable to the Schuler Homes, Inc. Amended and
Restated 1992 Stock Option Plan and to grant options thereunder to certain
employees of the Schuler Entities and the WP Entities.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SCHULER
The obligations of Schuler to effect the transactions
contemplated herein shall be subject to the fulfillment satisfaction or
waiver, on or before the Closing Date, of each of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the WP Partners contained in Article IV and
taken as a whole shall be true and correct in all material respects at and as
of the Closing Date with the same effect as though made at and as of the
Closing Date, except that representations and warranties made as of, or in
respect of, only a specified date or period shall be true and correct in all
material respects in respect of, or as of, such date or period.
7.2 PERFORMANCE. The WP Partners shall have performed and
complied in all material respects with all agreements and obligations
required by this Agreement to be performed or complied with by them on or
prior to the Closing Date.
7.3 HSR ACT. Any waiting period (and any extension
thereof) under the HSR Act applicable to the transactions contemplated hereby
shall have expired or shall have been terminated.
7.4 ABSENCE OF GOVERNMENTAL ORDERS. No temporary or
permanent Governmental Order shall be in effect which prohibits or makes
unlawful consummation of the transactions contemplated hereby.
7.5 OFFICERS' CERTIFICATES. The WP Partners shall have
furnished Schuler with such certificates of their officers certifying as to
compliance with the conditions set forth in this Article VII as may be
reasonably requested by Schuler.
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7.6 CERTAIN AGREEMENTS. Each party to the Ancillary
Agreements shall have duly authorized and executed the Ancillary Agreements
and shall have delivered the same to Schuler.
7.7 STOCKHOLDER APPROVAL. This Agreement and the
transactions contemplated hereby shall have been approved in the manner
required by applicable law and NASDAQ by the holders of the issued and
outstanding shares of capital stock of Schuler.
7.8 FORM S-4. The Form S-4 shall have become effective
and shall be effective at the Effective Time, and no stop order suspending
effectiveness of the Form S-4 shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, or, to the knowledge of Schuler
or the WP Partners, threatened, and all necessary approvals under state
securities laws relating to the issuance or trading of the Newco Common Stock
to be issued in connection with the Reorganization shall have been received.
7.9 LISTING. The Newco Common Stock to be issued in
connection with the Reorganization shall have been approved for listing on
The Nasdaq Stock Market, subject only to official notice of issuance.
7.10 WP REQUIRED CONSENTS. The WP Entities shall have
obtained the WP Required Consents.
7.11 FIRPTA MATTERS. The WP Entities shall have delivered
to Newco separate statements (in such form as may be reasonably requested by
counsel to Schuler) signed under penalty of perjury by each of the WP
Partners, certifying as to such WP Partner's non-foreign status for purposes
of United States income taxation and setting forth such WP Partner's tax
identification number and home or office address.
7.12 EMPLOYMENT AGREEMENT. Newco shall have entered into
an employment agreement with James K. Schuler substantially in the form of
Exhibit L.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE WP PARTNERS
The obligations of the WP Partners to effect the transactions
contemplated herein shall be subject to the fulfillment, satisfaction or waiver,
on or before the Closing Date, of each of the following conditions:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Schuler contained in Article V and taken as
a whole shall be true and correct in all material respects at and as of the
Closing Date with the same effect as though made at and as of the Closing
Date, except that representations and warranties made as of, or in respect
of, only a specified date or period shall be true and correct in all material
respects in respect of, or as of, such date, or period.
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8.2 PERFORMANCE. Schuler shall have performed and
complied in all material respects with all agreements and obligations
required by this Agreement to be performed or complied with by it on or prior
to the Closing Date.
8.3 HSR ACT. Any waiting period (and any extension
thereof) under the HSR Act applicable to the transactions contemplated hereby
shall have expired or shall have been terminated.
8.4 ABSENCE OF GOVERNMENTAL ORDERS. No temporary or
permanent Governmental Order shall be in effect which prohibits or makes
unlawful consummation of the transactions contemplated hereby.
8.5 OFFICERS' CERTIFICATES. Schuler shall have furnished
the WP Partners with such certificates of its officers certifying as to
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by the WP Partners.
8.6 CERTAIN AGREEMENTS. Each party to the Ancillary
Agreements shall have duly authorized and executed the Ancillary Agreements
and shall have delivered the same to the WP Partners.
8.7 STOCKHOLDER APPROVAL. This Agreement and the
transactions contemplated hereby shall have been approved in the manner
required by applicable law and NASDAQ by the holders of the issued and
outstanding shares of capital stock of Schuler.
8.8 FORM S-4. The Form S-4 shall have become effective
and shall be effective at the Effective Time, and no stop order suspending
effectiveness of the Form S-4 shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, or, to the knowledge of Schuler
or the WP Partners, threatened, and all necessary approvals under state
securities laws relating to the issuance or trading of the Newco Common Stock
to be issued in connection with the Reorganization shall have been received.
8.9 LISTING. The Newco Common Stock to be issued in
connection with the Reorganization shall have been approved for listing on
The Nasdaq Stock Market, subject only to official notice of issuance.
8.10 SCHULER REQUIRED CONSENTS. Schuler shall have
obtained the Schuler Required Consents.
8.11 EMPLOYMENT AGREEMENT. Newco shall have entered into
an employment agreement with James K. Schuler substantially in the form of
Exhibit L.
ARTICLE IX
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the WP Partners in Article IV and of
Schuler in Article V shall survive for a period
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of 21 months from the Closing; PROVIDED, HOWEVER, that the representations
and warranties contained in Sections 4.12 and 5.12 shall survive until the
applicable statute of limitations with respect to Taxes has expired. If
written notice of a claim has been given prior to the expiration of the
applicable representations and warranties by a party in whose favor such
representations and warranties have been made to the party that made such
representations and warranties, then the relevant representations and
warranties shall survive as to such claim, until the claim has been finally
resolved.
9.2 INDEMNIFICATION BY THE WP PARTNERS. Except as
otherwise limited by this Article IX, the WP Partners shall jointly and
severally indemnify, defend and hold harmless Schuler, and Schuler's
Affiliates, shareholders, officers, directors, employees, subsidiaries,
successors and assigns (collectively, the "Schuler Indemnified Parties") from
and against, and pay or reimburse the Schuler Indemnified Parties for, any
and all losses, damages, claims, costs and expenses, interest, awards,
judgments, fines, and penalties (including reasonable legal costs and
expenses) suffered or incurred by them (hereinafter a "Schuler Loss") arising
out of or resulting from:
(a) the inaccuracy of any representation or warranty of
the WP Partners set forth in Article IV; or
(b) any other breach or violation of this Agreement by
the WP Partners.
9.3 INDEMNIFICATION BY SCHULER. Except as otherwise
limited by this Article IX, Schuler shall indemnify, defend and hold harmless
the WP Partners and their Affiliates, shareholders, officers, directors,
employees, subsidiaries, successors and assigns (collectively, the "WP
Partners Indemnified Parties") from and against, and pay or reimburse the WP
Partners Indemnified Parties for, any and all losses, damages, claims, costs
and expenses, interest, awards, judgments, fines, and penalties (including
reasonable legal costs and expenses) actually suffered or incurred by them
(hereinafter a "WP Partners Loss") arising out of or resulting from:
(a) the inaccuracy of any representation or warranty of
Schuler set forth in Article V; or
(b) any other breach or violation of this Agreement by
Schuler.
9.4 GENERAL INDEMNIFICATION PROVISIONS. (a) For the
purposes of this Section 9.4 and Sections 9.5 and 9.6, the term "Indemnitee"
shall refer to the Person or Persons indemnified, or entitled, or claiming to
be entitled, to be indemnified, pursuant to the provisions of Section 9.2 or
9.3, as the case may be; the term "Indemnitor" shall refer to the person
having the obligation to indemnify pursuant to such provisions; and "Losses"
shall refer to WP Partners Losses or Schuler Losses, as the case may be.
Losses shall be determined without reduction based on the amount thereof
which may fall below standards based on materiality or specified amounts.
(b) Within a reasonable time following the determination
thereof, an Indemnitee shall give the Indemnitor notice of any matter which
an Indemnitee has determined has given or could give rise to a right of
indemnification under this Agreement (regardless of whether a claim for
indemnification otherwise would be prohibited by Section 9.5(a)), stating the
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amount of the Loss, if known, and method of computation thereof, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and Liabilities of an Indemnitor under this Article
IX with respect to Losses arising from claims of any third party that are
subject to the indemnification provided for in this Article IX ("Third Party
Claims") shall be governed by and contingent upon the following additional
terms and conditions: If an Indemnitee shall receive notice of any Third
Party Claim, the Indemnitee shall promptly give the Indemnitor notice of such
Third Party Claim and shall permit the Indemnitor, at its option, to
undertake the defense of such Third Party Claim by counsel of its own choice
and at its expense; PROVIDED, HOWEVER, that the failure of the Indemnitee to
notify the Indemnitor during the required notification period shall only
relieve the Indemnitor from its obligation to indemnify the Indemnitee
pursuant to this Article IX to the extent that the Indemnitor is actually
prejudiced by such failure (whether as a result of the forfeiture of
substantive rights or defenses or otherwise). If the Indemnitor acknowledges
in writing its obligation to indemnify the Indemnitee hereunder against any
Losses that may result from such Third Party Claims (subject to the
limitations set forth herein), then the Indemnitor shall be entitled, at its
option, to assume and control the defense of such Third Party Claim at its
expense and through counsel of its reasonable choice if it gives notice to
the Indemnitee within 20 calendar days of the receipt of notice of such Third
Party Claim from the Indemnitee of its intention to do so. If the Indemnitor
elects to assume and control the defense of any such Third Party Claim, the
Indemnitee shall have the right to employ separate counsel and to participate
in (but not control) the defense, compromise or settlement of the Third Party
Claim, but the fees and expenses of such counsel will be at the expense of
the Indemnitee, unless (i) the Indemnitor has agreed to pay such fees and
expenses, (ii) any relief other than the payment of money damages is sought
against the Indemnitee, or (iii) the Indemnitee has been advised by its
counsel that there may be one or more defenses reasonably available to it
which are different from or additional to those available to the Indemnitor
and which can not be effectively raised by Indemnitor, and in any such case
that portion of the fees and expenses of such separate counsel that are
reasonably related to matters covered by the indemnification provided by this
Article IX will be paid by the Indemnitor. Expenses of counsel to the
Indemnitee shall be reimbursed on a current basis by the Indemnitor if there
is no dispute as to the obligation of the Indemnitor to pay such amounts
pursuant to this Article IX. In the event the Indemnitor exercises its right
to undertake the defense against any such Third Party Claim as provided
above, the Indemnitee shall cooperate with the Indemnitor in such defense and
make available to the Indemnitor, at the Indemnitor's expense, all witnesses,
pertinent records, materials and information in its possession or under its
control relating thereto as is reasonably required by the Indemnitor.
Similarly, in the event the Indemnitee is, directly or indirectly, conducting
the defense against any such Third Party Claim, the Indemnitor shall
cooperate with the Indemnitee in such defense and make available to it, at
the Indemnitor's expense, all such witnesses, records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the Indemnitee. No such Third Party Claim, except the
settlement thereof which involves the payment of money only (by a party or
parties other than the Indemnitee) and for which the Indemnitee is released
by the third party claimant and is totally indemnified by the Indemnitor, may
be settled by the Indemnitor without the written consent of the Indemnitee.
No Third Party Claim which is being defended in good faith by the Indemnitor
shall be settled by the Indemnitee without the written consent of the
Indemnitor.
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9.5 LIMITATIONS ON INDEMNIFICATION. (a) No claim or claims may be
made against an Indemnitor for indemnification pursuant to Section 9.2(a) or
Section 9.3(a), as the case may be, unless the collective Losses of the
Indemnitees with respect to such Sections shall exceed in the aggregate an
amount equal to $5,000,000, in which case the Indemnitor shall be obligated
to the Indemnitee only for the amount of the Loss or Losses in excess of
$5,000,000.
(b) In addition to the provisions and limitations as provided in (i)
Section 9.1 with respect to the period of survival of representations and
warranties and (ii) Section 9.5(a) with respect to dollar amounts of Losses
for which indemnification for breaches of representations and warranties is
not available: (A) the WP Partners shall not be liable for any Schuler Loss
(1) to the extent Schuler Losses relate to breaches of the WP Partners'
representations and warranties contained in Sections 4.5, 4.6, 4.8, 4.9,
4.10, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21 (solely with
respect to representations and warranties contained in the Sections listed in
this clause (1)) and/or 4.22 and exceed (in the aggregate) an amount equal to
$15,000,000, (2) to the extent Schuler Losses relate to breaches of the WP
Partners' representations and warranties contained in Sections 4.7, 4.11,
4.12, 4.21 (solely with respect to representations and warranties contained
in the Sections listed in this clause (2)), and/or 4.23 and exceed (in the
aggregate) an amount equal to $25,000,000 or (3) for which a claim for
indemnification relating to such a breach is not asserted hereunder within
the applicable survival period as provided in Section 9.1; and (B) Schuler
shall not be liable for any WP Partners Loss (4) to the extent WP Partners
Losses relate to breaches of Schuler's representations and warranties
contained in Sections 5.5, 5.6 5.8, 5.9, 5.10, 5.13, 5.14, 5.15, 5.16, 5.17,
5.18, 5.19, 5.20, 5.21 (solely with respect to representations and warranties
contained in the Sections listed in this clause (4)) and/or 5.22 and exceed
(in the aggregate) an amount equal to $15,000,000, (5) to the extent WP
Partners Losses relate to breaches of Schuler's representations and
warranties contained in Sections 5.7, 5.11, 5.12, 5.21 (solely with respect
to representations and warranties contained in the Sections listed in this
clause (5)) and/or 5.23 and exceed (in the aggregate) an amount equal to
$25,000,000 or (6) for which a claim for indemnification relating to such a
breach is not asserted hereunder within the applicable survival period as
provided in Section 9.1. The immediately preceding sentence notwithstanding,
the liability of the WP Partners for Schuler Losses pursuant to clauses (1)
and (2) shall not exceed, in the aggregate, $25,000,000, and the liability of
Schuler for WP Partner Losses pursuant to clauses (4) and (5) shall not
exceed, in the aggregate, $25,000,000.
(c) Notwithstanding any other provision of this Agreement, the
Liability of any Indemnitor for Losses shall be determined on a basis that is
net of the amount of any such Losses covered by insurance after subtracting
deductibles and retroactive premiums and other co-payments required to be
made by an Indemnitee.
9.6 STOCK INDEMNIFICATION PAYMENTS. (a) Any indemnification
obligations of the WP Partners pursuant to Section 9.2 shall be satisfied by
payment in shares of Newco Class A Common Stock and/or shares of Newco Class
B Common Stock to Newco. The number of shares of Stock delivered by the WP
Partners in satisfaction of an indemnification obligation shall be determined
in accordance with Section 9.6(c) below.
(b) Any indemnification obligations of Schuler pursuant to Section 9.3
shall be satisfied by payment in shares of Newco Class A Common Stock and/or
Newco Class B
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Common Stock to WP LLC, the number of which shares shall be determined in
accordance with Section 9.6(c) below.
(c) The aggregate number of shares of Newco Class A Common Stock
and/or Newco Class B Common Stock paid by Schuler or the WP Partners in
satisfaction of an indemnification obligation pursuant to paragraph (a) or
(b) of this Section 9.6 shall be equal to (i)(x) the amount of the Losses for
which indemnification is owed by Schuler, MULTIPLIED BY the number of shares
of Newco Common stock owned by WP LLC and Bankers Trust on the Closing Date,
MINUS (y) the amount of the Losses for which indemnification is owed by the
WP Partners, MULTIPLIED BY the number of shares of Newco Common stock owned
by the stockholders of Schuler on the Closing Date, ALL DIVIDED BY (ii) (x)
the number of shares of Newco Common Stock owned by the stockholders of
Schuler on the Closing Date, MULTIPLIED BY the Schuler Common Stock Market
Value, MINUS (y) the amount of the Losses for which indemnification is owed
by Schuler (all rounded to nearest whole share). For purposes of this Section
9.6(c), the term "Schuler Common Stock Market Value" shall mean the average
closing price per share of Schuler Common Stock on NASDAQ (as reported in THE
WALL STREET JOURNAL or, if not reported therein, any other authoritative
source) for the twenty (20) consecutive trading days (whether or not actual
trading occurred during such period) ending one (1) trading day preceding the
Closing Date.
(d) An example of calculations made pursuant to this Section 9.6 is
attached as Exhibit M.
ARTICLE X
[INTENTIONALLY OMITTED]
ARTICLE XI
TERMINATION
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written consent of Schuler and the WP Partners; or
(b) by either Schuler, on the one hand, or the WP Partners, on the
other hand, if (i) the approval of Schuler's stockholders required by
Sections 7.7 and 8.7 shall not have been obtained at a meeting duly convened
therefor or at any adjournment thereof, or (ii) a United States federal or
state court of competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and non-appealable; PROVIDED, HOWEVER, that the party seeking to
terminate this Agreement pursuant to this clause (ii) shall have used all
reasonable efforts to remove such injunction, order or decree; or (iii) if
the Closing shall not have occurred by January 31, 2000 (which date may be
extended at the sole option of either party to February 28, 2001); PROVIDED,
HOWEVER, that the right to terminate this Agreement pursuant to this
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subsection shall not be available to any party or parties whose failure to
fulfill any obligation under this Agreement shall have been the cause of, or
shall have resulted in, the failure of the Closing to occur prior to such
date; or
(c) by Schuler, as a result of the breach in any material respect of
any of the representations and warranties of the WP Partners contained in
Article IV or the failure by the WP Partners to perform and comply in any
material respect with any of the agreements and obligations required by this
Agreement to be performed or complied with by the WP Partners, provided that
such breach or failure is not cured within 30 days of the WP Partners'
receipt of a written notice from Schuler that such a breach or failure has
occurred; or
(d) by the WP Partners, as a result of the breach in any material
respect of any of the representations and warranties of Schuler contained in
Article V or the failure by Schuler to perform and comply in any material
respect with any of the agreements and obligations required by this Agreement
to be performed or complied with by Schuler, provided that such breach or
failure is not cured within 30 days of Schuler's receipt of a written notice
from a WP Partner that such a breach or failure has occurred.
11.2 WRITTEN NOTICE. In order to terminate this Agreement pursuant to
Section 11.1, the party so acting shall give written notice of such
termination to the other parties, specifying the grounds thereof.
11.3 EFFECT OF TERMINATION. In the event of the termination of this
Agreement in accordance with Section 11.1, this Agreement (other than
Sections 6.6 and 12.1, which shall survive the termination hereof) shall
become void and have no effect, with no liability on the part of any party or
its Affiliates, directors, officers, employees, shareholders or agents in
respect thereof; PROVIDED, HOWEVER, that nothing in this Section 11.3 shall
deprive the WP Partners, on the one hand, and Schuler, on the other, from
bringing any Action for breach of the Agreement by the other.
11.4 WAIVER. At any time prior to the Closing, Schuler, on the one
hand, and the WP Partners, on the other hand, may (a) extend the time for the
performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions contained herein.
ARTICLE XII
GENERAL PROVISIONS
12.1 EXPENSES, TAXES, ETC. Except as otherwise provided herein or in
any Ancillary Agreement, in the event that the Closing occurs, Newco shall
pay all reasonable fees and expenses incurred by each party hereto in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereby. Except as otherwise provided herein or in any Ancillary
Agreement, in the event that the Closing does not occur, each party shall pay
all such fees and expenses incurred by it in connection with this Agreement,
the Ancillary Agreements and the transactions contemplated hereby and
thereby; PROVIDED, HOWEVER, that (a) the filing fee in connection with the
HSR Act filing, (b) the filing fee in connection with the
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filing of the Form S-4 or Proxy Statement/Prospectus with the SEC, (c) the
expenses incurred in connection with printing and mailing the Form S-4 and
the Proxy Statement/Prospectus and (d) all sales, use, documentary, stamp and
excise Taxes and all transfer, filing, recordation and similar Taxes and fees
(including all real estate transfer Taxes and conveyance and recording fees,
if any) incurred by any party or the WP Entities in connection with this
Agreement, the Ancillary Agreements and the transactions contemplated hereby
and thereby will be borne equally by Schuler, on the one hand, and the WP
Partners, on the other hand.
12.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
by recognized overnight delivery service or mailed by registered or certified
mail (postage prepaid, return receipt requested), or sent by facsimile
transmission (confirmation received) to the parties at the following
addresses and facsimile transmission numbers (or at such other address or
number for a party as shall be specified by like notice), except that notices
after the giving of which there is a designated period within which to
perform an act and notices of changes of address or number shall be effective
only upon receipt:
(a) if to the WP Partners:
Eugene Rosenfeld
c/o Western Pacific Housing
300 Continental Blvd., Suite 390
El Segundo, CA 90246
Facsimile No.: (310) 414-0514
AND
Rick Koenigsberger
Apollo Real Estate Advisors
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
Facsimile No.: (212) 515-3282
AND
Ronald J. Kravit
Blackacre WPH, LLC
450 Park Avenue, 28th Floor
New York, New York 10022
Facsimile No.: (212) 891-2103
with a copy to:
Peter P. Wallace, Esq.
Morgan, Lewis & Bockius LLP
300 S. Grand Avenue, 22nd Floor
Los Angeles, CA 90071
Facsimile No.: (213) 612-2554
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AND
Stuart D. Freedman, Esq.
Schulte, Roth & Zabel LLP
900 3rd Avenue
New York, New York 10022
Facsimile No.: (212) 832-4169
(b) if to Schuler:
James K. Schuler
Schuler Homes, Inc.
828 Fort Street Mall, 4th Floor
Honolulu, Hawaii 96813
Facsimile No.: (808) 524-8927
with a copy to:
Richard V. Smith, Esq.
Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, CA 94111
Facsimile No.: (415) 773-5759
12.3 DISCLOSURE SCHEDULES. The WP Disclosure Schedule and the Schuler
Disclosure Schedule shall be divided into sections corresponding to the
sections and subsections of this Agreement. Disclosure of any matter in
either the WP Disclosure Schedule or the Schuler Disclosure Schedule shall
not be deemed to imply that such matter is or is not material. Disclosure of
any matter in the WP Disclosure Schedule or the Schuler Disclosure Schedule
shall not constitute an admission or raise any inference that such matter
constitutes a violation of law or an admission of Liability or facts
supporting Liability.
12.4 INTERPRETATION. (a) When a reference is made in this Agreement to
Sections, subsections, Schedules or Exhibits, such reference shall be to a
Section, subsection, Schedule or Exhibit to this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without
limitation." The table of contents and the headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. The words "herein" and "hereby"
and similar references mean, except where a specific Section or Article
reference is expressly indicated, the entire Agreement rather than any
specific Section or Article. Except as otherwise expressly provided herein,
all monetary amounts referenced in this Agreement shall mean U.S. dollars.
All capitalized terms defined herein are equally applicable to both the
singular and plural forms of such terms.
(b) Any references in this Agreement to the "knowledge" of the WP
Partners and the WP Entities, or to matters "known" to the WP Partners and
the WP Entities, shall mean the actual knowledge without inquiry or
investigation of only the Persons listed on Schedule 12.4(a). Any references
in this Agreement to the "best knowledge" or "knowledge" of Schuler
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shall mean the actual knowledge without inquiry or investigation of only the
Persons listed on Schedule 12.4(b). Anything herein to the contrary
notwithstanding, no Person listed on any of such schedules shall have any
personal Liability with respect to any of the matters set forth in this
Agreement or any representation or warranty herein being or becoming untrue,
inaccurate or incomplete
12.5 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the greatest extent possible.
12.6 ASSIGNMENT. This Agreement may not be assigned by operation of law
or otherwise.
12.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any Person, other
than the parties hereto and such assigns, any legal or equitable rights or
remedies hereunder.
12.8 AMENDMENT. This Agreement may not be amended or modified except by
an instrument in writing signed by the WP Partners and Schuler. In the case
of Schuler, such amendment may be made by action taken or authorized by
Schuler's Board of Directors at any time before or after approval of the
matters presented in connection with the Reorganization by the stockholders
of Schuler, but after any such approval, no amendment shall be made which by
law requires further approval by such stockholders without such further
approval.
12.9 NO OTHER REMEDIES. Except as provided in Sections 11.3 and 12.13,
any and all remedies herein expressly conferred upon a party hereby are
deemed exclusive of any other remedy conferred hereby or by law or equity on
such party. In particular, the remedies provided by Article IX for Losses
shall be exclusive of any other rights or remedies available to a party
against the other party, either at law or in equity, in relation to any
breach, default or nonperformance of any representation, warranty, covenant,
agreement or undertaking made or entered into by such other party pursuant to
this Agreement or the transactions contemplated hereby. Notwithstanding any
provision hereof, neither party shall be liable hereunder to any Schuler
Indemnified Party or WP Partners Indemnified Party for any incidental or
consequential damages, damages for loss of profits or opportunities or
exemplary or punitive damages, regardless of the circumstances from which
such damages arose.
12.10 FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and
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reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement.
12.11 MUTUAL DRAFTING. This Agreement is the joint product of Schuler
and the WP Partners and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Schuler and the WP Partners and
shall not be construed for or against any party hereto.
12.12 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State (without
giving effect to such State's choice of law principles).
12.13 DISPUTE RESOLUTION. Except as otherwise provided in Section 11.3,
any dispute, controversy or claim between the parties relating to, arising
out of or in connection with this Agreement (or any subsequent agreements or
amendments thereto), including as to its existence, enforceability, validity,
interpretation, performance or breach or as to indemnification or damages,
including claims in tort, whether arising before or after the termination of
this Agreement (any such dispute, controversy or claim being herein referred
to as a "Dispute"), shall be settled without litigation and only by use of
the following alternative dispute resolution procedure:
(a) At the written request of the WP Partners, on the one hand, or
Schuler, on the other hand, each party shall appoint a knowledgeable,
responsible representative to meet and negotiate in good faith to resolve any
Dispute. The discussions shall be left to the discretion of the
representatives. Upon agreement, the representatives may utilize other
alternative dispute resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the parties'
representatives for purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt
from discovery and production, and without the concurrence of both parties
shall not be admissible in the arbitration described below or in any lawsuit.
Documents identified in or provided with such communications, which are not
prepared for purposes of the negotiations, are not so exempted and may, if
otherwise admissible, be admitted in the arbitration.
(b) If negotiations between the representatives of the parties do not
resolve the Dispute within 60 days of the initial written request, the
Dispute shall be submitted to binding arbitration by a panel of three
arbitrators (each of which shall have at least ten years of experience in the
industry in which the WP Business operates or some material aspect thereof
relating to the matter subject to arbitration) pursuant to the Commercial
Arbitration Rules, as then amended and in effect, of the American Arbitration
Association (the "Rules"). Any party may demand such arbitration in
accordance with the procedures set out in the Rules. The WP Partners and
Schuler shall each select one arbitrator, and the two arbitrators so selected
shall select the third arbitrator. The arbitration shall take place in San
Francisco, California. The arbitration hearing shall be commenced within 60
days of such party's demand for arbitration. The arbitrators shall control
the scheduling (so as to process the matter expeditiously) and any discovery.
The parties may submit written briefs. At the arbitration hearing, each party
may make written and oral presentations to the arbitrators, present testimony
and written evidence and
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examine witnesses. No party shall be eligible to receive, and the arbitrators
shall not have the authority to award, incidental or consequential damages,
damages for loss of profits or opportunities or exemplary or punitive
damages. The arbitrators shall rule on the Dispute by issuing a written
opinion within 30 days after the close of hearings. The arbitrators' decision
shall be binding and final. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction.
(c) Each party will bear its own costs and expenses in submitting and
presenting its position with respect to any Dispute to the arbitrators.
Schuler, on the one hand, and the WP Partners, on the other hand, shall pay
one-half of the fees and expenses of the arbitrators and the American
Arbitration Association.
(d) Notwithstanding any other provision of this Agreement, any party
may commence an Action to compel compliance with this Section 12.13.
12.14 CONSENT TO JURISDICTION; WAIVERS. Subject to Section 12.13, each
of the parties hereto irrevocably submits to the exclusive jurisdiction of
(a) the Delaware Chancery Court, and (b) the United States District Court for
Delaware, for the purposes of any Action arising out of this Agreement or any
transaction contemplated hereby. Each of the parties hereto agrees to
commence any Action relating hereto either in the United States District
Court for Delaware or if such Action may not be brought in such court for
jurisdictional reasons, in the Delaware Chancery Court. Each of the parties
hereto further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth
in Section 12.2 shall be effective service of process for any Action in
Delaware with respect to any matters to which it has submitted to
jurisdiction in this Section 12.14. Each of the parties hereto irrevocably
and unconditionally waives any objection to the laying of venue of any Action
arising out of this Agreement or any transaction contemplated hereby in (i)
the Delaware Chancery Court, or (ii) the United States District Court for
Delaware, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such Action brought
in any such court has been brought in an inconvenient forum.
12.15 WAIVER OF JURY TRIAL. Each of the parties hereto irrevocably and
unconditionally waives trial by jury in any Action relating to this Agreement
or any transaction contemplated hereby, and for any counterclaim with respect
thereto.
12.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
12.17 ENTIRE AGREEMENT. This Agreement, together with all Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties delivered pursuant hereto, including the Ancillary Agreements,
constitute the entire agreement and supersede all prior agreements and
undertakings, both written and oral, other than the Confidentiality
Agreement, among the WP Partners and Schuler with respect to the subject
matter hereof.
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IN WITNESS WHEREOF, Schuler and the WP Partners have caused this
Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
SCHULER HOMES, INC.,
a Delaware corporation
By /s/ James K. Schuler
---------------------------------------------
Name: James K. Schuler
Title: President and Chief Executive Officer
APOLLO REAL ESTATE INVESTMENT FUND, L.P.,
a Delaware limited partnership
By: APOLLO REAL ESTATE ADVISORS, L.P.,
a Delaware limited partnership,
Its General Partner
By: APOLLO REAL ESTATE MANAGEMENT, INC.,
a Delaware corporation,
Its General Partner
By: /s/ Michael D. Weiner
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Michael D. Weiner
Its Vice President
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BLACKACRE WPH, LLC,
a Delaware limited liability company
By: BLACKACRE CAPTIAL GROUP, L.P.,
a Delaware limited partnership,
Its Managing Member
By: BLACKACRE CAPTIAL MANAGEMENT CORP.
a Connecticut corporation,
Its General Partner
By: /s/ Ronald J. Kravit
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Ronald J. Kravit
Its Vice President
HIGHRIDGE PACIFIC HOUSING INVESTORS, L.P.,
a California limited partnership
By: WPH ACQUISITIONS, INC.,
a California corporation,
Its General Partner
By: /s/ Steven A. Berlinger
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Steven A. Berlinger
Its CFO and Secretary
AP WP PARTNERS, L.P.,
a Delaware limited partnership
By: AP WP OPERATING CORPORATION,
a Delaware corporation,
Its General Partner
By: /s/ Michael D. Weiner
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Michael D. Weiner
Its Vice President
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AP WESTERN GP CORPORATION,
a Delaware corporation
By /s/ Michael D. Weiner
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Name:
Title:
AP LHI, INC.,
a California corporation
By /s/ Thomas Connelly
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Thomas Connelly
Its Vice President
LAMCO HOUSING, INC.
a California corporation
By /s/ Thomas Connelly
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Thomas Connelly
Its Vice President
