Securities and Exchange Commission
Washington D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Period Ended March 31, 1996.
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Transition Period From
- - -_______________ to ________________.
Commission file number 0-22562
CROSSMANN COMMUNITIES, INC.
INDIANA 35-1880120
(State of incorporation) (I.R.S. Identification No.)
9202 NORTH MERIDIAN STREET
INDIANAPOLIS, IN 46260
(Address of principal executive offices) (Zip Code)
(317) 843-9514
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all
documents and reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter periods that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days:
Yes X No
There were 6,105,708 Common shares outstanding as of May 13, 1996.
<PAGE>
11
CROSSMANN COMMUNITIES, INC.
FORM 10-Q
INDEX
Part I. Financial Information.
Item 1. Financial Statements.
Consolidated balance sheets as of March 31, 1996 (unaudited)
and December 31, 1995.
Consolidated unaudited statements of income for the three
months ended March 31, 1996 and 1995.
Consolidated unaudited statements of cash flows for the three
months ended March 31, 1996 and 1995.
Notes to consolidated unaudited financial statements for the
three months ended March 31, 1996 and 1995.
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations.
Part II. Other Information
Item 1. Legal Proceedings.
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
Signatures.
<PAGE>
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements
<TABLE>
<CAPTION>
CROSSMANN COMMUNITIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
March 31, 1996 December 31, 1995
(unaudited)
----------------
ASSETS
Cash and cash equivalents $ 5,232,950
Retainages $ 1,191,850 604,973
Real estate inventories 76,381,935 69,682,696
Furniture and equipment, net 2,647,685 1,310,259
Investments in joint ventures 1,402,950 1,172,289
Goodwill, net 2,858,299 2,898,722
Other assets 3,318,898 3,052,587
---------------- ------------------
Total assets $ 87,801,617 $ 83,954,476
================ ==================
Liabilities and shareholders' equity
Accounts payable $ 9,791,830 $ 10,304,193
Accrued expenses and other liabilities 4,488,286 3,966,255
Notes payable 27,908,941 25,472,321
---------------- ------------------
Total liabilities 42,189,057 39,742,769
Shareholders' equity:
Common shares 24,059,879 24,028,879
Retained earnings 21,552,681 20,182,828
---------------- ------------------
Total shareholders' equity 45,612,560 44,211,707
---------------- ------------------
Total liabilities and shareholders' equity $ 87,801,617 $ 83,954,476
- - ------------------------------------------- ================ ==================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CROSSMANN COMMUNITIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<S> <C> <C>
THREE MONTHS ENDED MARCH 31, THREE MONTHS ENDED MARCH 31,
1996 1995
----------------------------- -----------------------------
Sales of residential real estate 37,568,566 24,660,150
Cost of residential real estate sold 30,036,068 19,730,097
----------------------------- -----------------------------
Gross profit 7,532,498 4,930,053
Selling, general and administrative 5,112,291 3,478,159
----------------------------- -----------------------------
Income from operations 2,420,207 1,451,894
Other income, net 234,938 118,156
Interest expense (208,003) (57,938)
----------------------------- -----------------------------
26,935 60,218
----------------------------- -----------------------------
Income before income taxes 2,447,142 1,512,112
Income taxes 1,077,289 612,030
----------------------------- -----------------------------
Net income 1,369,853 900,082
============================= =============================
Weighted average number of common shares outstanding 6,087,825 6,070,000
============================= =============================
Net income per common share 0.23 0.15
- - ---------------------------------------------------- ============================= =============================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CROSSMANN COMMUNITIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<S> <C> <C>
Three Months Ended March 31, 1996 Three Months Ended March 31, 1995
----------------------------------- -----------------------------------
Operating activities:
Net Income $ 1,369,853 $ 900,082
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 166,388 83,858
Amortization 40,423 40,423
Gain on sale of equipment (3,880)
Cash provided (used) by changes in:
Retainages (586,877) (211,628)
Real estate inventories (6,699,239) (2,567,173)
Amounts due from related parties 1,371
Other assets (267,682) (369,779)
Accounts payable (510,798) 193,332
Amounts due to related parties 210 300
Accrued expenses and other liabilities 520,256 838,670
Net cash used by operating activities (5,969,975) (1,091,915)
Investing activities:
Purchases of furniture and equipment (1,506,934) (534,287)
Proceeds from disposition of furniture and 7,000
equipment
Investments in joint ventures (230,661) 21,050
Net cash used by investing activities (1,730,595) (513,237)
Financing activities:
Proceeds from bank borrowings 7,360,000 1,716,375
Principal payments on bank borrowings (4,670,000)
Payments on notes and long-term debt (253,380) 111,223
Proceeds from sale of common shares 31,000
Net cash provided by financing activities 2,467,620 1,605,152
Net increase (decrease) in cash and cash (5,232,950)
equivalents
Cash and cash equivalents at beginning of period 5,232,950
Cash and cash equivalents at end of period $ $
- - ------------------------------------------------ ----------------------------------- -----------------------------------
<FN>
See accompanying notes.
</TABLE>
<PAGE>
CROSSMANN COMMUNITIES, INC.
Notes to Unaudited Consolidated Financial Statements
BASIS OF PRESENTATION
Crossmann Communities, Inc. (the "Company") is engaged primarily in the
development, construction, marketing and sale of new single-family homes for
first time and first move-up buyers. The Company also acquires and develops
land for construction of such homes and originates mortgage loans for the
buyers. The Company operates in Indianapolis, Ft. Wayne, and Lafayette,
Indiana; Cincinnati, Columbus, and Dayton, Ohio; and Louisville, Kentucky.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, the unaudited consolidated financial statements
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of the Company, all adjustments (consisting of normal recurring
accruals) considered necessary to present fairly the consolidated financial
statements have been included.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which is effective for the Company beginning January 1, 1996.
SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25,
which recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to
its stock-based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share.
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
The Company's business and the homebuilding industry in general are subject to
changes in economic conditions, including, but not limited to, employment
levels, interest rates, the availability of credit, and consumer confidence.
The Company's success over the past several years has been influenced by a
variety of factors including favorable economic conditions in its principal
markets, the availability of capital for expansion, and low interest rates.
To the extent these conditions do not continue, the Company's operating
results may be adversely affected.
The Company's business is subject to weather-related seasonal factors that can
affect quarter-to-quarter results of operations. The number of sales
contracts signed tends to be higher during the first four months of the year,
creating a backlog that declines during the second half of the year. A home
is included in "backlog" upon execution of a sales contract by the customer,
and sales and cost of sales are recognized when the title is transferred and
the home is delivered to the buyer at "closing." Adverse weather conditions
during the first and second quarters of the year usually restricts site
development work, and construction limitations generally result in fewer
closings during this period. (The Company attempts to mitigate the effect of
winter weather by building an inventory of foundations during the fall.)
Results of operation during the first half of the year may reflect increased
costs associated with adverse weather.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1995
Results of Operation
Sales for the three months ended March 31, 1996 increased approximately $12.9
million, or 52%, over the same period in 1995. This increase reflects more
homes closed (354 homes in 1996 as compared to 234 in 1995) and higher selling
prices ($106,126 per home for the period in 1996 as compared to approximately
$105,385 in 1995). Management attributes this increase in unit closings
principally to the contribution of closings by the Company's new markets, Ft.
Wayne, Cincinnati, and Southern Indiana.
Gross profits increased approximately $2.6 million for the three months ended
March 31, 1996, over the same period the year before. Gross profits as a
percentage of sales increased from 19.99% in 1995 to 20.05% in 1996. Due to
higher prevailing home mortgage rates in the last part of 1994, the Company
contributed more toward the points and closing costs of a new home buyer in
first quarter 1995 than in the corresponding period in 1996.
Selling, general and administrative expenses increased $1.6 million during the
three months ended March 31, 1996 compared to the same period in 1995, due in
part to sales commissions on the higher sales and increased overhead related
to the Company's new markets. Selling, general and administrative expenses
declined as a percentage of sales, from 14.1% to 13.6%.
Other income decreased $33,283 for the three months ended March 31, 1996
compared to the same period the year before. Earnings from land development
joint ventures were higher during the first quarter of 1996, offset by higher
interest expense during the first quarter of 1996 due to higher inventory
levels.
Income before income taxes for the three months ended March 31, 1996 increased
$935,025, from $1.5 million in 1995 to more than $2.4 million in 1996, an
increase of approximately 62%. Income before income taxes as a percentage of
sales increased to 6.5% of sales in 1996 compared to 6.1% in 1995. This
increase is due principally to increased sales volume with stable selling,
general, and administrative expenses.
Net income was $469,771 higher for the first quarter of 1996 than for the
first quarter of 1995, an increase of 52.2%. As a percentage of sales, net
income was 3.65% in 1996 which is unchanged from the same period in 1995.
Backlog
The Company generally builds only upon the execution of a sales contract by a
customer and after approval of financing, although it also builds a limited
number of homes on speculation. The standard sales contract used by the
Company provides for an earnest money deposit of $1,000. The contract usually
includes a termination provision under which the earnest money is refunded in
the event that mortgage financing is not available on terms specified in the
contract, and may include other contingencies. Cancellations by buyers with
approved financing occur infrequently.
Sales backlog at March 31, 1996 was 1,313 homes with an aggregate sales value
of approximately $139.3 million, compared to 815 homes with an aggregate sales
value of approximately $85.2 million at March 31, 1995, an increase of over
61%. This increase reflects a higher year-end backlog (757 at December 31,
1995 compared to 345 at December 31, 1994) and strong sales in the first
quarter of 1996 (910 new contracts written in the first quarter of 1996
compared to 704 in 1995, an increase of 29%). Management attributes the
strong sales improvement to the fact that it offers homes in more markets in
1996, but also to an aggressive marketing campaign undertaken during the first
quarter of 1996.
Changes in Financial Position
Income from operations and new borrowings on the line of credit were used
primarily to finance real estate inventories, which increased approximately
$6.6 million or 9.61% from their December 31 level. The expansion in
inventory during the first quarter of 1996 is a normal seasonal trend. Winter
weather slows closings but does not prevent work on houses under construction
from continuing; therefore, investment in inventory grows.
Retainages increased $586,877 in the first quarter, or 97%. This increase is
also seasonal. Mortgage companies retain escrows for the completion of
exterior landscape items. As weather permits, yards will be completed and
retainages will be released to the Company during the second and third
quarters of the year.
Furniture and equipment increased approximately $1.3 million dollars or 102%.
The increase is principally attributable to the purchase of an aircraft for
use in the management of the Company. Crossmann purchased a 1982 King Air
B200 for $1.295 million . The Company formed a wholly-owned subsidiary,
Deluxe Aviation, Inc., to hold and manage the aircraft, which will be
available for outside charter when it is not being used by the Company for
company business.
Notes payable increased approximately $2.4 million during the first quarter of
1996 as the line of credit was employed to increase inventories.
Capital Resources and Liquidity
On December 22, 1995, the Company issued senior notes pari passu with its
senior bank facility, in the amount of $25 million, to be repaid over nine
years at a fixed interest rate of 7.625%. With the note proceeds, the Company
repaid the subordinated notes to shareholders in full and repaid the entire
balance outstanding on the line of credit with the banks. At December 31, the
Company had excess cash and investments of approximately $5.2 million.
The new note agreement requires compliance with certain financial and
operating covenants and places certain limitations on the Company's
investments in land and in unconsolidated joint ventures. It also limits
payments of cash dividends by the Company.
Concurrent with the issuance of the notes, the Company also renegotiated its
credit agreement with Bank One, Indianapolis N.A. to permit the issuance of
the notes, streamline the covenants, and to extend the maturity of the banks'
credit agreement to March 31, 1998. To finance inventory expansion during the
first quarter, the Company used its cash reserves and, at March 31, 1996, had
drawn funds on its senior bank line of credit in the amount of $2,690,000.
The Company's financing needs depend on land acquisition, inventory turnover
and sales volume. Historically, the Company has financed operations with the
retention of earnings and borrowings from financial institutions. Management
believes future financing needs will be funded by internally generated
capital, funds available under the existing credit arrangement, and additional
financing to be negotiated.
FUTURE TRENDS
On April 29, 1996, the Company closed on an asset purchase of substantially
all the assets of Tom Peebles Builders, Inc., ("Peebles") a Dayton
homebuilder. Peebles' assets consist principally of land, model homes, and
houses under construction and were acquired for approximately $4 million.
Thomas H. Peebles, president and sole shareholder of Peebles has entered into
a 5-year employment agreement with the Company. The Company intends to hire
all the employees of the company and assume its rights and obligations under
purchase agreements with 50 Peebles' customers and in two land development
joint ventures. The acquisition adds approximately 450 lots to Crossmann's
lot inventory in Dayton. The transaction is not material in relation to the
Company's assets, sales, or income.
PART II. OTHER INFORMATION
The following items for which provision is made in the applicable regulations
of the Securities and Exchange Commission are not required under the related
explanations or are inapplicable and therefore have been omitted:
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submissions of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C>
Exhibit
Number Description of Exhibit
- - ------- ---------------------------------------------------------------------------------------------------------------
3.1 Amended and restated Articles of Incorporation of Crossmann Communities, Inc. (Incorporated by reference to
Exhibit 3.1 to Form S-1 Registration Statement No. 33-68396.)
3.2 Bylaws of Crossmann Communities, Inc. (Incorporated by reference to Exhibit 3.2 to Form S-1 Registration
Statement No. 33-68396.)
4.1 Specimen Share Certificate for Common Shares. (Incorporated by reference to Exhibit 2.9 to Form S-1
Registration Statement No. 33-68396.)
10.1 Tax Indemnification Agreement dated September 1, 1993, among Crossmann Communities, Inc., John B.
Scheumann and Richard H. Crosser, as sole trustee of the Richard H.
Crosser Living Trust. (Incorporated by reference to Exhibit 10.1 to Form S-1 Registration Statement No. 33-
68396.)
10.2 1993 Outside Director Stock Option Plan. (Incorporated by reference to Exhibit 10.2 to Form S-1 Registration
Statement No. 33-68396.)
10.3 1993 Employee Stock Option Plan. (Incorporated by reference to Exhibit 10.3 to Form S-1 Registration
Statement No. 33-68396.)
10.10 Share Purchase Agreement, dated October 7, 1993, by and among John B. Scheumann, Richard H. Crosser and
Crossmann Communities, Inc. (Incorporated by reference to Exhibit
10.10 to Form S-1 Registration Statement No. 33-68396.)
10.37 Note Agreement dated as of December 19, 1995, $25,000,000 7.625% Senior Notes due December 9, 2004, by
Crossmann Communities, Inc., et al. (Incorporated by reference to Exhibit 10.37 to From 10-K dated March 18,
1996.)
10.38 7.625% Senior Note due December 19, 2004, issued to Combined Insurance Company by Crossmann
Communities, Inc., et al. (Incorporated by reference to Exhibit 10.38 to Form 10-K dated March 18, 1996.)
10.39 7.625% Senior Note due December 19, 2004, issued to Minnesota Mutual Life Insurance company by
Crossmann Communities, Inc., et al. (Incorporated by reference to Exhibit 10.39 to Form 10-K dated March 18,
1996.)
10.40 Amended and Restated Credit Agreement, dated December 22, 1995, by and between Crossmann Communities,
Inc., et al. and Bank One, Indianapolis N.A. (Incorporated by reference to Exhibit 10.40 to Form 10-K dated
March 18, 1996.)
10.41 Asset Purchase Agreement, dated April 26, 1996, by and among Crossmann Communities, Inc., Crossmann
Communities of Ohio, Inc., Tom Peebles Builders, Inc., and Thomas H. Peebles.
10.42 Employment contract dated April 26, 1996, by and among Crossmann Communities Inc., Crossmann
Communities of Ohio, Inc., and Thomas H. Peebles.
11.1 Computation of Per Share Net Income for the quarter ended March 31, 1996.
19.1 Lease by and between Pinnacle Properties LLC ("Landlord") and Crossmann Communities, Inc. (Tenant"), 9202
North Meridian Street, Suite 300, Indianapolis, Indiana 46260, executed April 18, 1994. (Incorporated by
reference to Exhibit 19.1 to Form 10-Q dated August 12, 1994.)
21.1 Subsidiaries of the registrant. (Incorporated by reference to Exhibit 21.1 to Form S-1 Registration Statement
No. 33-68396.)
27.1 Financial Data Schedule for the quarter ended March 31, 1996.
</TABLE>
(b Reports on Form 8-K.
No Reports on Form 8-K were filed during the quarter for which this
report is filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CROSSMANN COMMUNITIES, INC.
_____________________________________
Jennifer A. Holihen
Director; Chief Financial Officer;
Treasurer; Secretary
(Principal Financial and Accounting Officer)
Dated: May 13, 1996
<PAGE>
ASSET PURCHASE AGREEMENT
dated as of the 26th day of April, 1996
by and among
CROSSMANN COMMUNITIES, INC.
CROSSMANN COMMUNITIES OF OHIO, INC.
TOM PEEBLES BUILDERS, INC.
and
THOMAS H. PEEBLES
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of the 26th day of April, 1996, by and among CROSSMANN COMMUNITIES, INC.,
an Indiana corporation ("Crossmann"), CROSSMANN COMMUNITIES OF OHIO, INC. an
Ohio corporation and a wholly owned subsidiary of Crossmann (the "Purchaser"),
TOM PEEBLES BUILDERS, INC., an Ohio corporation (the "Seller"), and Thomas H.
Peebles, the sole shareholder of the Seller ("Peebles").
WITNESSETH
WHEREAS, the Seller is engaged in the business of acquiring undeveloped
and developed real estate, developing such real estate, and building
residential homes thereon (the "Business").
WHEREAS, the Purchaser, in reliance upon the representations, warranties
and covenants of the Seller and Peebles set forth herein, desires to purchase
from the Seller, and the Seller desires to sell, transfer and convey the
Acquired Assets to the Purchaser pursuant to the terms and subject to the
conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the representations, warranties,
covenants, and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Crossmann, the Purchaser, the Seller, and Peebles hereby agree as follows:
ARTICLE I.
SALE AND PURCHASE
Section 1.011. Transfer of the Acquired Assets. Subject to the terms and
conditions set forth herein, on the Closing Date, the Seller shall sell,
convey, transfer, assign, and deliver to the Purchaser, and the Purchaser
shall purchase, acquire, and accept from the Seller, all of the respective
rights, titles, and interests of the Seller in and to the Acquired Assets,
which assets include, but are not limited to, the Seller's sales contracts and
other agreements for the conveyance of residential property. The Purchaser
shall not purchase, acquire, or accept from the Seller any right, title or
interest of the Seller in or to the Excluded Assets..
Section 1.012. Sale at Closing Date. The sales, conveyances, transfers,
assignments, and deliveries by the Seller of the Acquired Assets, as herein
provided, shall be effected on the Closing Date, free and clear of all Liens,
except for the Liens set forth on Schedule 1.02, by appropriate deeds, bills
of sale, endorsements, assignments, and other instruments of transfer and
conveyance satisfactory in form and substance to the Purchaser..
Section 1.013. Assumption of Liabilities. Subject to the terms and
conditions set forth herein, from and after the Closing, the Purchaser shall
assume, pay, perform, and discharge, when due, the liabilities and obligations
of the Seller which are secured by the Acquired Assets or which are otherwise
listed on Schedule 1.03 (the "Assumed Liabilities"). Notwithstanding the
foregoing, the Purchaser shall not assume, pay, perform or discharge any
liability or obligation of the Seller which is not an Assumed Liability,
including, but not limited to:.
(a) any liability or obligation which is secured by the Excluded Assets;
(b) any unfunded pension liability;
(c) any Tax liability which accrued on or before the Closing Date
(including any Tax liability resulting from the sale and
transfer by the Seller of the Acquired Assets hereunder);
provided, however, that the Purchaser shall pay (i) the real
estate taxes which become due and payable in June or July of
1996, the estimated amount of which is listed on Schedule 1.03
and (ii) the transfer taxes set forth a Schedule 1.04;
provided, further, that the Purchaser shall not be responsible
for any past due or delinquent taxes.
(d) any liability arising from activities outside of the ordinary
course of the Business;
(e) any tort liability not listed on Schedule 1.03;
(f) any warranty liability not listed on Schedule 1.03; provided
however, that with regard to warranty claims on residential homes built by the
Seller during the twelve (12) months preceding the Closing Date, the
Purchaser shall only assume a liability of $500 per house for warranty claims,
up to a maximum of $20,000 in the aggregate;
(g)
any cost or expense, not listed on Schedule 1.03, incurred in building
residential homes the sale of which closed prior to the Closing Date (for
example, the Purchaser shall not be responsible for paying any contractor or
subcontractor that worked on residential homes if the sale of such homes
closed prior to the Closing Date unless those costs are included in the
liabilities set forth on Schedule 1.03);
(h)
any liability arising from any suit, cause, action, claim, investigation, or
arbitral action that was filed, in progress, pending, or threatened against
the Seller (or any of its assets or property) on or before the Closing Date
whether at law or in equity, whether civil or criminal in nature, whether
before any federal, state, county, or local court, commission, board or
agency;
(i)
any liability arising from circumstances arising on or before the Closing Date
not listed on Schedule 1.03; or
(j)
any other undisclosed liability.
Section 1.014. Purchase PriceThe aggregate purchase price (the "Purchase
Price") to be paid by the Purchaser to the Seller for the Acquired Assets
shall be:.
(a) the sum of Five Hundred Thousand Dollars ($500,000.00)
payable at the Closing;
(b) the assumption of the Assumed Liabilities of the Seller; and
(c) the amount set forth on Schedule 1.04 (which shall be
delivered to the Purchaser three days prior to Closing) which shall reimburse
the Seller for certain transaction costs (including recording fees, title
insurance and transfer taxes, imposed on the transfer of the Real Property and
the Seller's trucks, automobiles and vans, but excluding the Seller's
accountant's and attorney's fees) that Seller will incur in connection with
the transactions contemplated by this Agreement (the "Transaction Costs"),
payable by check as soon as practicable after the Closing.
Section 1.015. Fair ConsiderationThe parties acknowledge and agree that
the consideration provided for in this Article I represents fair consideration
and reasonable equivalent value for the sale and transfer of the Acquired
Assets, the assumption of the Assumed Liabilities, and the transactions,
representation, warranties, covenants, and agreements set forth in this
Agreement, which consideration was agreed upon as the result of arm's-length,
good-faith negotiations between the parties and their respective
representatives..
Section 1.016. Subsequent DocumentationAt any time and from time to time
after the Closing Date and without any further consideration, the Seller and
Peebles shall, upon the request of the Purchaser, and the Purchaser shall,
upon the request of the Seller or Peebles, promptly execute, acknowledge, and
deliver, or cause to be executed, acknowledged, and delivered, such further
instruments and other documents, and perform, or cause to be performed, such
further acts, as may be reasonably required to evidence or effectuate the
sale, conveyance, transfer, assignment, and delivery hereunder of the Acquired
Assets, the assumption by the Purchaser of the Assumed Liabilities, the
performance by the parties of any of their other respective obligations under
this Agreement, and to carry out the purposes and intent of this Agreement.
Without limiting any of the foregoing, prior to or after the Closing Date the
Seller and Peebles shall execute and deliver a license agreement to the
Purchaser pursuant to which the Seller and Peebles shall grant the Purchaser
the right to use the name "Peebles Builders, Inc." in the Dayton Metropolitan
Area for a period of ten (10) years..
Section 1.017. Assignment of ContractsTo the extent that the assignment
of all or any portion of any of the Assigned Contracts shall require the
consent of any other party thereto, the execution of this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof. Prior to the Closing, the Seller shall use its
best efforts to obtain all consents required to assign all or any portion of
the Assigned Contracts to the Purchaser; provided, however, that no
modification of any such Assigned Contract shall be made without the
Purchaser's prior written consent. If the Seller is unable to obtain the
necessary consents or is otherwise unable to effect an assignment of an
Assigned Contract, the parties agree to take such actions and to enter into
such agreements as may be necessary in order to effect a transfer of all of
the rights and obligations with respect to such Assigned Contract from the
Seller to the Purchaser, including, but not limited to, causing Purchaser to
become the subcontractor of the Seller with respect to such Assigned
Contract..
Section 1.018. Best EffortsBoth prior and subsequent to the Closing, the
Seller and Peebles shall use their best efforts to take, or cause to be taken,
all actions, and do, or caused to be done, all things, necessary, proper, or
advisable, and consistent with applicable law, to consummate and make
effective the transactions contemplated by this Agreement, including all
actions necessary to obtain all consents, waivers, authorizations, and
approvals of all governmental and regulatory authorities and of all other
persons required to be obtained by the Seller in connection with its
execution, delivery, and performance of this Agreement. .
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND PEEBLES
As a material inducement to Crossmann and the Purchaser to enter into
this Agreement and to the Purchaser to enter into all other agreements and
documents executed by the Purchaser in connection with this Agreement,
including, but not limited to, the Peebles Employment Agreement described in
Section 7.04, and the Lease described in Section 8.09 , and to consummate the
transactions contemplated hereby and thereby, the Seller and Peebles jointly
and severally represent and warrant to Crossmann and the Purchaser that:
Section 1.021. Title to PropertyExcept as set forth in Schedule 2.01,
the Seller has good, valid and marketable title to all of its respective
properties, interests in properties and assets (other than those held by
lease), real or personal, tangible or intangible, that are used in its
Business, free and clear of all mortgages, liens, pledges, charges, claims,
security interests, encumbrances, easements, encroachments, rights of third
parties, or other interests of any kind or character, and except for liens for
property taxes not yet due and payable. Without limiting the foregoing,
except as set forth on Schedule 1.02, the Acquired Assets are held by the
Seller free and clear of any and all mortgages, liens, pledges, charges,
claims, security interests, encumbrances, easements, encroachments, rights of
third parties, or other interests of any kind or character..
Section 1.022. Authority; ConsentThe Seller and Peebles have the full
capacity, right, power, and authority to enter into, execute, and deliver this
Agreement, to consummate the transactions contemplated by this Agreement, and
to comply with and fulfill the terms and conditions of this Agreement. The
Seller has the full capacity, right, power, and authority to sell, transfer,
assign, and deliver all of the Acquired Assets to the Purchaser. The
execution and delivery of this Agreement by the Seller and the consummation by
the Seller of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the board of directors and
the shareholder of the Seller. This Agreement constitutes a valid and binding
obligation of the Seller and Peebles, enforceable against each of them in
accordance with its terms and conditions, subject as to enforcement to
applicable bankruptcy, insolvency, reorganization, and other similar laws of
general applicability relating to or affecting creditors rights generally. No
further action is necessary by the Seller or Peebles to make this Agreement
valid and binding upon it or him and enforceable against it or him in
accordance with the terms hereof or to carry out the transactions contemplated
hereby. Except as set forth in Schedule 2.02, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor compliance by the Seller and Peebles with any of the
provisions of this Agreement will:.
(a) Conflict with, violate, result in a breach of, constitute a
material default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or give rise to any right of termination,
cancellation, or acceleration under any provision of the Articles of
Incorporation or By-laws of the Seller or any of the terms, conditions or
provisions of any note, lien, bond mortgage, indenture, license, lease,
contract, commitment, agreement, understanding, arrangement, restriction, or
other instrument or obligation to which the Seller or Peebles is a party or by
which the Seller or Peebles or any of their respective properties or assets
may be bound;
(b) Violate any law, rule, or regulation of any government or
governmental agency or body, or any judgment, order, writ, injunction, or
decree of any court, administrative agency, or governmental agency or body
applicable to the Seller, Peebles or any of their respective properties,
assets, or outstanding shares or other securities of the Seller; or
(c) Constitute an event which, with or without notice, lapse of
time, or action by a third party, could result in the creation of any lien,
charge, or encumbrance upon any of the assets or properties of the Seller, or
upon the Acquired Assets, or cause the maturity of any liability, obligation,
or debt of the Seller to be accelerated or increased.
Section 1.023. Consents and ApprovalsExcept as set forth on Schedule
2.03, the execution, delivery, and performance of this Agreement by the Seller
and Peebles and the consummation by the Seller and Peebles of the transactions
contemplated hereby will not require any notice to, or consent, authorization,
or approval from any court or governmental authority or any other third party.
Except as set forth in Section 2.03, any and all notices, consents,
authorizations, and approvals set forth on Schedule 2.03 have been made and
obtained.
Section 1.024. Corporation OrganizationThe Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Ohio and does not own or lease property or conduct business outside of the
State of Ohio. The Seller has all the requisite power and authority to own,
lease, and operate its properties and to carry on its Business as it is now
being conducted. The Seller prior to the Closing will deliver to the
Purchaser (a) a true and complete copy of the Articles of Incorporation,
including all amendments thereto, of the Seller, (b) a Certificate of Good
Standing of the Seller issued by the Secretary of State for the State of Ohio,
and (c) a copy of the By-laws, including all amendments thereto, of the Seller
certified as true and complete and presently in effect by the Secretary of the
Seller.
Section 1.025. Transactions with Certain PersonsExcept as set forth in
Schedule 2.05, and except as incurred in the ordinary course of its Business,
the Seller is not owed any amount from, and does not owe any amount to, and
does not have any contracts with or commitments to (a) Peebles (other than
amounts payable by Seller to Peebles or payable by Peebles to Seller and which
(i) are not material in amount whether taken individually or in the aggregate
and (ii) do not constitute Acquired Assets or Assumed Liabilities), (b) any
key employees of the Seller, or (c) any Affiliate. Except as set forth in
Schedule 2.05, no assets or properties owned by any person specified above are
used by the Seller in connection with its Business..
Section 1.026. Financial StatementsTrue and complete copies of the
financial statements as of October 31 in each of the years 1993, 1994 and 1995
(collectively the "Annual Financial Statements") and the internally prepared
balance sheets and income statements of the Seller as of March 31, 1996, for
the five (5) months then ended (the "Interim Financial Statements") are
attached hereto as Schedule 2.06 (collectively the "Financial Statements").
The Financial Statements are true and correct in all material respects, have
been prepared from the books and records of the Seller in accordance with
generally accepted accounting principles and contain and reflect all necessary
adjustments or accruals necessary for a fair presentation of the financial
condition or results of operation of the Seller. The balance sheets included
in the Financial Statements fairly present the financial condition of the
Seller as of the date thereof, and the income statements and statements of
cash flow fairly present the results of the operations of the Seller for the
periods indicated (subject as to such balance sheet and statements included in
the Interim Financial Statements). The Financial Statements contain and
reflect adequate provisions for all reasonably anticipated liabilities and
adequate reserves for all reasonably anticipated material losses, costs, and
expenses..
Section 1.027. Tax MattersExcept as set forth in Schedule 2.07:.
(a)
All federal, state, county, and local taxes of any kind or character,
including, without limitation, income (including gross and adjusted gross),
receipts, property (including real, personal, and intangible), sales, use,
franchise, value added, excise, recording, financial institutions, employees'
income and social security withholding, and all other withholding, social
security, unemployment taxes, which are due and payable by or on behalf of the
Seller, and all interest and penalties thereon (collectively, the "Taxes"),
have been fully paid (and, to the extent applicable, withheld) in full (or are
adequately reflected as a liability in the Interim Financial Statements);
(b)
The Seller on behalf of the Seller has filed all currently due federal, state,
county, local, and other tax returns, statements, forms, reports, and similar
documents with respect to Taxes required to be filed with the appropriate
third parties and governmental agencies in all jurisdictions in which such
returns, statements, forms, reports, and similar documents are required to be
filed (collectively, the "Returns"); and all such Returns are true, correct,
and complete in all material respects;
(c)
There is not now in force any extension of time with respect to the date on
which any Return was or is due to be filed by, or on behalf of, or with
respect to the Seller or any waiver or agreement by the Seller for an
extension of time for the assessment of any Tax;
(d)
The Seller is not subject to any penalty by reason of a violation of any
order, rule, or regulation of, or with respect to any Return or any other Tax
return or report required to be filed with, any taxing authority;
(e)
The Seller does not have any pending requests for ruling with any taxing
authority; and
(f)
There are no liens for Taxes upon the assets of the Seller except liens for
current Taxes not yet due.
Section 1.028. Compliance with Laws; No Default or LitigationExcept as
set forth in Schedule 2.08:.
(a) The Seller is not in default or violation (nor is there any
event which, with notice or lapse of time or both, would constitute a default
or violation) in any respect (i) under any contract, agreement, lease, consent
order, or other commitment to which it is a party or the Business is subject
or bound or (ii) under any law, rule, regulation, writ, injunction, order, or
decree of any court or any federal, state, local, or other governmental
department, commission, board, bureau, agency, or instrumentality (including,
without limitation, applicable laws, rules and regulations relating to
environmental protection, antitrust, civil rights, health, and occupational
health and safety);
(b) There are no actions, suits, claims, investigations, or
legal arbitration or administrative proceedings in progress, pending, or
threatened by or against the Seller (or any of its assets or properties)
whether at law or in equity, whether civil or criminal in nature, or whether
before or by a federal, state, county, local, or other governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, nor has the Seller been charged with or received any notice of any
violation of any rule, regulation, ordinance, law, order, decree, or
requirement relating to the Seller, its properties, assets, or the
transactions contemplated by this Agreement; and
(c) No action, suit, or proceeding has been instituted or
threatened to restrain, prohibit, or otherwise challenge the legality or
validity of the transactions contemplated by this Agreement.
Section 1.029. Real Property-LeaseThe Seller is not a party to any lease
under which the Seller is a lessee or lessor of real property, except that the
Seller is a lessee of office space located at 955 Congress Park Drive, Dayton,
Ohio (the "Office Space") more fully described on Schedule 2.09 (the "Office
Lease"). The Seller has not executed any subordination agreements with
respect to the Office Lease. The Office Lease will be canceled or terminated
on or before the Closing Date, and such termination will not violate any of
the terms or conditions of the Office Lease..
Section 2.10. Real PropertySchedule 2.10 contains a list of the real
property that will be acquired by the Purchaser pursuant to Section 1.01
including all buildings, residential homes whether completed or incomplete,
structures and improvements located thereon, fixtures contained therein, and
appurtenances attached thereto (the "Real Property")..
Section 2.11. Conformity of the Real PropertyExcept as set forth in
Schedule 2.11, the Real Property conforms in all material respects to all
applicable federal, state, county, and local laws, regulations, and
ordinances, including without limitation those related to zoning, use, or
construction, and the Real Property is zoned for the purposes for which it
presently is used..
Section 2.12. Personal Property-OwnedThe Seller on or before the Closing
Date will deliver to the Purchaser a list and brief description of all tools,
furniture, machinery, supplies, vehicles, equipment, and other items of
tangible personal property owned by the Seller (the "Personal Property")..
Section 2.13. Personal Property-LeasedSchedule 2.13 contains a list and
brief description of all leases and other agreements under which the Seller is
a lessee of, holds, or operates any tools, furniture, machinery, vehicles,
equipment, or other personal property owned by any third party (the "Leased
Personal Property"). The Seller or Peebles on or before the Closing will
deliver to the Purchaser copies of the leases and agreements listed in
Schedule 2.13. Each of such leases and agreements is in full force and effect
and constitutes a legal, valid, and binding obligation of the Seller,
enforceable in accordance with its terms. No consent of any lessor of the
Leased Personal Property is required in connection with the transactions
contemplated by this Agreement, except as set forth in Schedule 2.13..
Section 2.14. Contracts.
(a) Schedule 2.14 lists the following contracts and leases
(other than those described in Schedule 2.09 and
Schedule 2.13, including all amendments thereto, to which the Seller is a
party (the "Contracts");
(1) All loans, lines of credit, security agreements,
guaranties, or other payment obligations;
(2) All agreements of guaranty or indemnification
(provided that after the Closing, the Purchaser will assume all
responsibilities and liabilities with respect to all such agreements which
constitute Assumed Liabilities);
(3)
All agreements, contracts, and commitments containing
any covenant limiting the right of the Seller to engage in any line of
business or compete with any person;
(4)
All written employment agreements, contracts, policies,
and commitments with or between the Seller and any of its employees,
directors, or officers, including without limitation those relating to
severance;
(5)
All material written agreements with employees as a group;
(6)
Contracts with suppliers and vendors of parts,
equipment, and other items used by the Seller in the ordinary course of
Business; and
(7) All joint venture or partnership agreements.
(b) All of the Contracts are valid and binding obligations of
the Seller, are enforceable in accordance with their respective terms, are in
full force and effect and, except as otherwise specified in Schedule 2.14,
will continue in full force and effect without the consent of any other party
so that, after the Closing, the Purchaser will be entitled to the full
benefits thereof. Except as set forth in Schedule 2.14, none of the Contracts
contains any provisions that are triggered by a change in control of or sale
of substantially all of the assets of the Seller or by any of the transactions
contemplated by this Agreement. Except as listed on Schedule 2.14, none of
the Contracts listed pursuant to paragraph (a)(i) of this Section 2.14 contain
a provision imposing a penalty if any of the amounts due thereunder are
prepaid. Except as disclosed in Schedule 2.14, there is not any existing
default or event
which, after notice or lapse of time, or both, would constitute a default or
result in a right to accelerate or loss of rights. Copies of the Contracts in
written form have been delivered or will be delivered to the Purchaser prior
to the Closing.
Section 2.15. Accounts and Notes ReceivableThe Seller on or before the
Closing will deliver to the Purchaser a list of accounts and notes receivable
owing to the Seller from its customers as of the date of the Interim Financial
Statements..
Section 2.16. SuppliesExcept as set forth in Schedule 2.16:.
(a) The Seller has not experienced any shortages of raw
materials, components or other supplies (collectively "Supplies") necessary to
conduct the Business within the twelve (12) month period preceding the date
hereof, and the Seller has on hand, or has reason to believe it can timely
obtain, a sufficient quantity of Supplies to satisfy all contracts to
construct residential homes (the "Construction Contracts") heretofore received
and all Construction Contracts anticipated to be received during the remainder
of the calendar year 1996.
(b) the Supplies of the Seller are good and merchantable, first
quality material and are saleable in the ordinary course of Business without
discount from the prices generally charged for like material of first quality,
and the quantities of all inventory are reasonable and warranted in the
present circumstances of the Business.
Section 2.17. Licenses and PermitsThe Seller possesses all franchises,
licenses, permits, certificates, approvals, consents, clearances,
notifications, registrations, and other authorizations necessary to conduct
the Business as now conducted (the "Permits"). Except as provided in Schedule
2.17, all such Permits are freely transferable and will continue in full force
and effect without the consent of any other party so that, after the Closing,
the Purchaser will be entitled to the full benefits of any Permits. Except as
set forth in Schedule 2.17, none of the Permits contain any provisions that
are triggered by a change in possession or ownership of such Permits or by any
of the transactions contemplated by this Agreement..
Section 2.18. Labor Relations: EmployeesAs of March 31, 1996, the
Seller employed a total of 15 employees. As of the Closing Date, except as
set forth in Schedule 2.18..
(a) The Seller has paid in full or accrued to all of its
employees all wages, salaries, commissions, bonuses, fringe benefit payments,
and all other direct and indirect compensation of any kind for all services
performed by them and each of them to the date
hereof;
(b) The Seller is in compliance with (i) all federal, state, and
local laws, ordinances, and regulations dealing with employment and employment
practices of any kind, and (ii) all wages and hours requirements and
regulations;
(c) There is no unfair labor practice, safety, health,
discrimination, or wage claim, charge, complaint, or suit pending or
threatened against or involving the Seller before the National Labor Relations
Board, Occupational Safety and Health Administration, Equal Employment
Opportunity Commission, Department of Labor, or any other federal, state, or
local agency;
(d) There is no labor dispute, strike, work stoppage,
interference with production, or slowdown in progress, threatened against, or
involving the Seller;
(e) There is no question of representation under the National
Labor Relations Act, as amended, or any state equivalent thereof, pending with
respect to the employees of the Seller;
(f) There is no grievance pending or threatened which might have
a material adverse effect on the Seller or on the conduct of the Business;
(g) There exists no collective bargaining agreement to which the
Seller is a party, and there is no collective bargaining agreement currently
being negotiated, subject to negotiation, or renegotiation by the Seller; and
(h) There is no dispute, claim, or proceeding pending with or
threatened by the Immigration and Naturalization Service with respect to the
Seller.
Section 2.19. Employee Benefit Plans.
(a)
Schedule 2.19, attached hereto and made a part hereof, contains a list of each
(i) employee welfare benefit plan (as defined in Section 3(1) of ERISA
(hereinafter referred to as "Employee Welfare Benefit Plan") and (ii) employee
pension benefit plan (as defined in Section 3(2) of ERISA) (hereinafter
referred to as "Employee Pension Benefit Plan"), (a) which was maintained or
administered by the Seller immediately prior to the Closing, (b) to which the
Seller contributed to, or was legally obligated to contribute to immediately
prior to the Closing, or (c) under which the Seller had any liability
immediately prior to Closing, with respect to its current or former employees
or independent contractors. Solely for purposes of this Section 2.19, the
Employee Welfare Benefit Plans and Employee Pension Benefit Plans are
collectively referred to as "Employee Benefit Plans" and individually referred
to as an "Employee Benefit Plan".
(b)
The Seller on or before the Closing will provide the Purchaser with true and
correct copies of (i) all Employee Benefit Plans listed on Schedule 2.19,
including all amendments thereto, (ii) the most recent summary plan
description for each Employee Benefit Plan, and (iii) the most recently filed
IRS Form 5500 for each Employee Benefit Plan.
(c) Each of the Employee Benefit Plans is in compliance in all
material respects with the applicable provisions of ERISA and those provisions
of the Code applicable to the Employee Benefit Plans, and each Employee
Benefit Plan intended to be qualified under section 401(a) of the Code is so
qualified. None of the Employee Benefit Plans is subject to Title IV of ERISA
or to section 412 of the Code. All contributions to, and payments from, the
Employee Benefit Plans which may have been required to be made in accordance
with the Employee Benefit Plans or the Code have been timely made. Each of
the Employee Benefit Plans has been administered at all times in all material
respects in accordance with its terms. There are no pending investigations by
any governmental agency involving the Employee Benefit Plans, except with
respect to this transaction, no termination proceedings involving the Employee
Benefit Plans, and no threatened or pending claims (except for claims for
benefits payable in the normal operation of the Employee Benefit Plans),
suits, or proceedings against any Employee Benefit Plan or assertion of any
rights or claims to benefits under any Employee Benefit Plan.
(d) No Employee Benefit Plan fiduciary has engaged in a
"prohibited transaction" (as that term is defined in section 4975 of the Code
or section 406 of ERISA) which could subject any Employee Benefit Plan to the
tax or penalty on prohibited transactions imposed by section 4975 or the
sanctions imposed under Title I of ERISA.
(e) The Seller is not obligated to contribute to any
multiemployer plan (as defined in ERISA Section 3(37).
Section 2.20. Environmental ComplianceExcept as set forth in
Schedule 2.20, or as set forth within the Phase I Environmental Assessment
Reports (as updated) identified in Schedule 2.20, or provided to the
Purchaser pursuant to Section 8.02 hereof:.
(a) To the knowledge of the Seller and Peebles, the Seller has
at all times complied with all applicable Environmental Requirements in its
development and construction of the Owned Property. Further, to the knowledge
of the Seller, no previous owner of any Owned Property materially violated any
Environmental Requirements.
(b) To the knowledge of the Seller and Peebles, no Hazardous
Material has ever been generated, manufactured, refined, used, transported,
treated, stored, handled, disposed, transferred, produced, or processed at,
to, or on any Owned Property and no Hazardous Material has ever been
incorporated into any
Owned Property.
(c) To the knowledge of the Seller and Peebles, there are no
existing or potential Environmental Claims relating to any Owned Property, and
the Seller has not received any notification, nor does it have any knowledge
of, any alleged, actual, or potential responsibility for any disposal,
release, or threatened release at any location of any Hazardous Material
generated at or transported from any Owned Property by or on behalf of the
Seller.
(d)
To the knowledge of the Seller and Peebles, (i) no underground storage tank or
other underground storage receptacle (or associated equipment or piping) for
Hazardous Materials is currently located at or on any Owned Property and there
have been no releases of any Hazardous Materials from any such underground
storage tank or related piping at any time prior to the Closing; and (ii)
there have been no releases (i.e., any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping) of Hazardous Materials at, on, to,
or from any Owned Property.
(e) To the knowledge of the Seller and Peebles, there are no
PCBs or friable asbestos located or contained at, on, or in any Owned
Property.
(f)
To the knowledge of the Seller and Peebles, no lien or other encumbrance has
been imposed on any Owned Property by any federal, state, local, or foreign
governmental agency or authority due to either the presence of any Hazardous
Material on, off, or in the Owned Property or a violation of any Environmental
Requirement.
(g) To the knowledge of the Seller and Peebles, the Seller has
not received any notices issued pursuant to the citizen's suit provision of
any Environmental Requirement relating to any Owned Property.
(h) To the knowledge of the Seller and Peebles, the Seller has
not received any request for information, notice, demand, letter,
administrative inquiry, formal or informal complaint, or claim with respect to
any Environmental Conditions or violation of any Environmental Requirement
relating to any Owned Property.
(i) To the knowledge of the Seller and Peebles, there have been
no environmental investigations, site assessments or audits, or soil or
groundwater sampling conducted at any Owned Property by the Seller, or, to the
Seller's or Peebles' knowledge, by any other person.
Section 2.21. Growth ManagementTo the knowledge of the Seller:.
(a) All of the Real Property and all operations conducted
thereon, including without limitation, the Seller's use of the Real Property,
Personal Property and Leased Personal Property, are currently in compliance
with all applicable federal, state, and local land use and growth management
laws, regulations, rules, ordinances, permits, development orders, approvals,
resolutions, and orders, including without limitation all consent orders.
(b) With respect to the Real Property there exists no state of
affairs and there has occurred no event that currently requires, or is
currently expected to require in the future, reporting or disclosure by the
Purchaser to any federal, state, or local agency concerned with management or
land use control or growth management, except as set forth in Schedule 2.21.
(c) All of the Owned Property sold, transferred or vacated by
Seller prior to the Closing was in compliance with all applicable federal,
state, and local land use and growth management laws, regulations, rules,
ordinances, permits, development orders, approvals, resolutions, and orders,
including all consent orders
at the time such Owned Property was sold, transferred or vacated by Seller.
(d) There are no pending or, to the Seller's knowledge,
threatened claims by any private parties or governmental agencies, and there
are no pending or threatened judicial or administrative actions, alleged
violations of any federal, state, or local land use or growth management laws,
regulations, rules, ordinances, permits, development orders, approvals,
resolutions, or orders on or connected with the Real Property, or the
operations conducted thereon or at any time prior to the Closing Date.
Section 2.22. Insurance.
(a) The Seller is insured by reputable insurers (unaffiliated
with the Seller or Peebles) with respect to the Real Property, the Personal
Property, the Leased Personal Property, the Supplies, and the Business.
Schedule 2.22 contains:
(1) A list of all policies of liability, theft, fidelity,
life, fire, product liability, workmen's compensation, health, and other forms
of insurance held by the Seller, and specifies the insurer, amount of
coverage, premiums, deductibles, type of insurance and policy number; and
(2) A list of all pending claims under such policies.
(b) The policies listed in Schedule 2.22 are in full force and
effect, and all premiums due and payable with respect to such policies are
currently paid. The insurance coverage provided by the policies listed in
Schedule 2.22 satisfies all contractual and statutory requirements applicable
to the Seller. The Seller or Peebles will deliver to the Purchaser prior to
the Closing copies of all insurance policies
listed on Schedule 2.22.
Section 2.23. No GuarantiesExcept as disclosed in Schedule 2.23, none of
the obligations or liabilities of the Seller is guaranteed by Peebles or any
other Person, nor has the Seller guaranteed the obligations or liabilities of
Peebles or any other Person..
Section 2.24. Power of AttorneySchedule 2.24 contains a list of the
names of all Persons holding general or special written powers of attorney
from the Seller and a summary of the terms thereof..
Section 2.25. No ChangesExcept as set forth in Schedule 2.25, since the
date of the Interim Financial Statements, the Seller has not (a) incurred any
liability or obligation of any nature (whether accrued, absolute, contingent
or otherwise) except in the ordinary course of Business, (b) incurred any
indebtedness for borrowed money or entered into any commitment to borrow money
or guarantee, assumption, endorsement of, or other assumption of any liability
that is secured by the Acquired Assets; (c) sold, transferred or otherwise
disposed of any of the Acquired Assets, without the written consent of the
Purchaser, other than sales in the ordinary course of Business of lots in
developments known as the White Fence Farm development or Green Meadow Ranch
development which are more fully described on Schedule 2.25; (d) declared or
paid any dividend or made any distribution on any shares of its capital stock;
(e) made any bonus or profit sharing distribution of any kind; (f) conducted
its Business or entered into any transaction except in the ordinary course of
Business consistent with past practice; (g) made any illegal payments to any
Person or (h) made any changes to its Articles of Incorporation or Bylaws..
Section 2.26. Director, President and ShareholderPeebles is the sole
director and shareholder of the Seller and is the President of the Seller..
Section 2.27. SuppliersExcept as set forth on Schedule 2.27, to the
knowledge of the Seller, none of the Seller's material suppliers, vendors or
subcontractors has, or intends to, terminate or change significantly its
relationship with the Seller..
Section 2.28. Letters of Intent and Sale DiscussionsExcept for the
Letter of Intent by and among Crossmann, the Seller and Peebles, dated the
17th day of January, 1996, neither the Seller nor Peebles has entered into any
letter of intent or other agreement pursuant to which the Seller or Peebles
has agreed to merge or consolidate the Seller with any other Person, sell or
exchange any of the stock of the Seller, or sell, transfer, or assign any
asset of the Seller, except for sales made in the ordinary course of Business,
which has not expired or otherwise been terminated..
Section 2.29. Absence of Certain Business PracticesExcept as set forth
on Schedule 2.29, within the ten years immediately preceding the date of this
Agreement, neither the Seller nor Peebles nor any Personnel or other Person
acting on behalf of the Seller or Peebles has given or agreed to give,
directly or indirectly, any gift or similar benefit to any customer, supplier,
governmental employee, or other Person who is or may be in a position to help
or hinder the Business (or assist the Seller in connection with any actual or
proposed transaction relating to the Business or the Acquired Assets), which
might subject the Seller to any damage or penalty in any civil, criminal, or
governmental litigation or proceeding or which, if not continued in the
future, may have a material adverse effect on the Acquired Assets or the
Business..
Section 2.30. Due DiligenceWith respect to all representations and
warranties which are qualified "to the knowledge of the Seller", "known to the
Seller", or words of similar import, the Seller has made reasonable
investigation of the subject matter of the representation of warranty and,
where appropriate, conferred with appropriate Personnel and/or examined
appropriate documents..
Section 2.31. Forest Ridge ProjectSince the date of the Interim Finance
Statements, the Seller has not sold, transferred, or assigned, or entered into
any agreement to sell, transfer or assign, any Real Property in the
development known as the Forest Ridge development, which is described more
fully on Schedule 2.31..
Section 2.32. Rights Under WarrantiesSchedule 2.32 contains a true and
complete list and brief description of the Seller's rights in, to, and
obligations under all representations, warranties, covenants, and guarantees
relating any of the Acquired Assets..
Section 2.33. DisclosureThis Agreement and the Exhibits and Schedules
attached hereto do not contain any untrue statements of a material fact or
omit to state a material fact necessary to make the statements contained
herein not misleading..
Section 2.34. SurvivalAll representations and warranties contained in
this Agreement, except those in Sections 2.07 and 2.20, shall survive the
execution, delivery, and performance hereof, notwithstanding any investigation
conducted at any time with respect thereto, for a period of two years after
the Closing Date. The representations and warranties contained in Sections
2.07 and 2.20 shall survive the execution, delivery, and performance hereof,
notwithstanding any investigation conducted at any time with respect thereto,
for a period of five years and seven years, respectively, after the Closing
Date..
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
As a material inducement to the Seller to enter into this Agreement and
to consummate the transactions contemplated by this Agreement, the Purchaser
and Crossmann represent and warrant to the Seller that:
Section 1.031. Authority; ConsentThe Purchaser and Crossmann each has
the full capacity, right, power, and authority to enter into, execute, and
deliver this Agreement, to consummate the transactions contemplated by this
Agreement, to comply with and fulfil the terms and conditions of this
Agreement, and to purchase the Acquired Assets and assume the Assumed
Liabilities from the Seller. The execution and delivery of this Agreement by
the Purchaser and Crossmann and the consummation by the Purchaser and
Crossmann of the transactions contemplated herein have been duly and validly
authorized by all necessary action on the part of the board of directors of
the Purchaser and Crossmann and the shareholder of the Purchaser. This
Agreement constitutes a valid and binding obligation of the Purchaser and
Crossmann, enforceable against each of them in accordance with its terms and
conditions, subject as to enforcement to applicable bankruptcy, insolvency,
reorganization, and other similar laws of general applicability relating to or
affecting creditors rights generally. No further action is necessary by the
Purchaser or Crossmann to make this Agreement valid and binding upon the
Purchaser and Crossmann and enforceable against the Purchaser and Crossmann in
accordance with the terms hereof or to carry out the transactions contemplated
hereby. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor compliance by the
Purchaser and Crossmann with any of the provisions of this Agreement will:.
(a) Conflict with, violate, result in a breach of, constitute a
default under (or an event which, with notice or lapse of time or both, would
constitute a default), or give rise to any right of termination, cancellation,
or acceleration under any of the terms, conditions or provisions of any note,
lien, bond, mortgage, indenture, license, lease, contract, commitment,
agreement, understanding, arrangement, restriction, or other instrument or
obligation to which either the Purchaser or Crossmann is a party or by which
the Purchaser, Crossmann or any of their respective properties or assets may
be bound;
(b) Violate any law, rule, or regulation of any government or
governmental agency or body, or any judgment, order, writ, injunction, or
decree of any court, administrative agency, or governmental agency or body
applicable to the Purchaser, Crossmann or any of their respective properties,
assets, outstanding shares or other securities; or
(c) Constitute an event which, with or without notice, lapse of
time, or action by a third party, could result in the creation of any lien,
charge, or encumbrance upon any of the assets or properties of the Purchaser
or Crossmann, or cause the maturity of any liability, obligation, or debt of
the Purchaser or Crossmann to be accelerated or increased.
Section 1.032. Consents and ApprovalsExcept as set out in Schedule 3.02,
the execution and delivery of this Agreement by the Purchaser and Crossmann
and the consummation by the Purchaser and Crossmann of the transactions
contemplated hereby will not require any notice to, or consent, authorization,
or approval from any court or governmental authority or any other third party.
Any and all notices, consents, authorizations, and approvals set forth in
Schedule 3.02 have been made and obtained..
Section 1.033. Corporate OrganizationThe Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Ohio. Crossmann is a corporation incorporated and validly existing under
the laws of the State of Indiana, for which the most recent required annual
report under Indiana Business Corporation Law has been filed with the Indiana
Secretary of State and no Articles of Dissolution appear as filed with the
Indiana Secretary of State's records. The Purchaser prior to the Closing will
deliver to the Seller (a) a true and complete copy of the Articles of
Incorporation, including all amendments thereto, of the Purchaser, (b) a
Certificate of Good Standing of the Purchaser issued by the Secretary of State
for the State of Ohio, and (c) a copy of the By-laws, including all amendments
thereto, of the Purchaser certified as true and complete and presently in
effect by the Secretary of the Purchaser..
ARTICLE IV.
POST-CLOSING COVENANTS
Section 1.041. Actions of the Seller and Peebles Following ClosingThe
Seller and Peebles hereby covenant and agree that at any time, and from time
to time, following the Closing:.
(a) The Seller or Peebles shall give prompt notice to the Purchaser
of any breach of a representation or warranty hereunder and any failure of the
Seller or Peebles to comply with or satisfy any covenant, condition, or
agreement to be complied with or satisfied by either of them hereunder, and
the Seller and Peebles will use their best efforts to remedy any such failure.
(b) Neither the Seller nor Peebles shall directly or indirectly
use, for its or his own benefit or otherwise, or disclose to any other Person,
any information relating to the Acquired Assets, the Business, or the terms
and conditions of this Agreement, except to the extent that such information
(i) was in the public domain at the time of the Closing; (ii) entered into the
public domain after the Closing through no fault of the Seller or Peebles;
(iii) is required to be disclosed by law or order of a court or governmental
body; or (iv) as is necessary in connection with Tax matters or the ordinary
conduct of the Business.
Section 1.042. Actions of the Purchaser and Crossmann Following the
Closing.
(a) The Purchaser shall lease the model home located on lot
number 08 in the Green Meadows Ranch development and the model home located on
lot number 28 in the White Fence Farms Development from the Seller for a
period of 60 days after the Closing Date and shall pay the Seller an amount
equal to the direct costs of operating such models, including any interest
costs and utility bills.
(b)
The Company shall reimburse the Seller for the difference, if any, between the
aggregate proceeds, after commissions and closing costs, from the sale of the
residential homes listed on Schedule 12.03 and the outstanding liabilities on
such homes; provided that, the Company shall have the right, which shall be
exercised in good faith, to approve (and reject) the purchase agreements for
such homes; provided further, that the maximum amount to be paid by the
Company pursuant to this Section 4.02(b) shall not exceed $100,000.00.
(c)
The Purchaser and Crossmann shall give prompt notice to the Seller of any
breach of a representation or warranty hereunder and any failure of the
Purchaser or Crossmann to comply with or satisfy any covenant, condition, or
agreement to be completed with or satisfied by the Purchaser or Crossmann
hereunder, and the Purchaser and Crossmann will use their best efforts to
remedy any such failure.
ARTICLE V.
TAXES
Section 1.051. TaxesThe Seller shall pay all state and local sales,
transfer, excise, value-added, or other similar taxes (including without
limitation, all state and local taxes in connection with the transfer of the
Acquired Assets) and any deficiency, interest, or penalty asserted with
respect thereto, and all recording and filing fees that may be imposed by
reason of the sale, transfer, assignment, or delivery by the Seller of the
Acquired Assets. The Seller shall be responsible for the preparation and
filing of all required Tax Returns and shall be liable for the payment of any
and all Taxes which accrued before the Closing Date, except for the real
estate taxes set forth on Section 1.03 and the transfer taxes set forth on
Schedule 1.04, but including all Taxes resulting from the sale and transfer by
the Seller of Acquired Assets hereunder..
Section 1.052. Cooperation on Tax MattersThe Purchaser shall retain
possession of all Files and Records transferred to the Purchaser hereunder and
coming into existence after the Closing Date which relate to the Business
before the Closing Date, for a period not to exceed three years from the
Closing Date. In addition, from and after the Closing Date, upon reasonable
notice and during normal business hours, the Purchaser shall provide access to
the Seller and its attorneys, accountants, and other representatives, at the
Seller's expense, to such Files and Records as the Seller may reasonably deem
necessary to properly prepare for, file, prove, answer, prosecute, and/or
defend any return, filing, audit, protest, claim, suit, inquiry, or other
proceeding. Seller shall be entitled at its own expense to make and to retain
copies of any such records in existence as of the Closing. .
Section 1.053. Allocation of Purchase PriceThe Seller and the Purchaser
shall use their best efforts to agree, in a timely manner, upon an allocation
of the Purchase Price among the Acquired Assets and shall cooperate in the
timely filing of Internal Revenue Service Form 8594 (or other appropriate
forms), which shall be prepared in accordance with the allocation pursuant to
Section 1060 of the Code, and any other forms or documents required to be
filed with respect to such matters with state or local taxing authorities..
ARTICLE VI.
INDEMNIFICATION
Section 1.061. Indemnification by the Seller and PeeblesThe Seller and
Peebles shall jointly and severally indemnify and hold harmless Crossmann, the
Purchaser, and their respective successors, shareholders, officers, directors,
affiliates, and agents from and against any and all damages, losses,
obligations, demands, liabilities, claims, encumbrances, penalties, costs, and
expenses, including reasonable attorneys' fees (and costs and reasonable
attorneys' fees in respect of any suit to enforce this provision) (each an
"Indemnity Loss"), arising from or relating to (a) any misrepresentation in or
any breach of any representation or warranty by the Seller or Peebles, or both
of them, or any breach or failure of the Seller or Peebles to perform any
covenant or obligation of the Seller or Peebles contained in this Agreement or
any related agreement, instrument, document, exhibit, schedule or certificate
furnished or required to be furnished by the Seller or Peebles pursuant to
this Agreement, including , but not limited to, the Peebles Employment
Agreement, or in connection with the transactions contemplated by this
Agreement, or any nonfulfillment of any of the covenants or agreements of the
Seller or Peebles contained in this Agreement, (b) any liability, obligation,
or commitment of any nature (absolute, accrued, contingent, or other) of the
Seller or Peebles, or relating to the Acquired Assets or the operation of the
Business, or arising out of transactions entered into or events occurring
prior to the Closing which is not an Assumed Liability expressly assumed by
the Purchaser pursuant to this Agreement; and (c) any and all actions, suits,
investigations, proceedings, demands, assessments, audits, and judgments
arising out of any of the foregoing..
In addition, the Seller and Peebles jointly and severally shall indemnify
and hold Crossmann, the Purchaser, and their respective lenders, if any,
harmless from and against any loss, claim, expense, damage, or liability
(including reasonable attorneys' fees and expenses) to which the Purchaser
and/or the Acquired Assets may become subject insofar as such loss, claim,
damage, or liability (or actions in respect thereof) arises out of or is based
upon a breach or alleged breach of, or failure to comply with any provision
of, or to give any notice or make any filing pursuant to, any bulk sales law
or similar statute.
Section 1.062. Indemnification by the PurchaserThe Purchaser shall
indemnify and hold harmless the Seller and its successors and their respective
shareholders, officers, directors, and agents from and against any and all
Indemnity Losses resulting from or relating to (a) any misrepresentation in or
any breach of any representation or warranty, or any breach or failure of the
Purchaser to perform any covenant or obligation of the Purchaser contained in
this Agreement or any related agreement, instrument, document, exhibit,
schedule or certificate furnished or required to be furnished by the Purchaser
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement, or any nonfulfillment of any of the covenants or agreements
of the Purchaser contained in this Agreement, (b) any and all suits, actions,
investigations, proceedings, demands, assessments, audits, and judgments
arising out of any of the foregoing and (c) Purchaser's operation of the
Business after the Closing (except to the extent such Indemnity Losses result
from or relate to actions of Peebles outside the scope of his employment or in
violation of his employment agreement with Purchaser or which would entitle
Purchaser to terminate Peebles Employment Agreement "for cause" under such
employment agreement)..
Section 1.063. NoticeIf an indemnified party (the "Claimant") believes
that it has suffered or incurred any Indemnity Loss, it shall so notify the
party which the Claimant believes has an obligation to indemnify (the
"Indemnifying Party") promptly in writing describing such loss or expense, the
amount thereof, if known, and the method of computation of such loss or
expense, all with reasonable particularity (the "Indemnification Notice"). If
any action at law, suit in equity, or administrative action is instituted by
or against a third party with respect to which the Claimant intends to claim
any liability or expense as an Indemnity Loss under this Article VI, it shall
promptly notify the Indemnifying Party in writing of such action or suit
describing such loss or expenses, the amount thereof, if known, and the method
of computation of such loss or expense, all with reasonable particularity (the
"Litigation Notice") in lieu of an Indemnification Notice..
Section 1.064. Arbitration.
(a)
If the Indemnifying Party does not agree that the Claimant is entitled to full
reimbursement for the amount specified in the Indemnification Notice, the
Indemnifying Party shall notify the Claimant (the "Disagreement Notice")
within 20 days of its receipt of the Indemnification Notice or Litigation
Notice, as the case may be. Failure to deliver a Disagreement Notice in a
timely manner shall be considered an express acknowledgement by the
Indemnifying Party of its obligation to indemnify and hold harmless the
Claimant with respect to the Indemnity Loss set forth in the Indemnification
Notice or the Litigation Notice, as the case may be. At any time after
delivery of the Disagreement Notice, either the Claimant or the Indemnifying
Party may notify the other that the determination as to whether and in what
amount the Claimant is entitled to indemnification from the Indemnifying Party
shall then be made by an arbitration tribunal (the "Arbitration Notice"). The
arbitration tribunal shall consist of three arbitrators, one to be selected by
the Claimant, one to be selected by the Indemnifying Party, and the third
arbitrator to be selected by the other two arbitrators. The arbitrators shall
each be reasonably experienced in conducting arbitration proceedings and all
arbitrators shall be selected within 15 days of the delivery of the
Arbitration Notice. An arbitration hearing shall then be held within 30 days
of the selection of the third arbitrator, and the arbitration tribunal shall
render its determination as to whether and in what amount the Claimant is
entitled to indemnification within 30 days of such hearing. All procedures
with respect to the arbitration proceeding provided for in this Section 6.04
(a) shall be in accordance with the rules of the American Arbitration
Association, except as otherwise specifically set forth in this Agreement.
(b)
Each party shall be responsible for its own costs and expenses incurred in
conducting the arbitration proceeding provided for in Section 6.04 (a),
including attorneys' fees.
(c)
The parties hereby irrevocably consent to be bound by the decision of the
arbitration tribunal with respect to indemnification determinations.
(d)
In cases in which the Purchaser or Crossmann is a Claimant, after the Seller
or Peebles has provided a Disagreement Notice and after the delivery of the
Disagreement Notice, the parties hereby agree that the bonus payments due to
Peebles pursuant to the Peebles Employment Agreement shall be paid into an
escrow account (the "Escrow Funds") pursuant to an escrow agreement
reasonably satisfactory to the Purchaser, Crossmann, the Seller, and Peebles;
provided, however, that if the Indemnity Loss arises from or relates to the
Agreement, the Escrowed Funds shall not exceed the maximum amount of the
Indemnifying Party's liability as provided in this Agreement. If the
arbitration tribunal determines that the Purchaser or Crossmann is entitled to
indemnification pursuant to this Article VI, the applicable amount of the
Escrowed Funds shall be used to satisfy the obligation of the Seller or
Peebles to the Purchaser or Crossmann, as the case may be. Peebles shall
promptly receive any amount by which the Escrowed Funds and any interest
earned thereon exceeds the amount to which the arbitration tribunal determines
that the Purchaser or Crossmann, as the case may be, is entitled. If the
arbitration tribunal determines that the Purchaser and/or Crossmann is not
entitled to indemnification pursuant to this Article VI, the Escrowed Funds
shall be immediately delivered to Peebles together with all interest earned
thereon. The Seller and Peebles shall be jointly and severally liable to the
Purchaser for any deficiency of the Escrowed Funds to satisfy the Indemnity
Loss of the Purchaser, as determined in accordance with this Article VI. If
the arbitration tribunal determines that the Purchaser is entitled to
indemnification, but the amount of the Indemnity Loss cannot be determined,
then the costs of arbitration shall be paid as provided in Section 6.04(b),
but the Escrow Funds shall be released to Peebles and the payment of the
Indemnity Loss will be made in accordance with Section 6.07. The escrow will
remain in effect for no more than 90 days unless and to the extent that
Peebles and/or the Seller contributed to a delay in the resolution of the
dispute.
Section 1.065. Defense of ClaimsThe Indemnifying Party shall have thirty
(30) Business Days after receipt of the Litigation Notice to notify the
Claimant that it acknowledges its obligation to indemnify and hold harmless
the Claimant with respect to the Indemnity Loss set forth in the Litigation
Notice and that it elects to conduct and control any legal or administrative
action or suit with respect to an indemnifiable claim (the "Election Notice").
If the Indemnifying Party gives a Disagreement Notice or does not give the
foregoing Election Notice, the Claimant shall have the right to defend,
contest, settle, or compromise such action or suit in the exercise of its
exclusive discretion. If the Indemnifying Party gives the foregoing Election
Notice, the Indemnifying Party shall have the right to undertake, conduct, and
control, through counsel of its own choosing and at its sole expense, the
conduct and settlement of such action or suit, and the Claimant shall
cooperate with the Indemnifying Party in connection therewith; provided,
however, that (a) the Indemnifying Party shall not thereby consent to the
imposition of any injunction against the Claimant without the written consent
of the Claimant; (b) the Indemnifying Party shall permit the Claimant to
participate in such conduct or settlement through counsel chosen by the
Claimant, but the fees and expenses of such counsel shall be borne by the
Claimant except as provided in clause (c) below; and (c) upon a final
determination of such action or suit, the Indemnifying Party shall promptly
reimburse the Claimant, to the extent required under this Article VI, for the
full amount of any Indemnity Loss incurred by the Claimant except fees and
expenses of counsel that the Claimant incurred after the assumption of the
conduct and control of such action or suit by the Indemnifying Party in good
faith; (d) the Claimant shall have the right to pay or settle any such action
or suit, provided that in such event the Claimant shall waive any right to
indemnity therefor by the Indemnifying Party and no amount in respect thereof
shall be claimed as an Indemnity Loss under this Article VI..
Section 1.066. Computation of Indemnity LossesThe amount of Indemnity
Losses hereunder shall be computed after giving effect to the receipt of any
and all insurance proceeds with respect thereto..
Section 1.067. Payment of LossesThe Indemnifying Party shall pay to the
Claimant in cash the amount to which the Claimant may become entitled by
reason of the provisions of this Article VI, such payment to be made within
fifteen (15) Business Days after such amount is finally determined either by
mutual agreement of the parties or pursuant to the arbitration proceeding
described in Section 6.04 of this Agreement or, in the case of an Indemnity
Loss described in a Litigation Notice, the date on which both such amount and
Claimant's obligation to pay such amount have been determined by a final
judgment of a court or administrative body having jurisdiction over such
proceeding. In addition to the foregoing, the Seller and Peebles hereby agree
that the Purchaser shall have the right to recoup all or any part of any
amount that the Purchaser is owed pursuant to the preceding sentence (in lieu
of seeking a cash payment from the Seller and Peebles pursuant to the
preceding sentence) by notifying the Seller and Peebles that the Purchaser is
reducing or eliminating the bonus payments due to Peebles under the Peebles
Employment Agreement..
Section 1.068. SurvivalNotwithstanding the foregoing, the Indemnifying
Party shall have no liability with respect to any Indemnity Loss notice of
which is not received by the Indemnifying Party pursuant to Section 6.03
hereof on or before the second anniversary of the Closing Date; provided,
however, that the Indemnifying Party shall remain liable for any Indemnity
Loss (i) arising from a breach of any representation or warranty made in
Sections 2.07 for a period of five years after the Closing Date; and (ii)
arising from a breach of any representation or warranty made in Section 2.20
for a period of seven years from the Closing Date..
Section 1.069. LimitationThe aggregate liability of Peebles for any one
or more breach, default or indemnification, under this Agreement except for a
breach of a representation or warranty contained in Section 2.20, shall not
exceed $250,000.00. In the case of an Indemnity Loss arising from or in
connection with a breach of the representations and warranties set forth in
Section 2.20, the aggregate liability of Peebles for any one or more breach of
such representations or warranties shall not exceed $500,000.00, which amount
shall be separate from and in addition to the $250,000.00 limitation above..
ARTICLE VII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER AND PEEBLES
The obligations of the Seller to sell and transfer Acquired Assets
hereunder on the Closing Date are subject to the fulfillment, at or before the
Closing, of the following conditions, any one or more of which may be waived
in writing by the Seller in its sole discretion:
Section 1.071. Performance of the Obligations of the PurchaserThe
Purchaser shall have performed in all material respects all obligations under
this Agreement on or before the Closing Date, and the Seller shall have
received a certificate from the Purchaser to that effect dated the Closing
Date and signed by the President or any other duly authorized officer of the
Purchaser..
Section 1.072. Consents and ApprovalsAll permits, consents, waivers,
authorizations, and approvals of any governmental or regulatory authority,
state or Federal, and of any other Person that may be reasonably required in
connection with the execution of this Agreement or the effectuation of the
transactions contemplated herein shall have been duly obtained and shall be in
full force and effect on the Closing Date..
Section 1.073. No Violation of OrdersNo preliminary or permanent
injunction or other order issued by any court or governmental or regulatory
authority, domestic or foreign, that declares this Agreement invalid or
unenforceable in any respect or prevents the consummation of the transactions
contemplated hereby shall be in effect, and no proceeding relating to any
order shall have commenced..
Section 1.074. Offer of EmploymentThe Purchaser and Peebles shall have
entered into an employment and noncompetition agreement in substantially the
same form as attached hereto as Exhibit 7.04 (the "Peebles Employment
Agreement"). The Purchaser shall have no other obligation to employ any other
Personnel after the Closing Date..
Section 1.075. Opinions of CounselThe Seller shall have received the
opinions, dated the Closing Date, of Ice Miller Donadio & Ryan to the effect
that (i) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio, (ii) execution and delivery
of this Agreement and consummation of the transactions contemplated thereby do
not violate the terms of the Purchaser's Articles of Incorporation or By-laws,
(iii) the execution and delivery of this Agreement by the Purchaser does not
require the consent or approval of any governmental authority or other third
party, except such consents and approvals which have been obtained prior to
the Closing, (iv) the Agreement and the Lease (described in Section 8.08) and
the Peebles Employment Agreement (described in Section 7.04) each has been
duly authorized by all corporate action by the Purchaser and has been duly
executed and delivered by the Purchaser and is enforceable against Purchaser
in accordance with its terms (provided, however, that for purposes of this
enforceability opinion, counsel will be permitted to assume that Ohio and
Indiana law are identical) and (v) to the knowledge of such counsel there is
no claim or lawsuit pending or threatened which would challenge or prevent the
consummation of the transactions contemplated by the Agreement..
ARTICLE VIII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser to purchase, acquire, and accept the
Acquired Assets, and to assume the Assumed Liabilities on the Closing Date are
subject to the fulfillment, at or before the Closing, of the following
conditions, any one or more of which the Purchaser may, in its sole
discretion, waive in writing.
Section 1.081. Performance of the Obligations of the Seller and
PeeblesThe Seller or Peebles shall have performed in all material respects all
obligations required under this Agreement to be performed by the Seller or
Peebles on or before the Closing Date from the Seller signed by the President
or any other authorized officer of the Seller and from Peebles..
Section 1.082. Completion of Due DiligenceThe Purchaser, in its sole
discretion, shall be satisfied with the results of its due diligence regarding
the Acquired Assets, the Assumed Liabilities, and the Business, including, but
not limited to, the information set forth on the Schedules to this Agreement.
Seller shall have delivered to Purchaser updated Phase 1 Environmental
Assessments of all Real Property of the Seller..
Section 1.083. Consents and ApprovalsAll Permits necessary to conduct
the Business, including any necessary transfer thereof, and all consents,
waivers, authorizations, and approvals of any governmental or regulatory
authority, state or Federal, and of any other Person, that may be reasonably
required in connection with the execution of this Agreement or the
effectuation of the transactions contemplated herein, including, but not
limited to, consents necessary to assign the Seller's partnership interest in
Partnerships to the Purchaser, shall have been duly obtained and shall be in
full force and effect on the Closing Date. Each party (other than the Seller)
to any of the Assigned Contracts specified in Schedule 12.02 shall have
provided its written consent to the assignment of the Assigned Contract to the
Purchaser as provided herein..
Section 1.084. No Violation of OrdersNo preliminary or permanent
injunction or other order issued by any court or governmental or regulatory
authority, domestic or foreign, that declares this Agreement invalid or
unenforceable in any respect or prevents the consummation of the transactions
contemplated hereby, or which materially and adversely affects the Acquired
Assets, the Business or the financial condition of the Seller shall be in
effect, and no proceeding relating to any order shall have commenced..
Section 1.085. Title InsurancePrior to the Closing, Seller shall have
furnished the Purchaser, at the Seller's expense, a commitment for an owner's
policy of title insurance, satisfactory to the Purchaser, in its sole and
absolute discretion, issued by a nationally reputable title insurance company
(the "Title Company"), and containing the agreement of the Title Company to
insure fee simple title to the Real Property in the name of the Purchaser upon
delivery of a general warranty deed from the Seller to the Purchaser..
Section 1.086. SurveyPrior to the Closing, the Seller, at the Seller's
expense, shall have furnished to Purchaser a boundary survey of the Real
Property, satisfactory to the Purchaser in its sole and absolute discretion..
Section 1.087. Opinion of CounselThe Purchaser shall have received the
opinion, dated the Closing Date, of Turner & McNamee to the effect that (i)
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio and G.T. Partners is a partnership duly
organized, validly existing and in good standing under the laws of the State
of Ohio, (ii) execution and delivery of this Agreement and the consummation of
the transactions contemplated by such agreements do not violate the terms of
the Seller's Articles of Incorporation or By-laws and the execution and
delivery of the Lease do not violate the partnership agreement and other
governing documents of G.T. Partners, (iii) the execution and delivery of this
Agreement by the Seller and the execution and delivery of the Lease by G.T.
Partners does not require the consent or approval of any governmental
authority or other third party, except such consents and approvals which have
been obtained prior to the Closing, (iv) the Agreement and the Lease each has
been duly authorized by all corporate action by the Seller (in the case of the
Agreement) and G.T. Partners (in the case of the Lease) and has been duly
executed and delivered by the Seller (in the case of the Agreement) and G.T.
Partners (in the case of the Lease) and is enforceable against Seller (in the
case of the Agreement) and G.T. Partners (in the case of the Lease) in
accordance with its terms, (v) to the knowledge of such counsel there is no
claim or lawsuit pending or threatened which would challenge or prevent the
consummation of the transactions contemplated by the Agreement or the Lease,
(vi) the conveyance documents executed by the Seller and/or Peebles transfer
the Seller's title to the Acquired Assets to the Purchaser and (vii) Peebles
is the sole shareholder, officer and director of the Seller..
Section 1.088. Peebles Employment AgreementThe Purchaser and Peebles
shall have entered into the Peebles Employment Agreement as described in
Section 7.04..
Section 1.089. LeaseThe Purchaser and G.T. Partners, shall have entered
into a lease with respect to the Office Space (the "Lease") in substantially
the same form as attached hereto as Exhibit 8.08..
Section 8.10. Hickey AgreementThe Seller and/or Peebles shall have
entered into an agreement reasonably satisfactory to the Purchaser pursuant to
which Seller and/or Peebles shall transfer their interest in the Tamarron
Corporation to James Hickey (the "Hickey Agreement")..
ARTICLE IX.
TERMINATION
Section 1.091. Termination; Failure to CloseThe Purchaser may terminate
this Agreement by giving written notice to the Seller at any time prior to the
Closing if the Purchaser is not satisfied, in its sole and absolute
discretion, with the condition of any of the Acquired Assets, the amount of
any of the Assumed Liabilities, or with the continuing operations of the
Business. Notwithstanding anything contained in the preceding sentence to the
contrary, this Agreement and the transactions contemplated herein may be
terminated at any time on or before the Closing (i) by unanimous agreement of
the parties or (ii) by one party giving written notice to the other party on
or before Closing in the event of fraud in the inducement relating to the
transactions contemplated in this Agreement by the party receiving notice of
termination..
Section 1.092. Effect of TerminationIn the event of termination pursuant
to Section 9.01, this Agreement shall terminate and have no further effect,
with no liability on any party hereto, other than liability arising out of a
breach by that party of any representation, warranty, covenant, or agreement
contained herein..
ARTICLE X.
CLOSING AND CLOSING DELIVERIES
Section 1.101. Closing DateThe closing of the purchase and sale of the
Purchased Assets (the "Closing") shall take place at 10:00 a.m. Eastern
Standard Time, on April 29, 1996 at the offices of the Seller, located at 955
Congress Park Drive, Dayton, Ohio (the "Closing Date")..
Section 1.102. Deliveries by the Seller and PeeblesAt the Closing, the
Seller or Peebles shall deliver or cause to be delivered to the Purchaser the
following duly executed documents and other items in form satisfactory to the
Purchaser:.
(a) All assignments and such other instruments of sale,
transfer, conveyance and assignment of the Acquired Assets as the Purchaser
may request, including, but not limited to, all third party consents that may
be necessary to assign any of the Acquired Assets to the Purchaser;
(b) A Certificate of Good Standing of the Seller issued by the
Secretary of State for the State of Ohio, dated as of the most recent
practicable date prior to the Closing;
(c) Results of searches dated within 10 days of the Closing
disclosing any judgments, tax liens, Uniform Commercial Code financing
statements, or any other Liens filed or indexed against any of the Acquired
Assets;
(d) A true and complete copy of the Articles of Incorporation,
including all amendments thereto, of the Seller;
(e) A copy of the By-laws, including all amendments thereto, of
the Seller certified as true and complete and presently in effect by the
Secretary of the Seller;
(f) An opinion of Turner & McNamee
as described in Section 8.07;
(g) All Permits necessary to conduct the Business, transferred
to the Purchaser as required by law;
(h) The Peebles Employment Agreement as described in Section
7.04;
(i) The Lease as described in Section 8.09;
(j) The Hickey Agreement, as described in Section 8.10 as well
as a certificate of the Seller and Peebles confirming that Seller's and/or
Peeble's interest in Tamarron Corporation has been transferred to Mr. Hickey;
(k)
All documents necessary to perfect title to or interest in any of the Acquired
Assets, including, but not limited to, a warranty deed and any other document
necessary to convey good and marketable title to the Real Property;
(l)
A certificate of the Seller and Peebles stating that the Transaction Costs set
forth on Schedule 1.04 are true and accurate and that the Purchaser is not
liable to the Seller and/or Peebles for any amount in excess of the amount set
forth therein;
(m) A certificate of the Seller and Peebles acknowledging (or
waiving) delivery by the Purchaser of the items set forth in Section 10.03.
The failure of the Seller or Peebles to deliver this certificate will not in
and of itself constitute a breach of this Agreement if the certificate was not
delivered because of Purchaser's failure to deliver the items set forth in
Section 10.03; and
(n) All Schedules to this Agreement, except Schedule 3.02,
(which shall have been delivered to Purchaser at least 3 days prior to the
Closing).
Section 1.103. Deliveries by PurchaserAt the Closing, the Purchaser
shall deliver or cause to be delivered to the Seller or Peebles the following
duly executed documents and other items in form satisfactory to the Seller and
Peebles:.
(a) The sum of Five Hundred Thousand Dollars ($500,000.00);
(b) An assumption of the Assumed Liabilities and such other
instruments of assumption as the Seller reasonably may request;
(c)
An opinion of Ice Miller Donadio & Ryan described in Section 7.05;
(d) The Peebles Employment Agreement as described in Section 7.04;
(e) The Lease as described in Section 8.09;
(f) Schedule 3.02;
(g) A Certificate of Good Standing of the Purchaser issued by
the Secretary of State for the State of Ohio, dated as of the most recent
practicable date prior to the Closing;
(h) A true and complete copy of the Articles of Incorporation,
including all amendments thereto, of the
Purchaser;
(i)
A copy of the By-laws, including all amendments thereto, of the Purchaser
certified as true and complete and presently in effect by the Secretary of the
Purchaser; and
(j)
A certificate of the Purchaser acknowledging (or waiving) delivery by the
Seller and/or Peebles of the items set forth in Section 10.02 . The failure
of the Purchaser to deliver this certificate will not in and of itself
constitute a breach of this Agreement if the certificate was not delivered
because of Seller's and/or Peeble's failure to deliver the items set forth in
Section 10.02.
ARTICLE XI.
MISCELLANEOUS
Section 1.111. CounterpartsThis Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument..
Section 1.112. ExpensesThe Purchaser and the Seller shall each bear
their own legal, accounting, and out-of-pocket expenses in connection with
this Agreement and the negotiation and consummation of the transactions
contemplated herein..
Section 1.113. Public AnnouncementsBefore the Closing, Crossmann, the
Purchaser, the Seller, Peebles, and their respective representatives shall not
make any public release of information regarding the matters contemplated
herein, except (i) that a press release mutually agreed upon by the Purchaser
and the Seller shall be jointly issued by the Purchaser and the Seller as soon
as practicable after the execution of this Agreement; (ii) that Crossmann, the
Purchaser, the Seller, and Peebles may continue communications with employees,
customers, suppliers, franchises, lenders, lessors, shareholders, and other
groups as may be legally required or appropriate and which is not inconsistent
with the best interests of any party or the prompt consummation of the
transactions contemplated herein; and (iii) as required by law..
Section 1.114. Risk of LossUntil the Closing, the risks of ownership and
loss of the Acquired Assets shall be borne by the Seller. If, prior to the
Closing, all or any part of the Acquired Assets are damaged by fire or by any
other cause whatsoever, or are taken, in whole or in part, by condemnation or
other exercise of eminent domain, the Seller shall promptly give the Purchaser
written notice of such damage or taking. In the event of any such damage or
taking, the Purchaser shall have the option to require the Seller either to:.
(a) convey the Acquired Assets on the Closing Date to the
Purchaser in a damaged condition and to assign to the Purchaser all of the
Seller's right, title and interest in and to (i) any claims Seller may have
under any insurance policies covering the Acquired Assets (with a credit for
any deductible amount), (ii) the proceeds of any self-insurance (as a credit
against the Purchase Price) or (iii) any condemnation proceeds; or
(b) terminate this Agreement.
Section 1.115. Index and CaptionsThe index and the captions of the
Sections and Articles of this Agreement are solely for convenient reference
and shall not be deemed to affect the meaning or interpretation of any
paragraph hereof..
Section 1.116. NoticesAll notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given and received (a) upon delivery, if personally delivered; (b) on the
fifth day after being deposited with the U.S. Postal Service, if sent by
certified or registered mail, return receipt requested; (c) on the next day
after being deposited with a reliable overnight delivery service; or (d) upon
receipt of an answer back, if transmitted by facsimile, postage prepaid in all
cases other than facsimile, addressed to the other party at the following
addresses, or facsimile numbers in the case of a facsimile:.
If to Crossmann or to the Purchaser, to:
Crossmann Communities, Inc.
9202 North Meridian Street
Suite 300
Indianapolis, Indiana 46268
Attention: John Scheumann
Tel. No.: (317) 843-9514
Facsimile No.: (317) 571-2210
With a copy to:
Steven K. Humke
ICE MILLER DONADIO & RYAN
One American Square
Box 82001
Indianapolis, Indiana 46282-0002
Tel. No.: (317) 236-2397
Facsimile No.: (317) 236-2219
If to the Seller or to Peebles, to:
Thomas H. Peebles
9816 Country Creek Way
Dayton, Ohio 45458
Tel. No.:(513) 885-3301
Facsimile No.: (513) 436-9968
With a copy to:
Bradley W. Evers
TURNER & MCNAMEE
360 National City Center
6 North Main Street
Dayton, Ohio 45402-1908
Tel. No.: (513) 496-3600
Facsimile No.: (513) 496-3608
Any party may change its address for the purpose of this Section 11.06 by
giving the other party written notice of its new address in the manner set
forth above.
Section 1.117. Entire AgreementThis Agreement and the agreements
expresly contemplated hereby, including the Exhibits and Schedules referred to
herein which form a part of this Agreement and a side letter that the parties
may enter into, contain the entire understanding of the parties hereto with
respect to the subject matter hereof and thereof. There are no
representations, promises, warranties, covenants, or undertakings other than
those expressly set forth or provided for in this Agreement or in the
agreements expressly contemplated hereby. This Agreement and the agreements
expressly contemplated hereby supersede all prior agreements and
understandings between the parties with respect to the transactions
contemplated by this Agreement. No provision of this Agreement may be amended
or waived except in writing, and no such amendment shall extend to anything
other than the specific subject matter thereof..
Section 1.118. Governing LawThis Agreement and all transactions
contemplated hereby shall be governed, construed, and enforced in accordance
with the laws of the State of Ohio and shall be treated in all respects as a
State of Ohio contract, without regard to the laws related to choice or
conflict of laws..
Section 1.119. Waiver of ComplianceThe party for whose benefit a
warranty, representation, covenant, or condition is intended may, in writing,
waive any inaccuracies in the warranties and representations contained in this
Agreement or waive compliance with any of the covenants or conditions
contained herein and so waive performance of any of the obligations of the
other party hereto, and any defaults hereunder; provided, however, that such
waiver must be in writing, and shall not affect or impair the waiving party's
rights with respect to any other warranty, representation, covenant, or any
default hereunder, nor shall any waiver constitute a continuing waiver..
Section 11.10. Validity of ProvisionsShould any part of this Agreement
be declared by any court of competent jurisdiction to be invalid, such
decision shall not affect the validity of the remaining portions of this
Agreement, which shall continue in full force and effect as if this Agreement
had been executed with the invalid portion thereof eliminated therefrom, it
being the intent of the parties that they would have executed the remaining
portions of this Agreement without including any such part or portion which
may be declared invalid..
Section 11.11. Schedules and ExhibitsEach and every Schedule and Exhibit
to this Agreement, and each and every document to be delivered in the future
pursuant to this Agreement is hereby incorporated into this Agreement and made
an integral part hereof..
Section 11.12. CurrencyAll amounts herein are stated in currency of the
United States of America..
Section 11.13. No Intention to Benefit Third PartiesThe provisions of
this Agreement are not intended to, and shall not, benefit any Person other
than the parties to this Agreement, the provisions hereof are not intended to,
and shall not create any third party beneficiary right in any Person..
Section 11.14. Successors and AssignsThis Agreement shall be binding on,
and shall inure to the benefit of, the parties and their respective successors
and permitted assigns; provided, however, that neither the Seller nor Peebles
may assign any rights or obligations under this Agreement..
ARTICLE XII.
DEFINITIONS
As used in this Agreement, the following terms have the meanings
indicated below:
"Accounts Receivable" means all accounts and notes receivable, rights to
refunds, and deposits of the Seller.
"Acquired Assets" means Accounts Receivable, Assigned Contracts, Files
and Records, Intangible Assets, Leased Personal Property, License,
Partnerships, Permits (to the extent transferable by the Seller), Personal
Property, Real Property, Supplies, and any other asset of the Seller listed on
Schedule 12.01. The term Acquired Asset shall not include any asset which is
an Excluded Asset.
"Affiliate" means any Person that directly or indirectly controls or is
under common control with, or is controlled by Crossmann, the Purchaser, or
the Seller. As used in this definition, "control" (including, its correlative
meanings "controlled by" and "under common control with") means possession,
directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interest, by contract or otherwise).
"Agreement" has the meaning specified in the Preamble.
"Annual Financial Statements" has the meaning specified in Section 2.06.
"Arbitration Notice" has the meaning specified in Section 6.04(a).
"Assigned Contracts" shall include, but not be limited to, all sales
contracts or other agreements for the conveyance of residential property, any
appraisals relating to the Real Property and any unexpired warranties and
guaranties from any subcontractors or suppliers regarding their performance,
quality of workmanship, or quality of materials supplied in connection with
the construction of residential homes or any other contracts or agreements
necessary to conduct the Business.
"Assumed Liabilities" has the meaning specified in Section 1.03.
"Business" has the meaning specified in the Recitals.
"Business Day" means any day other than Saturday, Sunday, and any day on
which commercial banks in Ohio are authorized by law to be closed.
"Claimant" has the meaning specified in Section 6.03.
"Closing" has the meaning specified in Section 10.01.
"Closing Date" has the meaning specified in Section 10.01.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" has the meaning specified in Section 2.14.
"Construction Contracts" has the meaning specified in Section 2.16(a).
"Crossmann" has the meaning specified in the Preamble.
"Dayton Metropolitan Area" means the following areas in Ohio: Montgomery
County, Greene County, the City of Springboro in Warren County and the City of
Franklin in Warren County.
"Disagreement Notice" has the meaning specified in Section 6.04(a).
"Election Notice" has the meaning specified in Section 6.05.
"Employee Benefit Plans" has the meaning specified in Section 2.19(a).
"Employee Pension Benefit Plan" has the meaning specified in Section
2.19(a).
"Employee Welfare Benefit Plan" has the meaning specified in Section
2.19(a).
"Environmental Claims" means all accusations, allegations,
investigations, warnings, notice letters, notices of violations, liens,
orders, claims, demands, suits, or administrative or judicial actions for any
injunctive relief, fines, penalties, or any damage, including without
limitation personal injury, property damage (including any depreciation of
property values), lost use of property, natural resource damages, or
environmental response costs arising out of Environmental Conditions or under
Environmental Requirements.
"Environmental Conditions" means the state of the environment, including
natural resources (e.g., flora and fauna), soil, surface water, ground water,
any present or potential drinking water supply, subsurface strata, or ambient
air, relating to or arising out of the use, handling, storage, treatment,
recycling, generation, transportation, spilling, leaking, pumping, pouring,
injecting, emptying, discharging, emitting, escaping, leaching, dumping,
disposal, release, or threatened release of Hazardous Materials, whether or
not discovered which could or does result in Environmental Claims. With
respect to Environmental Claims by third parties, Environmental Conditions
also include the exposure of persons to Hazardous Materials at the work place
or the exposure of persons or property to Hazardous materials migrating or
otherwise emanating from, to, or located at, under, or on the Owned Property.
"Environmental Expenses" means any liability (including strict
liability), loss, cost, penalty, fine, punitive damage, encumbrance, or
expense relating to any Environmental Claim or Environmental Conditions, or
incurred in compliance with any Environmental Requirements, including without
limitation the costs of investigation, cleanup, remedial, monitoring,
corrective, or other responsive action, compliance costs, settlement costs,
lost property value, and related legal and consulting fees and expenses.
"Environmental Requirements" means all present and future laws, rules,
regulations, ordinances, codes, policies, guidance documents, approvals,
plans, authorizations, licenses, permits issued by all government agencies,
departments, commissions, boards, bureaus, or instrumentalities of the United
States, all states and political subdivisions thereof, and any foreign body,
and all judicial, administrative, and regulatory decrees, judgments, and
orders relating to human health, pollution, or protection of the environment
(including ambient air, surface water, ground water, land surface, or surface
strata), including (i) laws relating to emissions, discharges, releases, or
threatened releases of Hazardous Materials, and (ii) laws relating to the
identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport, or other handling of
Hazardous Materials. Environmental Requirements shall include, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Superfund's Amendments and
Reauthorization Act ("SARA"), the Toxic Substances Control Act, as amended,
the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended ("RCRA"), the Clean Water Act, as
amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as
amended, the Atomic Energy Act of 1954, as amended, the Occupational Safety
and Health Act, as amended, and all other analogous laws or regulations
promulgated or issued by any federal, state, foreign, or other governmental
authority or body.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Funds" has the meaning specified in Section 6.04(d).
"Excluded Assets" means the assets listed on Schedule 12.03, which shall
include, but not be limited to, certain residential homes, including the
property upon which such homes are built.
"Files and Records" means all files and records of the Seller relating to
the Business, whether in hard copy or magnetic or other format including
customer and supplier records, equipments maintenance records, equipment
warranty information, specifications and drawings, sales and advertising
material, computer software, and the records relating to the employees to be
employed by the Purchaser following the Closing.
"Financial Statements" has the meaning specified in Section 2.06.
"Hazardous Materials" means (i) any substance that is or becomes defined
as a "hazardous substance," "hazardous waste," "hazardous materials,"
pollutant, or contaminant under any Environmental Requirements, including, but
not limited to, CERCLA, SARA, RCRA, and any other analogous federal, state,
local, or foreign law; (ii) petroleum (including crude oil and any fraction
thereof); and (iii) any natural or synthetic gas (whether in liquid or gaseous
state).
"Hickey Agreement" has the meaning specified in Section 8.10.
"Indemnification Notice" has the meaning specified in Section 6.03.
"Indemnity Loss" has the meaning specified in Section 6.01.
"Indemnifying Party" has the meaning specified in Section 6.03.
"Intangible Asset" means all intangible personal property rights of the
Seller, including all rights on the part of the Seller to proceeds of any
insurance policies and all claims on the part of the Seller for recoupment,
reimbursement, and coverage under any insurance policy.
"Interim Financial Statement" has the meaning specified in Section 2.06.
"Lease" has the meaning specified in Section 8.09.
"Leased Personal Property" has the meaning specified in Section 2.13.
"License" means the right to use the name "Tom Peebles Builders, Inc." in
the Dayton, Ohio metropolitan area for a period of ten years from the date of
this Agreement.
"Litigation Notice" has the meaning specified in Section 6.03.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
(statutory or other), option, easement, right-of-way, charge, or conditional
sale agreement.
"Office Lease" has the meaning specified in Section 2.09.
"Office Space" has the meaning specified in Section 2.09.
"Owned Property" means any Real Property that was or is owned, leased or
otherwise under the control of the Seller at any time before the Closing Date.
"Partnerships" means the Seller's or Peebles' partnership interest in all
partnerships specified on Schedule 12.04, which shall include, but not be
limited to, the Seller's partnership interest in the L & P Partners, the 3-G
Partnership, the Bellbrook Land Company, and any other partnership or joint
venture entered into by the Seller or Peebles for the purpose of residential
land development in the metropolitan Dayton, Ohio area.
"Peebles" has the meaning specified in the Preamble.
"Peebles Employment Agreement" has the meaning specified in Section 7.04.
"Permits" has the meaning specified in Section 2.17.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint-stock company, trust, or
unincorporated organization, or any governmental agency, officer, department,
commission, board, bureau, or instrumentality thereof.
"Personal Property" has the meaning specified in Section 2.12.
"Personnel" means the officers, employees and/or agents of the Seller.
"Purchase Price" has the meaning specified in Section 1.04.
"Purchaser" has the meaning specified in the Preamble.
"Real Property" has the meaning specified in Section 2.10.
"Returns" has the meaning specified in Section 2.07(b).
"Seller" has the meaning specified in the Preamble.
"Supplies" has the meaning specified in Section 2.16.
"Taxes" has the meaning specified in Section 2.07(a).
"Title Company" has the meaning specified in Section 8.05.
"Transaction Costs" has the meaning specified in Section 1.04(c).
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their duly authorized representatives, this Agreement as of the
date first above written.
"CROSSMANN"
CROSSMANN COMMUNITIES, INC.
By:
Its:
"PURCHASER"
CROSSMANN COMMUNITIES OF OHIO, INC.
By:
Its:
"SELLER"
TOM PEEBLES BUILDERS, INC.
By:
Its:
"PEEBLES"
Thomas H. Peebles
<PAGE>
Below is a list of all of the Schedules attached to
the Asset Purchase Agreement by and among Tom Peebles Builders, Inc., Thomas
H. Peebles, Crossmann Communities, Inc. and Crossmann Communities of Ohio,
Inc. Upon request, the Registrant will furnish the Commission with copies of
any and all of the Schedules.
<TABLE>
<CAPTION>
<S> <C>
Schedule 1.02 - Liens on Acquired Assets Not Held Free and Clear.
- - ----------------
Schedule 1.03 - Assumed Liabilities.
- - ----------------
Schedule 1.04 - Transaction Costs.
- - ----------------
Schedule 2.01 - Title to Property.
- - ----------------
Schedule 2.02 - Defaults and Violations Caused by Sale of Assets.
- - ----------------
Schedule 2.03 - Required Consents.
- - ----------------
Schedule 2.05 - Transactions with Certain Persons.
- - ----------------
Schedule 2.06 - 1993, 1994, and 1995 Financial Statements; Internally Prepared Balance
- - ----------------
and income Statement for November 1, 1995 through March 31, 1996.
Schedule 2.07 - Taxes Not Fully Paid or Undisclosed Taxes.
- - ----------------
Schedule 2.08 - Default or Violation of Contracts, Leases, Compliance with Laws.
- - ----------------
Schedule 2.09 - Description of Lease on Building.
- - ----------------
Schedule 2.10 - List of Real Property Acquired.
- - ----------------
Schedule 2.11 - Conformity of Real Property.
- - ----------------
Schedule 2.12 - List of Personal Property Owned.
- - ----------------
Schedule 2.13 - List of Leases and Agreements of Tom Peebles Builders, Inc., Which
- - ---------------- Require Consents From Third Parties to be Assigned to Crossmann
Communities of Ohio, Inc.
Schedule 2.14 - List of Contracts.
- - ----------------
Schedule 2.16 - List of Supplies.
- - ----------------
Schedule 2.17 - List of Licenses, Franchises.
- - ----------------
Schedule 2.18 - Non-compliance of Wages and Employment Practices.
- - ----------------
Schedule 2.19 - Employee Benefit Plans.
- - ----------------
Schedule 2.20 - Non-compliance With Environmental Regulations.
- - ----------------
Schedule 2.21 - Non-compliance With Growth Management of Laws.
- - ----------------
Schedule 2.22 - Insurance Policies.
- - ----------------
Schedule 2.23 - Non-disclosed Guarantees.
- - ----------------
Schedule 2.24 - Persons Holding Powers of Attorney.
- - ----------------
Schedule 2.25 - Non-disclosed Liabilities Not Included on Interim Financial
- - ---------------- Statement.
Schedule 2.27 - Material Suppliers to be Terminated.
- - ----------------
Schedule 2.29 - Non-disclosed Benefits to Customers, Suppliers, and
- - ---------------- Government Employees.
Schedule 2.31 - Description of Forest Ridge Project.
- - ----------------
Schedule 2.32 - Obligations Under Warranties.
- - ----------------
Schedule 3.02 - Consents and Approvals.
- - ----------------
Schedule 12.01 - Other Assets of Seller.
- - ----------------
Schedule 12.02 - Assigned Contracts.
- - ----------------
Schedule 12.03 - Excluded Assets.
- - ----------------
Schedule 12.04 - Partnerships.
- - ----------------
Exhibit 7.04 - Peebles Employment Agreement.
- - ----------------
Exhibit 8.08 - Lease.
- - ---------------- -------------------------------------------------------------------------
</TABLE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as
of the 26th day of April, 1996, by and among Crossmann Communities, Inc.
("Crossmann"), an Indiana corporation, Crossmann Communities of Ohio, Inc., an
Ohio corporation (the "Company"), and Thomas H. Peebles (the "Employee").
Preliminary Statement
The Company has determined that it is in the best interests of the
Company to retain the benefit of the Employee's services, experience and
loyalty, and the Employee desires to provide his services and experience and
devote his loyalty to the Company upon the terms and conditions set forth in
this Agreement.
Terms and Conditions
In consideration of the mutual promises and covenants contained in this
Agreement, and intending to be legally bound, the parties agree as follows:
Section 1. Employment and Duties.
(a) GeneralThe Employee shall serve as a vice president of the
Company and shall be responsible for the Company's homebuilding operations in
the following areas in Ohio: Montgomery County, Greene County, the City of
Springboro in Warren County and the City of Franklin in Warren County (which
areas, for purposes of this Agreement, will be referred to as the "Dayton
Metropolitan Area"). The Employee shall, to the best of his abilities,
perform such administrative and executive duties as are assigned to him from
time to time by the Company's Board of Directors (the "Board")..
(b) Employment DutiesThroughout the "Employment Term," as
defined in Section 2, the Employee shall: (i) devote his working hours, on a
"full-time basis" (as defined below) to his duties under this Agreement; (ii)
faithfully and loyally serve the Company; (iii) comply in all respects with
the lawful and reasonable directions and instructions given to him by the
Board; and (iv) use his best efforts to promote and serve the interests of the
Company. For purposes of this Agreement, the term "full-time basis" shall be
interpreted as the amount of time and level of commitment necessary to perform
the duties associated with the Employee's position with the Company in
accordance with standards of the Company and/or Crossmann for employees having
similar levels of responsibility. In recognition of Employee's religious
beliefs, the Company agrees that Employee's duties do not include working on
Saturday..
(c) Exclusive EmploymentThroughout the Employment Term, the
Employee shall not render his services, directly or indirectly, for
compensation, to any other person or organization without the prior written
consent of the Board, nor shall the Employee engage in any activity which
would interfere significantly with the faithful performance of his duties
under this Agreement. The Employee may perform minor services for which he
does not receive compensation, provided that the services do not contravene or
conflict with the provisions of Section 1(b) or Section 5 through Section 7 of
this Agreement. Employee may also participate (A) in the orderly liquidation
of Tom Peebles Builders, Inc., including the sale or other disposition of
assets of such company in connection with such liquidation or (B) in the
continued limited activity of Tom Peebles Builders, Inc. with the prior
express written consent of the Company; provided, however, that any such
activity does not unreasonably interfere with the performance of his
obligations to Company..
Section 2. Employment TermThe Employee's employment shall be deemed to
have commenced upon the Company's acquisition of certain assets and assumption
of certain liabilities of Tom Peebles Builders, Inc. pursuant to the terms and
conditions of an Asset Purchase Agreement (the "Asset Purchase Agreement")
dated as of the 26th day of April, 1996 (the "Effective Date") and shall
continue for a period of five years from the Effective Date (the "Employment
Term"), unless the Employee's employment is terminated prior to the expiration
of the Employment Term, as provided in Section 4 of this Agreement..
Section 3. Compensation and Other BenefitsThe Company shall pay and
provide the following compensation and other benefits to the Employee as
compensation for services rendered under this Agreement:.
(a) Annual SalaryDuring the Employment Term, the Company shall
pay to the Employee, in accordance with the then-prevailing payroll practices
of the Company, an annual base salary of Seventy Five Thousand Dollars
($75,000) per full year (the "Annual Base Salary"), less applicable payroll
deductions. Employee shall receive a $5,000 increase in the Annual Base
Salary effective on the first day of each year of the Employment Term,
commencing January 1, 1997. Because the Employee did not commence his
employment with the Company until the effective date of this Agreement, he
will receive only a pro rata share of his 1996 Annual Base Salary, to be
determined in accordance with the number of days in 1996 following the
Effective Date..
(b) BonusIn each of the years 1996, 1997, 1998, 1999 and 2000
(singly, a "Bonus Year" and collectively, the "Bonus Years"), the Employee
shall be eligible to receive, in addition to the Annual Base Salary, a bonus
which shall be calculated and paid in accordance with the provisions set forth
in Exhibit A hereto (the "Bonus").
(c) Employee Benefit PlanDuring the Employment Term, the
Employee shall be and remain eligible to participate in all benefit plans
maintained by the Company or by Crossmann for the benefit of all employees and
shall be subject to the terms and conditions of any such plans..
(d) Vacation and Paid LeaveThe Employee shall be entitled to 15
days of vacation leave per year. The Employee shall accrue and receive full
compensation and benefits during his vacation leave periods. Unused vacation
leave shall not carry over from one year of the Employment Term to the next,
except with the prior written consent of the Board. Unused vacation leave at
the end of the Employment Term shall not entitle the Employee to any
compensation in addition to the Annual Base Salary or the Bonus. Vacation
leave shall be taken at such times as the Employee and the Company shall
mutually agree..
(e) Other CompensationThe Employee shall be and remain eligible
to participate in, in accordance with their respective terms and conditions,
all benefit plans presently available or which may subsequently be made
available by the Company or by Crossmann for the benefit of officers, other
key employees, or directors, including stock option plans, health care, basic
life insurance, supplemental life insurance coverage, disability coverage,
business travel accident insurance, use of a Company car (including expenses
relating thereto for which Crossmann reimburses employees having similar
levels of responsibility), and any pension or retirement plan of any kind. .
Section 4. Termination of Employment.
(a) Termination for Cause.
(i) If, prior to the expiration of the Employment Term, the
Company terminates the Employee's employment "for cause" (as defined in
Section 4(a)(ii)), the Employee shall be entitled to payment of that portion
of the Employee's Annual Base Salary under Section 3(a) that the Employee
earned through and including the Termination Date (as defined in Section
4(a)(iii)).
(ii) Termination "for cause" shall mean termination by the
Board of the Employee's employment with the Company for any one or more of the
following reasons:
(A) Theft, fraud, embezzlement, dishonest or other
similar behavior by the Employee;
(B) Any material breach by the Employee of the terms
of this Agreement;
(C) Any material neglect of duty, incompetence,
insubordination or misconduct of the Employee in discharging any of his duties
and responsibilities hereunder;
(D) Any act of theft or dishonesty by the Employee or
any criminal connection or indictment of the Employee;
(E) Any occurrence of the Employee reporting to work
under the influence of alcohol or illegal drugs, or the Employee being under
the influence of alcohol or illegal drugs during working hours;
(F) Any failure or refusal by the Employee to comply
with the policies, rules, and regulations of the Company and of Crossmann,
whether now in force or hereafter adopted;
(G) Any misrepresentation or concealment by the
Employee of any material fact for the purpose of securing this Agreement; or
(H) Any other material act of misconduct within the
control of the Employee.
(iii) The Company may terminate for cause the Employee's
employment with the Company by giving written notice to the Employee at least
twenty-four (24) hours prior to the Termination Date (the "Termination
Notice"). "Termination Date" shall mean the actual date the Employee
terminates employment with the Company as a result of action taken by the
Board, and not as a result of the Employee's resignation from employment, as
provided in Section 4(b).
(b) ResignationThe Employee may resign from his employment with
the Company at any time and for any reason by providing written notice to the
Board of his resignation at least thirty (30) days prior to the effective date
of the resignation (the "Resignation Notice"). The effective date of the
Employee's resignation shall be that date specified in the Resignation Notice
or the actual date the Employee terminates employment with the Company as the
result of a resignation, whichever occurs later (the "Resignation Date"). If
the Employee resigns from his employment, the Employee shall be entitled to
that portion of the Employee's Annual Base Salary under Section 3(a) that the
Employee earned through and including the Resignation Date..
(c) DeathIf the Employee dies prior to the expiration of the
Employment Term or the Employee is entitled to receive payments from the
Company pursuant to Section 4(a)(i) or Section 4(b) at the time of his death,
the Employee's estate or personal representative shall be entitled to receive
that portion of the Annual Base Salary that the Employee earned through and
including the earlier of (i) the date of the Employee's death or (ii) the
Termination Date or the Resignation Date, as the case may be. .
(d) DisabilityThe Employee shall be deemed "Permanently
Disabled" when he is deemed permanently disabled in accordance with the
disability insurance policy of the Company in effect at the time of the
illness or injury causing the disability, or in the event no disability policy
is then in effect, in accordance with the disability policy last in effect.
If, prior to the expiration of the Employment Term, the Employee becomes
"Permanently Disabled," the Board may terminate the Employee's employment with
the Company by providing written notice to the Employee at least seventy-two
(72) hours prior to the Termination Date. If the Employee resigns from
employment with the Company as a result of a Permanent Disability or the
Company terminates the Employee's employment as a result of a Permanent
Disability, the Employee shall be entitled to receive that portion of the
Annual Base Salary that he earned through and including the Termination Date
or Resignation Date, as applicable. In addition, the Employee shall be
entitled to receive any benefits then due and payable pursuant to any benefit
plan or compensation arrangement maintained by the Company and with respect to
which the Employee is a participant, and the Employee's participation in such
benefit plans shall be continued throughout the period during which the
Employee is entitled to receive a portion of the Annual Salary pursuant to
this Section 4..
Section 5. Secrecy and Confidential Information.
(a) Confidential Information"Confidential Information" shall
mean all information, whether or not originated by the Employee, which is (1)
used in the business of the Company, Crossmann or any of their respective
subsidiaries or affiliates (collectively, the "Crossmann Entities") and is
proprietary to, about, or created by any of the Crossmann Entities; (2)
designated as confidential by any of the Crossmann Entities; or (3) not
generally known by any non-Crossmann Entity personnel. Confidential
Information includes, but is not limited to, the following types of
information (whether or not reduced to writing or designated as
confidential):.
(i) Information regarding any of the Crossmann Entities'
customers and clients, and their representatives, the identity of any of the
Crossmann Entities, potential customers or leads, the identity of any
contracts (contents and parties) to which any of the Crossmann Entities is a
party or is bound, data provided by any of the Crossmann Entities, and the
type, quantity and specifications of products and services being sold to,
purchased, leased, licensed or received by any of the Crossmann entities;
(ii) Information received by any of the Crossmann Entities
from third parties (such as vendors) under an obligation of confidentiality,
restricted disclosure or restricted use;
(iii) Any of the Crossmann Entities' internal personnel and
financial information (including the revenue, costs or profits associated with
any of the Crossmann Entities' products); vendor and supplier names, payroll
information, purchasing and internal cost information, internal service and
operational manuals and other information of any of the Crossmann Entities;
and the manner and methods of conducting any of the Crossmann Entities'
business;
(iv) Information with respect to any of the Crossmann
Entities' products, facilities and methods, systems, trade secrets and other
intellectual property;
(v) Work product related to work or projects performed or
about to be performed for any of the Crossmann Entities or for customers of
any of the Crossmann Entities;
(vi) Marketing and developmental plans, price and cost
data, price and fee amounts, pricing and billing policies, quoting procedures,
marketing techniques, methods of obtaining business, forecasts, forecast
assumptions and volumes, future plans and potential strategies of any of the
Crossmann Entities.
(b) Ownership of Confidential InformationThe Employee recognizes
that the services he will perform under this Agreement are special, unique and
extraordinary and that, by reason of his employment under this Agreement, he
may acquire Confidential Information. The Employee hereby acknowledges and
agrees that all Confidential Information is and shall remain the exclusive
property of the Crossmann Entities, whether or not prepared in whole or in
part by the Employee and whether or not disclosed to or entrusted to the
custody of the Employee. Upon the termination or resignation of his
employment with the Company, as applicable, or upon the request of any of the
Crossmann Entities, at any time, the Employee shall promptly deliver to the
Company all documents, tapes, disks, or other storage media and any other
materials, and all copies thereof in whatever form, in the possession of the
Employee pertaining to the business of any of the Crossmann Entities,
including, but not limited to, any containing Confidential Information..
(c) Non-Disclosure and Non-Use of Confidential InformationIn
furtherance of this Agreement and in order to assure adequate protection of
the Crossmann Entities against the wrongful use or disclosure of Confidential
Information, the Employee agrees that he will hold all Confidential
Information of the Crossmann Entities in strict confidence and solely for the
benefit of the Crossmann Entities, and that, except as necessary to perform
his obligations to the Company under this Agreement or with the prior written
consent of the Board, he will not directly or indirectly disclose or use or
authorize any third party to disclose or use any Confidential Information.
The Employee's obligations set forth in this Section 5(c), and the Crossmann
Entities' rights and remedies with respect thereto, whether legal or
equitable, shall remain in full force and effect during the Employment Term
and for a three year period thereafter, notwithstanding any prior termination
or resignation of the Employee or any other prior termination of this
Agreement for any reason..
Section 6. Non-CompetitionDuring the "Restricted Period" (as defined
below) the Employee shall not directly or indirectly engage in any activity or
business that is substantially similar to or competitive with that of any of
the Crossmann Entities in any state where any of the Crossmann Entities is
engaged in business on the Termination Date or the Resignation Date, as the
case may be; nor shall the Employee, without the express written consent of
the Board, directly or indirectly engage in, own, manage, operate, join,
control, lend money or other assistance to, or participate in or be connected
with, as an officer, director, employee, partner, shareholder, consultant,
manager, agent, or otherwise, any individual, corporation, partnership, firm,
other company, business organization, or entity that is engaged in the same or
a substantially similar business as that engaged in by any of the Crossmann
Entities in any state where any of the Crossmann Entities is engaged in
business on the Termination Date or the Resignation Date, as the case may be.
Notwithstanding any other provision, the Employee may own shares of stock
representing less than two percent (2%) of the outstanding shares of any
publicly-held competitor of any of the Crossmann Entities. For purposes of
interpreting this Section 6, the parties agree that construction of commercial
projects, such as office buildings and shopping malls, is not an activity
which is substantially similar to or competitive with the activities of any of
the Crossmann Entities as of the date of this Agreement, although commercial
construction could become a similar or competitive activity if any of the
Crossmann Entities began to participate in the construction of commercial
projects prior to the Employee's Termination Date or a Resignation Date, as
the case may be. The parties further agree that, notwithstanding any other
provision, the Employee may, during the Restricted Period, construct
commercial projects in any state as long as none of the Crossmann Entities has
begun a commercial project in such state prior to the Termination Date or the
Resignation Date, as the case may be. The Employee's obligations set forth on
this Section 6 and the Crossmann Entities' rights and remedies with respect
thereto, whether legal or equitable, shall remain in full force and effect
during the Restricted Period, notwithstanding any prior termination or
resignation of the Employee or any other prior termination of this Agreement
for any reason. For the purposes of this Agreement, the "Restricted Period"
shall include the Employment Term and a two year period beginning on the
Termination Date if the Employee's employment with the Company is terminated
other than for a reason described in Section 4(a)(ii) or Section 4(d) of this
Agreement. In all other instances, the Restricted Period shall include the
Employment Term and a three year period beginning on the later of (a) the date
the Company pays the Employee the last Bonus payment due hereunder, or (b) the
Termination Date or the Resignation Date, as the case may be..
Section 7. Non-SolicitationDuring the Restricted Period, the Employee
shall not, directly or indirectly, as an individual or on behalf of any other
individual, corporation, partnership, firm, other company, business
organization, or entity (other than any of the Crossmann Entities), or in any
other capacity: (a) call upon, solicit, contact, or service any customer,
client, or potential customer or client of any of the Crossmann Entities that
the Employee called upon, solicited, contacted, or serviced for the any of the
Crossmann Entities; (b) call upon, solicit, contact, or service any
individual, corporation, partnership, other company, or business of which the
Employee became aware through any of the Crossmann Entities; (c) call upon,
solicit, contact, or service any person or entity who is or was during the
Employee's Employment Term a vendor or supplier of or for any of the Crossmann
Entities; or (d) solicit for employment, endeavor to entice away from any of
the Crossmann Entities, recruit, hire, or otherwise interfere with any of the
Crossmann Entities' relationship with any person who is employed by or
otherwise engaged to perform services for any of the Crossmann Entities
(including, but not limited to, any independent sales representatives or
organizations); provided, however, that Employee may call upon, solicit,
contact or service a person or entity described in (a), (b) or (c), above with
respect to any activity or business in which Employee may participate without
violating Section 6 of this Agreement. The Employee's obligations set forth
in this Section 7 and the Crossmann Entities' rights and remedies with respect
thereto, whether legal or equitable, shall remain in full force and effect
during the Restricted Period, notwithstanding any prior termination or
resignation of the Employee or any other prior termination of this Agreement
for any reason..
Section 8. Reasonableness of TermsThe Company, Crossmann, and the
Employee stipulate and agree that the terms and covenants contained in Section
5 through Section 7 herein are fair and reasonable in all respects, including
the time period and geographical coverage in Section 6, and that these
restrictions are designed for the reasonable protection of the Crossmann
Entities' business. In the event that these restrictions are found to be
overly broad or unreasonable, the Company, Crossmann, and the Employee agree
that such restrictions shall be severable and enforceable on such modified
terms as may be deemed reasonable and enforceable by a court of competent
jurisdiction..
Section 9. Remedies.
(a) Monetary DamagesIn determining the existence and/or amount
of any monetary damages for the breach of any provision of this Agreement, the
parties intend to submit to arbitration using the procedures set forth in
Section 6.03, Section 6.04 and Section 6.08 of the Asset Purchase Agreement
with the following modifications:.
(i) The Company cannot withhold the Employee's Bonus due
hereunder if the Employee's employment had been terminated by the Company
other than for a reason described in Section 4(a)(ii) or Section 4(d) herein;
(ii) If any of the Crossmann Entities brings a claim
against the Employee alleging a breach of Section 5, Section 6, or Section 7
of this Agreement, all costs and expenses associated with conducting the
arbitration proceeding, including reasonable attorney's fees of both parties
to the proceeding, shall be borne exclusively by the losing party as
determined by the arbitration tribunal; provided, however, that the
arbitration tribunal may determine that more than one party is a losing party
in which event the arbitration tribunal shall allocate the costs and expenses
of the arbitration among such losing parties as they determine to be just and
fair; and
(iii) The survival provisions set forth in Section 6.08 of
the Asset Purchase Agreement shall be superseded and replaced by the survival
provisions set forth in Section 5, Section 6 and Section 7 of this Agreement.
(b) Equitable ReliefIn addition to the remedies set forth above,
the Employee recognizes that the disclosure of any Confidential Information or
other breach of this Agreement (including, but not limited to, a violation of
Section 6 or Section 7 of this Agreement) may give rise to irreparable injury
to the goodwill and proprietary rights of the Crossmann Entities, inadequately
compensable in monetary damages. Accordingly, in addition to any other legal
or equitable remedies that may be available to any of the Crossmann Entities,
the Employee agrees that the Crossmann Entities will be able to seek and
obtain injunctive relief against the breach or threatened breach of any of the
Employee's obligations hereunder and that if any of the Crossmann Entities
brings an equitable claim against the Employee for a breach of Section 5,
Section 6, or Section 7 of this Agreement, such entity shall be entitled to
recover from the Employee its reasonable attorneys' fees and costs incurred in
obtaining such equitable remedies..
Section 10. Employee WarrantiesThe Employee represents and warrants that
his employment by the Company and his execution and performance of this
Agreement do not and will not violate any express or implied obligation to any
former employer or other party. Employee further represents that he has not
brought with him and will not use or disclose during his employment with the
Company any information, documents, or materials subject to any legally
enforceable restrictions or obligations as to confidentiality or secrecy..
Section 11. Nonassignability.
(a) By the EmployeeThe Employee shall not assign or delegate
this Agreement or any other right, duty, obligation, or interest under this
Agreement without the Company's prior written consent; provided, however, that
nothing shall preclude the Employee from designating beneficiaries to receive
benefits payable under this Agreement upon his death, and nothing shall
preclude the Employee's executors, administrators or their legal
representatives, from assigning any rights under this Agreement to any
person..
(b) By the CompanyThe Company may assign, delegate, or transfer
this Agreement and all of the Company's rights and obligations under this
Agreement to any of its affiliates or subsidiaries or to any business entity
that by merger, consolidation, or otherwise acquires all or substantially all
of the assets of the Company or to which the Company transfers all or
substantially all of its assets; provided that the Company obtains a written
commitment from such entity that it will be bound by the terms of this
Agreement. Upon assignment, delegation or transfer, any affiliate,
subsidiary, or business entity related to the Company shall be deemed to be
substituted for the Company for all purposes of this Agreement..
(c) Binding EffectExcept as limited under Section 11(a) and
Section 11(b), this Agreement shall be binding upon and inure to the benefit
of the parties hereto, any successors or assigns of the Company, and the
Employee's heirs and the personal representatives or executor or the
Employee's estate..
Section 12. SeverabilityIf a court of competent jurisdiction makes a
final determination that any term or provision of this Agreement is invalid or
unenforceable, and all rights to appeal the determination have been exhausted
or the period of time during which any appeal of the determination may be
perfected has been exhausted, the remaining terms and provisions shall be
unimpaired and the invalid or unenforceable term or provision shall be deemed
replaced by a term or provision that is valid and enforceable and that most
closely approximates the intention of the parties with respect to the invalid
or unenforceable term or provision, as evidenced by the remaining valid and
enforceable terms and conditions of this Agreement..
Section 13. AmendmentThis Agreement may not be modified, amended, or
waived in any manner except by an instrument in writing signed by all parties
to this Agreement; provided, however, that the Board shall have previously
approved the Company's agreement to any modification, amendment or waiver..
Section 14. WaiverThe waiver by any party of compliance by any other
party with any provision of this Agreement shall not operate or be construed
as a waiver of any other provision of this Agreement (whether or not similar),
or a continuing waiver or a waiver of any subsequent breach by a party of a
provision of this Agreement. Performance by any party of any act not required
of it under the terms and conditions of this Agreement shall not constitute a
waiver of the limitations on its obligations under this Agreement, and no
performance shall estop that party from asserting those limitations as to any
further or future performance of its obligations..
Section 15. Governing Law and JurisdictionThe laws of the State of Ohio
shall govern the validity, performance, enforcement, interpretation and any
other aspect of this Agreement, notwithstanding any state's choice of law
provisions to the contrary. The parties intend the provisions of this
Agreement to supplement, but not displace, their respective rights and
responsibilities under the Ohio Uniform Trade Secrets Act, Ohio Rev. Code Ann.
section 1333.61 et seq., as amended. Any and all actions arising under
this Agreement shall be filed and maintained only in a state or federal
court of competent jurisdiction sitting in the State of Ohio, and the
parties hereby submit to venue and jurisdiction in such courts..
Section 16. NoticesAll notices required or desired to be given under
this Agreement shall be in writing and shall be deemed to have been given if
(i) delivered in person and receipted for by the party to whom notice is
directed; (ii) sent by telefax not later than the day upon which the notice is
required to be given pursuant to this Agreement, provided, that the sender
obtains confirmation that such telefax was received and a copy is mailed as
set forth below on the date of transmission; (iii) mailed by certified or
registered mail, United States mail postage prepaid, not later than the day
upon which the notice is required to be given pursuant to this Agreement; or
(iv) delivered by expedited courier, shipping prepaid or mailed to sender, on
the next business day, after the date on which it is so sent, and addressed as
follows:.
(a) If to Crossmann or the Company, to:
Crossmann Communities, Inc.
9202 North Meridian Street
Suite 300
Indianapolis, Indiana 46268
Attn: John Scheumann
Fax: (317) 571-2210
With a copy to:
Steven K. Humke
ICE MILLER DONADIO & RYAN
One American Square
Box 82001
Indianapolis, Indiana 46282
Fax: (317) 236-2219
(b) If to the Employee, to such address for the Employee as is
last shown on the payroll records of the Company with a copy to:
Bradley W. Evers
TURNER & MCNAMEE
360 National City Center
6 North Main Street
Dayton, Ohio 45402-3608
Fax: (513) 496-3608
Any party may, by giving written notice to the other parties, change the
address to which notice shall then be sent.
Section 17. Prior AgreementsThis Agreement is a complete and total
integration of the understanding of the parties, and supersedes all prior or
contemporaneous negotiations, commitments, agreements, writings and
discussions with respect to the subject matter of this Agreement..
Section 18. HeadingsThe subject headings of the sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction of this
Agreement..
Section 19. Joint DraftingThis Agreement shall be deemed to have been
drafted jointly by the parties and in the event of any ambiguity in this
Agreement, the same shall not be construed against either party..
Section 20. CounterpartsThis Agreement may be executed in one or more
counterparts, each of which for all purposes shall be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only
one counterpart signed by the party against which enforceability is sought
needs to be produced to evidence the existence of this Agreement..
<PAGE>
The parties have executed this Agreement on the date first above written.
"COMPANY" "EMPLOYEE"
Crossmann Communities of Ohio, Inc.
By: By:
(signed) Thomas H. Peebles
(title)
(printed)
"CROSSMANN"
Crossmann Communities, Inc.
By:
(signed)
(title)
(printed)
<PAGE>
EXHIBIT A TO EMPLOYMENT
AGREEMENT OF THOMAS H. PEEBLES
BONUS CALCULATION
The following principles and procedures will be followed in determining
the Bonus payable pursuant to Section 3(b) of the Employment Agreement (the
"Agreement") dated as of the 26th day of April, 1996 by and among Crossmann
Communities, Inc. ("Crossmann"), Crossmann Communities of Ohio, Inc. (the
"Company"), and Thomas H. Peebles (the "Employee"). Defined terms not
expressly defined in this Exhibit A shall have the meanings set forth in the
Agreement and Section references shall be deemed to refer to Sections of the
Agreement unless specified otherwise.
1. Determination of BonusDuring each Bonus Year (as defined below),
the Employee shall be entitled to receive a Bonus equal to the product of (1)
the Applicable Percentage for such Bonus Year and (2) the Dayton Net Income
for such Bonus Year; provided, however, that the Bonus for any Bonus Year
shall not exceed the Maximum Bonus for such Bonus Year. .
2. Applicable Percentage and Maximum BonusThe following table sets
forth the Applicable Percentage and Maximum Bonus for each Bonus Year:.
<TABLE>
<CAPTION>
<S> <C> <C>
Bonus Year Applicable Maximum
Percentage Bonus
1996 20% $200,000
1997 15% $175,000
1998 7% $150,000
1999 6% $175,000
2000 5% $150,000
</TABLE>
If Employee does not receive the Maximum Bonus in any Bonus Year, the
Maximum Bonus for the next succeeding Bonus Year shall be increased by an
amount equal to the difference between the Bonus actually received by Employee
for such year and the Maximum Bonus for such year. For example, if Employee
were to receive a Bonus of $290,000 in 1996, the Maximum Bonus for 1997 would
be adjusted to $285,000 and if in 1997 Employee received a $280,000 Bonus then
the Maximum Bonus available for 1998 would become $255,000.
3. Bonus YearEach Bonus Year shall be a full calendar year. .
4. Payment of Bonus.
(a) The Bonus payable with respect to a Bonus Year shall be paid
by the Company no later than April 15 of the next succeeding Bonus Year. The
Bonus payable for the year 2000 shall be paid no later than April 15, 2001.
(b) During a Bonus Year, the Employee shall have the right to
borrow (a "Draw") up to the Maximum Draw against the Bonus payable for such
Bonus Year. The Maximum Draw shall be considered a loan by the Company to the
Employee and Employee shall execute such documents as the Company reasonably
may request in order to document the borrowing. If the Bonus payable with
respect to such Bonus Year exceeds the Draw, the Company will reduce the
amount of Bonus otherwise payable to the Employee by the amount of the Draw
and Employee shall not be required to pay interest with respect to the Draw.
If the Bonus payable with respect to such Bonus Year is less than the Draw,
then no Bonus will be paid to the Employee for such Bonus Year and Employee
shall be required to repay the excess of the Draw over the amount of the Bonus
on or before June 15 of such year, plus interest at the prime rate (as such
rate is set from time to time by Bank One Indianapolis, N.A.) plus 2%, which
interest shall accrue from January 1 of such year. The following table sets
forth the Maximum Draw for each Bonus Year:
<TABLE>
<CAPTION>
<S> <C>
Bonus Year Maximum Draw
1996 $ 50,000
1997 $ 45,000
1998 $ 40,000
1999 $ 35,000
2000 $ 30,000
</TABLE>
(c) Employee and the Company are parties to that Asset Purchase
Agreement dated as of the 26th day of April, 1996. Pursuant to the provisions
of Article VI of such Asset Purchase Agreement and the provisions of Section 9
of this Agreement, the Company has the right to set off certain claims against
the Bonus payable to the Employee. Employee hereby acknowledges and agrees
that any set-off exercised by the Company or Crossmann pursuant to the terms
of the Asset Purchase Agreement shall be deemed for all purposes to have been
paid to the Employee by the Company in accordance with the Bonus provisions of
this Agreement and then paid by Employee to Crossmann or the Company in
accordance with the Asset Purchase Agreement.
(d) The Company shall have the right to set off against the 1996
Bonus an amount equal to any account receivable purchased by the Company from
Tom Peebles Builders, Inc. that was unpaid as of December 31, 1996, (the
"Unpaid Receivables"), and on January 1, 1997, the Company shall assign any
Unpaid Receivable to the Employee. If the amount of the Unpaid Receivables is
greater than the 1996 Bonus, the Bonuses payable in 1997 or in subsequent
years shall be reduced by an amount equal to the Unpaid Receivables less all
amounts previously set off pursuant to this Section 4(d).
5. Determination of Dayton Net Income.
(a) Dayton Net Income shall be equal to "Income before taxes" of
the Company derived from the Dayton Metropolitan Area, as determined in a
manner consistent with the determination of "Income before taxes" on the
Consolidated Statements of Income disclosed by Crossmann in its Annual Report
to Shareholders and Form 10-K filed with the Securities and Exchange
Commission, except that Dayton Net Income shall be determined taking into
account the following items:
(i) Funds provided to the Company by Crossmann to finance the
Company's acquisition of land, construction of residential homes, and
operations in the Dayton Metropolitan Area, which funds shall bear interest at
the rate of prime (as such rate is set from time to time by Bank One
Indianapolis, N.A.) plus 2%;
(ii) A charge of one percent (1%) of the sales in the Dayton
Metropolitan Area as an allocation for the Crossmann's and the Company's
overhead in the Dayton Metropolitan Area; and
(iii) For the 1996 Bonus Year, the Dayton Net Income shall
include income derived from the sale of residential homes which the Company
and Tom Peebles Builders, Inc. contracted to build in the Dayton Metropolitan
Area during the period from January 1, 1996 to the Effective Date, but which
were not completed and the sale of which were not closed prior to the
Effective Date.
(b) From the date of this Agreement and until December 31, 2000
(or, if earlier, until the end of the last Bonus Year with respect to which a
Bonus is payable as provided herein):
(i) Crossmann will not assign, contribute, transfer or merge the
operations of any other subsidiary or division of Crossmann into the Company
without obtaining the prior consent of the Employee unless and to the extent
that (A) such assignment, contribution, transfer or merger will not affect the
determination of the Bonus; or (B) such assignment, contribution, transfer or
merger relate to operations of Crossmann or any division of subsidiary of
Crossmann within the Dayton Metropolitan Area;
(ii) For purposes of the calculation of the Bonus, the Company
shall continue to be and the business, operations, assets and liabilities of
the Company shall continue to be accounted for as, a separate and independent
accounting entity; and
(iii) Crossmann shall cause the Company to conduct its business
only in the ordinary course, but Crossmann may cause the Company to follow the
general business strategies articulated by the Board or Directors and senior
management of Crossmann with respect to the continued growth and expansion of
the operations of Crossmann. Nothing in this clause (iii) shall be deemed to
constitute a limitation upon the power and authority of the respective Boards
of Directors of Crossmann and the Company over the business and operations of
the Company.
6. Statement of Income.
(a) Crossmann and the Company will prepare and deliver to the
Employee a statement setting forth the Dayton Net Income for the Bonus Year
(the "Statement of Income"), which Statement of Income shall be delivered on
or before March 15 of the next succeeding Bonus Year. The Statement of Income
shall be prepared in accordance with generally accepted accounting principles
applied in a manner consistent with the consolidated financial statements of
Crossmann and setting forth with reasonable particularity the material
revenues and expenses which determine the amount of Dayton Net Income for such
Bonus Year. Crossmann and the Company shall also provide Employee with
monthly reports (the "Monthly Reports") setting forth the Dayton Net Income
for such month, which shall be provided to Employee as soon as practicable
after the end of the month. The Monthly Reports shall be prepared in
accordance with generally accepted accounting principles applied in a manner
consistent with the consolidated financial statements of Crossmann, subject to
customary year-end adjustments.
(b) In the event of a dispute as to the manner in which a
Statement of Income has been prepared, the Company and Employee shall seek to
resolve such dispute, but any unresolved dispute shall be submitted for
determination by Deloitte & Touche, LLP ("D&T"). The determination by D&T
shall be made within 20 days following such submission and shall be binding
upon the Company and the Employee. The Company and the Employee shall each
bear 50% of the fees and expenses of D&T in making its determination. If,
after the determination by D&T is delivered to the parties, either the Company
or Employee continues to dispute the amount or determination of Dayton Net
Income, the dispute will be resolved using the procedures set forth in Section
7.04 of the Asset Purchase Agreement.
7. Termination of Employment.
(a) In the event of the Employee's resignation or termination
(other than in accordance with Section 4(a)(ii)) on or before December 31,
1998, the Employee's right to receive any Bonus for Bonus Years 1999 and 2000
shall automatically terminate, but the Employee shall remain eligible to
receive the Bonus for the Bonus Year in which he resigns and for any
subsequent Bonus Year through the 1998 Bonus Year; provided, however, that
such eligibility is conditional upon the Employee's continued compliance in
full with the provisions of Section 5 through Section 7 of this Agreement. If
the Employee resigns during 1999 or 2000, Employer will forfeit his right to
any Bonus for the Bonus Year in which he resigns and any subsequent Bonus
Year.
(b) In the event the Employee is terminated by the Company in
accordance with the provisions of Section 4(a)(ii), dies or becomes
Permanently Disabled before December 31, 1998, the Employee's right to receive
any Bonus for the Bonus Years 1999 and 2000 shall automatically terminate, but
the Employee, or the Employee's estate or personal representative, as the case
may be, shall remain eligible to receive the Bonus for the Bonus Year in which
Employee died, became Permanently Disabled or was terminated in accordance
with Section 4(a)(ii) and for any subsequent Bonus Years through the 1998
Bonus Year; provided, however, that such eligibility shall cease to exist if
the Employee was terminated by the Company in accordance with the provisions
of Section 4(a)(ii) and the actions of the Employee which resulted in such
termination could reasonably be expected to have a material adverse effect on
the continued operations of the Company or of Crossmann. If the Employee
dies, becomes Permanently Disabled or is terminated in accordance with Section
4(a)(ii) during 1999 or 2000, Employee, or his estate or personal
representative, as the case may be, will not be entitled to any further Bonus
payments.
<PAGE>
<TABLE>
<CAPTION>
Crossmann Communities, Inc.
Exhibit 11.1 - Computation of Per Share Net Income
For the Quarter Ended March 31, 1996
<S> <C> <C> <C> <C>
Quarter Ended March 31, 1995: Fully
Primary Diluted
--------- ---------
Weighted Average Number of Shares:
Average Common Shares Outstanding 6,087,825 6,087,825
at March 31, 1996
Dilutive Effect of Common Stock Equivalents
at March 31, 1996 83,852 83,852
--------- ---------
Weighted Average Shares at March 31, 1996 6,171,677 6,171,677
========= =========
Net Income 1,369,853 1,369,853
========= =========
Net Income per Common Share .22 (1) .22 (1)
========= =========
<FN>
This calculation is submitted in accordance with Regulation S-K item 601(b) (11)
although not required by footnote 2 to paragraph 14 of APB Opinion No. 15
because it results in dilution of less than 3%.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Crossmann Communities, Inc.
Exhibit 27.1
Article 5 Financial Data Schedule for 1996 1st Quarter 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Mar-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 76381935
<CURRENT-ASSETS> 0
<PP&E> 3922467
<DEPRECIATION> 1274782
<TOTAL-ASSETS> 87801617
<CURRENT-LIABILITIES> 0
<BONDS> 27908941
<COMMON> 24059879
0
0
<OTHER-SE> 21552681
<TOTAL-LIABILITY-AND-EQUITY> 87801617
<SALES> 37568566
<TOTAL-REVENUES> 37568566
<CGS> 30036068
<TOTAL-COSTS> 30036068
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 208003
<INCOME-PRETAX> 2477142
<INCOME-TAX> 1077289
<INCOME-CONTINUING> 1369853
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1369853
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
