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 June 30, 1998.
[ ] 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
<TABLE>
<CAPTION>
CROSSMANN COMMUNITIES, INC.
<S> <C>
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)
</TABLE>
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 11,480,921 Common shares outstanding as of August 14, 1998.
<PAGE>
CROSSMANN COMMUNITIES, INC.
FORM 10-Q
INDEX
Part I. Financial Information.
Item 1. Financial Statements.
Consolidated balance sheets as of June 30, 1998 (unaudited) and December 31,
1997.
Consolidated unaudited statements of income for the Three Months Ended June
30, 1998 and 1997, and for the Six Months ended June 30, 1998 and 1997.
Consolidated unaudited statements of cash flows for the six months ended June
30, 1998 and 1997.
Notes to consolidated unaudited financial statements for the six months ended
June 30, 1998 and 1997.
Item 2. Management's Discussion and Analysis of Financial Condition
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>
JUNE 30, 1998 DECEMBER 31, 1997
--------------- ------------------
(UNAUDITED)
---------------
ASSETS
Cash and cash equivalents $ 10,641,734 $ 5,526,138
Retainages 1,483,423 886,766
Real estate inventories 199,765,671 153,523,571
Furniture and equipment, net 3,730,513 3,310,345
Investments in joint ventures 15,341,969 12,354,474
Goodwill, net 15,037,702 3,817,650
Other assets 7,091,840 5,856,819
--------------- ------------------
Total assets $ 253,092,852 $ 185,275,763
=============== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and other liabilities $ 24,835,414 $ 23,350,353
Notes payable 101,011,994 51,122,431
--------------- ------------------
Total liabilities 125,847,408 74,472,784
Commitments and contingencies
Shareholders' equity:
Common shares 64,139,430 55,548,737
Retained earnings 63,106,014 55,254,242
--------------- ------------------
Total shareholders' equity 127,245,444 110,802,979
--------------- ------------------
Total liabilities and shareholders' equity $ 253,092,852 $ 185,275,763
=============== ==================
<FN>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
CROSSMANN COMMUNITIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
------------ ------------ ------------- -------------
Sales of residential real estate $91,226,487 $69,538,866 $147,549,729 $116,360,129
Cost of residential real estate sold 72,171,510 55,564,577 116,699,067 92,638,587
------------ ------------ ------------- -------------
Gross profit 19,054,977 13,974,289 30,850,662 23,721,542
Selling, general and
administrative 10,876,479 7,588,432 18,734,943 13,941,742
------------ ------------ ------------- -------------
Income from operations 8,178,498 6,385,857 12,115,719 9,779,800
Other income, net 984,307 236,775 1,503,018 550,300
Interest expense (398,267) (303,630) (614,383) (589,250)
------------ ------------ ------------- -------------
586,040 (66,855) 888,635 (38,950)
------------ ------------ ------------- -------------
Income before income taxes 8,764,538 6,319,002 13,004,354 9,740,850
Income taxes 3,461,949 2,578,739 5,152,582 3,947,470
------------ ------------ ------------- -------------
Net income $ 5,302,589 $ 3,740,263 $ 7,851,772 $ 5,793,380
============ ============ ============= =============
Weighted average number of
common shares outstanding:
Basic 11,242,535 9,202,949 11,180,543 9,195,840
Diluted 11,489,251 9,328,652 11,417,926 9,366,492
============ ============ ============= =============
Net income per common share:
Basic $ .47 $ .41 $ .70 $ .63
Diluted $ .46 $ .40 $ .69 $ .62
============ ============ ============= =============
<FN>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
CROSSMANN COMMUNITIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<S> <C> <C>
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------- ----------------
1998 1997
---------------- ----------------
OPERATING ACTIVITIES:
Net Income $ 7,851,772 $ 5,793,380
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 307,050 318,097
Amortization 105,848 81,148
Gain on sale of equipment -0- (2,651)
Cash provided (used) by changes in:
Retainages (596,657) (362,950)
Amounts due from related parties 60,558 2,787
Real estate inventories (23,564,263) (20,552,886)
Other assets (270,700) (1,005,204)
Accounts payable (5,828,685) 3,742,955
Amounts due to related parties -0- -0-
Accrued expenses and other liabilities 5,661,656 (194,415)
---------------- ----------------
Net cash flows from operating activities (16,273,421) (12,179,739)
INVESTING ACTIVITIES:
Purchases of furniture and equipment (380,795) (398,425)
Proceeds from disposition of furniture and equipment -0- 2,651
Investments in joint ventures (2,987,495) (1,547,860)
Business acquisitions (9,669,888) 124,840
---------------- ----------------
Net cash used by investing activities (13,038,178) (1,818,794)
FINANCING ACTIVITIES:
Proceeds from bank borrowing 89,977,946 64,000,644
Principal payments on bank borrowing (105,847,000) (49,663,000)
Proceeds from issue of senior notes 50,000,000 -0-
Payments on notes and long-term debt -0- 361,611
Proceeds from sale of common shares 296,249 225,500
---------------- ----------------
Net cash provided by financing activities 34,427,195 13,998,533
---------------- ----------------
Net increase in cash and cash equivalents 5,115,596 -0-
Cash and cash equivalents at beginning of period 5,526,138 100,000
---------------- ----------------
Cash and cash equivalents at end of period $ 10,641,734 $ 100,000
================ ================
<FN>
See accompanying notes.
</TABLE>
CROSSMANN COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Crossmann Communities, Inc. ("Crossmann" or 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;
Louisville and Lexington, Kentucky; Memphis, Tennessee; and Myrtle Beach,
South Carolina. In 1998, Crossmann has also entered Charlotte, North Carolina
and Nashville, Tennessee with start-up operations; no revenue has yet been
generated in these markets.
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.
2. ACQUISITIONS
On May 5, 1998, Crossmann acquired the assets of Paragon Builders, Inc.
("Paragon"), a homebuilding company in Memphis, Tennessee, for approximately
$3.8 million in cash and notes and the assumption of approximately $3.3
million in debt. The excess of cost over estimated fair value of assets
acquired and liabilities assumed was approximately $3.2 million.
On May 29, 1998, Crossmann acquired Pinehurst Builders, Inc. and related
entities ("Pinehurst"), a homebuilding company in Myrtle Beach, South
Carolina. Crossmann issued approximately $8.3 million in stock (311,938
shares) and $5.4 million in cash in exchange for the equity in the Company.
Crossmann also assumed approximately $10.7 million in debt and approximately
$4.4 million in other liabilities. The transaction gave rise to approximately
$7.8 million in goodwill.
The acquisitions have been accounted for under the purchase method of
accounting and the allocation of the purchase price to assets acquired and
liabilities assumed is based upon preliminary estimates of fair value. The
acquisitions were not material, individually or in the aggregate, therefore,
pro forma information has not been presented.
3. JOINT VENTURES
The Company has entered into joint ventures with various real estate
developers and owns 50% or less in each venture. These joint ventures are
accounted for using the equity method. At June 30, 1998, investments in and
advances to these joint ventures totaled approximately $15.3 million, compared
to approximately $12.4 million at December 31, 1997.
4. CREDIT ARRANGEMENTS
On June 11, 1998, the Company issued an additional $50 million in senior
notes, payable over 10 years at a fixed rate of 7.75%. Interest is payable
quarterly. Equal annual principal reductions of $8,333,334 commence June 11,
2003.
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 restrict site
development work, and construction limitations generally result in fewer
closings during this period. Results of operation during the first half of
the year also tend to reflect increased costs associated with adverse weather.
RESULTS OF OPERATION: THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 1997.
Sales increased approximately $21.7 million, or 31.2%, to approximately $91.2
million in the second quarter of 1998 from approximately $69.5 million for the
same period in 1997. Sales were higher primarily as a result of increased
home closings; 812 homes were closed in the second quarter of 1998 compared to
616 homes closed during the second quarter of 1997. Part of the increase in
closings is attributable to the contribution of closings in Crossmann's new
markets: Lexington, entered via acquisition in June 1997, and Memphis, by
acquisition in September 1997, generated 79 closings in the second quarter of
1998. Myrtle Beach, South Carolina, entered by acquisition in May 1998,
contributed 27 closings. Excluding these new markets, the Company closed 90
more units in the second quarter of 1998 than in the second quarter of 1997,
an increase of 14.6%.
Gross profit increased approximately $5.1 million, or 36.4%, to approximately
$19.1 million for the second quarter of 1998 from approximately $14.0 million
for the second quarter of 1997. This represents a gross margin of 20.9% of
sales in the second quarter of 1998 as compared to 20.1% of sales in the
second quarter of 1997. This increase was due to generally improving margins
in Crossmann's more established markets. Moderate lumber prices, volume
purchasing arrangements and low interest rates all contributed to better
margins.
Selling, general and administrative expenses increased approximately $3.3
million, or 43.3%, to approximately $10.9 million for the second quarter of
1998 from approximately $7.6 million for the second quarter of 1997. This
increase reflects increased sales commissions on the higher sales volume and
increased overhead incurred to achieve higher production. Selling, general
and administrative expenses increased as a percentage of sales to 11.9% in the
second quarter of 1998 from 10.9% in the second quarter of 1997.
Income before income taxes increased approximately $2.4 million, or 38.7%,
to approximately $8.8 million in the second quarter of 1998 from approximately
$6.3 million in the second quarter of 1997. The Company's effective tax rate
was 39.5% in the second quarter of 1998 as compared to 40.8% in the second
quarter of 1997. Net income increased approximately $1.6 million, or 41.8%,
to approximately $5.3 million in the second quarter of 1998 from approximately
$3.7 million in the second quarter of 1997. Net income as a percentage of
sales increased to 5.8% in the second quarter of 1998 from 5.4% in the second
quarter of 1997.
RESULTS OF OPERATION: SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 1997.
Sales increased approximately $31.2 million, or 26.8%, to approximately $147.5
million for the six months ended June 30, 1998 from approximately $116.4
million for the six months ended June 30, 1997. Sales were higher primarily
as a result of increased home closings; 1,291 homes were closed in the six
months ended June 30, 1998, compared to 1,036 homes closed during the six
months ended June 30,1997. Selling prices were also higher, approximately
$114,400 per home for the six months ended June 30, 1998 as compared to
approximately $112,300 during the same period in 1997. Part of the increase
in closings is attributable to the contribution of Crossmann's new markets.
Lexington, entered through acquisition in June 1997, and Memphis, entered
through acquisition in September 1997, generated 109 closings in the first
half of 1998. Myrtle Beach, South Carolina, entered through acquisition in
May 1998, contributed 27 closings. Excluding these new markets, the Company
closed 119 more units in 1998 than in 1997, an increase of 11%.
Gross profit increased approximately $7.1 million, or 30.0%, to approximately
$30.9 for the six months ended June 30, 1998 from approximately $23.7 million
for the six months ended June 30, 1997. This represents a gross margin of
20.9% of sales in the first six months of 1998 as compared to 20.4% of sales
in the first six months of 1997. This improvement was due to generally
improving margins in Crossmann's more established markets. Moderate lumber
prices, volume purchasing arrangements and low interest rates contributed to
better margins.
Selling, general and administrative expenses increased approximately $4.8
million , or 34.4% , to approximately $18.7 million for the six months ended
June 30, 1998 from approximately $13.9 million for the six months ended June
30, 1997. This increase reflects increased sales commissions on the higher
sales volume and higher advertising and administrative expenses associated
with the Company's new divisions. Selling, general and administrative
expenses as a percentage of sales increased to 12.7% in the first six months
of 1998 from 12.0% in the first six months of 1997.
Income before income taxes increased approximately $3.3 million, or 33.5%, to
approximately $13.0 million for the six months ended June 30, 1998 from
approximately $9.7 million for the six months ended June 30, 1997. The
Company's effective tax rate was 39.6% in the first six months of 1998 as
compared to 40.5% in the first six months of 1997. Net income increased
approximately $2.1 million, or 35.5%, to approximately $7.9 million in the
first six months of 1998 from approximately $5.8 million in the first six
months of 1997. Net income as a percentage of sales increased to 5.3% in 1998
from 5.0% in 1997.
CHANGES IN FINANCIAL POSITION
Cash
Crossmann holds more in cash and marketable securities at June 30, 1998 than
at December 31, 1997 to take advantage of a change in pricing of its $60.0
million unsecured bank line of credit. Lower interest can be achieved by
committing outstandings on the line for fixed periods; occasionally a
temporary cash surplus occurs when such commitments are in place and the line
cannot be reduced. (See "Credit Arrangements" under Notes to Unaudited
Consolidated Financial Statements.) From time to time the Company will make
such commitments to minimize interest cost.
Retainages
Retainages increased approximately $597,000 in the first half of the year, or
67.3%. 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
half of the year.
Inventory
Real estate inventories increased approximately $46.2 million, or 30.1%, from
their December 31, 1997 level. Expansion in inventory during the first half
is a normal seasonal trend. Winter weather slows closings but does not
prevent work on houses under construction from continuing; therefore,
investment in inventory generally grows during the first half of the year.
Inventories also increased due to the acquisition of Paragon and Pinehurst.
Goodwill
Goodwill increased approximately $11.2 million or 293.9% during the first half
of 1998. Of this increase, approximately $3.2 million was related to the
acquisition of Paragon and $7.8 million was related to the acquisition of
Pinehurst.
Notes Payable
Notes payable increased approximately $49.9 million during the first six
months of 1998 as borrowings were used to finance real estate inventories,
acquisitions, and joint venture investments.
CAPITAL RESOURCES AND LIQUIDITY
At June 30, 1998, the Company had approximately $10.6 million in cash and cash
equivalents.
The Company's primary uses of capital are home construction costs and the
purchase and development of land. Real estate inventories were approximately
$199.8 million, or 78.9% of total assets, at June 30, 1998, compared to $153.5
or 82.8% of total assets at December 31, 1997. Capital is also used for the
addition and improvement of equipment used in administering the business and
for model home furnishings.
Cash expenditures are financed with cash from operations and with borrowings
from a $60.0 million unsecured line of credit with Bank One, Indiana, N.A. and
its participant, NBD, Indianapolis, N.A. The line of credit bears interest at
the banks's prime lending rate, but permits portions of the outstanding
balance to be committed for fixed periods of time at a rate equal to LIBOR
plus 1.45%. The credit facility matures March 31, 2000.
The Company also has approximately $19.4 million of senior notes outstanding,
payable through 2004 at a fixed interest rate of 7.625%, payable quarterly.
On December 21, 1998, the Company will make a scheduled reduction in the
outstanding principal balance of the senior notes of $2,777,778. On June
11,1998 the Company issued $50.0 million in new notes, payable over 10 year at
a fixed interest rate of 7.75%, payable quarterly. Annual principal
reductions of $8,333,334 begin June 11, 2003.
To facilitate Crossmann's acquisitions in May of 1998, and in anticipation of
closing on the $50 million notes, the Company obtained a temporary
supplemental line of credit of $10.0 million from Bank One, Indiana, N.A. No
balances were outstanding on this line at June 30, 1998. The temporary
facility expired July 15, 1998.
The note agreements and the bank line of credit require compliance with
certain financial and operating covenants and place certain limitations on the
Company's investments in land and unconsolidated joint ventures. The
agreements also restrict payments of cash dividends on the common shares by
the Company.
The Company's credit arrangements are expected to provide adequate liquidity
for planned internal growth and capital expenditures. In the event that the
Company seeks to accelerate growth through the acquisition of large parcels of
land or of other homebuilding companies, additional capital may be needed.
The Company believes that such capital could be obtained from banks or other
financing alternatives, from the issuance of additional shares, or from seller
financing; however, there can be no assurances that the Company would be able
to secure the necessary capital.
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.
Backlog at June 30, 1998 was 2,234 homes with an aggregate sales value of
approximately $250.4 million, compared to 1,638 homes with an aggregate sales
value of approximately $177.8 million at June 30, 1997. The increase in the
number of homes in backlog is approximately 36.4%. Year-end backlog was
slightly higher, with 1,080 in backlog at December 31, 1997, compared to 1,006
at December 31, 1996. New orders in the first half of 1998 were higher as
well: 2,187 contracts were written in the first half of 1998 as compared to
1,668 in 1997, an increase of 31.1%). In addition, Crossmann acquired 58
homes in backlog with its acquisition of Paragon and 225 homes in backlog with
its acquisition of Pinehurst during the second quarter of 1998.
OTHER BUSINESS CONDITIONS
Inflation
The Company, as well as the homebuilding industry in general, may be adversely
affected during periods of high inflation, primarily because of higher land
and construction costs. To date, inflation has not had a material adverse
effect on the Company's business, financial condition, and results of
operations. However, there is no assurance that inflation will not have a
material adverse impact on the Company's future business, financial condition,
and results of operations.
Seasonality
The Company's business is subject to weather-related seasonal factors which
can affect quarterly results of operations. During the first and second
quarters of the year, weather conditions usually restrict site development
work and limit construction. This generally results in fewer closings during
this period. Results of operations during the first half of the year may also
reflect increased costs associated with adverse weather . The number of sales
contracts signed tends to rise during the first four months of the year,
creating a backlog which declines during the second half of the year.
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 5. Other Information.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's annual meeting on May 28, 1998, there were represented either
in person or by proxy 9,653,780 shares of the Company's common shares,
representing 86.7% of the total common shares outstanding. At the meeting,
9,644,934 of the shares present in person or by proxy voted in favor of
Richard H. Crosser and James C. Shook for election to the Board, and Messrs.
John B. Scheumann, and Larry S. Wechter and Jennifer A. Holihen continue as
members of the Board. Additionally, 9,623,380 of the common shares present in
person or by proxy voted in favor of the ratification of Deloitte & Touche LLP
as the Company's independent auditors for the year ending December 31, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
a) Exhibits
<S> <C>
Exhibit Description of Exhibit
Number
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 1993 Outside Director Stock Option Plan. (Incorporated by reference to Exhibit 10.2
to Form S-1 Registration Statement No. 33-68396.)
10.2 1993 Employee Stock Option Plan, As amended as of May 22, 1996. (Incorporated
by reference to Exhibit 10.3 to Form 10-Q dated August 13, 1996.)
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 First Amendment to Amended and Restated Credit Agreement, dated March 27, 1997,
by and between Crossmann Communities, Inc. et al. and Bank One, Indiana N.A.
(Incorporated by reference to Exhibit 10.41 to Form 10-Q dated May 13, 1997.)
10.42 Promissory Note, dated March 27, 1997, by and between Crossmann Communities,
Inc. et al. and Bank One, Indiana, N.A. (Incorporated by reference to Exhibit 10.40
to Form 10-Q dated May 13, 1997.)
10.43 Second Amendment to Amended and Restated Credit Agreement, dated March 31,
1998, by and between Crossmann Communities, Inc. et al. and Bank One, Indiana
N.A. (Incorporated by reference to Exhibit 10.51 to Form 10-Q dated May 13, 1997.)
10.44 Third Amendment to Amended and Restated Credit Agreement, dated May 13, 1998,
by and between Crossmann Communities, Inc. et al. and Bank One, Indiana, N.A.
10.45 Form of 7.75% Senior Note due June 11, 2008, issued to various insurance companies
by Crossmann Communities, Inc. et al.
10.46 Note Agreement dated as of June 11, 1998, $50,000,000 7.75% Senior Notes due
June 11, 2008, by Crossmann Communities, Inc., et al.
10.47 Asset Purchase Agreement, dated May 5, 1998 by and among Crossmann
Communities, Inc., Crossmann Communities of Tennessee, LLC, Paragon Properties,
LLC, W. V. Richerson, Jr. and William R. Hyneman.
10.48 Employment contract dated May 5, 1998, by and among Crossmann Communities of
Tennessee, LLC and W.V. Richerson, Jr.
10.49 Agreement and Plan of Merger, dated May 29, 1998 by and among Crossmann
Communities, Inc., Crossmann Communities of North Carolina, Inc., Pinehurst
Builders, Inc. Buck Creek Development, Inc. CTS Communications, Inc. Beach
Vacations, Inc. James T. Callihan, Ralph R. Teal, Jr., Jeffrey H. Skelley, and H.
Gilford Edwards.
10.50 Purchase agreement dated May 29,1998, by and between Crossmann Communities
of North Carolina, Inc., True Blue Development, LLC, and James T. Callihan, Ralph
R. Teal, Jr., Jeffrey H. Skelley, Charles D. Floyd and Ralph Jones.
10.51 Agreement and Plan of Merger, dated May 29, 1998, by and among Crossmann
Communities, Inc., Crossmann Communities of North Carolina, Inc., River Oaks
Golf Development Corporation and James T. Callihan, Ralph R. Teal, Jr., Jeffrey H.
Skelley, Charles D. Floyd and Ralph C. Jones.
10.52 Employment contract dated May 29, 1998, by and among Crossmann Communities
of North Carolina, Inc., Crossmann Communities, Inc. and H. Gilford Edwards.
10.53 Employment contract dated May 29, 1998, by and among Crossmann Communities
of North Carolina, Inc., Crossmann Communities, Inc. and James T. Callihan
10.54 Employment contract dated May 29, 1998, by and among Crossmann Communities
of North Carolina, Inc., Crossmann Communities, Inc. and Ralph R. Teal, Jr.
10.55 Employment contract dated May 29, 1998, by and among Crossmann Communities
of North Carolina, Inc., Crossmann Communities, Inc. and Jeffrey H. Skelley.
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 Amended subsidiaries of the registrant, dated August 13, 1998.
27.1 Financial Data Schedule for the quarter ended June 30, 1998.
</TABLE>
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
and 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.
/s/ Jennifer A. Holihen
Jennifer A. Holihen
Director, Chief Financial Officer;
Treasurer; Secretary;
(Principal Financial and Accounting Officer)
Dated: August 14, 1998
EXHIBIT 10.44
THIRD AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
CROSSMANN COMMUNITIES, INC., an Indiana corporation (the "Company") and
BANK ONE, INDIANA, NA, (formerly known as Bank One, Indianapolis, NA) a
national banking association (the "Bank") being parties to that certain
Amended and Restated Credit Agreement dated December 21, 1995, as amended by
that certain First Amendment to Amended and Restated Credit Agreement dated as
of March 31, 1997, and further amended by that certain Second Amendment to
Amended and Restated Credit Agreement dated as of March 31, 1998
(collectively, the "Agreement"), hereby enter into this Third Amendment to
Amended and Restated Credit Agreement (this "Amendment") in order to further
amend the Agreement as follows:
1. DEFINITIONS. All defined terms used in this Amendment unless
otherwise defined herein shall have their respective meanings set forth in the
Agreement. Further, the following definition is added to Section 1 of the
Agreement as follows:
"Third Amendment" means that certain agreement entitled
"Third Amendment to Amended and Restated Credit Agreement" entered into by and
between the Company and the Bank dated as of May 13, 1998.
2. REVOLVING LOAN. Section 2(a) and the first sentence of
Section 2(b) of the Agreement are hereby amended and restated in their
respective entireties as follows:
(a) The Commitment -- Use of Proceeds. Until the Revolving
Loan Maturity Date, the Bank agrees to make Advances (collectively, the
"Revolving Loan") under a revolving line of credit from time to time to the
Company of amounts not exceeding in the aggregate principal amount outstanding
at any time from the date of the Third Amendment and until July 15, 1998,
Seventy Million and 00/100 Dollars ($70,000,000.00), and thereafter until
maturity not exceeding in the aggregate principal amount outstanding at any
time Sixty Million and 00/100 Dollars ($60,000,000.00) (such amount as it
reduces, the "Commitment"), provided that all conditions of lending stated in
Sections 7(a), 7(c), and 7(d) of this Agreement as being applicable to the
Revolving Loan have been fulfilled at the time of each Advance. Proceeds of
the Revolving Loan may be used by the Company only to: (i) fund the working
capital requirements of the Company and the Current Subsidiaries, and (ii) to
the extent provided herein, for the issuance of Letters of Credit as provided
in Section 2(e). Upon receipt of the written request of the Company signed by
an Authorized Officer, the Company may permanently reduce the Commitment to
Sixty Million Dollars ($60,000,000.00) at any time prior to July 15, 1998,
provided that (i) no Event of Default or Unmatured Event of Default has
occurred and is continuing and (ii) payment of all principal outstanding in
excess of Sixty Million Dollars ($60,000,000.00) together with all accrued
interest thereon and unpaid fees is made on the effective date of such
reduction.
(b) Method of Borrowing. The obligation of the Company to
repay the Revolving Loan shall be evidenced by a promissory note (the
"Revolving Note") of the Company in the form of Exhibit "A" attached to the
Third Amendment.
3. REPRESENTATIONS AND WARRANTIES. In consideration for the
terms and provisions hereof, the Company represents and warrants that each of
its representations and warranties appearing in Section 3 of the Agreement are
complete and correct as of the date hereof except that the representation
appearing in Section 3(d) shall be deemed to also refer to the most recent
financial statements delivered by the Company to the Bank.
4. CONDITIONS PRECEDENT. As conditions precedent to the
effectiveness of this Amendment, the Bank shall have received the following,
in form and substance acceptable to the Bank:
(a) This Amendment duly executed by the Company;
(b) The Revolving Note in the form of Exhibit "A" attached
hereto (the "Revolving Note") which hereafter shall be deemed to be the
Revolving Note for all purposes of the Agreement;
(c) A certified copy of the Resolutions of the Board of
Directors of the Company authorizing the execution and delivery of this
Amendment, the Revolving Note, and any other document required hereunder.
(d) A certificate signed by the Secretary of the Board of
Directors of the Company certifying the name of the Officer or Officers
authorized to sign this Amendment, the Revolving Note, and any other document
required to be executed and delivered pursuant to this Amendment, together
with a sample of the true signature of each such officer.
(e) The Reaffirmation of Guaranty (each a "Reaffirmation of
Guaranty") of each of the Current Subsidiaries in the forms of Exhibits "B,
"C," "D," "E," "F," "G," "H," "I," ",J" "K," "L" "M,"
"N," and "O" attached hereto.
(f) The reasonable fees of Bank's counsel incurred in connection
with the drafting, negotiation and closing of this Amendment.
(g) Such other documents as the Bank may reasonably require.
5. REAFFIRMATION OF AGREEMENT. Except as specifically modified
herein, the Agreement is hereby reaffirmed and shall remain in full force and
effect as originally written and as may have been previously amended.
IN WITNESS WHEREOF, the Company and the Bank have entered into this Third
Amendment to Amended and Restated Credit Agreement by their respective duly
authorized officers as of this 13th day of May, 1998.
CROSSMANN COMMUNITIES, INC., an Indiana
corporation
By: /s/ Jennifer A. Holihen
Jennifer A. Holihen, Secretary
BANK ONE, INDIANA, NA, formerly known as
Bank One, Indianapolis, NA, a national banking association
By: /s/ Daniel H. Hatfield
Daniel H. Hatfield, Vice President
EXHIBIT 10.45
CROSSMANN COMMUNITIES, INC.
DELUXE HOMES INC.
DELUXE HOMES OF LAFAYETTE, INC.
TRIMARK HOMES, INC.
TRIMARK DEVELOPMENT, INC.
MERIT REALTY, INC.
CROSSMANN COMMUNITIES OF OHIO, INC.
CROSSMANN MORTGAGE CORP.
CROSSMANN COMMUNITIES PARTNERSHIP
CROSSMANN INVESTMENTS, INC.
CROSSMANN MANAGEMENT, INC.
CROSSMANN COMMUNITIES OF TENNESSEE, LLC
CUTTER HOMES LTD
CROSSMANN COMMUNITIES OF NORTH CAROLINA, INC.
DELUXE AVIATION, INC.
7.75% Senior Note
Due June 11, 2008
PPN: 22765 @ AB 3
No. June ____, 1998
$
CROSSMANN COMMUNITIES, INC., an Indiana corporation (the "Company"),
DELUXE HOMES INC., an Indiana corporation ("DHI"), DELUXE HOMES OF LAFAYETTE,
INC., an Indiana corporation ("DHL"), TRIMARK HOMES, INC., an Indiana
Corporation ("THI"), TRIMARK DEVELOPMENT, INC., an Indiana corporation
("TDI"), MERIT REALTY, INC., an Indiana corporation ("MRI"), CROSSMANN
COMMUNITIES OF OHIO, INC., an Ohio corporation ("CCO"), CROSSMANN MORTGAGE
CORP., an Indiana corporation ("CMC") CROSSMANN COMMUNITIES PARTNERSHIP, an
Indiana general partnership ("CCP"), CROSSMANN INVESTMENTS, INC., an Indiana
corporation ("CII"), CROSSMANN MANAGEMENT, INC., an Indiana corporation
("CMI"), CROSSMANN COMMUNITIES OF TENNESSEE, LLC, a Tennessee limited
liability company ("CCT"), CUTLER HOMES LTD, a Kentucky corporation ("CHL"),
CROSSMANN COMMUNITIES OF NORTH CAROLINA, INC., a NORTH Carolina corporation
("CCNC") and DELUXE AVIATION, INC., an Indiana corporation ("DA") (the
Company, DHI, DHL, THI, TDI, MRI, CCO, CMC, CCP, CII, CMI, CCT, CHL, CCNC and
DA are referred to individually as an "Obligor" and collectively as the
"Obligors") for value received, hereby promise, jointly and severally to pay
to
EXHIBIT A
(to Note Agreement)
<PAGE>
or registered assigns
on the eleventh (11th) day of June, 2008
the principal amount of
DOLLARS ($___________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at
the rate of 7.75% per annum from the date hereof until maturity, payable
quarterly on the eleventh (11th) day of each March, June, September and
December in each year (commencing on the first of such dates after the date
hereof) and at maturity. The Obligors agree to pay interest on overdue
principal (including any overdue required or optional prepayment of principal)
and premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest, at the rate of 9.75% per annum after the due date,
whether by acceleration or otherwise, until paid. Both the principal hereof
and interest hereon are payable at the principal office of the Company in
Indianapolis, Indiana in coin or currency of the United States of America
which at the time of payment shall be legal tender for the payment of public
and private debts.
This Note is one of the 7.75% Senior Notes due June 11, 2008 (the
"Notes") of the Obligors in the aggregate principal amount of $50,000,000
issued or to be issued under and pursuant to the terms and provisions of the
Note Agreement dated as of June 11, 1998 (the "Note Agreement"), entered into
by the Obligors with the original Purchasers therein referred to, and this
Note and the holder hereof are entitled equally and ratably with the holders
of all other Notes outstanding under the Note Agreement to all the benefits
provided for thereby or referred to therein. Reference is hereby made to the
Note Agreement for a statement of such rights and benefits. This Note is
subject to the terms and conditions set forth in the Note Agreement.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Obligors prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.
This Note is registered on the books of the Obligors and is transferable
only by surrender thereof at the principal office of the Obligors duly
endorsed or accompanied by a written instrument of transfer duly executed by
the registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
A-2
CROSSMANN COMMUNITIES, INC.
DELUXE HOMES, INC.
DELUXE HOMES OF LAFAYETTE, INC.
TRIMARK HOMES, INC.
TRIMARK DEVELOPMENT, INC.
MERIT REALTY, INC.
CROSSMANN COMMUNITIES OF OHIO, INC.
CROSSMANN MORTGAGE CORP.
CROSSMANN INVESTMENTS, INC.
CROSSMANN MANAGEMENT, INC.
CROSSMANN COMMUNITIES OF
TENNESSEE, LLC
CUTTER HOMES, LTD.
CROSSMANN COMMUNITIES OF NORTH CAROLINA, INC.
DELUXE AVIATION, INC.
By:
Jennifer A. Holihen,
Secretary of each of the above Obligors
CROSSMANN COMMUNITIES PARTNERSHIP
By: Deluxe Homes, Inc., Managing General Partner
By:
Jennifer A. Holihen,
Secretary
A-3
EXHIBIT 10.46
CROSSMANN COMMUNITIES, INC.
DELUXE HOMES INC.
DELUXE HOMES OF LAFAYETTE, INC.
TRIMARK HOMES, INC.
TRIMARK DEVELOPMENT, INC.
MERIT REALTY, INC.
CROSSMANN COMMUNITIES OF OHIO, INC.
CROSSMANN MORTGAGE CORP.
CROSSMANN COMMUNITIES PARTNERSHIP
CROSSMANN INVESTMENTS, INC.
CROSSMANN MANAGEMENT, INC.
CROSSMANN COMMUNITIES OF TENNESSEE, LLC
CUTTER HOMES LTD
CROSSMANN COMMUNITIES OF NORTH CAROLINA, INC.
DELUXE AVIATION, INC.
NOTE AGREEMENT
Dated as of June 11, 1998
Re: $50,000,000 7.75% Senior Notes
Due June 11, 2008
TABLE OF CONTENTS
PAGE
Parties 1
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT 2
Section 1.1. Description of Notes 2
Section 1.2. Commitment, Closing Date 2
Section 1.3. Several Commitments 2
SECTION 2. PREPAYMENT OF NOTES 3
Section 2.1. Required Prepayments 3
Section 2.2. Optional Prepayment with Premium 3
Section 2.3. Prepayment upon Change Control 3
Section 2.4. Notice of Optional Prepayments 4
Section 2.5. Application of Prepayments 4
Section 2.6. Direct Payment 4
SECTION 3. REPRESENTATIONS 5
Section 3.1. Representations of the Obligors 5
Section 3.2. Representations of the Purchasers 5
SECTION 4. CLOSING CONDITIONS. 6
Section 4.1. Conditions 6
Section 4.2. Waiver of Conditions 7
SECTION 5. COMPANY COVENANTS 8
Section 5.1. Corporate Existence, Etc 8
Section 5.2. Insurance 8
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with
Laws 8
Section 5.4. Maintenance, Etc. 8
Section 5.5. Nature of Business 8
Section 5.6. Current Ratio 9
Section 5.7. Limitation on Certain Investments 9
Section 5.8. Consolidated Adjusted Tangible Net Worth 9
Section 5.9. Limitations on Debt 9
Section 5.10. Fixed Charges Coverage Ratio 9
Section 5.11. Limitation on Liens 10
Section 5.12. Restricted Payments 11
Section 5.13. Investments 12
Section 5.14. Mergers, Consolidations and Sales of Assets 13
Section 5.15. Guaranties 14
Section 5.16. Repurchase of Notes 15
Section 5.17. Transactions with Affiliates 15
Section 5.18. Termination of Pension Plans 15
Section 5.19. Reports and Rights of Inspection 15
Section 5.20. Joinder Agreement 18
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR 18
Section 6.1. Events of Default 18
Section 6.2. Notice to Holders 20
Section 6.3. Acceleration of Maturities 20
Section 6.4. Rescission of Acceleration 20
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS 21
Section 7.1. Consent Required 21
Section 7.2. Solicitation of Holders 21
Section 7.3. Effect of Amendment or Waiver 21
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS 22
Section 8.1. Definitions 22
Section 8.2. Accounting Principles 32
Section 8.3. Directly or Indirectly 32
SECTION 9. MISCELLANEOUS 32
Section 9.1. Registered Notes 32
Section 9.2. Exchange of Notes 32
Section 9.3. Loss, Theft, Etc. of Notes 32
Section 9.4. Expenses, Stamp Tax indemnity 33
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative 33
Section 9.6. Notices 33
Section 9.7. Successors and Assigns 34
Section 9.8. Survival of covenants and Representations 34
Section 9.9. Severability 34
Section 9.10. Governing Law 34
Section 9.11. Captions 34
Section 9.12. Disclosure to Other Persons 34
The following schedules attached to the note agreement have been omitted in
this filing as they are not material to investment decisions. The Company
will make such schedules available.
ATTACHMENTS TO NOTE AGREEMENT:
Schedule I-- Names of Note Purchasers and Amounts of Commitments
Exhibit A -- Form of 7.75% Senior Note due June 11, 2008
Exhibit B -- Representations and Warranties of the Company
Exhibit C -- Description of Special Counsel's Closing Opinion
Exhibit D -- Description of Closing Opinion of Counsel to the Company
Exhibit E -- Joinder Agreement
Exhibit F -- Compliance Certificate
CROSSMANN COMMUNITIES, INC.
DELUXE HOMES INC.
DELUXE HOMES OF LAFAYETTE, INC.
TRIMARK HOMES, INC.
TRIMARK DEVELOPMENT, INC.
MERIT REALTY, INC.
CROSSMANN COMMUNITIES OF OHIO, INC.
CROSSMANN MORTGAGE CORP.
CROSSMANN COMMUNITIES PARTNERSHIP
CROSSMANN INVESTMENTS, INC.
CROSSMANN MANAGEMENT, INC.
CROSSMANN COMMUNITIES OF TENNESSEE, LLC
CUTTER HOMES LTD
CROSSMANN COMMUNITIES OF NORTH CAROLINA, INC.
DELUXE AVIATION, INC.
NOTE AGREEMENT
Re: $50,000,000 7.75% Senior Notes
Due June 11, 2008
Dated as of
June 11, 1998
To the Purchasers named on Schedule I
to this Agreement
Each of the undersigned, CROSSMANN COMMUNITIES, INC., an Indiana
corporation (the "Company"), DELUXE HOMES INC., an Indiana corporation
("DHI"), DELUXE HOMES OF LAFAYETTE, INC., an Indiana corporation ("DHL"),
TRIMARK HOMES, INC., an Indiana corporation ("THI"), TRIMARK DEVELOPMENT,
INC., an Indiana corporation ("TDI"), MERIT REALTY, INC., an Indiana
corporation ("MRI"), CROSSMANN COMMUNITIES OF OHIO, INC., an Ohio corporation
("CCO"), CROSSMANN MORTGAGE CORP., an Indiana corporation ("CMC"), CROSSMANN
COMMUNITIES PARTNERSHIP, an Indiana general partnership ("CCP"), CROSSMANN
INVESTMENTS, INC., an Indiana corporation ("CII"), CROSSMANN MANAGEMENT, INC.,
an Indiana corporation ("CMI"), CROSSMANN COMMUNITIES OF TENNESSEE, LLC, a
Tennessee limited liability company ("CCT"), CUTTER HOMES LTD, a Kentucky
corporation ("CHL"), CROSSMANN COMMUNITIES OF NORTH CAROLINA, INC., a North
Carolina corporation ("CCNC") and DELUXE AVIATION, INC., an Indiana
corporation ("DA") (the Company, DHI, DHL, THI, TDI, MRI, CCO, CMC, CCP, CII,
CMI, CCT, CHL, CCNC and DA and any other entity which becomes obligated under
this Agreement being herein referred to individually as an "Obligor" and
collectively as the "Obligors") hereby, jointly and severally, agree with the
Purchasers named on Schedule I to this Agreement (the "Purchasers") as
follows:
1. abSECTION .DESCRIPTION OF NOTES AND COMMITMENT
1.1. ab Section Description of Notes . The Obligors will authorize
the issue and sale of $50,000,()00 aggregate principal amount of their 7.75%
Senior Notes (the "Notes") to be dated the date of issue, to bear interest
from such date at the rate of 7.75% per annum, payable quarterly on the
eleventh (11th) day of each March, June, September and December in each year
(commencing September 11, 1998) and at maturity and to bear interest on
overdue principal (including any overdue required or optional prepayment of
principal) and premium, if any, and (to the extent legally enforceable) on any
overdue installment of interest at the rate of 9.75% per annum after the date
due, whether by acceleration or otherwise, until paid, to be expressed to
mature on June 11, 2008, and to be substantially in the form attached hereto
as Exhibit A. Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months. The Notes are not subject to prepayment
or redemption at the option of the Obligors prior to their expressed maturity
dates except on the terms and conditions and in the amounts and with the
premium, if any, set forth in 2 of this Agreement. The term "Notes" as used
herein shall include each Note delivered pursuant to this Agreement.
1.2. ab Section Commitment, Closing Date . Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Obligors agree to issue and sell to each Purchaser,
and such Purchaser agrees to purchase from the Obligors, Notes in the
principal amount set forth opposite such Purchaser's name on Schedule I hereto
at a price of 100% of the principal amount thereof on the Closing Date
hereinafter mentioned.
Delivery of the Notes will be made at the offices of Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, against payment therefor in
Federal Reserve or other funds current and immediately available to the
Company's account number 193160694 at the principal office of Bank One,
Indiana, NA, ABA #074000010, in the amount of the purchase price at 10:00 A.M.
Chicago time, on June 11, 1998 or such later date (not later than June 15,
1998) as shall mutually be agreed upon by the Obligors and the Purchasers (the
"Closing Date"). The Notes delivered to each Purchaser on the Closing Date
will be delivered to such Purchaser in the form of a single registered Note in
the form attached hereto as Exhibit A for the full amount of such Purchaser's
purchase (unless different denominations are specified by such Purchaser),
registered in such Purchaser's name or in the name of such Purchaser's
nominee, all as such Purchaser may specify at any time prior to the date fixed
for delivery.
1.3. ab Section Several Commitments . The obligations of the
Purchasers shall be several and not joint and no Purchaser shall be liable or
responsible for the acts or defaults of any other Purchaser.
2. abSECTION PREPAYMENT OF NOTES.
2.1. ab Section Required Prepayments. The Obligors jointly and
severally agree that on the eleventh (11th) day of June in each year,
commencing June 11, 2003 and ending June 11, 2007, both inclusive, it will
prepay and apply and there shall become due and payable on the principal
indebtedness evidenced by the Notes an amount equal to the lesser of (i)
$8,333,334 or (ii) the principal amount of the Notes then outstanding. The
entire remaining principal amount of the Notes shall become due and payable on
June 11, 2008. No premium shall be payable in connection with any required
prepayment made pursuant to this 2.1.
In the event of any prepayment of less than all of the Notes pursuant to
2.2 or 2.3 or any purchase or other acquisition by the Obligors of less than
all of the Notes, the amount of the payment required at maturity and each
prepayment required to be made pursuant to this 2.1 shall be reduced in the
proportion that the principal amount of such prepayment, purchase or other
acquisition bears to the unpaid principal amount of the Notes immediately
prior to such prepayment, purchase or other acquisition (after giving effect
to any prepayment made pursuant to this 2.1 on the date of such purchase or
other acquisition).
2.2. ab Section Optional Prepayment with Premium. In addition to the
payments required by 2.1, upon compliance with 2.4 the Obligors shall have
the privilege, at any time and from time to time on any business day, of
prepaying the outstanding Notes, either in whole or in part (but if in part
then in a minimum principal amount of $100,000) by payment of the principal
amount of the Notes, or portion thereof to be prepaid, and accrued interest
thereon to the date of such prepayment, together with a premium equal to the
Make-Whole Amount, determined as of five business days prior to the date of
such prepayment pursuant to this 2.2.
2.3. ab Section Prepayment upon Change Control. The Obligors will
give written notice to the holders of the Notes not less than 45 days prior to
a proposed Change of Control. Any such notice referred to hereinabove in this
2.3 shall be referred to as a "Control Change Notice". The Control Change
Notice shall (i) describe the facts and circumstances of such Change of
Control (including the Change of Control Date or proposed Change of Control
Date) in reasonable detail, (ii) make reference to this 2.3 and the rights of
the holders of the Notes to require the Obligors to prepay their Notes on the
terms and conditions provided for herein, (iii) state that the holder must
make a declaration of its intent to have the Notes held by it prepaid, (iv)
specify the date by which the holder must respond to such Control Change
Notice pursuant to this 2.3 in order to make such declaration (the "Notice
Cut-Off Date" ), which Notice Cut-Off Date shall be the day 15 days prior to
the Change of Control Payment Date referred to in clause (v) below and (v)
state a prepayment date for the Notes, which date, subject to the following
sentence, shall be the Change of Control Date (the "Change of Control Payment
Date").
Upon the receipt of such Control Change Notice, the holder of any Notes
shall have the right, upon written notice to the Obligors (the "Prepayment
Notice") given by such holder on or before the Notice Cut-Off Date, of
requiring prepayment of all Notes held by such holder serving such Prepayment
Notice on the Change of Control Payment Date. The Obligors covenant and agree
to prepay in full on the Change of Control Payment Date all Notes held by such
holder serving such Prepayment Notice to the Obligors. All prepayments on the
Notes pursuant to this 2.3 shall be made by the payment of the principal
amount remaining unpaid on such Notes and accrued interest thereon to the date
of such prepayment.
2.4. ab Section Notice of Optional Prepayments. The Obligors will
give notice of any prepayment of the Notes pursuant to 2.2 to each Holder
thereof not less than 30 days nor more than 60 days before the date fixed for
such optional prepayment specifying (i) such date, (ii) the principal amount
of the Holder's Notes to be prepaid on such date, (iii) that a premium equal
to the Make-Whole Amount may be payable, (iv) the date when such premium will
be calculated, (v) the estimated Make-Whole Amount, and (vi) the accrued
interest applicable to the prepayment. Notice of prepayment having been so
given, the aggregate principal amount of the Notes specified in such notice,
together with accrued interest thereon and the Make-Whole Amount, if any,
payable with respect thereto shall become due and payable on the prepayment
date specified in said notice. Two business days prior to the prepayment date
specified in such notice, the Obligors shall provide each Holder written
notice of the premium, if any, payable in connection with such prepayment and,
whether or not any premium is payable, a reasonably detailed computation of
the Make-Whole Amount.
2.5. ab Section Application of Prepayments. All partial prepayments
pursuant to 2.1 and 2.2 shall be applied on all outstanding Notes ratably in
accordance with the unpaid principal amounts thereof.
2.6. ab Section Direct Payment. Notwithstanding anything to the
contrary contained in this Agreement or the Notes, in the case of any Note
owned by any Holder that is a Purchaser or any other Institutional Holder
which has given written notice to the Obligors requesting that the provisions
of this 2.6 shall apply, the Obligors will punctually pay when due the
principal thereof, interest thereon and premium, if any, due with respect to
said principal, without any presentment thereof, directly to such Holder at
its address set forth herein or such other address as such Holder may from
time to time designate in writing to the Obligors or, if a bank account with a
United States bank is so designated for such Holder, the Obligors will make
such payments in immediately available funds to such bank account, marked for
attention as indicated, or in such other manner or to such other account in
any United States bank as such Holder may from time to time direct in writing.
3. abSECTION REPRESENTATIONS.
3.1. ab Section Representations of the Obligors . Each of the
Obligors, jointly and severally, represents and warrants that all
representations and warranties set forth in Exhibit B are true and correct as
of the date hereof and are incorporated herein by reference with the same
force and effect as though herein set forth in full.
3.2. ab Section Representations of the Purchasers . (a) Each
Purchaser represents, and in entering into this Agreement the Obligors
understand, that (i) such Purchaser is acquiring the Notes for the purpose of
investment and not with a view to the distribution thereof, and that such
Purchaser has no present intention of selling, negotiating or otherwise
disposing of the Notes; it being understood, however, that the disposition of
such Purchaser's property shall at all times be and remain within its control;
(ii) such Purchaser has been advised and understands and agrees that the Notes
have not been registered under the 1933 Act, and, therefore, cannot be resold
unless registered under said 1933 Act as well as under applicable state
securities laws or unless a valid exemption from such registration is
available; and (iii) such Purchaser is an "accredited investor" as defined in
Rule 501 under the 1933 Act.
(b) ab Each Purchaser represents that at least one of the following
statements is an accurate representation as to each source of funds (a
"Source") to be used by it to pay the purchase price of the Notes to be
purchased by it hereunder:
(a) ab if such Purchaser is an insurance company, the Source is its
"insurance company general account" within the meaning of Department of Labor
Prohibited Transaction Exemption PTE 95-60 (60 FR 35925), July 12, 1995
(hereinafter "PTE 95-60"), and in respect thereof you represent that there is
no "employee benefit plan" (as defined in section 3(3) of ERISA and section
4975(e)(1) of the Code) established or maintained by the Company (and
affiliates thereof as defined in section V(a)(l) of PTE 95-60), with respect
to which the amount of general account reserves and liabilities of all
contracts held by or on behalf of such plan exceed ten percent (10%) of the
total reserves and liabilities of such general account (exclusive of separate
account liabilities) plus surplus, as set forth in the NAIC Annual Statement
filed with your state of domicile; or
(b) ab the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a
bank collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as such Purchaser has disclosed to the Company in
writing pursuant to this paragraph (b), no employee benefit plan or group of
plans maintained by the same employer or employee organization beneficially
owns more than 10% of all assets allocated to such pooled separate account or
collective investment fund; or
(c) ab the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in such
investment fund, when combined with the assets of all other employee benefit
plans established or maintained by the same employer or by an affiliate
(within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer
or by the same employee organization and managed by such QPAM, exceed 20% of
the total client assets managed by such QPAM, the conditions of Part 1(c) and
(g) of the QPAM Exemption are satisfied, neither the QPAM nor a person
controlling or controlled by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company
and (i) the identity of such QPAM and (ii) the names of all employee benefit
plans whose assets are included in such investment fund have been disclosed to
the Company in writing pursuant to this paragraph (c); or
(d) ab the Source is a governmental plan; or
(e) ab the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each of
which has been identified to the Issuer in writing pursuant to this paragraph
(e); or
(f) ab the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
4. abSECTION CLOSING CONDITIONS..
4.1. ab Section Conditions . The obligation of each Purchaser to
purchase the Notes on the Closing Date shall be subject to the performance by
each of the Obligors of its respective agreements hereunder which by the terms
hereof are to be performed at or prior to the time of delivery of the Notes
and to the following further conditions precedent:
(a) ab Closing Certificate. Such Purchaser shall have received a
certificate dated the Closing Date, signed by the President or a Vice
President of each of the Obligors, the truth and accuracy of which shall be a
condition to such Purchaser's obligation to purchase the Notes proposed to be
sold to such Purchaser and to the effect that (i) the representations and
warranties of the Obligors set forth in Exhibit B hereto are true and correct
on and with respect to the Closing Date, (ii) each of the Obligors has
performed all of its obligations hereunder which are to be performed on or
prior to the Closing Date, and (iii) no Default or Event of Default has
occurred and is continuing.
(b) ab Legal Opinions. Such Purchaser shall have received from
Chapman and Cutler, who are acting as special counsel to the Purchasers in
this transaction, and from Ice Miller Donadio & Ryan, counsel for the
Obligors, their respective opinions dated the Closing Date, in form and
substance satisfactory to such Purchaser, and covering the matters set forth
in Exhibits C and D, respectively, hereto.
(c) ab Bank Consent. The Obligors shall have provided to such
Purchaser an appropriate written consent from the Banks permitting the
Obligors to enter into this Agreement and issue and sell the Notes
contemplated by this Agreement.
(d) ab Certain Expenses. The Obligors shall have paid the
professional fees and separately charged items of Chapman and Cutler, your
special counsel, which have been incurred through the Closing Date.
(e) ab Purchase Permitted by Applicable Law, etc. On the Closing
Date, your purchase of Notes shall be permitted by the laws and regulations of
each jurisdiction to which you are subject, without recourse to provisions
(such as Section 1405(a)(8) of the New York Insurance Law) permitting limited
investments by insurance companies without restriction as to the character of
the particular investment. You shall have received a certificate
substantially in the form of Exhibit F to enable you to determine whether such
purchase is so permitted.
(f) ab Related Transactions. The Obligors shall have consummated the
sale of the entire principal amount of the Notes scheduled to be sold on the
Closing Date pursuant to this Agreement.
(g) ab Satisfactory Proceedings. All proceedings taken in connection
with the transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be satisfactory in form and
substance to such Purchaser and such Purchaser's special counsel, and such
Purchaser shall have received a copy (executed or certified as may be
appropriate) of all legal documents or proceedings taken in connection with
the consummation of said transactions.
4.2. ab Section Waiver of Conditions . If on the Closing Date the
Obligors fail to tender to any Purchaser the Notes to be issued to any
Purchaser on such date or if the conditions specified in 4.1 have not been
fulfilled, such Purchaser may thereupon elect to be relieved of all further
obligations under this Agreement. Without limiting the foregoing, if the
conditions specified in 4.1 have not been fulfilled, such Purchaser may waive
compliance by the Obligors with any such condition to such extent as such
Purchaser may in its sole discretion determine. Nothing in this 4.2 shall
operate to relieve the Obligors of any of their obligations hereunder or to
waive any Purchaser's rights against the Obligors.
5. abSECTION COMPANY COVENANTS..
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
5.1. ab Section Corporate Existence, Etc . Each Obligor will preserve
and keep in full force and effect its corporate existence or its legal
existence as a partnership or limited liability company, as the case may be,
and all licenses and permits necessary to the proper conduct of its business;
provided, however, that the foregoing shall not prevent any transaction
permitted by 5.14. The Obligors shall at all times own and hold 100%,
directly or indirectly, of the capital stock, partnership interest or
membership interest, as the case may be, of each Obligor (other than the
Company), free and clear of all Liens.
5.2. ab Section Insurance . Each Obligor will maintain insurance
coverage by financially sound and reputable insurers in such forms and amounts
and against such risks as are customary for corporations of established
reputation engaged in the same or a similar business and owning and operating
similar properties.
5.3. ab Section Taxes, Claims for Labor and Materials, Compliance with
Laws . Each Obligor will promptly pay and discharge all lawful taxes,
assessments and governmental charges or levies imposed upon such Obligor,
respectively, or upon or in respect of all or any part of the property or
business of such Obligor, all trade accounts payable in accordance with usual
and customary business terms, and all claims for work, labor or materials,
which if unpaid might become a Lien upon any property of such Obligor;
provided, however, that such Obligor shall not be required to pay any such
tax, assessment, charge, levy, account payable or claim if (i) the validity,
applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale
of any property of such Obligor or any material interference with the use
thereof by such Obligor, and (ii) such Obligor shall set aside on its books,
reserves deemed by it to be adequate with respect thereto. Each Obligor will
promptly comply with all laws, ordinances or governmental rules and
regulations to which it is subject including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, ERISA and all laws,
ordinances, governmental rules and regulations relating to environmental
protection in all applicable jurisdictions, the violation of which could
materially and adversely affect the properties, business, prospects, profits
or condition of the Obligors or would result in any Lien not permitted under
5.11.
5.4. ab Section Maintenance, Etc. . Each Obligor will maintain,
preserve and keep its properties which are used or useful in the conduct of
its business (whether owned in fee or a leasehold interest) in good repair and
working order and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the efficiency
thereof shall be maintained.
5.5. ab Section Nature of Business . No Obligor will engage in any
business if, as a result, the general nature of the business, taken on a
consolidated basis, which would then be engaged in by the Obligors would be
substantially changed from the general nature of the business engaged in by
the Obligors on the date of this Agreement.
5.6. ab Section Current Ratio . The Obligors will keep and maintain,
as of the end of each fiscal quarter, the ratio of Consolidated Current Assets
to Consolidated Current Liabilities at not less than 1.50 to 1.00.
5.7. ab Section Limitation on Certain Investments . (a) The Obligors
will not at any time permit the ratio of Consolidated Land Investments to
Consolidated Adjusted Tangible Net Worth to exceed 1.25 to 1.00.
(b) ab The Obligors will not at any time permit Consolidated Joint
Venture Investments to exceed 25% of Consolidated Adjusted Tangible Net Worth.
5.8. ab Section Consolidated Adjusted Tangible Net Worth . The
Obligors will at all times keep and maintain Consolidated Adjusted Tangible
Net Worth at an amount not less than the sum of (i) $90,000,000 plus (ii) 50%
of positive Consolidated Net Income determined on a cumulative basis for each
fiscal quarter ending on and after June 30, 1998, provided that for the
purposes of the foregoing calculation, in the event that Consolidated Net
Income is a deficit figure for any such fiscal quarter, Consolidated Net
Income for such fiscal quarter shall be deemed to be zero and, accordingly,
shall not reduce the amount of Consolidated Adjusted Tangible Net Worth
required to be maintained pursuant to the requirements of this 5.8.
5.9. ab Section Limitations on Debt .
(a) ab Total Debt to Total Capitalization. The Obligors will not
incur, assume, guarantee or otherwise become liable for or in respect of any
Debt if after giving effect thereto and to the application of the proceeds
thereof, the ratio of Total Debt to Total Capitalization would exceed .60 to
1.00.
(b) ab Total Debt to Borrowing Base. The Obligors will not as of the
end of each fiscal quarter permit the ratio of Total Debt to Borrowing Base to
exceed 1.00 to 1.00.
(c) ab Subsidiary Debt. The Obligors will not at any time permit
Consolidated Subsidiary Debt to exceed an amount equal to 5% of Total
Capitalization.
(d) ab Secured Debt. The Obligors will not at any time permit the
total amount of Debt secured by Liens permitted pursuant to 5.11(F) and
5.11(G) to exceed an amount equal to 5% of Total Capitalization.
5.10. ab Section Fixed Charges Coverage Ratio . The Obligors will
keep and maintain as of the end of each fiscal quarter the ratio of Net Income
Available for Fixed Charges to Fixed Charges (determined as of the end of each
fiscal quarter for the immediately preceding four fiscal quarters) for each
period of four consecutive fiscal quarters (taken as a single accounting
period) at not less than 2.00 to 1.00.
5.11. ab Section Limitation on Liens . The Obligors will not create
or incur, or suffer to be incurred or to exist, any Lien on their property or
assets, whether now owned or hereafter acquired, or upon any income or profits
therefrom, or transfer any property for the purpose of subjecting the same to
the payment of obligations in priority to the payment of their general
creditors, or acquire or agree to acquire, any property or assets upon
conditional sales agreements or other title retention devices, except:
(a) ab Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided payment thereof is not at the time required by 5.3;
(b) ab Liens of or resulting from any judgment or award, the time for
the appeal or petition for rehearing of which shall not have expired, or in
respect of which an Obligor shall at any time in good faith be prosecuting an
appeal or proceeding for a review and in respect of which a stay of execution
pending such appeal or proceeding for review shall have been secured provided,
that the aggregate amount secured by such Liens shall not exceed $5,000,000;
(c) ab in addition to, and not in limitation of, Liens permitted by
5.11(G), Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, taxes and mechanics'
Liens, warehousemen's and attorneys' liens and statutory landlords' liens) and
Liens to secure the performance of bids, tenders or trade contracts, or to
secure statutory obligations, surety or appeal bonds or other Liens of like
general nature incurred in the ordinary course of business and not in
connection with the borrowing of money; provided in each case, the obligation
secured is not overdue or, if overdue, is being contested in good faith by
appropriate actions or proceedings and, provided, further, that the aggregate
amount secured by such Liens shall not exceed $5,000,000;
(d) ab minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of the
Obligors or which customarily exist on properties of corporations engaged in
similar activities and similarly situated and which do not in any event
materially impair their use in the operation of the business of the Obligors;
(e) ab Liens securing Indebtedness of a Subsidiary to another Obligor;
(f) ab Liens existing as of May 29, 1998 and reflected in Annex B to
Exhibit B hereto; and
(g) ab Liens incurred after the Closing Date given to secure the
payment of the purchase price incurred in connection with the acquisition of
equipment, real property or other fixed assets useful and intended to be used
in carrying on the business of the Obligors, including, without limitation,
Liens existing on such equipment, real property or other fixed assets at the
time of acquisition thereof or at the time of acquisition by an Obligor of any
business entity then owning such assets, whether or not such existing Liens
were given to secure the payment of the purchase price of the assets to which
they attach so long as they were not incurred, extended or renewed in
contemplation of such acquisition, provided that (i) the Lien shall attach
solely to the assets acquired or purchased, (ii) at the time of acquisition of
such assets, the aggregate amount remaining unpaid on all Indebtedness secured
by Liens on such assets whether or not assumed by an Obligor shall not exceed
the lesser of the total purchase price or fair market value at the time of
acquisition of such assets (as determined in good faith by the Board of
Directors of any such Obligor), and (iii) all such Indebtedness shall be
permitted by the applicable limitations provided in 5.9.
5.12. ab Section Restricted Payments . The Obligors will not, except
as hereinafter provided:
(a) ab Declare or pay any dividends, either in cash or property, on
any shares of its capital stock of any class (except dividends or other
distributions payable (i) solely in shares of capital stock of the Company or
(ii) by a Subsidiary to the Company or another Subsidiary);
(b) ab Directly or indirectly purchase, redeem or retire any shares of
its capital stock of any class or any warrants, rights or options to purchase
or acquire any shares of its capital stock (other than (i) the lapse or
cancellation of stock warrants, rights or options for which no direct or
indirect consideration was paid by any Obligor or (ii) in exchange for or out
of the net cash proceeds to the Company from the substantially concurrent
issue or sale of other shares of capital stock of the Company or warrants,
rights or options to purchase or acquire any shares of its capital stock);
(c) ab Purchase, redeem, retire or otherwise make any payment or
distribution, either directly or indirectly, in respect of Subordinated Debt
issued after the Closing Date; or
(d) ab Make any other payment or distribution, either directly or
indirectly, in respect of its capital stock;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options and all such
other payments or distributions being herein collectively called "Restricted
Payments"), if after giving effect thereto any Event of Default shall have
occurred and be continuing or the sum of the aggregate amount of Restricted
Payments made during the period from and after March 31, 1998 to and including
the date of the making of the Restricted Payment in question, would exceed the
sum of (i) $23,500,000 plus (ii) 50% of Consolidated Net Income for such
period, computed on a cumulative basis for said entire period (or if such
Consolidated Net Income is a deficit figure, then minus 100% of such deficit)
plus (iii) the net cash proceeds to the Company from the issuance by the
Company after March 31, 1998 of shares of its common stock to Persons who are
not Subsidiaries.
The Company will not declare any dividend which constitutes a Restricted
Payment payable more than 60 days after the date of declaration thereof.
For the purposes of this 5.12, the amount of any Restricted Payment
declared, paid or distributed in property shall be deemed to be the greater of
the book value or fair market value (as determined in good faith by the Board
of Directors of the Company) of such property at the time of the making of the
Restricted Payment in question.
5.13. ab Section Investments . The Obligors will not make any
Investments other than Investments permitted by 5.7 and other than:
(a) ab Investments by the Obligors in and to Obligors, including any
Investment in a business entity which, after giving effect to such Investment,
will become an Obligor;
(b) ab Investments in commercial paper maturing in 270 days or less
from the date of issuance which, at the time of acquisition by an Obligor, is
accorded the highest rating by S&P, Moody's or other nationally recognized
credit rating agency of similar standing;
(c) ab Investments in direct obligations of the United States of
America or any agency or instrumentality of the United States of America, the
payment or guarantee of which constitutes a full faith and credit obligation
of the United States of America, in either case, maturing in twelve months or
less from the date of acquisition thereof;
(d) ab Investments in certificates of deposit maturing within one year
from the date of issuance thereof, issued by a bank or trust company organized
under the laws of the United States or any state thereof, having capital,
surplus and undivided profits aggregating at least $150,000,000 and whose
long-term certificates of deposit are, at the time of acquisition thereof by
an Obligor, rated A or better by S&P or A2 or better by Moody's;
(e) ab loans or advances in the usual and ordinary course of business
to officers, directors and employees for expenses (including moving expenses
related to a transfer) incidental to carrying on the business of the Obligors,
not to exceed $100,000 in aggregate amount outstanding at any one time;
(f) ab receivables arising from the sale of goods and services in the
ordinary course of business of the Obligors;
(g) ab existing Investments as of June 9, 1998 of the Obligors and
described in Annex B to Exhibit B;
(h) ab property to be used by the Obligors in the ordinary course of
their business;
(i) ab Investments in preferred stock of corporations incorporated in
the United States required to be redeemed within 365 days from the date of
issuance, which at the time of acquisition by an Obligor are accorded the
highest rating by S&P and Moody's;
(j) ab Investments consisting of Consolidated Land Investments and
Consolidated Joint Venture Investments to the extent permitted by 5.7; and
(k) ab other Investments (in addition to those permitted by the
foregoing provisions of this 5.13), provided that (i) such other Investments
are not outside the Obligors' general line of business, (ii) such other
Investments in the aggregate do not at any time exceed 15% of Total
Capitalization and (iii) after giving effect to such other Investments, no
Default (including, without limitation, any Default under 5.7) or Event of
Default shall have occurred and be continuing.
In valuing any Investments for the purpose of applying the limitations
set forth in this 5.13, such Investments shall be taken at the original cost
thereof, without allowance for any subsequent write-offs or appreciation or
depreciation therein, but less any amount repaid or recovered on account of
capital or principal.
For purposes of this 5.13, at any time when a corporation becomes a
Subsidiary, all Investments of such corporation at such time shall be deemed
to have been made by such corporation, as a Subsidiary, at such time.
5.14. ab Section Mergers, Consolidations and Sales of Assets . (a)
The Obligors will not (i) consolidate with or be a party to a merger with any
other corporation or (ii) sell, lease or otherwise dispose of all or any
substantial part (as defined in paragraph (b) of this 5.14) of the assets of
the Obligors; provided, however, that:
(1) ab any Obligor (other than the Company) may merge or consolidate
with or into any other Obligor so long as in any merger or consolidation
involving the Company, the Company shall be the surviving or continuing
corporation;
(2) ab the Company may consolidate or merge with any corporation if
(i) the surviving or continuing corporation shall be either (A) the Company or
(B) an entity organized under the laws of the United States or any
jurisdiction thereof which shall expressly assume in writing the due and
punctual payment of the principal of, the premium and the interest on the
Notes according to their tenor and the due and punctual performance and
observance of all the covenants in the Notes and this Agreement to be
performed or observed by the Obligors and the Holders shall have received an
opinion reasonably satisfactory to the holders of 66-2/3% in aggregate
principal amount of the Notes from independent counsel (which may be outside
counsel to the Company or any other counsel approved by the holders of 66-2/3%
in aggregate principal amount of the Notes) to the effect that such assumption
constitutes the legal, valid and binding agreement of such surviving or
continuing corporation enforceable in accordance with its terms, and (ii) at
the time of such consolidation or merger and after giving effect thereto no
Default or Event of Default shall have occurred and be continuing and the
Obligors would be permitted to incur at least $1.00 of Debt under 5.9(A); and
(3) ab any Obligor (other than the Company) may sell, lease or
otherwise dispose of all or any substantial part of its assets to any other
Obligor.
(b) ab As used in this 5.14, a sale, lease or other disposition of
assets shall be deemed to be a "substantial part" of the assets of the
Obligors if the book value of such assets, when added to the book value of all
other assets sold, leased or otherwise disposed of by the Obligors (other than
in the ordinary course of business) (i) during the 12-month period ending with
the date of such sale, lease or other disposition, exceeds 5% of Total Assets,
or (ii) during the period from and after the Closing Date to and including the
date of such sale, lease or other disposition, exceeds 25% of Total Assets, in
each case determined as of the end of the immediately preceding fiscal year.
Notwithstanding the foregoing, solely for determining whether a sale, lease or
other disposition of assets shall be deemed to be a "substantial part" of the
assets of the Obligors, there shall be excluded any sale, lease or other
disposition if the proceeds of such sale, lease or other disposition are
applied to a Debt Purchase Application or to a Property Reinvestment
Application or any combination thereof within 360 days after such sale, lease
or other disposition of assets.
5.15. ab Section Guaranties . No Obligor shall be a guarantor or
surety of, or otherwise be responsible in any manner with respect to any
undertaking of any other Person, or otherwise, except for:
(i) ab Guaranties of the Senior Bank Facility;
(ii) ab Guaranties by endorsement of instruments for deposit made in
the ordinary course of business, and
(iii) ab those specific existing Guaranties listed in Annex B to
Exhibit B hereto.
5.16. ab Section Repurchase of Notes . No Obligor or Affiliate,
directly or indirectly, may repurchase or make any offer to repurchase any
Notes unless an offer has been made to repurchase Notes, pro rata, from all
Holders at the same time and upon the same terms. In case any Obligor
repurchases or otherwise acquires any Notes, such Notes shall immediately
thereafter be canceled and no Notes shall be issued in substitution therefor.
Without limiting the foregoing, upon the repurchase or other acquisition of
any Notes by any Obligor or any Affiliate (or upon the agreement of any
Obligor or any Affiliate to purchase or otherwise acquire any Notes), such
Notes shall no longer be outstanding for purposes of any section of this
Agreement relating to the taking by the Holders of any actions with respect
hereto, including, without limitation, 6.3, 6.4 and 7.1.
5.17. ab Section Transactions with Affiliates . No Obligor will enter
into or be a party to any transaction or arrangement with any Affiliate
(including, without limitation, the purchase from, sale to or exchange of
property with, or the rendering of any service by or for, any Affiliate),
except in the ordinary course of and pursuant to the reasonable requirements
of such Obligor's business and upon fair and reasonable terms no less
favorable to such Obligor than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate.
5.18. ab Section Termination of Pension Plans . No Obligor will
withdraw from any Multiemployer Plan or permit any employee benefit plan
maintained by it to be terminated if such withdrawal or termination could
result in withdrawal liability (as described in Part 1 of Subtitle E of Title
IV of ERISA) or the imposition of a Lien on any property of any Obligor
pursuant to Section 4068 of ERISA.
5.19. ab Section Reports and Rights of Inspection . Each Obligor will
keep proper books of record and account in which full and correct entries will
be made of all dealings or transactions of, or in relation to, the business
and affairs of such Obligor, in accordance with (GAAP consistently applied
(except for changes disclosed in the financial statements furnished to the
Holders pursuant to this 5.19 and concurred in by the independent public
accountants referred to in 5.19(B) hereof), and will furnish to each
Institutional Holder (in duplicate if so specified below or otherwise
requested):
(a) ab Quarterly Statements. As soon as available and in any event
within 45 days after the end of each quarterly fiscal period (except the last)
of each fiscal year, copies of:
(1) ab consolidated balance sheets of the Obligors as of the close of
such quarterly fiscal period, setting forth in comparative form the
consolidated figures for the fiscal year then most recently ended,
(2) ab consolidated statements of income of the Obligors for such
quarterly fiscal period and for the portion of the fiscal year ending with
such quarterly fiscal period, in each case setting forth in comparative form
the consolidated figures for the corresponding periods of the preceding fiscal
year, and
(3) ab consolidated statements of cash flows of the Obligors for the
portion of the fiscal year ending with such quarterly fiscal period, setting
forth in comparative form the consolidated figures for the corresponding
period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct by an
authorized financial officer of each Obligor;
(b) ab Annual Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Obligors, copies of:
(1) ab consolidated balance sheets of the Obligors as of the close of
such fiscal year, and
(2) ab consolidated statements of income and retained earnings and
cash flows of the Obligors for such fiscal year,
in each case setting forth in comparative form the consolidated figures for
the preceding fiscal year, all in reasonable detail and accompanied by a
report thereon of a firm of independent public accountants of recognized
national standing selected by the Obligors to the effect that the consolidated
financial statements present fairly, in all material respects, the
consolidated financial position of the Obligors as of the end of the fiscal
year being reported on and the consolidated results of the operations and cash
flows for said year in conformity with GAAP and that the examination of such
accountants in connection with such financial statements has been conducted in
accordance with generally accepted auditing standards and included such tests
of the accounting records and such other auditing procedures as said
accountants deemed necessary in the circumstances;
(c) ab Audit Reports. Promptly upon receipt thereof, one copy of any
interim or special audit made by independent accountants of the books of any
Obligor and any management letter received from such accountants;
(d) ab SEC and Other Reports. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement sent
by any Obligor to stockholders generally and of each regular or periodic
report, and any registration statement or prospectus filed by any Obligor with
any securities exchange or the Securities and Exchange Commission or any
successor agency, and copies of any orders in any proceedings to which any
Obligor is a party, issued by any governmental agency, Federal or state,
having jurisdiction over any Obligor;
(e) ab ERISA Reports. Promptly upon the occurrence thereof, written
notice of a Reportable Event with respect to any Plan; (ii) the institution of
any steps by any Obligor, any ERISA Affiliate, the PBGC or any other person to
terminate any Plan; (iii) the institution of any steps by any Obligor or any
ERISA Affiliate to withdraw from any Plan; (iv) a non-exempt "prohibited
transaction" within the meaning of Section 406 of ERISA in connection with any
Plan; (v) any material increase in the contingent liability of any Obligor
with respect to any post-retirement welfare liability; or (vi) the taking of
any action by, or the threatening of the taking of any action by, the Internal
Revenue Service, the Department of Labor or the PBGC with respect to any of
the foregoing;
(f) ab Officer's Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial officer
of each of the Obligors stating that such officer has reviewed the provisions
of this Agreement and setting forth: (i) the information and computations (in
sufficient detail) required in order to establish whether the Obligors were in
compliance with the requirements of 5.6 through 5.18 at the end of the
period covered by the financial statements then being furnished, and (ii)
whether there existed as of the date of such financial statements and whether,
to the best of such officer's knowledge, there exists on the date of the
certificate or existed at any time during the period covered by such financial
statements any Default or Event of Default and, if any such condition or event
exists on the date of the certificate, specifying the nature and period of
existence thereof and the action the Obligors are taking and propose to take
with respect thereto;
(g) ab Accountant's Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an opinion
with respect to such financial statements, stating that they have reviewed
this Agreement and stating further whether, in making their audit, such
accountants have become aware of any Default or Event of Default under any of
the terms or provisions of this Agreement insofar as any such terms or
provisions pertain to or involve accounting matters or determinations, and if
any such condition or event then exists, specifying the nature and period of
existence thereof;
(h) ab Additional Reports. As soon as available and in any event
within 30 days after the end of each fiscal quarter, a report setting forth,
for such fiscal quarter and for the portion of the fiscal year ending as of
the last day of such fiscal quarter, and in each case setting forth in
comparative form the figures for the same periods of the previous fiscal year,
(i) all residential sales, (ii) all Residential Homes Under Construction,
(iii) all Land Held for Future Development, Land Under Development and
Developed Lots, whether under contract to be sold or not, (iv) the Obligors'
backlog of orders as of the end of each such period, and (v) new orders
received by the Obligors during such period, all in such form and detail as
the Holders may reasonably require; and
(i) ab Requested Information. With reasonable promptness, such other
data and information as such Institutional Holder may reasonably request.
Without limiting the foregoing, the Obligors will permit each Institutional
Holder (or such Persons as such Institutional Holder may designate), to visit
and inspect, under the Obligors' guidance, any of the properties of the
Obligors, to examine all of their books of account, records, reports and other
papers, to make copies and extracts therefrom and to discuss their respective
affairs, finances and accounts with their respective officers, employees, and
independent public accountants (and by this provision the Obligors authorize
said accountants to discuss with any Institutional Holder the finances and
affairs of the Obligors) all at such reasonable times and as often as may be
reasonably requested. The Obligors shall pay or reimburse any Holder for
expenses which such Holder may incur in connection with any such visitation or
inspection promptly upon demand provided, that so long as no Default or Event
of Default shall then be continuing, the Obligors shall not be required to pay
or reimburse (A) any Holder other than the Purchasers or (B) expenses of the
Purchasers (i) of more than two (2) representatives of such Institutional
Holder in connection with any such visitation or inspection or (ii) for any
visit or inspection more often than once per fiscal year.
5.20. ab Section Joinder Agreement . The Obligors shall cause each
New Subsidiary to execute and deliver a joinder agreement substantially in the
form of Exhibit E attached hereto, concurrently with the acquisition or
creation of such New Subsidiary.
6. abSECTION EVENTS OF DEFAULT AND REMEDIES THEREFOR.
6.1. ab Section Events of Default . Any one or more of the following
shall constitute an "Event of Default " as such term is used herein:
(a) ab Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more than
five business days; or
(b) ab Default shall occur in the making of any required prepayment on
any of the Notes as provided in 2.1; or
(c) ab Default shall occur in the making of any other payment of the
principal of any Note or premium, if any, thereon at the expressed or any
accelerated maturity date or at any date fixed for prepayment; or
(d) ab Default shall be made in the payment when due (whether by lapse
of time, by declaration, by call for redemption or otherwise) of the principal
of or interest on any Material Debt (other than the Notes) of any Obligor and
such default shall continue beyond the period of grace, if any, allowed with
respect thereto; or
(e) ab Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Material Debt of any
Obligor may be issued and such default or event shall continue for a period of
time sufficient to permit the acceleration of the maturity of any Material
Debt of any Obligor outstanding thereunder; or
(f) ab Default shall occur in the observance or performance of any
covenant or agreement contained in 5.6 through 5.14 which is not remedied
within five days after the earlier of (i) the day on which any Obligor first
obtains knowledge of such default, or (ii) the day on which written notice
thereof is given to the Obligors by any Holder; or
(g) ab Default shall occur in the observance or performance of any
other provision of this Agreement which is not remedied within thirty days
after the earlier of (i) the day on which any Obligor first obtains knowledge
of such default, or (ii) the day on which written notice thereof is given to
the Obligors by any Holder; or
(h) ab Any representation or warranty made by any Obligor herein, or
made by any Obligor in any statement or certificate furnished by any Obligor
in connection with the consummation of the issuance and delivery of the Notes
or furnished by any Obligor pursuant hereto, is untrue in any material respect
as of the date of the issuance or making thereof; or
(i) ab Final judgment or judgments for the payment of money
aggregating in excess of $3,000,000 is or are outstanding against any Obligor
or against any property or assets of any Obligor and any one of such judgments
has remained unpaid, unvacated, unbonded or unstayed by appeal or otherwise
for a period of 30 days from the date of its entry; or
(j) ab A custodian, liquidator, trustee or receiver is appointed for
any Obligor or for the major part of the property of either and is not
discharged within 30 days after such appointment; or
(k) ab Any Obligor becomes insolvent or bankrupt, is generally not
paying its debts as they become due or makes an assignment for the benefit of
creditors, or any Obligor applies for or consents to the appointment of a
custodian, liquidator, trustee or receiver for such Obligor or for the major
part of the property of any such Obligor; or
(l) ab Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar
law or laws for the relief of debtors, are instituted by or against any
Obligor and, if instituted against any Obligor, are consented to or are not
dismissed within 60 days after such institution.
6.2. ab Section Notice to Holders . When any Event of Default
described in the foregoing 6.1 has occurred, or if any Holder or the holder
of any other evidence of Debt of any Obligor gives any notice or takes any
other action with respect to a claimed default, the Obligors agree to give
notice within three business days of such event to all Holders.
6.3. ab Section Acceleration of Maturities . When any Event of
Default described in paragraphs (a) through (i), inclusive, of said 6.1 has
happened and is continuing, any Holder or Holders holding 25% or more of the
principal amount of Notes at the time outstanding may, by notice to the
Obligors, declare the entire principal and all interest accrued on all Notes
to be, and all Notes shall thereupon become, forthwith due and payable,
without any presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived. In addition, when any Event of Default
described in paragraph (a), (b) or (c) of 6.1 has happened and is continuing,
any Holder may, by written notice to the Obligors, declare the principal of
and accrued interest on the Notes of such Holder to be, and the Notes of such
Holder shall thereupon become, forthwith due and payable, without any
presentment, demand, or other notice of any kind, all of which are hereby
expressly waived. When any Event of Default described in paragraph (j), (k)
or (l) of 6.1 has occurred, then all outstanding Notes shall immediately
become due and payable without presentment, demand or notice of any kind.
Upon the Notes (or portion thereof) becoming due and payable as a result of
any Event of Default as aforesaid, the Obligors will forthwith pay to the
Holder or Holders thereof, the entire principal and interest accrued on the
Notes due and payable and, to the extent not prohibited by applicable law, an
amount as liquidated damages for the loss of the bargain evidenced hereby (and
not as a penalty) equal to the Modified Make-Whole Amount, determined as of
the date on which the Notes shall so become due and payable. No course of
dealing on the part of the Holder or Holders nor any delay or failure on the
part of any Holder to exercise any right shall operate as a waiver of such
right or otherwise prejudice such Holder's rights, powers and remedies. The
Obligors further agree, to the extent permitted by law, to pay to the Holder
or Holders all costs and expenses incurred by them in the collection of any
Notes upon any default hereunder or thereon, including reasonable compensation
to such Holder's or Holders' attorneys for all services rendered in connection
therewith.
6.4. ab Section Rescission of Acceleration . The provisions of 6.3
are subject to the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (i), inclusive, of 6.1, the Holders holding 51% in aggregate
principal amount of the Notes then outstanding may, by written instrument
filed with the Obligors, rescind and annul such declaration and the
consequences thereof, provided that at the time such declaration is annulled
and rescinded:
(a) ab no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) ab all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable solely by
reason of such declaration under 6.3) shall have been duly paid; and
(c) ab each and every other Default and Event of Default shall have
been made good, cured or waived pursuant to 7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right
consequent thereto.
7. abSECTION AMENDMENTS, WAIVERS AND CONSENTS.
7.1. ab Section Consent Required . Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Obligors, be amended
or compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), if the Obligors shall
have obtained the consent in writing of the Holders holding at least 66-2/3%
in aggregate principal amount of outstanding Notes; provided, however, that
without the written consent of all of the Holders, no such amendment or waiver
shall be effective (i) which will change the time of payment (including any
prepayment required by 2.1) of the principal of or the interest on any Note
or change the principal amount thereof or reduce the rate of interest thereon,
or (ii) which will change any of the provisions with respect to optional
prepayments, or (iii) which will change the percentage of Holders required to
consent to any such amendment or waiver of any of the provisions of this 7 or
6.
7.2. ab Section Solicitation of Holders . So long as there are any
Notes outstanding, the Obligors will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of
this Agreement or the Notes unless each Holder (irrespective of the amount of
Notes then owned by it) shall be informed thereof by the Obligors and shall be
afforded the opportunity of considering the same and shall be supplied by the
Obligors with sufficient information to enable it to make an informed decision
with respect thereto. The Obligors will not, directly or indirectly, pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, to any Holder as consideration for or
as an inducement to entering into by any Holder of any waiver or amendment of
any of the terms and provisions of this Agreement or the Notes unless such
remuneration is concurrently offered, on the same terms, ratably to all
Holders.
7.3. ab Section Effect of Amendment or Waiver . Any such amendment or
waiver shall apply equally to all of the Holders and shall be binding upon
them, upon each future Holder and upon the Obligors, whether or not any Note
shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
8. abSECTION INTERPRETATION OF AGREEMENT; DEFINITIONS.
8.1. ab Section Definitions . Unless the context otherwise requires,
the terms hereinafter set forth when used herein shall have the following
meanings and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than an Obligor) (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, any Obligor, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of any
Obligor or (iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by any Obligor. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Agreement" shall mean this Note Agreement as amended from time to time.
"Banks" shall mean Bank One, Indiana, NA, and any other bank which
becomes a party to the Senior Bank Facility.
"Borrowing Base" shall mean the sum of (i) 100% of the aggregate amount
of cash and cash equivalents of the Obligors, (ii) 80% of the lesser of the
net book value or current market value of Spec Homes, (iii) 90% of the lesser
of the net book value or current market value of Residential Homes under
Construction (including model homes), (iv) 65% of the lesser of the net book
value or current market value of Consolidated Land Investments (excluding
options to acquire land) and (v) 95% of the receivables of the Obligors held
in escrow.
"Capitalized Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a consolidated balance sheet
of the lessee and its subsidiaries in accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"Change of Control" shall mean a Person or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the 1934 Act), other than (i) John Scheumann
or Richard Crosser, or (ii) the spouses, lineal descendants and spouses of
lineal descendants of the persons named in clause (i), or (iii) the estates or
legal representatives of the persons named in clauses (i) and (ii), becoming
the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act) of 50% or
more (determined by number of votes) of the issued and outstanding Voting
Stock of the Company.
As used herein, the term "Change of Control Date" shall mean any date
upon which a Change of Control shall occur.
"Closing Date" is defined in 1.2
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Crossmann Communities, Inc., an Indiana corporation,
and any Person who succeeds to all, or substantially all, of the assets and
business of Crossmann Communities, Inc.
"Confidential Information" shall mean any written information delivered
or made available by or on behalf of any Obligor, either directly or through
any Person referred to in 5.19 hereof, to a Holder pursuant to this Agreement
which information is marked confidential, but in no event shall include
information (i) which was publicly known or otherwise known to such Holder at
the time of disclosure, (ii) which subsequently becomes publicly known through
no act or omission by such Holder or (iii) which otherwise becomes known to
such Holder other than through disclosure by or on behalf of an Obligor.
"Consolidated Adjusted Tangible Net Worth" shall mean as of the date of
any determination thereof the remainder of (i) shareholders' equity of the
Obligors determined on a consolidated basis in accordance with GAAP less (ii)
the sum of all Intangible Assets arising after March 31, 1998 (other than good
will arising in connection with the acquisition of the predecessor to CCNC in
an amount not in excess of $8,200,000).
"Consolidated Current Assets" shall mean as of the date of any
determination thereof the sum of (i) cash and cash equivalents, (ii)
retainages and (iii) real estate inventories, of the Obligors determined on a
consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities" shall mean as of the date of any
determination thereof such liabilities of the Obligors on a consolidated basis
as shall be determined in accordance with GAAP constitute current liabilities,
excluding, to the extent otherwise included therein, liabilities consisting of
the so-called "current maturities" of Total Debt but including, in any event,
the amount of revolving credit under bank facilities and the total amount of
all letters of credit issued and outstanding.
"Consolidated Joint Venture Investments" shall mean, as of the date of
any determination thereof, the aggregate Investments of the Obligors in land
development joint ventures formed to engage principally in land development
including, without limitation, Special Joint Venture Investments.
"Consolidated Land Investments" shall mean, as of the date of any
determination thereof, the sum of (i) Land Held for Future Development, (ii)
Land Under Development, (iii) Developed Lots and (iv) Investments by the
Obligors in options to acquire land, excluding Special Joint Venture
Investments.
"Consolidated Net Income" for any period shall mean net income of the
Obligors for such period, determined on a consolidated basis in accordance
with GAAP, excluding any extraordinary gains or losses and any unremitted
earnings of any corporation not a Subsidiary.
"Consolidated Subsidiary Debt" shall mean as of the date of any
determination thereof all Debt of Subsidiaries determined on a consolidated
basis in accordance with GAAP, excluding, to the extent otherwise included
therein, (i) Debt of Subsidiaries owing to another Obligor and (ii) the Notes.
"Debt" of any Person shall mean, as of the date of any determination
thereof:
(i) ab all obligations of such Person for borrowed money, including,
but not limited to, obligations for borrowed money evidenced by notes, bonds,
debentures or similar evidences of indebtedness of such Person,
(ii) ab obligations secured by any Lien upon property or assets owned
by such Person, even though such Person has not assumed or become liable for
the payment of such obligation including, without limitation, obligations
secured by Liens arising from the sale or transfer of notes or accounts
receivable,
(iii) ab obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of property including, without limitation, obligations
secured by Liens arising from the sale or transfer of notes or accounts
receivable,
(iv) ab Capitalized Rentals,
(v) ab obligations of such Person representing the deferred and unpaid
purchase price of any property or business or services, excluding trade
payables and accrued expenses constituting current liabilities,
(vi) ab letters of credit issued for the account of such Person;
(vii) ab obligations of joint ventures of such Person to the extent
the holder of such obligations has recourse to such Person with respect to the
satisfaction of such obligations; and
(viii) ab Guaranties of obligations of others of the character
referred to hereinabove in this definition.
"Debt Purchase Application" shall mean, with respect to any sale, lease
or other disposition, the application by an Obligor of cash in an amount equal
to the proceeds of such sale, lease or other transfer to pay or prepay Senior
Debt of an Obligor including, in each case, a prepayment pursuant to 2.2 of
this Agreement of a principal amount of the Notes equal to or greater than the
amount which bears the same ratio to the aggregate principal amount of all
Notes as the principal amount of all Notes bears to the principal amount of
all Senior Debt.
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"Developed Lots" shall mean, as of the date of any determination thereof,
land owned by an Obligor which satisfies the requirements for the issuance of
a building permit, but on which no construction has been commenced and in any
event shall include, without duplication, all items recorded in the account
"Developed Lots" on the Obligors' most recent financial statements and
excluding, in any event, any land on which an Obligor has contracted to build
a residence.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that is,
along with any Obligor, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in 6.1.
"Fixed Charges" for any period shall mean on a consolidated basis the sum
of (i) all Rentals (other than Rentals on Capitalized Leases) payable during
such period by the Obligors, and (ii) all Interest Charges on all Indebtedness
(including the interest component of Rentals on Capitalized Leases) of the
Obligors.
"GAAP" shall mean generally accepted accounting principles at the time in
the United States.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent
or otherwise, by such Person: (i) to purchase such Indebtedness or obligation
or any property or assets constituting security therefor, (ii) subject to the
last sentence of this definition, to advance or supply funds (x) for the
purchase or payment of such Indebtedness or obligation, (y) to maintain
working capital or other balance sheet condition or otherwise to advance or
make available funds for the purchase or payment of such Indebtedness or
obligation, (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness or obligation, or (iv) otherwise to assure the
owner of the Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of all computations made under this
Agreement, a Guaranty in respect of any Debt shall be deemed to be Debt equal
to the principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend. "Guaranties" shall not
include Investments by an Obligor in joint ventures which are permitted
hereunder and with respect to which there is no recourse to such Obligor.
"Holder" shall mean any Person which is, at the time of reference, the
registered Holder of any Note.
"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with GAAP shall be classified upon a balance
sheet of such Person as liabilities of such Person, and in any event shall
include all Debt.
"Institutional Holder" shall mean any Holder which is a Purchaser or an
insurance company, bank, savings and loan association, trust company,
investment company, charitable foundation, employee benefit plan (as defined
in ERISA) or other institutional investor or financial institution and, for
purposes of the direct payment provisions of this Agreement, shall include any
nominee of any such Holder.
"Intangible Assets" shall mean as of the date of any determination
thereof the total amount of all assets of the Obligors consisting of good
will, patents, trade names, trade marks, copyrights, franchises, experimental
expense, organization expense, unamortized debt discount and expense, deferred
assets other than prepaid insurance and prepaid taxes, the excess of cost of
shares acquired over book value of related assets and such other assets as are
properly classified as "intangible assets" in accordance with GAAP.
"Interest Charges" for any period shall mean all interest, whether
capitalized or expensed, and all amortization of debt discount and expense on
any particular Indebtedness for which such calculations are being made.
Computations of Interest Charges on a pro forma basis for Indebtedness having
a variable interest rate shall be calculated at the rate in effect on the date
of any determination.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise.
"Joint Venture Subsidiary" shall mean any Subsidiary of the Company owned
jointly with a non-affiliated third party entered into for the development of
real estate projects.
"Land He Id for Future Development" shall mean as of the date of any
determination thereof, land owned by an Obligor with respect to which such
Obligor has not entered into any contract for the construction of sewers,
streets, water, or utilities and, in any event, shall include, without
duplication, all items recorded in the account "Land Held for Future
Development" on the Obligors' most recent financial statements.
"Land Under Development" shall mean as of the date of any determination
thereof, land owned by an Obligor and with respect to which such Obligor has
entered into a contract for the construction of sewers, streets, water or
utilities and, in any event, shall include, without duplication, all items
recorded in the account "Land Under Development" on the Obligors' most recent
financial statements.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but
not limited to the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
(including, with respect to stock, stockholder agreements, voting trust
agreements, buy-back agreements and all similar arrangements) affecting
property. For the purposes of this Agreement, an Obligor shall be deemed to
be the owner of any property which it has acquired or holds subject to a
conditional sale agreement, Capitalized Lease or other arrangement pursuant to
which title to the property has been retained by or vested in some other
Person for security purposes and such retention or vesting shall constitute a
Lien.
"Make-Whole Amount" means, with respect to any Note, an amount equal to
the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of such
Note that is to be prepaid pursuant to 2.2 or has become or is declared to be
immediately due and payable pursuant to 6.3, as the context requires.
"Discounted Value" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of any
Note, .50% over the yield to maturity implied by (i) the yields reported, as
of 10:00 A.M. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on the display
designated as Screen PX7 on the Bloomberg Financial Markets Services Screen
(or such other display as may replace Screen PX7 on Bloomberg Financial
Markets Services Screen) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal as of
such Settlement Date, or (ii) if such yields are not reported as of such time
or the yields reported as of such time are not ascertainable (including by way
of interpolation), the Treasury Constant Maturity Series Yields reported, for
the latest day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date/ Such implied yield will be determined,
if necessary, by (a) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted financial practice and (b)
interpolating linearly between (1) the actively traded U.S. Treasury security
with a maturity closest to and greater than the Remaining Average Life and (2)
the actively traded U.S. Treasury security with a maturity closest to and less
than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called Principal, the
number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products obtained
by multiplying (a) the principal component of each Remaining Scheduled Payment
with respect to such Called Principal by (b) the number of years (calculated
to the nearest one-twelfth year) that will elapse between the Settlement Date
with respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date, provided that if such Settlement Date is not a date on
which interest payments are due to be made under the terms of the Notes, then
the amount of the next succeeding scheduled interest payment will be reduced
by the amount of interest accrued to such Settlement Date and required to be
paid on such Settlement Date pursuant to 2.2 or 6.3.
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
2.2 or has become or is declared to be immediately due and payable pursuant to
6.3, as the context requires.
"Material Debt" shall mean, as of the date of any determination thereof,
one or more obligations of any Obligor constituting Debt which is outstanding
in an aggregate principal amount in excess of $3,000,000.
"Modified Make-Whole Amount" shall mean the Make-Whole Amount as defined
herein except that ".75%" shall be substituted for ".50%" in the definition of
"Reinvestment Yield".
"Moody's" means Moody's Investors Services, Inc.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Net Income Available for Fixed Charges" for any period shall mean the
sum of (i) Consolidated Net Income during such period plus (to the extent
deducted in determining Consolidated Net Income), (ii) all provisions for any
Federal, state or other income taxes made by the Obligors during such period
and (iii) Fixed Charges of the Company and its Subsidiaries during such
period.
"New Subsidiary" shall mean any Subsidiary, other than a Joint Venture
Subsidiary, acquired or created by any Obligor after the Closing Date.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Notice Cut-Off Date" shall have the meaning assigned to such term in
2.3.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political
subdivision thereof.
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by any Obligor or any ERISA Affiliate or as to which
any Obligor or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Prepayment Notice" shall have the meaning assigned to such term in 2.3.
"Property Reinvestment Application" shall mean, with respect to any sale,
lease or other transfer of assets, the application by an Obligor of the
proceeds thereof to the acquisition by an Obligor of operating assets to be
used in the ordinary course of business by such Obligor.
"Purchasers" shall have the meaning set forth in 1.1.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of
the property) payable by an Obligor, as lessee or sublessee under a lease of
real or personal property, but shall be exclusive of any amounts required to
be paid by an Obligor (whether or not designated as rents or additional rents)
on account of maintenance, repairs, insurance, taxes and similar charges.
Fixed rents under any so-called "percentage leases" shall be computed solely
on the basis of the minimum rents, if any, required to be paid by the lessee
regardless of sales volume or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
"Residential Homes under Construction" shall mean as of the date of any
determination thereof, (a) land on which construction of a residence has
begun, (b) all residential housing completed by any Obligor, including model
homes owned by any Obligor and (c) land on which an Obligor has contracted to
build a residence, regardless of whether construction has begun, and, in any
event, shall include, without duplication, all items recorded in the account
"Residential Homes Under Construction" on the Obligors' most recent financial
statements excluding, in any event, all Spec Homes.
"S&P" shall mean Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Senior Bank Facility" shall mean that certain Amended and Restated
Credit Agreement dated December 21, 1995 between the Company and the Banks and
any agreement which amends, replaces or supersedes such Credit Agreement and
is otherwise entered into in compliance with the terms and provisions of this
Agreement.
"Senior Debt" shall mean and include any Debt of an Obligor (excluding
Debt owing to an Obligor, Subsidiary or Affiliate) which is not expressed to
be junior or subordinate to any other Debt of such Obligor.
"Spec Homes" shall mean speculative homes and model homes completed or
under construction, and winter foundations or land which any Obligor owns and
does not have a contract with a third party to build a house.
"Special Joint Venture Investments" shall mean Investments by an Obligor
in non-consolidated joint venture partnerships formed to engage principally in
single-family land development.
"Subordinated Debt" shall mean all Debt of any Obligor which is junior or
subordinate by its terms to the Notes.
The term "subsidiary" shall mean as to any particular parent business
entity, any business entity of which (i) in the case of any corporation, more
than 50% (by number of votes) of the Voting Stock shall be beneficially owned,
directly or indirectly, by such parent business entity and (ii) in the case of
any partnership, limited liability company or similar entity, a partnership
interest, membership interest or similar interest which exceeds 50% of the
aggregate outstanding partnership interest, membership interest or similar
interest and which permits the owner thereof, directly or indirectly, to
direct the management of such partnership, limited liability company or
similar entity shall be owned by such parent business entity. The term
"Subsidiary" shall mean a subsidiary of any Obligor.
"Total Assets" shall mean as of the date of any determination thereof the
sum of all assets of the Obligors less depreciation, amortization and other
properly deductible valuation reserves determined on a consolidated basis in
accordance with GAAP.
"Total Capitalization" shall mean as of the date of any determination
thereof the sum of (i) Consolidated Adjusted Tangible Net Worth and (ii) Total
Debt.
"Total Debt" shall mean as of the date of any determination thereof all
Debt of the Obligors determined on a consolidated basis in accordance with
GAAP.
"Voting Stock" shall mean as of the date of any determination thereof
Securities of any class or classes, the holders of which are ordinarily, in
the absence of contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions).
8.2. ab Section Accounting Principles . Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in
accordance with GAAP, to the extent applicable, except where such principles
are inconsistent with the requirements of this Agreement.
8.3. ab Section Directly or Indirectly . Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action
in question is taken directly or indirectly by such Person.
9. abSECTION MISCELLANEOUS.
9.1. ab Section Registered Notes . The Obligors shall cause to be
kept at the principal office of the Company a register for the registration
and transfer of the Notes (hereinafter called the "Note Register"), and the
Obligors will register or transfer or cause to be registered or transferred as
hereinafter provided any Note issued pursuant to this Agreement.
At any time and from time to time any Holder of a Note which has been
duly registered as hereinabove provided may transfer such Note upon surrender
thereof at the principal office of the Company duly endorsed or accompanied by
a written instrument of transfer duly executed by the Holder or its attorney
duly authorized in writing.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and holder thereof and a Holder for all
purposes of this Agreement. Payment of or on account of the principal,
premium, if any, and interest on any registered Note shall be made to or upon
the written order of such Holder.
9.2. ab Section Exchange of Notes . At any time and from time to
time, upon not less than ten days' notice to that effect given by the Holder
of any Note initially delivered or of any Note substituted therefor pursuant
to 9.1, this 9.2 or 9.3, and, upon surrender of such Note at the Company's
office, the Obligors will deliver in exchange therefor, without expense to
such Holder, except as set forth below, a Note for the same aggregate
principal amount as the then unpaid principal amount of the Note so
surrendered, or Notes in the denomination of $250,000 or any amount in excess
thereof as such Holder shall specify, dated as of the date to which interest
has been paid on the Note so surrendered or, if such surrender is prior to the
payment of any interest thereon, then dated as of the date of issue,
registered in the name of such Person or Persons as may be designated by such
Holder, and otherwise of the same form and tenor as the Notes so surrendered
for exchange. The Obligors may require the payment of a sum sufficient to
cover any stamp tax or governmental charge imposed upon such exchange or
transfer.
9.3. ab Section Loss, Theft, Etc. of Notes . Upon receipt of evidence
satisfactory to the Obligors of the loss, theft, mutilation or destruction of
any Note, and in the case of any such loss, theft or destruction upon delivery
of a bond of indemnity in such form and amount as shall be reasonably
satisfactory to the Obligors, or in the event of such mutilation upon
surrender and cancellation of the Note, the Obligors will make and deliver
without expense to the Holder thereof, a new Note, of like tenor, in lieu of
such lost, stolen, destroyed or mutilated Note. If an Institutional Holder is
the owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of such Note at the time of such loss, theft
or destruction shall be accepted as satisfactory evidence thereof and no
further indemnity shall be required as a condition to the execution and
delivery of a new Note other than the written agreement of such owner to
indemnify the Obligors.
9.4. ab Section Expenses, Stamp Tax indemnity . Whether or not the
transactions herein contemplated shall be consummated, the Obligors agree to
pay directly all of the Purchasers' out-of-pocket expenses in connection with
the preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the reasonable charges and
disbursements of Chapman and Cutler, special counsel to the Purchasers,
duplicating and printing costs and charges for shipping the Notes, adequately
insured to each Purchaser's home office or at such other place as such
Purchaser may designate, and all expenses (including the fees and expenses of
any financial advisor for the Holders) of the Holders relating to any proposed
or actual amendment, waivers or consents pursuant to the provisions hereof,
including, without limitation, any amendments, waivers, or consents resulting
from any work-out, renegotiation or restructuring relating to the performance
by the Obligors of their obligations under this Agreement and the Notes. The
Obligors shall also pay for, or reimburse you for any and all costs incurred
in connection with obtaining a valuation of the Notes by the National
Association of Insurance Commissioners and for the cost of obtaining a
so-called private placement number with respect to the Notes. The Obligors
also agree that they will pay and save each Purchaser harmless against any and
all liability with respect to stamp and other taxes, if any, which may be
payable or which may be determined to be payable in connection with the
execution and delivery of this Agreement or the Notes, whether or not any
Notes are then outstanding. The Obligors agree to protect and indemnify each
Purchaser against any liability for any and all brokerage fees and commissions
payable or claimed to be payable to any Person in connection with the
transactions contemplated by this Agreement.
9.5. ab Section Powers and Rights Not Waived; Remedies Cumulative .
No delay or failure on the part of any Holder in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of each
Holder are cumulative to, and are not exclusive of, any rights or remedies any
such Holder would otherwise have.
9.6. ab Section Notices . All communications provided for hereunder
shall be in writing and, if to a Holder, delivered or mailed prepaid by
registered or certified mail or overnight air courier, or by facsimile
communication, in each case addressed to such Holder at its address appearing
beneath its signature at the foot of this Agreement or such other address as
any Holder may designate to the Obligors in writing, and if to the Obligors,
delivered or mailed by registered or certified mail or overnight air courier,
or by facsimile communication, to the Company at the address beneath its
signature at the foot of this Agreement or to such other address as the
Obligors may in writing designate to the Holders; provided, however, that a
notice to a Holder by overnight air courier shall only be effective if
delivered to such Holder at a street address designated for such purpose in
accordance with this 9.6, and a notice to such Holder by facsimile
communication shall only be effective if made by confirmed overnight written
copy to such Holder at a telephone number designated for such purpose in
accordance with this 9.6 and promptly followed by the delivery of such notice
by registered or certified mail or overnight air courier, as set forth above.
9.7. ab Section Successors and Assigns . This Agreement shall be
binding upon the Obligors and their successors and assigns and shall inure to
the benefit of each Purchaser and its successor and assigns, including each
successive Holder.
9.8. ab Section Survival of covenants and Representations . All
covenants, representations and warranties made by the Obligors herein and in
any certificates delivered pursuant hereto, whether or not in connection with
the Closing Date, shall survive the closing and the delivery of this Agreement
and the Notes.
9.9. ab Section Severability . Should any part of this Agreement for
any reason be declared invalid or unenforceable, such decision shall not
affect the validity or enforceability of any remaining portion, which
remaining portion shall remain in force and effect as if this Agreement had
been executed with the invalid or unenforceable portion thereof eliminated and
it is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts or portion which may, for any reason, be hereafter declared
invalid or unenforceable.
9.10. ab Section Governing Law . This Agreement and the Notes issued
and sold hereunder shall be governed by and construed in accordance with
Indiana law.
9.11. ab Section Captions . The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
9.12. ab Section Disclosure to Other Persons . Each Holder shall not
use any Confidential Information for any purpose other than evaluating or
protecting its investment in any Note and shall not disclose any Confidential
Information to any Person; provided that nothing herein shall prevent any
Holder from delivering or disclosing (and the Obligors acknowledge that each
Holder may deliver or disclose) any financial statements and other documents
delivered to it, and any other information disclosed to it (including, but not
limited to, Confidential Information), by or on behalf of any Obligor, in
connection with or pursuant to this Agreement to (i) its directors, officers,
employees, agents and professional consultants, (ii) any other Holder, (iii)
any Person to which it offers to sell any Note or any part thereof consistent
with reasonable business practice, (iv) any Person to which it sells or offers
to sell a participation in all or any part of any Note, (v) any federal or
state regulatory authority having jurisdiction over it, (vi) the National
Association of Insurance Commissioners or any similar organization or (vii)
any other Person to which such delivery or disclosure may be necessary (a) to
effect compliance with any law, rule, regulation or order applicable to it,
(b) in response to any subpoena or other legal process or informal
investigative demand, (c) in connection with any litigation to which it is a
party, or (d) in order to protect its investment in any Note.
The execution hereof by the Purchasers shall constitute a contract among
the Obligors and the Purchasers for the uses and purposes hereinabove set
forth. This Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one
agreement.
CROSSMANN COMMUNITIES, INC.
DELUXE HOMES, INC.
DELUXE HOMES OF LAFAYETTE, INC.
TRIMARK HOMES, INC.
TRIMARK DEVELOPMENT, INC.
MERIT REALTY, INC.
CROSSMANN COMMUNITIES OF OHIO,
INC.
CROSSMANN MORTGAGE CORP.
CROSSMANN INVESTMENTS, INC.
CROSSMANN MANAGEMENT, INC.
CROSSMANN COMMUNITIES OF
TENNESSEE, LLC
CUTTER HOMES, LTD.
CROSSMANN COMMUNITIES OF NORTH
CAROLINA, INC.
DELUXE AVIATION INC.
By: /s/ Jennifer A. Holihen
Jennifer A. Holihen Secretary of each of the above Obligors
<PAGE>
CROSSMANN COMMUNITIES
PARTNERSHIP
By: Deluxe Homes, Inc., Managing General Partner
By: /s/ Jennifer A. Holihen
Jennifer A. Holihen,
Secretary
CROSSMANN COMMUNITIES, INC.
9202 North Meridian Street, Suite 300
Indianapolis, Indiana 47260
Attention: John Scheumann
Telefacsimile: (317) 571-2210
Confirmation: (317) 843-9514
EXHIBIT 10.47
ASSET PURCHASE AGREEMENT
DATED AS OF THE 5TH DAY OF MAY, 1998
BY AND AMONG
CROSSMANN COMMUNITIES, INC.
CROSSMANN COMMUNITIES OF TENNESSEE, LLC
AND
PARAGON PROPERTIES, LLC,
RUSTY HYNEMAN
AND
W.V. RICHERSON, JR.
TABLE OF CONTENTS
PAGE
ARTICLE I SALE AND PURCHASE 1
Section 1.01. Transfer of the Acquired Assets. 1
Section 1.02. Sale at Closing Date. 1
Section 1.03. Assumption of Liabilities. 2
Section 1.04. Purchase Price. 2
Section 1.05. Closing Date Payment. 4
Section 1.06. Determination of Paragon Net Income. 4
Section 1.07. Withholding of Tax. 4
Section 1.08. Subsequent Documentation. 4
Section 1.09. Allocation of Purchase Price. 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER 5
Section 2.01. Title to Property. 5
Section 2.02. Authority; Consent. 5
Section 2.03. Consents and Approvals. 6
Section 2.04. Organization. 6
Section 2.05. Financial Statements of the Seller. 6
Section 2.06. Tax Matters. 7
Section 2.07. Compliance with Laws; No Default or Litigation. 7
Section 2.08. Personal Property Owned. 8
Section 2.09. Personal Property Leased. 8
Section 2.10. Developed Real Property. 8
Section 2.11. Undeveloped Real Property. 9
Section 2.12. Real Property Leases. 9
Section 2.13. Land Contracts. 9
Section 2.14. Real Property Generally. 10
Section 2.15. Homeowner's Associations. 12
Section 2.16. Environmental Compliance. 12
Section 2.17. Contracts. 14
Section 2.18. Accounts and Notes Receivable. 15
Section 2.19. Licenses and Permits. 15
Section 2.20. Intellectual Property. 15
Section 2.21. Labor Relations: Employees. 16
Section 2.22. Employee Benefit Plans. 16
Section 2.23. Warranty Liability. 18
Section 2.24. Letters of Intent and Sale Discussions. 18
Section 2.25. Due Diligence. 18
Section 2.26. Disclosure. 18
Section 2.27. Survival. 18
Section 2.28. Other Limitations. 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 19
Section 3.01. Authority: Consent. 19
Section 3.02. Consents and Approvals. 20
Section 3.03. Corporate Organization. 20
ARTICLE IV INDEMNIFICATION 20
Section 4.01. Indemnification by Seller. 20
Section 4.02. Indemnification by the Purchaser. 21
Section 4.03. Notice. 21
Section 4.04. Arbitration. 21
Section 4.05. Defense of Claims. 22
Section 4.06. Computation of Indemnity Losses. 23
Section 4.07. Payment of Losses. 23
Section 4.08. Survival. 23
Section 4.09. Changes to Representations and Warranties. 24
Section 4.10. Other Limitations. 24
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER 24
Section 5.01. Performance of the Obligations of the Purchaser. 24
Section 5.02. Consents and Approvals. 24
Section 5.03. No Violation of Orders. 25
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE PURCHASER 25
Section 6.01. Performance of the Obligations of the Seller. 25
Section 6.02. Completion of Due Diligence. 25
Section 6.03. Consents and Approvals. 25
Section 6.04. No Violation of Orders. 25
Section 6.05. Title Insurance. 26
Section 6.06. Phase I for Country Walk Subdivision. 26
Section 6.07. Lot Purchase Agreements. 26
Section 6.08. Noncompetition Agreement with Seller. 26
Section 6.09. Employment Agreement. 26
Section 6.10. Assignment and Assumption of Country Walk Agreements.
26
Section 6.11. Deposit of Proceeds. 27
Section 6.12. Brokerage Services Agreement. 27
Section 6.13. Oakland Agreement. 27
ARTICLE VII TERMINATION 27
ARTICLE VIII CLOSING AND POST-CLOSING MATTERS 27
Section 8.01. Closing Date. 27
Section 8.02. Deliveries by the Seller. 27
Section 8.03. Deliveries by Purchaser. 28
Section 8.04. Confidentiality. 29
Section 8.05. Sale of Homes. 29
Section 8.06. Assignment of Country Walk Proceeds. 29
ARTICLE IX MISCELLANEOUS 30
Section 9.01. Counterparts. 30
Section 9.02. Expenses. 30
Section 9.03. Public Announcements. 30
Section 9.04. Risk of Loss. 30
Section 9.05. Index and Captions. 30
Section 9.06. Notices. 31
Section 9.07. Entire Agreement. 32
Section 9.08. Waiver of Compliance. 32
Section 9.09. Validity of Provisions. 32
Section 9.10. Schedules and Exhibits. 32
Section 9.11. No Intention to Benefit Third Parties. 33
Section 9.12. Successors and Assigns. 33
Section 9.13. Governing Law. 33
ARTICLE X DEFINITIONS 33
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of the 5th day of May, 1998, by and among CROSSMANN COMMUNITIES, INC., an
Indiana corporation ("Crossmann"), Crossmann Communities of Tennessee, LLC, a
Tennessee limited liability company which is owned 99% by Crossmann and 1% by
Deluxe Homes of Lafayette, Inc., a wholly-owned subsidiary of Crossmann (the
"Company" and, collectively with Crossmann the "Purchaser") and Paragon
Properties, LLC, a Tennessee limited liability company ("Paragon" or the
"Seller"), and Rusty Hyneman ("Hyneman") and W.V. Richerson, Jr. ("Richerson")
the sole owners of the Seller.
WITNESSETH
WHEREAS, the Seller is engaged in the business of acquiring developed and
undeveloped real estate, and building residential homes on such real estate in
Tennessee.
WHEREAS, the Purchaser, in reliance upon the representations, warranties
and covenants of the Seller set forth herein, desires to purchase from the
Seller, and the Seller desires to sell, transfer and convey the Acquired
Assets (as defined in Article X herein) to the Purchaser pursuant to the terms
and subject to the conditions set forth in this Agreement.
WHEREAS, Article X lists defined terms used in this Agreement.
NOW THEREFORE, in consideration of the representations, warranties,
mutual covenants, and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Purchaser and Seller hereby agree as follows:
I abARTICLE
SALE AND PURCHASE
1.01 ab Section. 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. 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.
1.02 ab Section. 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 Seller and
the Purchaser.
1.03 ab Section. 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, only the
liabilities and obligations of the Seller which are (i) related to the
Acquired Assets and (ii) listed on Schedule 1.03 (the "Assumed
Liabilities"). Notwithstanding the foregoing, the Purchaser shall not assume,
pay, perform or discharge any of the following:
(a) ab any liability not listed on Schedule 1.03;
(b) ab any liability or obligation not listed on Schedule 1.03 which
is secured by an Excluded Asset;
(c) ab any unfunded pension liability;
(d) ab except as otherwise provided in Section 9.02(ii), 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), including past due or delinquent taxes or interest or
penalties thereon;
(e) ab any liability not listed on Schedule 1.03 arising from
activities outside of the ordinary course of business of the Seller;
(f) ab any tort liability not specified on Schedule 1.03;
(g) ab any other cost or expense, not listed on Schedule 1.03,
including, but not limited to, any cost or expense incurred in building
residential homes (for example, the Purchaser shall not be responsible for
paying any contractor or subcontractor that worked on a residential home if
the sale of such home closed prior to the Closing Date, unless those costs are
included in the liabilities set forth on Schedule 1.03); Seller shall retain
the responsibility for all of Seller's pre-closing operating expenses,
including but not limited to rent, utility bills, and promotional and
advertising expenses;
(h) ab 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; or
(i) ab any liability arising from any circumstances arising on or
before the Closing Date not listed on Schedule 1.03.
1.04 ab Section. Purchase Price. The aggregate consideration
(the "Purchase Price") to be paid by the Purchaser to the Seller for the
Acquired Assets shall be:
(a) ab cash in the amount equal to the sum of (i) Three Million
Dollars ($3,270,000.00), plus (ii) an amount equal to the Net Assets as of
Closing, payable in accordance with Section 1.05 (the "Closing Date Payment");
(b) ab a promissory note (the "Note"), in the form of Exhibit 1.04(b)
attached hereto, to be delivered at Closing in the aggregate principal amount
of Five Hundred Thousand Dollars ($500,000) bearing interest at 5.50% per
annum, payable in two equal installments (plus accrued interest thereon) on
January 15, 1999 and January 15, 2000 (the "Payment Dates"); provided,
however, that the principal amount due on each Payment Date shall be reduced
on a dollar-for-dollar basis (the "Reduced Amount") to the extent that the net
operating income of the Company attributable to the Paragon Operations (the
"Paragon Net Income"), determined in accordance with Section 1.06, for the
years ending December 31, 1998 and December 31, 1999 is less than One Million
Five Hundred Thousand Dollars ($1,500,000) per year; and, provided
further, that the Purchaser shall not be obligated to pay any amount of
interest due on each Payment Date that has accrued on the Reduced Amount;
(c) ab cash payments in each of 1999 and 2000 (the "Earn-Out
Payments") in an aggregate amount equal to the lesser of (i) thirty-five
percent (35%) of the Paragon Net Income in excess of One Million Five Hundred
Thousand Dollars ($1,500,000) for each of the twelve-month periods (the
"Earn-Out Periods") ending May 1, 1999 and May 1, 2000, or (ii) One Hundred
Seventy-Five Thousand Dollars ($175,000) for each of the Earn-Out Periods;
provided, however, that the Purchaser shall not be obligated to make any
such Earn-Out Payments to the Seller unless the Paragon Operations achieve at
least a twenty-five percent (25%) return on assets for the applicable Earn-Out
Period; and provided further that the Purchaser shall not be obligated to make
an Earn-Out Payment to the Purchaser if the Seller or Hyneman breaches any
term or condition of the Noncompetition Agreement, or if Richerson is
terminated for "Cause" (as defined in the Employment Agreement), submits his
resignation or otherwise voluntarily ceases his employment with the Purchaser
prior to the date such Earn-Out Payment becomes due and payable. The
Purchaser shall pay the Earn-Out Payments, if any, within ninety (90) days
after the close of the preceding Earn-Out Period. The Earn-Out Payments shall
be calculated in accordance with GAAP reflected in Crossmann's audited annual
financial statements. The Purchaser shall submit to the Seller its
determination of each of the Earn-Out Payments within forty-five (45) days
after the close of the preceding Earn-Out Period. In the event that the
Seller objects to the Purchaser's determination, the parties shall work
together to obtain a mutually acceptable determination. If a mutually
agreeable determination cannot be agreed upon within ten (10) business days of
the Seller's objection, the amount of the disputed Earn-Out Payment shall be
determined by an independent third party selected by the Seller and the
Purchaser. The cost of obtaining such an independent third party shall be
borne equally by the Seller and the Purchaser; and
(d) ab the assumption of the Assumed Liabilities.
1.05 ab Section. Closing Date Payment. The Net Assets at
Closing shall be determined by the Seller. The Seller shall submit its
determination of the Net Assets at Closing to the Purchaser for approval at
least three business days before the Closing Date. Purchaser shall pay to the
Seller the Closing Date Payment by check or by wire transfer of next-day funds
pursuant to payment instructions provided by the Seller. In the event,
however, that Purchaser objects to the Seller's determination, the parties
shall work together to reach a mutually acceptable determination. If a
mutually acceptable determination cannot be agreed upon prior to Closing, the
Net Assets at Closing shall be determined by an independent third party
selected by the Seller and the Purchaser. The cost of obtaining such an
independent third party shall be borne equally by the Seller and the
Purchaser.
1.06 ab Section. Determination of Paragon Net Income.
(a) ab The Paragon Net Income shall be equal to "Income before taxes"
of the Company derived from the Paragon Operations, 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 the Paragon Net Income shall be determined taking into account the
following item:
(i)Funds provided to the Company by Crossmann to finance the
Company's acquisition of land, construction of residential homes, and
operations in the Memphis metropolitan area in an amount equal to a percentage
of the operating assets of the Company directly related to the Paragon
Operations, which funds shall bear interest at the prime rate (as such rate is
set from time to time by Bank One Indianapolis, N.A.). Except for the
financing charge set forth in this subsection (a)(i), the parties expressly
agree that no overhead charge or other indirect charge of Crossmann or the
Company will be levied on or allocated to the Paragon Operations in the
determination of the Paragon Net Income. In addition, the parties expressly
agree that any post-closing transactions between the Paragon Operations and
Crossmann, or any division or subsidiary of Crossmann, will be conducted on an
arms-length basis.
1.07 ab Section. Withholding of Tax. At Closing, the Purchaser
shall withhold from the Purchase Price and pay to any applicable federal or
state taxing authority any and all amounts owed by the Seller which the
Purchaser is required to withhold and pay over to a federal or state taxing
agency by law.
1.08 ab Section. Subsequent Documentation. At any time and from
time to time after the Closing Date and without any further consideration, the
Seller shall, upon the request of the Purchaser, and the Purchaser shall, upon
the request of the Seller, 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.
1.09 ab Section. Allocation of Purchase Price. The Purchase
Price shall be allocated among the Acquired Assets as mutually agreed upon by
the parties and set forth on Schedule 1.09.
II abARTICLE
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As a material inducement to the Purchaser to enter into this Agreement
and other agreements and documents executed by the Purchaser in connection
with this Agreement, and to consummate the transactions contemplated hereby
and thereby, Paragon, Hyneman and Richerson jointly and severally represent
and warrant to the Purchaser that:
2.01 ab Section. Title to Property. Except as set forth in
Schedule 2.01, the Seller has good, valid and marketable title to all of the
Acquired Assets, 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, except for liens
for property taxes not yet due and payable.
2.02 ab Section. Authority; Consent. Paragon has 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. Seller
has the full capacity, right, power, and authority to sell, transfer, assign,
and deliver each and all of the Acquired Assets to the Purchaser. The
execution and delivery of this Agreement by Seller and the consummation by
Seller of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the Board of Managers and
the Members of Paragon. This Agreement constitutes a valid and binding
obligation of Seller enforceable 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
Seller to make this Agreement valid and binding upon it and enforceable
against it 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 Seller with any of the
provisions of this Agreement will:
(a) ab 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
Organization or the Operating Agreement of Paragon, or any of the terms,
conditions or provisions of any note, credit agreement, security or pledge
agreement, lien, bond, mortgage, indenture, license, lease, contract,
commitment, agreement, understanding, arrangement, restriction, or other
instrument or obligation to which Paragon is a party or by which Paragon or
any of its respective properties or assets may be bound;
(b) ab 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 Paragon or any of its respective properties, assets, or
outstanding membership interests shares, or other securities of Paragon; or
(c) ab Constitute an event which, with or without notice, lapse of
time, or action by a third party, could trigger a default of any of the
Assumed Liabilities, or any portion thereof, result in the creation of any
lien, charge, or encumbrance upon any of the assets or properties of Paragon,
or upon the Acquired Assets, or cause the maturity of any liability,
obligation, or debt of Paragon to be accelerated or increased.
2.03 ab Section. Consents and Approvals. Except as set forth on
Schedule 2.03, the execution, delivery, and performance of this Agreement by
the Seller or the consummation by the Seller 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.
2.04 ab Section. Organization. Paragon is a limited liability
company duly organized, validly existing, and in good standing under the laws
of the State of Tennessee. The Seller has all the requisite power and
authority to own, lease, and operate its properties and to carry on its
business operations as it is now being conducted. Prior to the Closing, the
Seller will deliver to the Purchaser (a) a copy of the Articles of
Organization and Operating Agreement, including all amendments thereto, of
Paragon certified as true, complete, and presently in effect by the Secretary
of Paragon, and (b) Certificate of Good Standing of Paragon issued by the
Secretary of State for the State of Tennessee.
2.05 ab Section. Financial Statements of the Seller. True and
complete copies of the annual financial statements of the Seller for each of
the years 1995, 1996 and 1997 and the internally prepared interim balance
sheets and income statements of the Seller as of April 30, 1998, are attached
hereto as Schedule 2.05 (collectively the "Financial Statements of the
Seller"). The Financial Statements of the Seller are true and correct in all
material aspects, have been prepared from the books and records of the Seller
in accordance with accounting principles consistently applied, and contain and
reflect all material adjustments or accruals necessary for a fair presentation
of the financial condition and results of the operations of the Seller for the
periods indicated.
2.06 ab Section. Tax Matters. Except as set forth in Schedule
2.06:
(a) ab 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),
transfer, 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 paid (and, to the extent applicable,
withheld) in full (or are adequately reflected as a liability in the Interim
Financial Statements);
(b) ab 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; and
(c) ab 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.
2.07 ab Section. Compliance with Laws; No Default or Litigation.
Except as set forth in Schedule 2.07:
(a) ab The Seller is not in default or violation (nor is there, to the
knowledge of the Seller, 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 any of the Acquired Assets 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) ab There are no actions, suits, claims, investigations, or legal
arbitration or administrative proceedings in progress, pending, or, to the
knowledge of the Seller, threatened by or against the Seller (or any of the
Acquired Assets) 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) ab No action, suit, or proceeding has been instituted or, to the
knowledge of the Seller, threatened to restrain, prohibit, or otherwise
challenge the legality or validity of the transactions contemplated by this
Agreement.
2.08 ab Section. Personal Property Owned. Schedule 2.08
contains a list and brief description of all model homes, tools, furniture,
furnishings, fixtures, machinery, supplies, vehicles, equipment, and all other
items of tangible personal property owned or used by Seller (the "Personal
Property").
2.09 ab Section. Personal Property Leased. Schedule 2.09
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 on or before the Closing
will deliver to the Purchaser copies of the leases and agreements listed in
Schedule 2.09. 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 2.09.
Except as disclosed in Schedule 2.09, 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 as to the Leased
Personal Property. None of the Acquired Assets is subject to any lease other
than as set forth in Schedule 2.09 or Schedule 2.12.
2.10 ab Section. Developed Real Property. Schedule 2.10 lists
and contains a legal description of each parcel of Developed Real Property in
which Seller owns an interest. For purposes of this Agreement, Developed Real
Property is real property, owned by the Seller, which (i) has all necessary
access to and from public highways, streets, and roads and for which no
pending or threatened proceeding or other fact or condition exists that could
limit or result in the termination of such access and (ii) (A) is or can be
connected to and, where applicable, serviced by electric, gas, sewage or
septic, telephone, and public or private water facilities, and, when so
connected, will be in compliance in all material respects with all applicable
laws and (B) for which all applicable installation and connection charges have
been paid in full, to the best of Seller's knowledge and belief. Developed
Real Property shall not include Land Contract Property and Land Option
Property (as those terms are defined below). Except as set forth on Schedule
2.10, Developed Real Property is Substantially Complete. For purposes of
this Agreement, "Substantially Complete" means that each and all of the
requirements listed below have been met with respect to the Developed Real
Property and each lot contained therein (a "Lot" or "Lots"):
(a) ab Final subdivision plats have been approved by all applicable
governmental authorities and recorded in the official records of the county,
municipality or applicable governmental authority;
(b) ab Final acceptance letters have been issued by the appropriate
governmental authority which evidence that such authority has accepted for
permanent maintenance all the streets, water lines, sanitary sewer, and storm
sewers for the Lots;
(c) ab The appropriate governmental authority has certified that
operable water and sewer taps are available to each of the Lots; and
(d) ab The appropriate governmental authority has certified that
building permits are obtainable for the construction of single-family houses
on the Lots.
2.11 ab Section. Undeveloped Real Property. Schedule 2.11
lists and sets forth the legal description (or such other description legally
sufficient to identify the subject property) of each parcel of Undeveloped
Real Property in which Seller owns an interest (the "Undeveloped Real
Property"). For purposes of this Agreement, "Undeveloped Real Property" shall
be defined as all real property which is not Developed Real Property, Land
Contract Property or Land Option Property. Except as set forth on Schedule
2.11, no fact, condition or restriction could preclude or prevent the
Undeveloped Real Property from (a) having access to and from public highways,
streets, and roads or (b) being connected to and, where applicable, serviced
by electric, gas, sewage or septic, telephone, and public or private water
facilities. Except as set forth on Schedule 2.11, Seller has secured all
easements and public dedications necessary to connect the utilities referenced
above from their current locations to the boundary of each parcel of
Undeveloped Real Property as such boundaries currently exist.
2.12 ab Section. Real Property Leases. Schedule 2.12 contains
a list and brief description of each agreement, arrangement, contract,
commitment, lease or usufruct (each, a "Real Property Lease") pursuant to
which Seller is the lessor or the lessee (or has an equivalent interest in the
case of usufructs or other arrangements which may not be leases under
applicable law) of any real property (the "Leased Real Property"). As to each
Real Property Lease, (a) Seller has neither delivered nor received notice that
any breach or event of default exists, and (b) no condition or event has
occurred that with the giving of notice, the lapse of time, or both would
constitute a breach or event of default by Seller or any other person or
entity.
2.13 ab Section. Land Contracts.
(a) ab Schedule 2.13(a) contains a list and brief description of all
written and oral agreements, arrangements, contracts, and commitments pursuant
to which Seller (i) is obligated to purchase any developed or undeveloped real
property (the "Land Contract Property"), or (ii) possesses an option to
acquire any developed or undeveloped real property (the "Option Real
Property") as of the date hereof. Schedule 2.13(a) also sets forth the
legal description of each parcel of Land Contract Property and Option Real
Property, or such other description legally sufficient to identify the subject
property.
(b) ab Each parcel of developed real property included in the Land
Contract Property, when and if purchased, will satisfy all of the
representations and warranties set forth herein concerning the Developed Real
Property. Each parcel of undeveloped real property included in the Land
Contract Property, when and if purchased, will satisfy all of the
representations and warranties set forth herein concerning the Undeveloped
Real Property.
(c) ab Schedule 2.13(c) sets forth all letters of intent and similar
proposals relating to the purchase of real property by Seller which have not
expired or been terminated.
2.14 ab Section. Real Property Generally.
(a) ab Good and Marketable Title. Seller has good and marketable
title in fee simple to its Developed Real Property, Undeveloped Real Property
and Land Contract Property (collectively, the "Real Property"), except as set
forth on Schedule 2.14(a) and except that Seller will not acquire such title
to its Land Contract Property until the acquisition thereof. The Real
Property constitutes all of the real property which Seller owns or has a right
to acquire or in which it otherwise has an interest, except for the Excluded
Assets, and except for any easements, rights of way, covenants, servitude,
licenses or other interests, whether arising by contract, statute, regulation,
common law, equity or otherwise which are appurtenant to any Real Property.
(b) ab No Breach or Default. Except as set forth in Schedule
2.14(b), the Seller has not given nor has it received any written notice that
a breach or an event of default exists any under or with respect to any
agreements, arrangements, contracts, covenants, conditions, deeds, deeds of
trust, rights-of-way, easements, mortgages, restrictions, surveys, title
insurance policies, and other documents granting Seller title to or an
interest in or otherwise affecting the Real Property, and, to the knowledge of
the Seller, no condition or event has occurred that with the giving of notice,
the lapse of time, or both would constitute a breach or event of default of
any such agreement or document, by Seller or any other person or entity.
(c) ab No Condemnation. No condemnation, eminent domain, or similar
proceeding exists, is pending or, to the knowledge of the Seller, is
threatened with respect to, or that could affect, any Real Property or its
development or the construction, marketing, or sale of dwellings situated
thereon or the insurability or marketability of the title thereto.
(d) ab Compliance with Laws. The buildings and improvements on and
the subdivision of the Real Property do not violate (i) any applicable law,
including any building, set-back, or zoning law, ordinance, regulation, or
statute, or other governmental restriction in the nature thereof, or (ii) any
enforceable restrictive covenant affecting any such property.
(e) ab Parties in Possession. There are no parties in possession of
any portion of the Real Property as lessees, tenants at sufferance, or
trespassers, except for rightful possessors of the Option Property, the Leased
Property, or the Land Contract Property.
(f) ab Site Obligations. Except as set forth on Schedule 2.14(f),
no Real Property is subject to any condition or obligation to any governmental
entity or other person or entity requiring the owner or any transferee thereof
to donate land (except for incidental rights of way), money or other property
or to make off-site public improvements.
(g) ab Assessments. No developer-related charges or assessments by
any public authority or any other person or entity for public improvements or
otherwise made against the Real Property are unpaid (other than those set
forth on the Financial Statements of the Seller or incurred since the date
thereof in the ordinary course of business consistent with past practices),
including without limitation those for construction of sewer lines, water
lines, storm drainage systems, electric lines, natural gas lines, streets
(including perimeter streets), roads and curbs, excluding homeowner
association dues, utility connection fees, and per lot impact fees.
(h) ab Subdivision Standards. Except as set forth on Schedule
2.14(h), the Real Property and all lots included therein conform to the
appropriate governmental authority's subdivision standards, and there is no
material impediment to subdivision approval for the Undeveloped Real Property,
such approval to allow development of the Undeveloped Real Property for
construction and sale of single family homes at the density and materially in
the manner in which title Seller currently anticipates building thereon.
(i) ab Moratoria. There is no moratorium applicable to any of the
Real Property, to the extent Seller plans further development thereof, on (i)
the issuance of building permits for the construction of houses, or
certificates of occupancy therefor, or (ii) the purchase of sewer or water
taps to the extent the Seller plans or is required to rely on public water or
sewer facilities.
(j) ab Construction Conditions. Except as set forth on Schedule
2.14(j), each of the lots included in the Developed Real Property, developed
real property included in the Land Contract Property and developed real
property included in the Land Option Property is stable and otherwise suitable
for the construction of a residential structure by customary means and without
extraordinary site preparation measures.
(k) ab Certain Prior Uses. Except as set forth on Schedule
2.14(k), none of the Real Property has a gravesite that will materially
impede the development of residential homes and no permanent structures have
been constructed on a fill or borrow area in a manner that materially
adversely affects the Seller's intended use thereof or that does not comply
with any applicable law in any material respect.
(l) ab Claims. Except as set forth on Schedule 2.14(l), no action
described in Section 2.07(b) or (c) is pending or, to the knowledge of the
Seller, threatened against the Seller with respect to any of the Real
Property. All of the Real Property is in compliance with all applicable
zoning and subdivision ordinances and none of the development-site preparation
and construction work performed on the Real Property has concentrated or
diverted surface water or percolating water improperly onto or from the Real
Property in a manner that affects Seller's present or intended use thereof or
the value of the Real Property.
(m) ab Third Party Rights. Except as set forth on Schedule
2.14(m), Seller has not granted to any person or entity any material contract
or other right to the use of any portion of the Real Property or to the
furnishing or use of any facility or amenity on or relating to the Real
Property, other than sales contracts in the ordinary course of business.
(n) ab Zoning. Except as set forth on Schedule 2.14(n), all of
the Real Property is zoned to permit single-family home construction and
occupancy thereon.
2.15 ab Section. Homeowner's Associations.
(a) ab Schedule 2.15 sets forth a list of all homeowner associations
in which the Seller has or has had declarant rights (the "Homeowner
Associations") and all amounts owing between Seller and the Homeowner
Associations.
(b) ab Except as set forth on Schedule 2.15, (i) all restrictive
covenants and other documents used by Seller in connection with the creation
and operation of the Homeowner Associations (A) in which Seller previously had
declarant rights complied in all materials respects with applicable laws at
the time the same were promulgated, and (B) in which Seller currently has
declarant rights currently comply in all material respects with applicable
laws, and (ii) all material disclosures and deliveries of information and
documents required by applicable laws as to such Homeowner Associations and
their creation and operation have been materially complied with.
(c) ab To the knowledge of the Seller, no other claims exist by a
Homeowner Association against Seller, and each Homeowner Association has been
operated, so long as Seller has participated therein, in accordance with
applicable laws.
2.16 ab Section. Environmental Compliance. Except as set forth
in Schedule 2.16:
(a) ab The Seller has at all times complied with all applicable
Environmental Requirements in its development, construction and disposition of
the Real Property. Further, to the knowledge of the Seller, no current or
previous owner of any Real Property materially violated any Environmental
Requirements;
(b) ab No Hazardous Material has ever been generated, manufactured,
refined, used, transported, treated, stored, handled, disposed, transferred,
produced, or processed at, to, or on any Real Property and no Hazardous
Material has ever been incorporated into any Real Property;
(c) ab There are no existing or, to the knowledge of the Seller,
potential Environmental Claims relating to any Real 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 Real Property by or on behalf of the Seller;
(d) ab (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 Real 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 Real Property;
(e) ab There are no PCBs or friable asbestos located or contained at,
on, or in any Real Property;
(f) ab No lien or other encumbrance has been imposed on any Real
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 Real Property or a violation of any Environmental Requirement;
(g) ab The Seller has not received any notices issued pursuant to the
citizen's suit provision of any Environmental Requirement relating to any Real
Property;
(h) ab 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 Real Property;
(i) ab There have been no environmental investigations, site
assessments or audits, or soil or groundwater sampling conducted at any Real
Property by the Seller, or, to the Seller's knowledge, by any other person.
(j) ab None of the Real Property on which the Seller intends to
construct a residential dwelling is located within a "critical,"
"preservation," "conservation" or similar type of area which will materially
affect the Seller's present development plans therefor. No wetlands exist
which will restrict development of any of the Real Property as contemplated by
the Seller nor render the cost of its development of any Real Property
materially in excess of the Seller's budget therefor. No portion of the Real
Property which the Seller has developed or intends to develop for residential
lots and dwellings is situated within a "noise cone" such that the Federal
Housing Administration will not approve mortgages due to the noise level
classification of such real property. Any Real Property which cannot be
developed in accordance with its official development plan and preliminary
plot without materially increasing development costs above those contemplated
by the Seller or materially delaying construction shall be listed on Schedule
2.16.
2.17 ab Section. Contracts.
(a) ab Schedule 2.17(a) lists the following contracts and leases
(other than those described in Schedule 1.03, Schedule 2.09, and Schedule
2.12), including all amendments thereto, to which Paragon is a party (all the
contracts, leases and amendments thereto listed on Schedules 1.03, 2.09,
2.12 and 2.17(a) are defined as the "Contracts") including, but not
limited to all;
(1) ab Loans, lines of credit, letters of credit, security agreements,
pledges, mortgages, hypothecations, loan agreements, guaranties, or other
payment or collateral obligations;
(2) ab Agreements of guaranty or indemnification;
(3) ab Agreements, contracts, and commitments containing any covenant,
condition, or promise limiting the right of the Seller to engage in any
activity or compete with any person;
(4) ab Written employment agreements, contracts, policies, and
commitments with or between Paragon and any of their respective employees,
directors, or officers, including without limitation those relating to
severance;
(5) ab Material written agreements with employees as a group;
(6) ab Contracts with suppliers and vendors of parts, equipment, and
other items used by the Seller in the ordinary course of business; and
(7) ab Joint venture or partnership agreements.
Notwithstanding the above, the term "Contract" does not include any agreement
relating to an Excluded Asset which agreement will not be assigned by Seller
to the Purchaser pursuant to this transaction.
(b) ab 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 2.17(a),
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 2.17(b), (i) none of the
Contracts contain any provision that is triggered by any of the transactions
contemplated by this Agreement; (ii) none of the Contracts contain a provision
imposing a penalty if any of the amounts due thereunder are prepaid; (iii)
there is not any existing default or, to the knowledge of the Seller, 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; (iv) to the knowledge of
the Seller, none of the material suppliers, vendors or subcontractors used by
Seller has, or intends to, terminate or change significantly its relationship
with the Seller. Copies of the Contracts in written form have been delivered
or will be delivered to the Purchaser prior to the Closing.
2.18 ab Section. Accounts and Notes Receivable. The Seller on
or before the Closing will deliver to the Purchaser a list of Accounts
Receivable owing to the Seller from its customers and all other parties as of
the date of Closing with such list to be set forth in Schedule 2.18. Such
list shall include the amount of the obligation, date the obligation was
created, date when the obligation is due, and any applicable penalties or
discounts. The Seller has no knowledge of any facts or circumstances which
will interfere with the collection of Accounts Receivable in accordance with
their terms.
2.19 ab Section. Licenses and Permits. The Seller possesses all
franchises, licenses, permits, certificates, approvals, consents, clearances,
notifications, registrations, and other authorizations necessary to conduct
its business operations as now conducted (the "Licenses" or "Permits").
Except as provided in Schedule 2.19, all builder's permits with respect to
each Lot which is an Acquired Asset 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 such
builder's permits.
2.20 ab Section. Intellectual Property. Except as set forth in
Schedule 2.20, Seller owns or possesses all corporate names, trade names,
trademarks, service marks, mailing lists, copyrights, works of art, trade
secrets, computer programs, know-how, proprietary processes and formulae,
technology and all other proprietary technical information, whether patentable
or unpatentable, and all applications and registrations of the foregoing
(collectively, "Intellectual Property"), necessary to conduct the business of
the Seller as presently operated. Schedule 2.20 also contains a list and
brief description of all such Intellectual Property in written form which has
been registered with any state trademark office, with the U.S. Patent and
Trademark Office or with the U.S. Copyright Office, including computer
programs having a cost to Seller in excess of One Thousand Dollars ($1,000.00)
per copy. Except as set forth in Schedule 2.20, each copyright claimed to
be owned by Seller relating to a work of art created prior to January 1, 1978
has been properly registered by Seller claiming ownership with the U.S.
Copyright Office. Except as set forth in Schedule 2.20, Seller is not
infringing upon or otherwise acting adversely to, or engaging in the
unauthorized use or misappropriation of, any Intellectual Property, rights of
publicity, or rights of privacy which are owned by any other person or entity,
and there is no claim or action by any such person or entity pending or
threatened with respect thereto.
2.21 ab Section. Labor Relations: Employees. As of April 30,
1998, the Seller employed a total of 9 employees. As of the Closing Date,
except as set forth in Schedule 2.21:
(a) ab 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) ab 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) ab 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) ab There is no labor dispute, strike, work stoppage, interference
with production, or slowdown in progress, threatened against, or involving the
Seller;
(e) ab 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) ab There is no grievance pending or threatened which might have a
material adverse effect on the Seller, or on the conduct of the business of
the Seller;
(g) ab 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) ab There is no dispute, claim, or proceeding pending with or
threatened by the Immigration and Naturalization Service with respect to the
Seller.
2.22 ab Section. Employee Benefit Plans.
(a) ab Schedule 2.22, 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
2.22, 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) ab 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 2.22, 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) ab 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) ab 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) ab The Seller is not obligated to contribute to any multi-employer
plan (as defined in ERISA Section 3(37).
(f) ab The Seller has complied with the requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(hereinafter referred to as ("COBRA")) and the rules and regulations
thereunder. Seller shall be solely responsible and liable for providing any
and all benefits to employees or others (or their covered dependents) of
Seller required under COBRA arising from any qualifying event as defined under
Code Section 4980B(f)(3) and ERISA Section 603 occurring on or before Closing.
2.23 ab Section. Warranty Liability. Except as set forth in
Schedule 2.23, the Seller has not (a) incurred any costs in regard to any
Warranty Liability at any time (b) the Seller has not been notified, in
writing or orally, of any pending or potential Warranty Liability which has
arisen or may arise in the future, (c) nor does Seller have reason to
anticipate any pending or potential Warranty Liability.
2.24 ab Section. Letters of Intent and Sale Discussions. Except
for the Letter of Intent by and between Crossmann and Paragon, dated March 2,
1998, the Seller has not entered into any binding letter of intent nor other
agreement pursuant to which the Seller has agreed to merge or consolidate, in
whole or in part, 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 of residential homes made in the ordinary course of business.
2.25 ab Section. Due Diligence. With 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.
2.26 ab Section. Disclosure. This 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.
2.27 ab Section. Survival. All representations and warranties
contained in this Agreement, except those in Sections 2.06 and 2.16, shall
survive the execution, delivery, and performance hereof for a period of
eighteen (18) months after the Closing Date, provided, however, that the
representations contained in Section 2.06 relating to tax matters and the
obligation to indemnify with respect to a breach thereof shall survive for so
long as the applicable statute of limitations, as set forth in the Internal
Revenue Code; and, provided further, that the representations contained in
Section 2.16 relating to environmental matters and the obligation to
indemnify with respect to a breach thereof shall survive for so long as any
environmental regulatory authority shall have the power to make any claim,
assessment or reassessment with respect thereto. Notwithstanding the
foregoing, the representations contained in Section 2.16 relating to
environmental matters and the obligation to indemnify with respect to a breach
thereof relating to any specific property shall survive for a period of five
(5) years from the date on which the Seller has delivered to Purchaser and the
Purchaser has accepted in writing from the Seller a reasonably acceptable
"Phase I" environmental site assessment relating to that property, as provided
for in Section 4.08
2.28 ab Section. Other Limitations. Seller's liability for a
breach of a representation or warranty contained in this Agreement shall be
limited as provided for in Section 4.10.
III abARTICLE
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to the Seller to enter into this Agreement and
to consummate the transactions contemplated by this Agreement, the Company and
Crossmann represent and warrant to the Seller that:
3.01 ab Section. Authority: Consent. Each of the Company and
Crossmann 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 fulfill 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 Company and Crossmann and the consummation by the Company and
Crossmann of the transactions contemplated herein have been duly and validly
authorized by all necessary actions on the part of the boards of directors of
the Company and Crossmann. This Agreement constitutes a valid and binding
obligation of the Company 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 Company or Crossmann to make this Agreement
valid and binding upon the Company and Crossmann and enforceable against the
Company 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 Company and Crossmann with any of the provisions of this
Agreement will:
(a) ab 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 Company or Crossmann is a party or by which the
Company, Crossmann or any of their respective properties or assets may be
bound;
(b) ab 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 Company, Crossmann or any of their respective properties,
assets, outstanding shares or other securities; or
(c) ab 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 Company or
Crossmann, or cause the maturity of any liability, obligation, or debt of the
Company or Crossmann to be accelerated or increased.
3.02 ab Section. Consents and Approvals. Except as set out in
Schedule 3.02, the execution and delivery of this Agreement by the Company
and Crossmann and the consummation by the Company 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.
3.03 ab Section. Corporate Organization. The Company is a
limited liability company, duly organized, validly existing, and in good
standing under the laws of the State of Tennessee. The Company is a
wholly-owned subsidiary of Crossmann. 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. Prior to the
Closing, Crossmann will deliver to the Seller (a) a true and complete copy of
the Articles of Incorporation, including all amendments thereto, of Crossmann,
(b) a Certificate of Existence (or similar document) of Crossmann issued by
the Secretary of State for the State of Indiana, and (c) a copy of the
By-laws, including all amendments thereto, of Crossmann certified as true and
complete and presently in effect by the Secretary of Crossmann.
IV abARTICLE
INDEMNIFICATION
4.01 ab Section. Indemnification by Seller. Seller shall
indemnify and hold harmless the Company, and its 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 if the Company prevails in such suit) (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 any breach or
failure of the Seller to perform any covenant or obligation of the Seller
contained in this Agreement or any related agreement, instrument, document,
exhibit, schedule or certificate furnished or required to be furnished by the
Seller pursuant to this Agreement, or any nonfulfillment of any of the
covenants or agreements of the Seller contained in this Agreement, (b) any
liability, obligation, or commitment of any nature (absolute, accrued,
contingent, or other) of the Seller 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.
The Seller agrees to indemnify and hold harmless the Purchaser from and
against any and all Warranty Liabilities. Purchaser will notify Seller, in
writing, of any pending Warranty Liability. The Seller shall have fifteen
(15) Business Days to notify the Purchaser, in writing, that the Seller will
assume full responsibility for the payment and resolution of each Warranty
Liability. Failure of the Seller to respond within fifteen (15) Business Days
shall be deemed a waiver by the Seller of its right to assume responsibility
for the Warranty Liability. Upon notification to the Purchaser by the Seller
that the Seller intends to assume responsibility for any Warranty Liability,
that Warranty Liability shall remain the full responsibility of Seller until
the problem giving rise to the Warranty Liability has been resolved.
Notwithstanding the foregoing, the parties agree that Purchaser may take any
actions during the fifteen (15) Business Days as may be reasonably necessary
to mitigate or prevent the occurrence of any additional costs associated with
a Warranty Liability; Seller shall remain responsible for such mitigation
expenses.
4.02 ab Section. Indemnification by the Purchaser. The
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 Assumed Liability, and (c) any and all suits, actions,
investigations, proceedings, demands, assessments, audits, and judgments
arising out of any of the foregoing.
4.03 ab Section. Notice. If 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 IV, 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. To the extent failure to promptly notify the
Indemnifying Party of such action or suit can reasonably be deemed to increase
the liability or expense to the Claimant, the Indemnifying Party shall not be
obligated to reimburse claimant for the amount of the increase in liability or
expense.
4.04 ab Section. Arbitration.
(a) ab If the Indemnifying Party does not agree that the Claimant is
entitled to reimbursement for the full amount specified in the Indemnification
Notice or Litigation Notice, as the case may be, the Indemnifying Party shall
notify the Claimant (the "Disagreement Notice") within thirty (30) 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 acknowledgment 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 independent of
the parties and reasonably experienced in conducting arbitration proceedings
relating to similar matters and all arbitrators shall be selected within
thirty (30) days of the delivery of the Arbitration Notice. An arbitration
hearing shall then be held within thirty (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 thirty (30) days of such hearing. All procedures with respect to the
arbitration proceeding provided for in this Section 4.04(a) shall be in
accordance with the rules of the American Arbitration Association, except as
otherwise specifically set forth in this Agreement.
(b) ab Each party shall be responsible for its own costs and expenses
incurred in conducting the arbitration proceeding provided for in Section
4.04(a), including attorneys' fees.
(c) ab The parties hereby irrevocably consent to be bound by the
decision of the arbitration tribunal with respect to indemnification
determinations.
4.05 ab Section. Defense of Claims. The Indemnifying Party
shall have twenty (20) 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; provided, however, that the right of Claimant to
indemnification hereunder shall not be conclusively established hereby. 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 IV, 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 IV. In the event of a settlement under this Section 4.05(d), the
Claimant shall also reimburse the Indemnifying Party for fees and costs
incurred by the Indemnifying Party prior to the settlement.
4.06 ab Section. Computation of Indemnity Losses. The amount of
Indemnity Losses hereunder shall be computed after giving effect to the
receipt of any and all insurance proceeds with respect thereto.
4.07 ab Section. Payment of Losses. The 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 IV, 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 4.04 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 the trial court or administrative body having jurisdiction
over such proceeding. In addition to the foregoing, the Seller agrees 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 pursuant to the preceding sentence) by
notifying the Seller that the Purchaser is reducing or eliminating the
payments due to the Seller under the Note, the Oakland Note or the Earn-Out
Payments, as the case may be. In the event of a dispute with respect to any
indemnification claims by Purchaser, Purchaser shall have the right to place
amounts otherwise payable under the Note or the Earn-Out Payments into escrow
pending resolution of such dispute.
4.08 ab Section. Survival. Notwithstanding the foregoing, the
Indemnifying Party shall have no liability with respect to any Indemnity Loss
Notice which is not received by the Indemnifying Party pursuant to Section
4.03 hereof within eighteen (18) months after the Closing Date; provided,
however, that the Indemnifying Party shall remain liable for any Indemnity
Loss arising from a breach of any representation contained in Section 2.06
relating to tax matters and the obligation to indemnify with respect to a
breach thereof shall survive for so long as the applicable statute of
limitations, as set forth in the Internal Revenue Code; and, provided
further, that the Indemnifying Party shall remain liable for any Indemnity
Loss arising from a breach of any representation contained in Section 2.16
relating to environmental matters and the obligation to indemnify with respect
to a breach thereof (an "Environmental Obligation") shall survive for so long
as any environmental regulatory authority shall have the power to make any
claim, assessment or reassessment with respect thereto. Notwithstanding the
foregoing, the Indemnifying Party shall have no obligation with respect to an
Environmental Obligation relating to any specific property after the date five
(5) years from the date on which the Seller has delivered to Purchaser and the
Purchaser has accepted in writing from the Seller a reasonably acceptable
"Phase I" environmental site assessment relating to that property (a "Phase
I"). The scope and performance of each Phase I shall meet or exceed ASTM
Standard practice E1527-94, Standard Practice for Environmental Site
Assessment Process. Each Phase I shall be addressed to Purchaser or
accompanied by a reliance letter addressed to the Purchaser and shall be
prepared by a consulting firm acceptable to Purchaser. The cost and expense
of obtaining such Phase I shall be borne solely by the Seller. In the event
Seller elects to obtain an insurance policy or insurance policies to insure
itself against any Environmental Obligation, Seller shall name Crossmann and
the Company as additional payees.
4.09 ab Section. Changes to Representations and Warranties.
Upon the delivery by the Seller to the Purchaser of a reasonably acceptable
Phase I relating to any specific property and conforming in scope and
performance to the specifications set forth in Section 4.08, the
representations contained in Section 2.16 (b), (c), (d), (e) and (j) with
respect to such property will be deemed to have been satisfied if Seller has
no knowledge of any of the events, conditions, acts or omissions specified in
such representations.
4.10 ab Section. Other Limitations. Notwithstanding the
foregoing, (i) an Indemnifying Party shall only be liable to a Claimant to the
extent the aggregate amount of Indemnity Losses exceeds $40,000; and (ii) the
Seller's aggregate liability shall be limited to an amount equal to the
Purchase Price.
V abARTICLE
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER
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:
5.01 ab Section. Performance of the Obligations of the Purchaser.
The Purchaser shall have performed in all material respects all obligations
under this Agreement on or before the Closing Date, the representations and
warranties of the Purchaser set forth in Article III shall remain true,
correct, and complete in all material respects as of 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.
5.02 ab Section. Consents and Approvals. All 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.
5.03 ab Section. No Violation of Orders. No 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.
VI abARTICLE
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.
6.01 ab Section. Performance of the Obligations of the Seller.
The Seller shall have performed in all material respects all obligations under
this Agreement on or before the Closing Date, the representations and
warranties of the Seller set forth in Article II shall remain true, correct,
and complete in all material respects as of the Closing Date, and the
Purchaser shall have received a certificate from the Seller to that effect
dated the Closing Date and signed by the President or any other duly
authorized officer of the Seller.
6.02 ab Section. Completion of Due Diligence. The 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
operations of Seller, including, but not limited to, the information set forth
on the Schedules to this Agreement.
6.03 ab Section. Consents and Approvals. All Permits and
Licenses necessary to conduct the business of Seller as now conducted,
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, 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 Contracts specified in Schedule 2.17(a), Schedule
1.03, Schedule 2.09, or Schedule 2.12 shall have provided its written
consent to the assignment of the Contract to the Purchaser as provided herein,
to the extent such consent is required.
6.04 ab Section. No Violation of Orders. No 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 Paragon Operations, or the financial condition of the
Seller shall be in effect, and no proceeding relating to any order shall have
commenced.
6.05 ab Section. Title Insurance. Prior to the Closing, Seller
shall have furnished the Purchaser, 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 (except for the Leased Real Property,
the Land Contract Property, and the Option Real Property) in the name of the
Purchaser upon delivery of a general warranty deed from the Seller to the
Purchaser. The cost of obtaining such title insurance shall be borne equally
by the Purchaser and the Seller.
6.06 ab Section. Phase I for Country Walk Subdivision. Prior to
the Closing, Seller shall have furnished to the Purchaser a Phase I relating
to the Country Walk Subdivision and conforming in scope and performance to the
specifications set forth in Section 4.08.
6.07 ab Section. Lot Purchase Agreements. The Company and the
respective owners of the real property shall have entered into lot purchase
agreements in the form of Exhibit 6.07 attached hereto (the "Lot Purchase
Agreements").
6.08 ab Section. Noncompetition Agreement with Seller. The
Seller and certain owners and officers of Seller who are presently engaged in
any business, enterprise, endeavor or activity which is substantially similar
to the business or activities conducted by the Purchaser or any of its
subsidiaries or affiliates shall have entered into a confidentiality and
noncompetition agreement with the Purchaser in the form of Exhibit 6.08
attached hereto and incorporated herein by this reference (the "Noncompete
Agreement").
6.09 ab Section. Employment Agreement. The Purchaser and
Richerson shall have entered into an employment agreement in the form of
Exhibit 6.09 attached hereto and incorporated herein by this reference (the
"Employment Agreement"); provided, however, that Richerson will remain an
employee of Seller and Seller will remain obligated to pay Richerson his
appropriate compensation until the Closing Date.
6.10 ab Section. Assignment and Assumption of Country Walk
Agreements. The Purchaser, Paragon and Country Walk Partners shall have
entered into an assignment and assumption agreement with consent (the
"Assignment and Assumption Agreement with Consent") in the form of Exhibit
6.10 attached hereto and incorporated herein by this reference, pursuant to
which Paragon assigns and Purchaser assumes all of Paragon's rights and
obligations under the Country Walk Agreements; provided, however, that if
any Lot located in any phase of the Country Walk Subdivision which is
purchased by Purchaser pursuant to the Country Walk Agreements is unbuildable
for any reason, including without limitation, inadequate soils, title defects,
noncompliance with applicable zoning regulations, the presence of
environmental contamination or the presence of the 100 year flood plain on the
Lot, and Purchaser is unable to obtain a refund of the purchase price for such
Lot from Country Walk Partners, Paragon hereby agrees to purchase such
unbuildable Lot from Purchaser (at the price paid by Purchaser to Country Walk
Partners) within thirty (30) days of notice from the Purchaser of the
existence of such unbuildable Lot. At the closing for such unbuildable Lot,
the Purchaser shall convey title to the Lot to Paragon by Limited Warranty
Deed in exchange for payment from Paragon of a sum equal to the purchase price
paid by the Purchaser to Country Walk Partners for such Lot.
6.11 ab Section. Deposit of Proceeds. Prior to the Closing, the
Seller shall cause the Country Walk Proceeds to be deposited as provided for
in Section 8.07.
6.12 ab Section. Brokerage Services Agreement. Prior to the
Closing, the Company and Paragon Realty, Inc., a Tennessee corporation, shall
have entered into an Agreement for Brokerage Services in the form of Exhibit
6.12 attached hereto and incorporated herein by this reference (the
"Brokerage Services Agreement").
6.13 ab Section. Oakland Agreement. Prior to the Closing, good
and marketable title shall be conveyed to the Company for each Lot or parcel
of raw ground located in the residential subdivision commonly known as the
Oakland subdivision purchased by the Company pursuant to a Contract for the
Purchase of Real Estate, dated May 5, 1998 between the Company and the John
Hyneman Development Company, Inc.
VII abARTICLE
TERMINATION
[INTENTIONALLY LEFT BLANK]
CLOSING AND POST-CLOSING MATTERS
7.01 ab Section. Closing Date. The closing of the purchase and
sale of the Acquired Assets (the "Closing") shall take place at a mutually
agreeable time and place, on or before May 1, 1998, unless mutually extended
by the parties.
7.02 ab Section. Deliveries by the Seller. At the Closing, the
Seller 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) ab The certification required in Section 6.01;
(b) ab All assignments and such other instruments of sale, transfer,
conveyance and assignment of the Acquired Assets as the Purchaser may
reasonably request, including, but not limited to, all third party consents
that may be necessary to assign any of the Acquired Assets to the Purchaser;
(c) ab A Certificate of Good Standing of Paragon issued by the
Secretary of State for the State of Tennessee, dated as of the most recent
practicable date prior to the Closing;
(d) ab Results of searches dated within ten (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;
(e) ab All Permits necessary to conduct the business of Seller as now
conducted, transferred to the Purchaser as required and permitted by law;
(f) ab The Noncompete Agreement provided for in Section 6.08;
(g) ab All documents necessary to perfect title to or interest in any
of the Acquired Assets, including, but not limited to, a warranty deed, where
applicable, and any other document necessary to convey good and marketable
title to the Real Property; and
(h) ab A certificate of the Seller acknowledging (or waiving) delivery
by the Purchaser of the items set forth in Section 8.03. The failure of the
Seller 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 8.03.
7.03 ab Section. Deliveries by Purchaser. At the Closing, the
Purchaser shall deliver or cause to be delivered to the Seller the following
duly executed documents and other items in form satisfactory to the Seller:
(a) ab The certification required in Section 5.01;
(b) ab The Closing Date Payment provided for in Section 1.04(a);
(c) ab The Note provided for in Section 1.04(b);
(d) ab An assumption of the Assumed Liabilities and such other
instruments of assumption as the Seller reasonably may request; and
(e) ab A certificate of the Purchaser acknowledging (or waiving)
delivery by the Seller of the items set forth in Section 8.02. 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 failure to deliver the items set forth in Section 8.02.
7.04 ab Section. Confidentiality. The Seller shall not 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 of
the Seller 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; (iii) is required to be disclosed by law or order of a court or
governmental body; (iv) is directly related to the Excluded Assets or (v) as
is necessary in connection with Tax matters or the ordinary conduct of the
Seller.
7.05 ab Section. Sale of Homes. After the Closing, Hyneman may
sell to a third party contractor the lots located in a certain residential
subdivision commonly referred to as Dalton Downs; provided, however, that
prior to such sale, the Purchaser shall have the option to purchase such lots
at the same terms and conditions as offered by the third party by giving
notice to Hyneman of its intention to do so within fifteen (15) Business Days
of receiving notice of the other offer; provided, however, that Hyneman is
not required to provide the Purchaser with notice of any offer until Hyneman
is satisfied with the terms and conditions of such offer. If the Purchaser
does not notify Hyneman of its intention to exercise this right of first
option within such fifteen (15) Business Day period, Hyneman shall be entitled
to complete the proposed sale to the third party, provided that such sale is
on the same terms and conditions as the option granted to the Purchaser, and
such sale is completed within thirty (30) Business Days after the expiration
of Purchaser's right of first option. In the event that Hyneman fails to
obtain an offer for the sale of the lots located in Dalton Downs within a
reasonable time after the Closing, Purchaser agrees to provide reasonable
assistance to Hyneman in the marketing and/or build out of such lots,
including the construction of a model home and "spec" homes as deemed
necessary or appropriate by the Purchaser in accordance with a reasonable lot
price to be agreed upon by the Purchaser and Hyneman. If there is
insufficient development of the Dalton Downs subdivision to permit the
reasonably prompt marketing of the lots contained in such subdivision (as
mutually agreed to by the Seller, Hyneman and the Purchaser), Seller and/or
Hyneman may hire a third-party contractor reasonably acceptable to the
Purchaser to assist in the development of such subdivision.
7.06 ab Section. Assignment of Country Walk Proceeds. At the
Closing, the Seller agrees to assign free and clear of all liens or
encumbrances the net proceeds received on or before the Closing Date from the
sales of Lots 226, 338 and 364 located in the Country Walk Subdivision (the
"Country Walk Proceeds") to Crossmann. Notwithstanding any other provision
contained herein, Seller will indemnify the Purchaser for any amount of
Country Walk Proceeds assigned to the Purchaser pursuant to this Section
8.06 which may not be deposited or cashed by the Purchaser due to
insufficient funds.
VIII abARTICLE
MISCELLANEOUS
8.01 ab Section. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
8.02 ab Section. Expenses. The 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, provided, however, that the Purchaser
and the Seller hereby agree that each of them shall be responsible for
one-half of (i) the cost of obtaining the title insurance described in
Section 6.05 herein and (ii) any real estate transfer tax that is incurred
by either of them as a result of the transfer of the Acquired Assets described
herein.
8.03 ab Section. Public Announcements. Before the Closing the
Purchaser, the Seller, 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 the Purchaser and
the Seller 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.
8.04 ab Section. Risk of Loss. Until 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) ab 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) ab terminate this Agreement.
8.05 ab Section. Index and Captions. The 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.
8.06 ab Section. Notices. All 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 the Purchaser, to:
Crossmann Communities, Inc.
9202 North Meridian Street, Suite 300
Indianapolis, Indiana 46268
Attention: John B. 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) 236-2394
Facsimile No.: (317) 236-5817
If to the Seller to:
Rusty Hyneman
W.V. Richerson, Jr.
Paragon Properties, LLC
1364 Cordova Cove
Germantown, Tennessee 38138-0628
Tel. No.: (901)756-4064
Facsimile No.: (901)757-1860
With a copy to:
Robert Mark Field
THE BOGATIN LAW FIRM
Suite 300
1661 International Place Drive
Memphis, Tennessee 38120
Tel. No.: (901) 767-1234
Facsimile No.: (901) 767-2803
Any party may change its address for the purpose of this Section 9.06
by giving the other party written notice of its new address in the manner set
forth above.
8.07 ab Section. Entire Agreement. This Agreement and the
agreements expressly 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.
8.08 ab Section. Waiver of Compliance. The 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.
8.09 ab Section. Validity of Provisions. Should 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.
8.10 ab Section. Schedules and Exhibits. Each 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.
8.11 ab Section. No Intention to Benefit Third Parties. The
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.
8.12 ab Section. Successors and Assigns. This Agreement shall be
binding on, and shall inure to the benefit of, the parties and their
respective successors and permitted assigns; provided, however, that no party
may assign any rights or obligations under this Agreement without the prior
written consent of the other parties hereto.
8.13 ab Section. Governing Law. The laws of the State of
Tennessee shall govern all aspects of this Agreement notwithstanding any
choice of law provisions to the contrary.
IX abARTICLE
DEFINITIONS
As used in this Agreement, the following terms have the meanings
indicated below:
"Accounts Receivable" means all accounts receivable and notes receivable,
pre-paid expenses, rights to refunds, and deposits with respect to the Seller.
"Acquired Assets" means the rights, title and interest to the name
"Paragon Properties"together with the goodwill of the business associated with
such name, and any other assets listed on Schedule 1.01(a), with respect to
the business of the Seller. 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 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).
"Arbitration Notice" means a notice for arbitration as provided for in
Section 4.04.
"Assigned Contracts" shall include, but not be limited to, all sales
contracts, listed on Schedule 10.01 or other agreements for the conveyance
of residential property, any appraisals relating to the Real Property and any
unexpired warranties and guaranties of 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 of the Seller.
"Assignment and Assumption Agreement with Consent" shall have the meaning
set forth in Section 6.10.
"Assumed Liabilities" means all of the liabilities and obligations of the
Seller which are related to the Acquired Assets and which are listed on
Schedule 1.03.
"Bonus Payments" means the cash payments payable to Seller as provided
for in the Executive Employment Agreement.
"Brokerage Services Agreement" shall have the meaning set forth in
Section 6.12.
"Business Day" means any day other than Saturday, Sunday, and any day on
which commercial banks in Indiana are authorized by law to be closed.
"Claimant" shall have the meaning set forth in Section 4.03.
"Closing" means the closing of the transactions contemplated by this
Agreement as provided for in Section 8.01.
"Closing Date Payment" shall have the meaning set forth in Section
1.04(a).
"Company" means Crossmann Communities of Tennessee, LLC, an Indiana
limited liability company.
"Contracts" shall have the meaning set forth in Section 2.17.
"Country Walk Agreements" means (i) the Real Estate Sales Contract by and
between Paragon and Country Walk Partners, dated April 16, 1998, pursuant to
which Paragon agreed to purchase and Country Walk Partners agreed to sell
certain parcels of real estate located in Phase VI of the Country Walk
Subdivision; and (ii) the Real Estate Sales Contract by and between Paragon
and Country Walk Partners, dated February 11, 1997 pursuant to which Paragon
agreed to purchase and Country Walk Partners agreed to sell certain parcels of
real estate located in Phases IV and V of the Country Walk Subdivision.
"Country Walk Proceeds" shall have the meaning set forth in Section
8.06.
"Country Walk Subdivision" means the residential subdivision located in
Shelby County, Tennessee and commonly referred to as the Country Walk
subdivision.
"Crossmann" means Crossmann Communities, Inc., an Indiana corporation.
"Disagreement Notice" shall have the meaning set forth in Section 4.04.
"Earn-Out Payments" shall have the meaning set forth in Section
1.04(c).
"Election Notice" shall have the meaning set forth in Section 4.05.
"Employee Welfare Benefit Plan" shall have the meaning set forth in
Section 2.22.
"Employment Agreement" means that certain Executive Employment Agreement,
dated May 5, 1998, between the Purchaser and Richerson, as provided for in
Section 6.09.
"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 Real 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 Obligation" shall have the meaning set forth in Section
4.08.
"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.
"Excluded Assets" means (i) all parcels of real property, work in process
and other assets relating to that certain residential subdivision commonly
referred to as the Dalton Downs subdivision; (ii) any parcels of real property
owned by the Seller which are located in the state of Florida; and (iii) all
prepaid expenses, deposits, revenues, contracts, Accounts Receivable, Files
and Records, Leased Personal Property, suppliers, Licenses, Permits, and
Personal Property relating solely to the assets described in parts (i) and
(ii) of this definition.
"Files and Records" means all files and records of the Seller 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 of the Seller" means the annual financial
statements and the internally prepared interim balance sheets and income
statements of Seller, as provided in Section 2.05.
"GAAP" means generally accepted accounting principles.
"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).
"Homeowner's Associations" shall have the meaning set forth in Section
2.15.
"Hyneman" means Rusty Hyneman.
"Indemnification Notice" shall have the meaning set forth in Section
4.03.
"Indemnifying Party" shall have the meaning set forth in Section 4.03.
"Indemnity Loss" shall have the meaning set forth in Section 4.01.
"Intellectual Property" shall have the meaning set forth in Section
2.20.
"Judgment" means an order by a court of law requiring the payment of
money.
"Land Contract Property" shall have the meaning set forth in Section
2.13.
"Leased Personal Property" shall have the meaning set forth in Section
2.09.
"Leased Real Property" shall have the meaning set forth in Section
2.12.
"Licenses" shall have the meaning set forth in Section 2.19.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
(statutory or other), option, easement, right-of-way, charge, or conditional
sale agreement.
"Litigation Notice" shall have the meaning set forth in Section 4.03.
"Lot" or "Lots" shall have the meaning set forth in Section 2.10.
"Lot Purchase Agreements" shall have the meaning set forth in Section
6.07.
"Net Assets" means the excess, if any, of the book value of the Acquired
Assets over the Assumed Liabilities.
"Noncompete Agreement" shall have the meaning set forth in Section
6.08.
"Note" means the promissory note delivered at Closing by Purchaser to
Seller as set forth in Section 1.04(b).
"Option Real Property" shall have the meaning set forth in Section
2.13.
"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.
"Paragon" shall have the meaning set forth in the preamble to this
Agreement.
"Paragon Net Income" means the net operating income of the Company
attributable to the Paragon Operations, as adjusted in accordance with
Section 1.06.
"Paragon Operations" means (a) the sale by the Purchaser of Acquired
Assets in the ordinary course of business, and (b) the development and sale by
the Purchaser of Lots and any improvements thereon located in those certain
residential developments and/or subdivisions commonly referred to as the
Rogers Farm development, the Dalton Downs subdivision and the Country Walk
Subdivision.
"Partnerships" means the Seller's partnership interest in all
partnerships including but not limited to those specified on Schedule 10.02.
"Permits" shall have the meaning set forth in Section 2.19.
"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" shall have the meaning set forth in Section 2.08.
"Phase I" shall have the meaning set forth in Section 4.08.
"Purchase Price" means the aggregate consideration to be paid by the
Purchaser to the Seller for the Acquired Assets as set forth in Section
1.04.
"Purchaser" shall have the meaning set forth in the preamble to this
Agreement.
"Real Property" means all Developed Real Property (defined in Section
2.10), Undeveloped Real Property (Defined in Section 2.11), Leased Real
Property (defined in Section 2.12), Land Contract Property (defined in
Section 2.13(a)), the Country Walk Subdivision and Option Real Property
(defined in Section 2.13(a)) collectively.
"Real Property Lease" shall have the meaning set forth in Section 2.12.
"Reduced Amount" shall have the meaning set forth in Section 1.04(b).
"Returns" shall have the meaning set forth in Section 2.06.
"Richerson" means W.V. Richerson, Jr.
"Seller" shall have the meaning set forth in the preamble to this
Agreement.
"Substantially Complete" shall have the meaning set forth in Section
2.10.
"Taxes" shall have the meaning set forth in Section 2.06.
"Title Company" shall have the meaning set forth in Section 6.05.
"Undeveloped Real Property" shall have the meaning set forth in Section
2.11.
"Warranty Liability" means any and all costs incurred as a result of a
warranty claim on a residential home which was constructed by Seller. Such
costs shall include, but not be limited to, costs to repair, replace, fix,
clean, remove, or correct any alleged defect in a property upon which a
warranty claim is made and any and all costs to investigate and defend against
a warranty claim.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
<PAGE>
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: /s/ John B. Scheumann
John B. Scheumann, Chief Executive Officer
"COMPANY"
CROSSMANN COMMUNITIES
OF TENNESSEE, LLC
By: Crossmann Communities, Inc., Member
By: /s/ John B. Scheumann
John B. Scheumann, Chief Executive Officer
"SELLER"
Paragon Properties, LLC
By: /s/ Rusty Hyneman
Rusty Hyneman, Member
By: /s/ W.V. Richerson, Jr.
W.V. Richerson, Jr., Member
"HYNEMAN"
/s/ Rusty Hyneman
Rusty Hyneman
"RICHERSON"
/s/ W.V. Richerson, Jr.
W.V. Richerson, Jr.
EXHIBIT 10.48
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and entered
into this 5th day of May, 1998, by and among Crossmann Communities of
Tennessee, LLC (the "Company"), a Tennessee limited liability company, with
its principal place of business at 2753 Mendenhall, Suite 30, Memphis,
Tennessee, 38115, Crossmann Communities, Inc. ("Crossmann"), an Indiana
corporation and the holder, directly and indirectly, of 100% of the ownership
interest in the Company, and W.V. Richerson, Jr. (the "Executive").
PRELIMINARY STATEMENTS
The Company and Crossmann (collectively referred to herein as the
"Employers") have determined that it is in their best interests to employ the
Executive as Division Manager of the Company, and the Executive desires to
accept such position and to devote his loyalty to the Employers 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 hereto agree as
follows:
I. abARTICLE
Employment and Duties
1.1 ab Section. General. The Employers hereby employ the
Executive, and the Executive hereby agrees to serve the Employers in the
capacities of Division Manager of the Company and to perform the executive and
management duties that the Board of Directors of the Company and/or the Board
of Directors of Crossmann (collectively and individually the "Boards") shall
reasonably assign to the Executive from time to time.
1.2 ab Section. Employment Duties. Throughout the Employment
Term, as defined in Section 2, the Executive shall: (i) devote his working
hours, on a full-time basis, to his duties under this Agreement; (ii)
faithfully and loyally serve the Employers; (iii) comply in all respects with
the lawful and reasonable directions and instructions given to him by the
Boards; and (iv) use his best efforts to promote and serve the interests of
the Employers. In the event the directions and instructions given to the
Executive by the Boards conflict in any manner, the directions and
instructions given by the Board of Directors of Crossmann shall be deemed
controlling; full compliance with the express directions and instructions of
the Board of Directors of Crossmann shall be deemed a defense to any claim of
failure to comply with the directions and instructions of the Board of
Directors of the Company.
1.3 ab Section. Exclusive Employment. Throughout the Employment
Term, as defined in Section 2, the Executive shall not render his services,
directly or indirectly, for compensation, to any other person or organization
without the prior written consent of the Employers and shall not engage in any
activity which would significantly interfere with the faithful performance of
his duties under this Agreement. In addition, the Executive may perform minor
services for which he does not receive compensation, provided that the
activity does not contravene or conflict with any other provision of this
Agreement. The Executive also may participate as an investor in other real
estate projects, provided, however, that (i) such participation does not
require a material amount of the Executive's time and/or attention on a
regular basis during his Employment Term (as defined below), (ii) such
participation does not materially interfere with the performance by the
Executive of his obligations under this Agreement or his duties to the
Employer, (iii) such real estate project does not compete with the business or
activities of the Crossmann Group (as defined below), and (iv) such
participation does not involve active participation in any material
operational aspect of the real estate project in which the Executive is an
investor; and, provided further, that if the conditions of this sentence
are satisfied, the status of the Executive as a member of a member managed or
board managed limited liability company will not violate the terms of this
Agreement.
II. abARTICLE
Employment TermThe Executive's employment hereunder shall commence on the
Closing Date as that term is defined in an Asset Purchase Agreement by and
among the Employers, the Executive, Paragon Properties, LLC, ("Paragon" or
"Seller") and Rusty Hyneman, Jr., dated May 5, 1998 (the "Asset Purchase
Agreement") and shall continue until April 30, 2000; provided, however,
that commencing on May 1, 2000, and on the first day of each year thereafter,
the term of this Agreement shall automatically be extended for one (l) year
thereafter unless the Employers or the Executive shall have given written
notice to the other, at least three (3) months prior thereto, that the term
shall not be extended. Notwithstanding the foregoing, the Executive's
employment hereunder shall be subject to resignation or termination in
accordance with the provisions of Section 4 hereof. As used in this
Agreement, the term "Expiration Date" shall mean April 30, 2000, or, if
applicable, the May 1st thereafter on which the Executive's employment
hereunder shall automatically expire and terminate in accordance with the
provisions of this Section 2, and the term "Employment Term" shall mean the
period beginning on the date hereof and ending on the earlier of the
Expiration Date, the Termination Date, the Resignation Date, (both as defined
in Section 4 hereof), or other date the Executive ceases to be employed by
the Employers in accordance with Section 4 hereof.
III. abARTICLE
Compensation and Other BenefitsThe Company or Crossmann, as applicable, shall
pay and provide the following compensation and other benefits to the Executive
for the services rendered by him under this Agreement:
3.1 ab Section. Annual Base Salary. The Company shall pay to
the Executive, in accordance with the then prevailing payroll practices of the
Company, an annual salary of not less than Seventy-Five Thousand Dollars
($75,000.00) (the "Annual Base Salary"), subject to required withholdings
under Federal, state, and local laws. The Company's obligations with respect
to payment of the Annual Base Salary shall not be effective until the
Employment Term has commenced. Beginning on January l, 1999 and on each
January 1 thereafter during the Employment Term (or within a reasonable time
thereafter not to exceed thirty (30) days) the Employers shall review the
annual salary payable to the Executive hereunder and shall, in their sole
discretion, determine whether or not an adjustment in the Annual Base Salary
then payable hereunder is appropriate.
3.2 ab Section. Executive Benefits. Except as otherwise
specifically provided in this Agreement, the Executive shall be eligible to
participate, in accordance with their respective terms and conditions, in all
benefit plans presently available or which may subsequently be made available
to executives of the Employers, including Crossmann's health care, basic life
insurance, supplemental life insurance coverage, disability coverage, business
travel accident insurance and any pension or retirement plan of any kind.
3.3 ab Section. Vacation Leave. The Executive shall be entitled
to that number of days of vacation leave per year that is generally applicable
to all executive personnel of Crossmann. The Executive shall accrue and
receive full compensation and benefits during his vacation leave periods.
Unused vacation leave time shall not carry over from one year of the
Employment Term to the next and unused vacation leave time shall not entitle
the Executive to any additional compensation.
3.4 ab Section. Stock Option Plan. The Board of Directors of
the Employers may permit the Executive to participate in stock option plans of
Crossmann at a level consistent with other employees of the Company or
Crossmann having similar responsibilities as the Executive.
IV. abARTICLE
Termination of Employment
4.1 ab Section. Termination for Cause.
(a) ab The Employers may terminate the Executive's employment with the
Employers pursuant to this Agreement for Cause, as defined herein, by
providing written notice to the Executive at least twenty-four (24) hours
prior to the Termination Date, as defined in subsection (iii) below.
(b) ab A termination for "Cause" means a termination by reason of the
good faith determination by one of the Boards that the Executive (a) willfully
and continually failed to substantially perform his duties under this
Agreement, (b) willfully engaged in conduct which constituted a breach of
Section 5 of this Agreement, (c) engaged in conduct which constituted a
crime of moral turpitude, (d) perpetrated a fraud or embezzlement against the
Company, Crossmann any affiliate or subsidiary of the Company or Crossmann or
any entity in which the Company, Crossmann, or any affiliate or subsidiary of
the Company or Crossmann owns at least a 20% ownership interest (collectively
the "Crossmann Group"), or (e) has willfully engaged in conduct which is
materially injurious to the Crossmann Group, monetarily or otherwise.
(c) ab In the case of a termination for Cause, the term "Termination
Date" as used in this subsection (a) shall mean the actual date the Executive
terminates employment with the Employers as a result of action taken by one of
the Boards, and not as a result of the Executive's resignation, as provided in
Section 4(b).
(d) ab If prior to the Expiration Date the Employers terminate the
Executive's employment for Cause, the Executive shall only be entitled to
payment of that portion of the Annual Base Salary under Section 3(a) that
the Executive earned through and including the Termination Date at the rate of
the Annual Base Salary in effect at that time.
4.2 ab Section. Resignation. The Executive may resign from his
employment with the Employers pursuant to this Agreement at any time by
providing written notice to the Boards of his resignation at least thirty (30)
days prior to the effective date of the resignation (the "Resignation
Notice"); provided, however, that in the event that the Executive is
terminated for Cause, submits his Resignation Notice or otherwise voluntarily
ceases his employment prior to the Expiration Date, the Employer shall have no
obligation to make any Earn-Out Payment (as that term is defined in the Asset
Purchase Agreement) otherwise payable to Paragon after the date of the
Resignation Notice, as provided under the Asset Purchase Agreement. The
effective date of the Executive's resignation shall be that specified in the
Resignation Notice, or the actual date the Executive terminates employment
with the Employers as the result of a resignation, whichever occurs earlier
(the "Resignation Date"). If prior to the Expiration Date, the Executive
resigns his employment, the Executive shall only be entitled to payment of
that portion of the Annual Base Salary under Section 3(a) that the Executive
earned through and including the Resignation Date, at the rate of the Annual
Base Salary in effect at that time.
4.3 ab Section. Termination Without Cause. The Employers may,
in their sole discretion, terminate the Executive's employment with the
Employers pursuant to this Agreement at any time without Cause, by providing
written notice to the Executive at least twenty-four (24) hours prior to the
Termination Date, as defined in this subsection (c). If the Employers
terminate the Executive's employment without Cause, the Company shall be
obligated to continue to pay to him the Annual Base Salary for one year and
two weeks after the Termination Date. Such payments shall be made as and when
the same would have been due and payable if the Executive's employment had
continued through such date, subject to the provisions of Sections 4(d) and
4(e). The term "Termination Date" as used in this subsection (c) shall mean
the actual date the Executive terminates employment with the Employers as a
result of action taken by one of the Employers, and not as a result of the
Executive's resignation as provided in Section 4(b). Except as provided in
this subsection (c), the Executive shall not be eligible to receive any
compensation or benefits under this Agreement with respect to any future
periods beginning on or after the Termination Date.
4.4 ab Section. Death. If the Executive dies prior to the
Expiration Date, the Executive's estate or personal representative shall be
entitled to receive that portion of the Annual Base Salary, at the rate in
effect at the Executive's death, and any other compensation or benefits, that
the Executive earned through and including the date of the Executive's death.
If the Executive is entitled to receive payments from the Employers pursuant
to Section 4(c) at the time of his death, the Executive's estate or personal
representative shall be entitled to receive that portion of the Annual Base
Salary, at the rate in effect at the Executive's death, and any other
compensation or benefits, that the Executive would have been entitled to
receive under Section 4(c) through and including the date of the Executive's
death. The Executive's estate or personal representative shall not be
entitled to receive any portion of the Annual Base Salary or any other
compensation or benefits under this Agreement, with respect to any periods
ending on or after the date of the Executive's death, which was not payable in
accordance with the provisions thereof prior to the date of death.
4.5 ab Section. Disability. If prior to the Expiration Date,
the Executive becomes Permanently Disabled, as defined in this subsection (e),
the Employers may terminate the Executive's employment with the Employers as a
result of the Permanent Disability by providing written notice to the
Executive at least twenty-four (24) hours prior to the Termination Date, as
defined in this subsection (e). If prior to the Expiration Date, the
Executive becomes Permanently Disabled, the Executive may resign from his
employment with the Employers pursuant to this Agreement by providing written
notice to the Employers of his resignation at least twenty-four (24) hours
prior to the Resignation Date, as defined in this subsection (e). If the
Employers terminate the Executive's employment as a result of a Permanent
Disability or the Executive resigns from employment with the Employers as a
result of a Permanent Disability, the Executive shall be entitled to receive
that portion of the Annual Base Salary under Section 3(a) that the Executive
earned through and including the Termination Date or Resignation Date, as
applicable, at the rate in effect on such date. If the Executive is entitled
to receive payments from the Employers pursuant to Section 4(c) at the time
he becomes Permanently Disabled, the Executive shall be entitled to receive
the payments that the Executive would have been entitled to receive under
Section 4(c). The Executive shall not be entitled to receive any portion of
the Annual Base Salary or any other compensation or benefits under this
Agreement with respect to any future periods beginning on or after the later
of the Resignation Date, Termination Date, or the date the Executive becomes
Permanently Disabled. The Executive shall be deemed "Permanently Disabled"
when, and only when, he is deemed permanently disabled in accordance with the
disability insurance policy of the Employers 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 of the
Employers last in effect. The definition of Permanently Disabled for purposes
of this Agreement shall comply with all provisions of applicable law. The term
"Termination Date" as used in this subsection (e) shall mean the actual date
the Executive terminates employment with the Employers. The term "Resignation
Date" as used in this subsection (e) shall mean the actual date the Executive
terminates employment with the Employers as the result of a resignation.
V. abARTICLE
Non-competition and Secrecy
5.1 ab Section. Noncompetition. Executive agrees that during
the Employment Term and for a three-year period thereafter (the "Restricted
Period"), he will not directly or indirectly engage in any business which is
substantially similar or in competition with the business of the Crossmann
Group, as that may change from time to time; provided, however, that this
Section 5(a) shall no longer apply in the event of a termination of the
Executive's employment by the Employer without Cause. For purposes of this
Section 5(a), the Executive will be deemed to be directly engaged in a
business which is substantially similar to or in competition with the business
of the Employers if he serves such business as a director, officer, employee,
consultant, partner or individual proprietor, or an investor who has made
loans, advances or investments in material amount. The prohibitions of this
Section 5(a) shall not be deemed to prevent the Executive from (i) making
investments in or advancing funds to corporations any of whose securities are
listed on a National Securities Exchange or registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended, and if the equity
interest obtained by such investment is not more than 5% of the capital stock
of such concern, or (ii) engaging in investment activities described in
Section 1(c) above.
The restrictions contained in this Section 5(a), to the extent
applicable following termination of the Executive's employment with the
Employers, shall only apply within metropolitan areas in which the Crossmann
Group conducts business during the term of the Executive's employment with the
Employers (the "Restricted Area"). Executive and Employer each stipulate and
agree that the terms and covenants contained in this Section 5(a) are fair
and reasonable in all respects, including the time period and geographical
coverage, and that these restrictions are designed for the reasonable
protection of Employer's business. If a court of competent jurisdiction
determines that any of the foregoing restrictions are unreasonable in terms of
geographic scope or otherwise then the court is hereby authorized to reduce
the scope of said restriction and enforce this Section 5(a) as so reduced.
If any sentence, word, or provision of this Section 5(a) shall be determined
to be unenforceable, the same shall be severed herefrom and the remainder
shall be enforced as if the unenforceable sentence, word, or provisions did
not exist.
Notwithstanding any other provisions of this Section 5(a), during the
three (3) years immediately following termination of the Executive's
employment with the Employers, the Executive may (i) build up to twenty-five
(25) residential homes per year in the Memphis metropolitan area, each of such
homes having a fair market value of at least One Hundred Fifty Thousand
Dollars ($150,000) (the "Target Price"), provided that the Target Price shall
increase by Two Thousand Dollars ($2,000) on each annual anniversary of this
Agreement; and (ii) build no more than seventy (70) apartment units on the
parcel of real property described in Exhibit A attached hereto and
incorporated herein.
5.2 ab Section. Secrecy and Confidential Information. The
Executive recognizes that the services he will perform under this Agreement
are special, unique, and extraordinary in that, by reason of his employment
under this Agreement, he may acquire Confidential Information concerning the
operations, businesses, and financial affairs of the Crossmann Group, the use
or disclosure of which could cause the Crossmann Group immeasurable and
substantial loss and damages for which no remedy at law would be adequate.
Accordingly, the Executive covenants and agrees with the Employers that,
except as necessary to perform his obligations to the Employers under this
Agreement or with the prior written consent of the Employers, he will not at
any time directly or indirectly disclose any Confidential Information that he
may learn or has learned by reason of his association with the Crossmann
Group. The term "Confidential Information" includes information not in the
public domain and not previously disclosed to the public or to the trade by
the management of the Crossmann Group with respect to the products or units,
facilities and methods, trade secrets and other intellectual property, blue
prints, building plans, systems, procedures, manuals, confidential reports,
product or unit price lists, customer lists, all assets and information
acquired by the Crossmann Group from Paragon Properties, LLC, or its
affiliates, financial information (including the revenues, costs, or profits
associated with any of the services, products or units of the Crossmann
Group), business plans, prospects, or opportunities of the Crossmann Group;
provided, however, that the term Confidential Information does not include the
following: (i) information that was in the public domain or generally known
in the industry at the time Executive first received, observed, or otherwise
became aware of such information; (ii) information that becomes a part of the
public domain or becomes generally known in the industry other than by the
breach by Executive of Executive's obligations under this Agreement; (iii)
information that is disclosed to the Executive after the termination of the
Executive's employment by a third party having the right to disclose the same
without obligation to the Employers; or (iv) information that is independently
developed by the Executive after the termination of the Executive's employment
under this Agreement. The Executive's obligations set forth in this Section
5(b) and the Crossmann Group's rights and remedies, whether legal or
equitable, with respect thereto, shall extend indefinitely.
5.3 ab Section. Exclusive Property. The Executive agrees that
all Confidential Information is and shall remain the exclusive property of the
Crossmann Group. All business records, papers, and documents kept or made by
the Executive relating to the business of the Crossmann Group shall be and
remain the property of the Crossmann Group. Upon the termination of his
employment with the Employers or upon the request of the Crossmann Group at
any time, the Executive shall promptly deliver to the Crossmann Group and
shall not, without the written consent of the Employers, retain copies of any
written materials prepared by or for the Crossmann Group that may contain
Confidential Information. The Executive's obligations set forth in this
Section 5(c), and the Crossmann Group's rights and remedies with respect
thereto, whether legal or equitable, shall extend indefinitely.
5.4 ab Section. Injunctive Relief. The Executive acknowledges
that a breach of any of the covenants or obligations contained in this
Section 5 may result in material and irreparable injury to the Crossmann
Group, for which there is no adequate remedy at law, and that injury and
damages to the Crossmann Group resulting from a breach will be immeasurable.
Without limiting the rights or remedies, both legal and equitable, available
to the Crossmann Group in the event of an actual or threatened breach, the
Crossmann Group shall be entitled to seek and obtain a temporary restraining
order and/or a preliminary or permanent injunction against the Executive,
which shall prevent the Executive from engaging in any activities prohibited
by this Section 5, or to seek and obtain such other relief against the
Executive as may be required to specifically enforce any of the covenants or
obligations contained in this Section 5. The Executive hereby agrees and
consents that injunctive relief may be sought ex parte in any state or federal
court of record in the State of Indiana, in the state and county in which the
violation occurs, or in any other court of competent jurisdiction, at the
election of the Crossmann Group.
Non-assignability, Binding Agreement
5.5 ab Section. By the Executive. The Executive shall not
assign or delegate this Agreement or any right, duty, obligation, or interest
under this Agreement without the Company's and Crossmann's prior written
consent; provided, however, that nothing shall preclude the Executive from
designating beneficiaries to receive benefits payable under this Agreement
upon his death, and nothing shall preclude the Executive's executors,
administrators, or their legal representatives, from assigning any rights
under this Agreement to any person.
5.6 ab Section. By the Company or Crossmann. The Company and/or
Crossmann may assign, delegate, or transfer this Agreement and all of their
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
Crossmann or to which the Company or Crossmann transfers all or substantially
all of its assets. Upon assignment, delegation, or transfer, any affiliate,
subsidiary, or business entity related to the Company and/or Crossmann shall
be deemed to be substituted for the Company and/or Crossmann, as applicable,
for all purposes of this Agreement.
5.7 ab Section. Binding Effect. Except as limited under
Sections 6(a) and 6(b), this Agreement shall be binding upon and inure to
the benefit of the parties, any successors to or assigns of the Company and/or
Crossmann, and the Executive's heirs and the personal representatives or
executor of the Executive's estate.
VI. abARTICLE
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.
VII. abARTICLE
AmendmentNo provision of this Agreement may be modified, amended, waived, or
discharged in any manner except by an instrument in writing signed by the
Executive and on behalf of the Company and Crossmann by such officers as may
be specifically designated by the Boards. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by any party which is not expressly set forth in this
Agreement.
VIII. abARTICLE
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.
IX. abARTICLE
Governing Law and JurisdictionThe laws of the State of Tennessee 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 to this Agreement irrevocably consent to the
jurisdiction and venue of Shelby County, Tennessee with respect to any and all
actions related to this Agreement or the enforcement of this Agreement and the
parties to this Agreement hereby irrevocably waive any and all objections
thereto.
X. abARTICLE
NoticesAll notices required or desired to be given under this Agreement shall
be in writing and shall be deemed to have been duly given (i) on the date of
service if served personally on the party to whom notice is to be given, (ii)
on the date of receipt by the party to whom notice is to be given if
transmitted to such party by telefax, provided a copy is mailed as set forth
below on the date of transmission, or (iii) on the third day after mailing if
mailed to the party to whom notice is to be given by registered or certified
mail, return receipt requested, postage prepaid, to the following addresses:
(a) If to the Company or Crossmann, to:
Crossmann Communities, Inc.
9202 North Meridian St., Suite 300
Indianapolis, IN 46268
Attn: John B. Scheumann
Tel. No.: (317) 843-9514
Fax: (317) 571-2210
(b) If to the Executive, to:
W.V. Richerson, Jr.
9525 Doe Meadow
Germantown, TN 38193
Tel. No.:
Fax:
Any party may, by giving written notice to the other parties, change the
address to which notice shall then be sent.
XI. abARTICLE
Prior AgreementsThis Agreement is a complete and total integration of the
understanding of the parties. This Agreement supersedes all prior or
contemporaneous negotiations, commitments, agreements, writings including
handbooks, and discussions with respect to the subject matter of this
Agreement.
XII. abARTICLE
HeadingsThe 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.
XIII. abARTICLE
CounterpartsThis Agreement may be executed in one or more counterparts, each
of which 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 enforcement is sought needs to be produced to evidence the
existence of this Agreement
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<PAGE>
The parties have executed this Agreement on the date first written above.
"COMPANY"
CROSSMANN COMMUNITIES
OF TENNESSEE, LLC
By: Crossmann Communities, Inc., Member
By: /s/ John B. Scheumann
John B. Scheumann, Chief Executive Officer
"CROSSMANN"
CROSSMANN COMMUNITIES, INC.
By: /s/ John B. Scheumann
John B. Scheumann, Chief Executive Officer
"EXECUTIVE"
/s/ W. V. Richerson, Jr.
W.V. Richerson, Jr.
EXHIBIT 10.49
AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 29TH DAY OF MAY, 1998
BY AND AMONG
CROSSMANN COMMUNITIES, INC.
CROSSMANN COMMUNITIES OF NORTH CAROLINA, INC.
AND
THE PINEHURST ENTITIES
JAMES T. CALLIHAN
RALPH R. TEAL, JR.
JEFFREY H. SKELLEY
AND
H. GILFORD EDWARDS
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER 1
Section 1.01. Merger 1
Section 1.02. Effective Time 2
Section 1.03. Legal Effect 2
Section 1.04. Name 2
Section 1.05. Other Actions 2
ARTICLE II
CORPORATE GOVERNANCE 2
Section 2.01. Articles of Incorporation and Bylaws 2
Section 2.02. Directors and Officers 2
ARTICLE III
CONVERSION OF AND PAYMENT FOR SHARES 3
Section 3.01. Conversion 3
Section 3.02. Payment of the Merger Consideration 3
Section 3.03. Escrow 3
Section 3.04. Certificates 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PINEHURST ENTITIES
AND THE STOCKHOLDERS 4
Section 4.01. Title to Property 4
Section 4.02. Authority; Consent 4
Section 4.03. Consents and Approvals 5
Section 4.04. Organization 5
Section 4.05. Capital Structure of the Pinehurst Entities and Related Matters
6
Section 4.06. No Subsidiaries or Other Interests 6
Section 4.07. Title to Shares 6
Section 4.08. Financial Statements of the Pinehurst Entities 6
Section 4.09. Absence of Undisclosed Liabilities 6
Section 4.10. Tax Matters 7
Section 4.11. Compliance with Laws; No Default or Litigation 7
Section 4.12. Personal Property Owned 8
Section 4.13. Personal Property Leased 8
Section 4.14. Developed Real Property 8
Section 4.15. Undeveloped Real Property 9
Section 4.16. Real Property Leases 10
Section 4.17. Land Contracts 10
Section 4.18. Real Property Generally 10
Section 4.19. Homeowner Associations 13
Section 4.20. Environmental Compliance 13
Section 4.21. Contracts 15
Section 4.22. Accounts and Notes Receivable 16
Section 4.23. Permits 16
Section 4.24. Intellectual Property 16
Section 4.25. Labor Relations: Employees 17
Section 4.26. Employee Benefit Plans 18
Section 4.27. Warranty Liability 19
Section 4.28. Conduct of the Corporation Since the Interim Balance Sheet Date
19
Section 4.29. Outstanding Debt and Related Matters 20
Section 4.30. Power of Attorney 20
Section 4.31. Absence of Certain Business Practices 21
Section 4.32. Minute Book and Stock Record Book 21
Section 4.33. Directors and Officers 21
Section 4.34. S Corporation Status 21
Section 4.35. Investment Intent 21
Section 4.36. Access to Information 21
Section 4.37. Accredited Investor 22
Section 4.38. Sophistication of Each Stockholder 22
Section 4.39. Letters of Intent and Sale Discussions 22
Section 4.40. Distributions 22
Section 4.41. Closings 22
Section 4.42. Brokers Commissions 22
Section 4.43. Due Diligence 22
Section 4.44. Disclosure 23
Section 4.45. Survival 23
Section 4.46. Other Limitations 23
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 23
Section 5.01. Authority: Consent 23
Section 5.02. Consents and Approvals 24
Section 5.03. Corporate Organization 24
Section 5.04. SEC Documents and Other Reports 25
Section 5.05. Shares 25
ARTICLE VI
INDEMNIFICATION 25
Section 6.01. Indemnification by the Stockholders 25
Section 6.02. Indemnification by the Purchaser 26
Section 6.03. Notice 26
Section 6.04. Arbitration 27
Section 6.05. Defense of Claims 27
Section 6.06. Computation of Indemnity Losses 28
Section 6.07. Payment of Losses 28
Section 6.08. Survival 29
Section 6.09. Other Limitations 29
Section 6.10. Warranty Liabilities 29
ARTICLE VII
TAXES 30
Section 7.01. Preparation of Return 30
Section 7.02. Cooperation 30
Section 7.03. Tax Agreements 30
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PINEHURST ENTITIES
AND THE STOCKHOLDERS 31
Section 8.01. Performance of the Obligations of the Purchaser 31
Section 8.02. Consents and Approvals 31
Section 8.03. No Violation of Orders 31
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER 31
Section 9.01. Performance of the Obligations of the Pinehurst Entities and
the Stockholders 31
Section 9.02. Completion of Due Diligence 32
Section 9.03. Consents and Approvals 32
Section 9.04. No Violation of Orders 32
Section 9.05. Title Insurance 32
Section 9.06. Employment Agreements 32
Section 9.07. Noncompetition Agreements 32
Section 9.08. Satisfaction of Fees and Note and Release 33
Section 9.09. 33
Section 9.10. Lease 33
Section 9.11. 33
Section 9.12. Contribution of New Homes Sales Division 33
Section 9.13. True Blue Acquisition and River Oaks Merger 33
Section 9.14. CTS Acquisitions, Inc. and Callihan, Teal and Skelley
Development, Inc. 33
ARTICLE X
TERMINATION 34
Section 10.01. Termination; Failure to Close 34
Section 10.02. Effect of Termination 34
ARTICLE XI
CLOSING 34
Section 11.01. Closing Date 34
Section 11.02. Deliveries by the Pinehurst Entities 34
Section 11.03. Deliveries by Purchaser 36
ARTICLE XII
POST-CLOSING COVENANTS OF THE STOCKHOLDERS 36
Section 12.01. Acquisition of Additional Consideration Shares 36
Section 12.02. Voting Agreement 36
Section 12.03. Proxy Solicitations 37
Section 12.04. Formation of a "Group" 37
Section 12.05. Dissolution of Pinehurst Commercial 38
Section 12.06. Net Book Value 38
ARTICLE XIII
POST CLOSING COVENANTS OF THE PURCHASER 38
Section 13.01. Filing of Registration Statement 38
Section 13.02. Piggyback Registrations 39
Section 13.03. Repayment of Existing Debt 40
ARTICLE XIV
MISCELLANEOUS 40
Section 14.01. Counterparts 40
Section 14.02. Expenses 41
Section 14.03. Public Announcements 41
Section 14.04. Risk of Loss 41
Section 14.05. Index and Captions 41
Section 14.06. Notices 41
Section 14.07. Entire Agreement 43
Section 14.08. Waiver of Compliance 43
Section 14.09. Validity of Provisions 43
Section 14.10. Schedules and Exhibits 43
Section 14.11. No Intention to Benefit Third Parties 43
Section 14.12. Successors and Assigns 43
Section 14.13. Governing Law 44
Section 14.14. Guaranty 44
Section 14.15. Stockholder Agreements 44
ARTICLE XV
DEFINITIONS 44
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of the 29th day
of May, 1998 is by and among CROSSMANN COMMUNITIES, INC., an Indiana
corporation ("Crossmann"), Crossmann Communities of North Carolina, Inc., a
North Carolina corporation ("CCNC" and together with Crossmann, the
"Purchaser"), the Pinehurst Entities and the Stockholders.
WITNESSETH
WHEREAS, the Pinehurst Entities are engaged in the business of acquiring
undeveloped real estate, developing such real estate, building and selling
single family and multi-family homes built on such real estate and engaging in
activities ancillary thereto.
WHEREAS, the Purchaser, in reliance upon the representations, warranties
and covenants of the Pinehurst Entities and the Stockholders set forth herein,
desires to acquire all of the outstanding stock of the Pinehurst Entities by
merging each and every one of the Pinehurst Entities with and into CCNC (the
"Merger") pursuant to the terms and subject to the conditions set forth in
this Agreement.
WHEREAS, for the purposes of this Agreement the term "Pinehurst Entities"
shall include CTS Acquisitions, Inc. and Callihan, Teal, Skelley Development,
Inc. both of which were merged with and into Pinehurst Builders on or before
May 28, 1998.
WHEREAS, Article XV lists defined terms used in this Agreement.
NOW THEREFORE, in consideration of the representations, warranties,
mutual covenants, and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Purchaser, the Pinehurst Entities and the Stockholders hereby agree as
follows:
XIV abARTICLE
THE MERGER
14.01 ab Section. Merger. Upon the terms and subject to the
satisfaction of the conditions precedent contained in this Agreement, each of
the Pinehurst Entities shall be merged with and into CCNC, which, in each
case, shall be the surviving corporation. The Merger shall be effected
pursuant to the provisions of and with the effect provided in the North
Carolina Business Corporation Act (the "NCBCA") and the South Carolina
Business Corporation Act of 1988 (the "SCBCA"). Upon the consummation of the
Merger, the separate existence of each Pinehurst Entity shall cease, the
corporate existence of CCNC with all of its purposes, powers and objects shall
continue unaffected and unimpaired by the Merger, and the Pinehurst Entities
and CCNC shall be a single corporation. The parties hereto intend that the
Merger shall be treated as a reorganization pursuant to Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Code.
14.02 ab Section. Effective Time. If (a) all of the conditions
precedent to the Merger set forth in Article VIII and Article IX are
satisfied or waived, and (b) this Agreement is not terminated prior to the
Closing as permitted by the provisions of this Agreement, then as soon as
practicable following the Closing, the Purchaser shall cause Articles of
Merger for the merger of each of the Pinehurst Entities with and into CCNC
conforming to the requirements of the (a) NCBCA to be filed with the Secretary
of State of the State of North Carolina in the manner provided under the NCBCA
and (b) SCBCA to be filed with the Secretary of State of the State of South
Carolina in the manner provided under the SCBCA. The Merger shall become
effective as of noon, Indianapolis time, on the date of the filing of the
Articles of Merger (the "Effective Time").
14.03 ab Section. Legal Effect. At and after the Effective
Time, CCNC shall possess all of the rights, privileges, immunities, powers and
franchises of the Pinehurst Entities and shall have all of the duties and
liabilities of the Pinehurst Entities, in accordance with the NCBCA and SCBCA.
14.04 ab Section. Name. Following the Merger, the name of CCNC
shall remain "Crossmann Communities of North Carolina, Inc.;" provided,
however, that CCNC may, at the sole discretion of the Board of Directors of
CCNC and/or the Board of Directors of Crossmann, file appropriate
documentation with the Secretary of State of the State of South Carolina to do
business in that state as "Pinehurst Builders, a division of Crossmann
Communities, Inc."
14.05 ab Section. Other Actions. The Purchaser, the Pinehurst
Entities, and the Stockholders shall take all other actions as may be
necessary or appropriate in order to effectuate the transactions contemplated
by this Agreement. If any further action is necessary or desirable to carry
out the purposes of this Agreement after the Effective Time, the officers and
directors of the Purchaser shall have the authority to take that action.
XV abARTICLE
CORPORATE GOVERNANCE
15.01 ab Section. Articles of Incorporation and Bylaws. The
Articles of Incorporation and Bylaws of CCNC as in effect immediately prior to
the Effective Time shall continue as the Articles of Incorporation and Bylaws,
respectively, of CCNC following the Effective Time until amended or repealed
as provided by applicable law.
15.02 ab Section. Directors and Officers. The directors and
officers of CCNC immediately prior to the Effective Time shall continue as the
directors and officers of CCNC following the Effective Time, to serve until
their successors shall have been duly elected or appointed and qualified in
the manner provided in the Articles of Incorporation and Bylaws of CCNC, or as
otherwise provided by applicable law.
XVI abARTICLE
CONVERSION OF AND PAYMENT FOR SHARES
16.01 ab Section. Conversion. At the Effective Time, each share
of common stock of each Pinehurst Entity ("Pinehurst Stock") which shall be
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive cash, common shares of Crossmann (the "Consideration
Shares") and options to purchase common shares of Crossmann (the "Options") as
set forth on Schedule 3.01 (the "Merger Consideration"), and all
certificates formerly representing shares of Pinehurst Stock shall be deemed
cancelled and shall represent only the right to receive the Merger
Consideration. The terms and conditions of the Options shall be set forth in
the Option Agreements, attached hereto as Exhibit 3.01. After the Effective
Time, the holder of a certificate formerly representing shares of Pinehurst
Stock shall have no rights with respect to such shares other than as provided
by this Article III or the laws of the State of North Carolina or the State
of South Carolina. The aggregate number of Consideration Shares which shall
be delivered to the Stockholders pursuant to this Section 3.01 shall be
determined by dividing (a) $7,350,000 by (b) the average of the average of
last bid and ask prices for the common shares of Crossmann as reported by the
National Association of Securities Dealers Automated Quotation
System--National Market System ("NASDAQ-NMS") for the period beginning on
April 30, 1998 and ending on May 13, 1998. The parties acknowledge that this
calculation results in an aggregate of 276,420 Consideration Shares being
delivered to the Stockholders.
16.02 ab Section. Payment of the Merger Consideration. Subject
to Section 3.07 below, the Merger Consideration shall be delivered by the
Purchaser at the Closing. Certificates representing the Consideration Shares
delivered by the Purchaser in connection with the Merger shall bear a legend
indicating the manner in which such Consideration Shares were acquired by the
Stockholders and requiring compliance with the registration requirements under
the Securities Act prior to resale. No certificates or scrip representing
fractional Consideration Shares shall be issued in the Merger, and no holder
of any fractional share interest shall be entitled to vote, to receive any
dividends or other distributions paid or declared on Consideration Shares, or
to exercise any other rights as a shareholder of Crossmann with respect to
such fractional share interest. Each holder of Pinehurst Stock who would
otherwise be entitled to receive a fractional Crossmann Share in exchange for
that holder's Pinehurst Stock hereunder shall be entitled, upon surrender of
certificates for Pinehurst Stock in accordance with this Agreement, to receive
in lieu of such fractional share interest an amount in cash equal to the
amount of the fractional share interest multiplied by the closing price of the
Crossmann Share on the Closing Date.
16.03 ab Section. Escrow. As security for the satisfaction of
indemnification obligations provided for in Article VI, Crossmann shall hold
back that number of Consideration Shares set forth next to each Stockholder's
name on Exhibit 3.03 (the "Escrow Deposit"), which number shall equal 30,000
Consideration Shares. Within thirty (30) days of the date of this Agreement,
the Purchaser and the Stockholders shall select a mutually acceptable
independent escrow agent (the "Escrow Agent") and Crossmann shall deliver the
Escrow Deposit to such Escrow Agent within two (2) days of the selection of
the Escrow Agent. The Escrow Agent shall hold the Escrow Deposit in escrow
(the "Escrow") pursuant to an escrow agreement in substantially the same form
as attached hereto as Exhibit 3.03 (the "Escrow Agreement") which shall,
among other things, contain the following terms: 20,000 Consideration Shares
shall be released on June 1, 1999 and the remaining Consideration Shares shall
be released on June 1, 2000 so long as no claims against the Escrow have been
made or are pending.
16.04 ab Section. Certificates. The Stockholders shall deliver
at the Closing certificates representing the Pinehurst Stock outstanding
immediately prior to the Closing or to the extent such certificates are not
available, shall execute such affidavits and indemnities and provide such
bonds as the Purchaser may reasonably require.
XVII abARTICLE
REPRESENTATIONS AND WARRANTIES OF PINEHURST ENTITIES
AND THE STOCKHOLDERS
As a material inducement to the Purchaser to enter into this Agreement
and other agreements and documents executed by the Purchaser in connection
with this Agreement, and to consummate the transactions contemplated hereby
and thereby, each of the Pinehurst Entities and each Stockholder jointly and
severally represent and warrant to the Purchaser that:
17.01 ab Section. Title to Property. Except as set forth in
Schedule 4.01, each Pinehurst Entity has good, valid and marketable title to
all of its Assets, free and clear of all Liens, except for Liens for property
Taxes not yet due and payable.
17.02 ab Section. Authority; Consent. The Pinehurst Entities
and the Stockholders 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, and to comply with and fulfill
the terms and conditions of this Agreement. The Pinehurst Entities each has
the full capacity, right, power, and authority to consummate the Merger. The
execution and delivery of this Agreement by each of the Pinehurst Entities and
the consummation by each of the Pinehurst Entities of the transactions
contemplated hereby have been duly and validly authorized by all necessary
action on the part of the respective Boards of Directors of the Pinehurst
Entities and the Stockholders. This Agreement constitutes a valid and binding
obligation of each of the Pinehurst Entities and the Stockholders enforceable
against each 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 Pinehurst Entities or
the Stockholders, or any of them, 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 4.02, neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
compliance by any of the Pinehurst Entities or the Stockholders with any of
the provisions of this Agreement will:
(a) ab 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 the Bylaws of any of the Pinehurst Entities, or any of the
terms, conditions or provisions of any note, credit agreement, security or
pledge agreement, Lien, bond, mortgage, indenture, license, lease, contract,
commitment, agreement, understanding, arrangement, restriction, or other
instrument or obligation to which any Pinehurst Entity or any Stockholder is a
party or by which any Pinehurst Entity or any Stockholder or any of their
respective properties or assets may be bound;
(b) ab 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 any Pinehurst Entity or any Stockholder or any of their
respective properties, assets, or outstanding membership interests shares, or
other securities of any Pinehurst Entity; or
(c) ab Constitute an event which, with or without notice, lapse of
time, or action by a third party, could trigger a default of any of the Debt,
or any portion thereof, result in the creation of any Lien upon any of the
Assets or any Stockholder, or cause the maturity of any liability, obligation,
or debt of any Pinehurst Entity or any Stockholder to be accelerated or
increased.
17.03 ab Section. Consents and Approvals. Except as set forth
on Schedule 4.03, the execution, delivery, and performance of this Agreement
by the Pinehurst Entities and the Stockholders and the consummation by the
Pinehurst Entities and the Stockholders 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 4.03, any and all notices, consents, authorizations,
and approvals set forth on Schedule 4.03 have been made and obtained.
17.04 ab Section. Organization. Each Pinehurst Entity is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each Pinehurst Entity has all the requisite
power and authority to own, lease, and operate its properties and to carry on
its business operations as it is now being conducted. Prior to the Closing,
each Pinehurst Entity will deliver to the Purchaser (a) a copy of its Articles
of Incorporation, including all amendments thereto, certified as true,
complete, and presently in effect by the Secretary of State of its
jurisdiction of organization, (b) a copy of its Bylaws, including all
amendments thereto, certified as true, complete and presently in effect by its
Secretary, and (c) Certificate of Existence issued by the Secretary of State
of its jurisdiction of organization.
17.05 ab Section. Capital Structure of the Pinehurst Entities and
Related Matters. The total authorized and outstanding capital stock of each
of the Pinehurst Entities is set forth on Schedule 4.05. All outstanding
shares of the Pinehurst Stock have been duly authorized, validly issued and
are fully paid and non-assessable. No capital stock of any Pinehurst Entity
is entitled to preemptive rights. No Pinehurst Entity has any outstanding
options, warrants or other rights of any kind to acquire any shares of any
Pinehurst Entity, or securities convertible into or exchangeable for, or which
otherwise confer on the holder thereof any right to acquire, any shares of any
Pinehurst Entity, nor is any Pinehurst Entity committed to issue any such
option, warrant, right or security.
17.06 ab Section. No Subsidiaries or Other Interests. No
Pinehurst Entity has any subsidiary and does not own, directly or indirectly,
any debt or equity interest in any Person.
17.07 ab Section. Title to Shares. Each of the Stockholders has
legal, valid and marketable title to the shares of common stock of the
Pinehurst Entities set forth opposite his name on Schedule 4.07, free and
clear of all Liens, buy-sell agreements, cross-purchase agreements,
stockholder agreements or restrictions.
17.08 ab Section. Financial Statements of the Pinehurst Entities.
True and complete copies of the annual financial statements of each of the
Pinehurst Entities for each of the years 1995, 1996 and 1997 and the
internally prepared interim balance sheet (the "Interim Balance Sheet") of
each of the Pinehurst Entities as of April 30, 1998 (the "Interim Balance
Sheet Date"), are attached hereto as Schedule 4.08 (collectively the
"Financial Statements of the Pinehurst Entities"). The Financial Statements
of the Pinehurst Entities, and each of them, are true and correct in all
material aspects, have been prepared from the books and records of the
Pinehurst Entities in accordance with GAAP consistently applied, and contain
and reflect all material adjustments or accruals necessary for a fair
presentation of the financial condition and results of the operations of the
Pinehurst Entities for the periods indicated.
17.09 ab Section. Absence of Undisclosed Liabilities. The
Pinehurst Entities have no liabilities or obligations except:
(a) ab those liabilities or obligations set forth on the Interim
Balance Sheet and not heretofore paid or discharged in the normal and ordinary
course of business consistent with past practice;
(b) ab liabilities arising in the normal and ordinary course of
business consistent with past practice under any agreement, contract,
commitment, lease or plan specifically disclosed on Schedule 4.13, Schedule
4.16, Schedule 4.17(a) or Schedule 4.21; and
(c) ab those liabilities or obligations incurred in or as a result of
the normal and ordinary course of business consistent with past practice since
the Interim Balance Sheet Date.
For purposes of this Agreement, the term "liabilities" shall include, without
limitation, any direct or indirect, or matured or unmatured, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, whether absolute, fixed, contingent or
otherwise, known or unknown, asserted or unasserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
17.10 ab Section. Tax Matters. Except as set forth in Schedule
4.10:
(a) ab All federal, state, county, local and other taxes of any kind
or character, including, without limitation, income (including gross and
adjusted gross), receipts, property (including real, personal, and
intangible), transfer, sales, use, franchise, value added, excise, recording,
financial institutions, employees' income and social security withholding, and
all other withholding, social security, unemployment taxes, which have been
incurred or assessed, or which are due and payable, by or on behalf of any
Pinehurst Entity, and all interest and penalties thereon (collectively, the
"Taxes"), have been paid (and, to the extent applicable, withheld) in full (or
are adequately reflected as a liability in the Interim Balance Sheet);
(b) ab Each Pinehurst Entity 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; and
(c) ab 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 any Pinehurst Entity or any waiver or agreement by any
Pinehurst Entity for an extension of time for the assessment of any Tax.
17.11 ab Section. Compliance with Laws; No Default or Litigation.
Except as set forth in Schedule 4.11:
(a) ab No Pinehurst Entity is in default or violation (nor is there,
to the knowledge of the Pinehurst Entities or any Stockholder, 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 any of the Assets 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, domestic or foreign (including, without limitation,
applicable laws, rules and regulations relating to environmental protection,
antitrust, civil rights, health, and occupational health and safety);
(b) ab There are no actions, suits, claims, investigations, legal
arbitrations or administrative proceedings in progress, pending, or, to the
knowledge of the Pinehurst Entities or any Stockholder, threatened by or
against any Pinehurst Entity (or any of the Assets) 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 any
Pinehurst Entity been charged with or received any notice of any violation of
any rule, regulation, ordinance, law, order, decree, or requirement relating
to any Pinehurst Entity, its properties, assets, or the transactions
contemplated by this Agreement; and
(c) ab No action, suit, or proceeding has been instituted or, to the
knowledge of the Pinehurst Entities or any Stockholder, threatened to
restrain, prohibit, or otherwise challenge the legality or validity of the
transactions contemplated by this Agreement.
17.12 ab Section. Personal Property Owned. Schedule 4.12
contains a list and brief description of all model homes, tools, furniture,
furnishings, fixtures, machinery, supplies, vehicles, equipment, and all other
items of tangible personal property owned or used by any Pinehurst Entity (the
"Personal Property").
17.13 ab Section. Personal Property Leased. Schedule 4.13
contains a list and brief description of all leases and other agreements under
which any Pinehurst Entity 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 Pinehurst Entities on
or before the Closing will deliver to the Purchaser copies of the leases and
agreements listed in Schedule 4.13. Each of such leases and agreements is
in full force and effect and constitutes a legal, valid, and binding
obligation of the applicable Pinehurst Entity, 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 4.13. Except as disclosed in Schedule
4.13, 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 as to the Leased Personal Property. None of the
Assets is subject to any lease other than as set forth in Schedule 4.13 or
Schedule 4.16.
17.14 ab Section. Developed Real Property. Schedule 4.14
lists and sets forth the legal description of each parcel of Developed Real
Property in which any Pinehurst Entity or any entity owned in whole or in part
by a Pinehurst Entity owns an interest. For purposes of this Agreement,
Developed Real Property is real property, owned in whole or in part by any
Pinehurst Entity or any entity owned in whole or in part by a Pinehurst
Entity, which (a) has all necessary access to and from public highways,
streets, and roads and for which no pending or threatened proceeding or other
fact or condition exists that could limit or result in the termination of such
access and (b) (i) is or can be connected to and, where applicable, serviced
by electric, gas, sewage or septic, storm sewers, telephone, and public or
private water facilities, and, when so connected, will be in compliance in all
material respects with all applicable laws and (ii) for which all applicable
installation and connection charges have been paid in full. Developed Real
Property shall not include Undeveloped Property, Land Contract Property and
Option Real Property (as those terms are defined below). Except as set forth
on Schedule 4.14, Developed Real Property is Substantially Complete. For
purposes of this Agreement, "Substantially Complete" means that each and all
of the requirements listed below have been met with respect to the Developed
Real Property and each lot contained therein (a "Lot" or "Lots"):
(a) ab Final subdivision plats have been approved by all applicable
governmental authorities and recorded in the official records of the county,
municipality or applicable governmental authority;
(b) ab Final acceptance letters have been issued by the appropriate
governmental authority which evidence that such authority has accepted for
permanent maintenance all the streets, water lines, sanitary sewer, and storm
sewers for the Lots;
(c) ab The appropriate governmental authority has certified that
operable water and sewer taps are available to each of the Lots;
(d) ab The buildable portion of each Lot is not located in a "Special
Flood Hazard Area" pursuant to the applicable Federal Insurance Rate Map or
the 100 year flood elevation as designated by the U.S. Army Corps of
Engineers, the Federal Emergency Management Agency, or any applicable state
agency;
(e) ab Rough grading of the Lots has been completed to assure that
there is sufficient drainage to eliminate the need for major benching or
filling in order to render the Lots buildable; and
(f) ab The appropriate governmental authority has certified that
building permits are obtainable for the construction of single-family or
multifamily homes on the Lots.
17.15 ab Section. Undeveloped Real Property. Schedule 4.15
lists and sets forth the legal description (or such other description legally
sufficient to identify the subject property) of each parcel of Undeveloped
Real Property in which any Pinehurst Entity or any entity owned in whole or in
part by a Pinehurst Entity owns an interest (the "Undeveloped Real Property").
For purposes of this Agreement, "Undeveloped Real Property" shall be defined
as all real property which is not Developed Real Property, Land Contract
Property or Option Real Property. Except as set forth on Schedule 4.15, no
fact, condition or restriction could preclude or prevent the Undeveloped Real
Property from (a) having all necessary access to and from public highways,
streets, and roads or (b) being connected to and, where applicable, serviced
by electric, gas, sewage or septic, telephone, and public or private water
facilities. Except as set forth on Schedule 4.15, the Pinehurst Entities
have secured all easements and public dedications necessary to connect the
utilities referenced above from their current locations to the boundary of
each parcel of Undeveloped Real Property as such boundaries currently exist.
17.16 ab Section. Real Property Leases. Schedule 4.16
contains a list and brief description of all written and oral agreements,
arrangements, contracts, commitments, leases or usufructs (each, a "Real
Property Lease") pursuant to which any Pinehurst Entity or any entity owned in
whole or in part by a Pinehurst Entity is the lessor or the lessee (or has an
equivalent interest in the case of usufructs or other arrangements which may
not be leases under applicable law) of any real property (the "Leased Real
Property"). As to each Real Property Lease, (a) no Pinehurst Entity has
delivered nor received notice that any breach or event of default exists, and
(b) no condition or event has occurred that with the giving of notice, the
lapse of time, or both would constitute a breach or event of default by any
Pinehurst Entity or any other Person.
17.17 ab Section. Land Contracts.
(a) ab Schedule 4.17(a) contains a list and brief description of all
written and oral agreements, arrangements, contracts, and commitments pursuant
to which any Pinehurst Entity or any entity owned in whole or part by a
Pinehurst Entity (i) is obligated to purchase any developed or undeveloped
real property (the "Land Contract Property"), or (ii) possesses an option to
acquire any developed or undeveloped real property (the "Option Real
Property") as of the date hereof. Schedule 4.17(a) also sets forth the
legal description of each parcel of Land Contract Property and Option Real
Property, or such other description legally sufficient to identify the subject
property.
(b) ab Each parcel of developed real property included in the Land
Contract Property or Option Real Property, when and if purchased, will satisfy
all of the representations and warranties set forth herein concerning the
Developed Real Property. Each parcel of undeveloped real property included in
the Land Contract Property or Option Real Property, when and if purchased,
will satisfy all of the representations and warranties set forth herein
concerning the Undeveloped Real Property.
(c) ab Schedule 4.17(c) sets forth all letters of intent and similar
proposals relating to the purchase of real property by any Pinehurst Entity or
any entity owned in whole or in part by a Pinehurst Entity which have not
expired or been terminated.
17.18 ab Section. Real Property Generally.
(a) ab Good and Marketable Title. Each Pinehurst Entity or any
entity owned in whole or in part by a Pinehurst Entity has good and marketable
title in fee simple to or a valid leasehold interest in its Developed Real
Property, Undeveloped Real Property, Leased Real Property, Land Contract
Property and Option Real Property (collectively, the "Real Property"), except
as set forth on Schedule 4.18(a) and except that no Pinehurst Entity or any
entity owned in whole or in part by a Pinehurst Entity will acquire such title
to its Land Contract Property and Option Real Property until the acquisition
thereof. The Real Property constitutes all of the real property which any
Pinehurst Entity or any entity owned in whole or in part by a Pinehurst Entity
owns or has a right to acquire or in which any Pinehurst Entities or entity
owned in whole or part by a Pinehurst Entity otherwise has an interest, except
for any easements, rights of way, covenants, servitude, licenses, or other
interests, whether arising by contract, statute, regulation, common law,
equity, or otherwise which are appurtenant to any Real Property.
(b) ab No Breach or Default. Except as set forth in Schedule
4.18(b), no Pinehurst Entity has given nor has it received any written notice
that a breach or an event of default exists under or with respect to any
agreement, arrangement, contract, covenant, condition, deed, deed of trust,
right-of-way, easement, mortgage, restriction, survey, title insurance policy,
and other document granting such Pinehurst Entity title to or an interest in
or otherwise affecting the Real Property, and, to the knowledge of the
Pinehurst Entities and the each Stockholder, no condition or event has
occurred that with the giving of notice, the lapse of time, or both would
constitute a breach or event of default of any such agreement or document, by
such Pinehurst Entity or any other Person.
(c) ab No Condemnation. No condemnation, eminent domain, or similar
proceeding exists, is pending or, to the knowledge of the Pinehurst Entities
and the Stockholders, is threatened with respect to, or that could affect, any
Real Property or its development or the construction, marketing, or sale of
dwellings situated thereon or the insurability or marketability of the title
thereto.
(d) ab Compliance with Laws. The buildings and improvements on and
the subdivision of the Real Property do not violate (i) any applicable law,
including any building, set-back, or zoning law, ordinance, regulation, or
statute, or other governmental restriction in the nature thereof, or (ii) any
enforceable restrictive covenant affecting any such property.
(e) ab Parties in Possession. There are no parties in possession of
any portion of the Real Property as lessees, tenants at sufferance, or
trespassers, except for rightful possessors of the Option Real Property, the
Leased Real Property, or the Land Contract Property.
(f) ab Site Obligations. Except as set forth on Schedule 4.18(f),
no Real Property is subject to any condition or obligation to any governmental
entity or other Person requiring the owner or any transferee thereof to donate
land (except for incidental rights-of-way), money or other property or to make
off-site public improvements.
(g) ab Assessments. No developer-related charges or assessments by
any public authority or any other Person for public improvements or otherwise
made against the Real Property are unpaid (other than those set forth on the
Interim Balance Sheet or incurred since the date thereof in the ordinary
course of business consistent with past practices), including without
limitation those for construction of sewer lines, water lines, storm drainage
systems, electric lines, natural gas lines, streets (including perimeter
streets), roads and curbs, excluding homeowner association dues, utility
connection fees, and per lot impact fees.
(h) ab Subdivision Standards. Except as set forth on Schedule
4.18(h), the Real Property and all lots included therein conform to the
appropriate governmental authority's subdivision standards, and there is no
material impediment to subdivision approval for the Undeveloped Real Property,
such approval to allow development of the Undeveloped Real Property for
construction and sale of single-family and multifamily homes at the density
and materially in the manner in which the Pinehurst Entities currently
anticipate building thereon.
(i) ab Moratoria. There is no moratorium applicable to any of the
Real Property, to the extent any Pinehurst Entity plans further development
thereof, on (i) the issuance of building permits for the construction of
condominiums or houses, or certificates of occupancy therefor, or (ii) the
purchase of sewer or water taps to the extent any Pinehurst Entity plans or is
required to rely on public water or sewer facilities.
(j) ab Construction Conditions. Except as set forth on Schedule
4.18(j), each of the lots included in the Developed Real Property, developed
real property included in the Land Contract Property and developed real
property included in the Option Real Property is stable and otherwise suitable
for the construction of a residential structure by customary means and without
extraordinary site preparation measures.
(k) ab Certain Prior Uses. Except as set forth on Schedule
4.18(k), none of the Real Property has a gravesite that will materially
impede the development of residential homes or condominiums and no permanent
structures have been constructed on a fill or borrow area in a manner that
materially adversely affects any Pinehurst Entity's intended use thereof or
that does not comply with any applicable law.
(l) ab Claims. Except as set forth on Schedule 4.18(l), no action
described in Section 4.11 is pending or, to the knowledge of the Pinehurst
Entities and the Stockholders, threatened against any Pinehurst Entity with
respect to any of the Real Property. All of the Real Property is in
compliance with all applicable zoning and subdivision ordinances and none of
the development-site preparation and construction work performed on the Real
Property has concentrated or diverted surface water or percolating water
improperly onto or from the Real Property in a manner that affects any
Pinehurst Entity's present or intended use thereof or the value of the Real
Property.
(m) ab Third Party Rights. Except as set forth on Schedule
4.18(m), no Pinehurst Entity has granted to any Person any contract or other
right to the use of any portion of the Real Property or to the furnishing or
use of any facility or amenity on or relating to the Real Property, other than
sales contracts in the ordinary course of business.
(n) ab Zoning. Except as set forth on Schedule 4.18(n), all of
the Real Property is zoned to permit single-family or multifamily home
construction and occupancy thereon.
17.19 ab Section. Homeowner Associations.
(a) ab Schedule 4.19 sets forth a list of all homeowner associations
in which any Pinehurst Entity or any entity owned in whole or part by a
Pinehurst Entity has or has had declarant rights (the "Homeowner
Associations") and all amounts owing between such Pinehurst Entity or entity
owned in whole or part by a Pinehurst Entity on the one hand and the Homeowner
Associations on the other.
(b) ab Except as set forth on Schedule 4.19, (i) all restrictive
covenants and other documents used by any Pinehurst Entity or any entity owned
in whole or part by a Pinehurst Entity in connection with the creation and
operation of the Homeowner Associations (A) in which any Pinehurst Entity or
any entity owned in whole or part by a Pinehurst Entity previously had
declarant rights complied in all materials respects with applicable laws at
the time the same were promulgated, and (B) in which any Pinehurst Entity or
any entity owned in whole or part by a Pinehurst Entity currently has
declarant rights currently comply in all material respects with applicable
laws, and (ii) all disclosures and deliveries of information and documents
required by applicable laws as to such Homeowner Associations and their
creation and operation have been materially complied with.
(c) ab To the knowledge of the Pinehurst Entities and the
Stockholders, no other claims exist by a Homeowner Association against any
Pinehurst Entity or any entity owned in whole or part by a Pinehurst Entity,
and each Homeowner Association has been operated, so long as any Pinehurst
Entity or any entity owned in whole or part by a Pinehurst Entity has
participated therein, in accordance with applicable laws.
17.20 ab Section. Environmental Compliance. Except as set forth
in Schedule 4.20:
(a) ab Each Pinehurst Entity and each entity owned in whole or part by
a Pinehurst Entity has at all times complied with all applicable Environmental
Requirements in its operation, development, construction and disposition of
the Real Property. Further, to the knowledge of the Pinehurst Entities and
the Stockholders, no current or previous owner of any Real Property violated
any Environmental Requirements;
(b) ab No Hazardous Material has ever been generated, manufactured,
refined, used, transported, treated, stored, handled, disposed, transferred,
produced, or processed at, to, from or on any Real Property and no Hazardous
Material has ever been incorporated into any Real Property;
(c) ab There are no existing or, to the knowledge of the Pinehurst
Entities and the Stockholders, potential Environmental Claims relating to any
Real Property, and no Pinehurst Entity or any entity owned in whole or part
by a Pinehurst Entity has received any notification, nor does it or any
Stockholder 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 Real
Property by or on behalf of any Pinehurst Entity or any entity owned in whole
or part by a Pinehurst Entity;
(d) ab (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 Real 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 Real Property;
(e) ab There are no PCBs or friable asbestos located or contained at,
on, or in any Real Property;
(f) ab No Lien has been imposed on any Real 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 Real Property or a
violation of any Environmental Requirement;
(g) ab No Pinehurst Entity or any entity owned in whole or part by a
Pinehurst Entity has received any notices issued pursuant to the citizen's
suit provision of any Environmental Requirement relating to any Real Property;
(h) ab No Pinehurst Entity or any entity owned in whole or part by a
Pinehurst Entity has 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 Real Property;
(i) ab There have been no environmental investigations, site
assessments or audits, or soil or groundwater sampling conducted at any Real
Property by any Pinehurst Entity or any entity owned in whole or part by a
Pinehurst Entity, or, to the Pinehurst Entities' and the Stockholders'
knowledge, by any other Person.
(j) ab None of the Real Property on which any Pinehurst Entity or any
entity owned in whole or part by a Pinehurst Entity intends to construct a
residential dwelling is located within a "critical," "preservation,"
"conservation" or similar type of area which will affect the present
development plans therefor. No wetlands exist which will restrict development
of any of the Real Property as contemplated by any Pinehurst Entity or any
entity owned in whole or part by a Pinehurst Entity nor render the cost of its
development of any Real Property materially in excess of such entity's budget
therefor. No portion of the Real Property which any Pinehurst Entity or any
entity owned in whole or part by a Pinehurst Entity has developed or intends
to develop for residential lots and dwellings is situated within a "noise
cone" such that the Federal Housing Administration will not approve mortgages
due to the noise level classification of such real property. Any Real
Property which cannot be developed in accordance with its official development
plan and preliminary plot without materially increasing development costs
above those contemplated any Pinehurst Entity or any entity owned in whole or
part by a Pinehurst Entity or materially delaying construction shall be listed
on Schedule 4.20.
17.21 ab Section. Contracts.
(a) ab Schedule 4.21(a) lists all material contracts and leases
(other than those described in Schedule 4.13, Schedule 4.16 and Schedule
4.17(a)), including all amendments thereto, to which any Pinehurst Entity is
a party (all the contracts, leases and amendments thereto listed on 4.13,
4.16, Schedule 4.17(a) and 4.21(a) are defined as the "Contracts")
including, but not limited to all;
(1) ab Loans, lines of credit, letters of credit, security agreements,
pledges, mortgages, hypothecations, loan agreements, guaranties, or other
payment or collateral obligations;
(2) ab Agreements of guaranty or indemnification;
(3) ab Agreements, contracts, and commitments containing any covenant,
condition, or promise limiting the right of any Pinehurst Entity to engage in
any activity or compete with any Person;
(4) ab Written employment agreements, contracts, policies, and
commitments with or between any Pinehurst Entity and any of its employees,
directors, or officers, including without limitation those relating to
severance;
(5) ab Material written agreements with employees as a group;
(6) ab Contracts with subcontractors and other service providers;
(7) ab Contracts with suppliers and vendors of parts, equipment, and
other items used by any Pinehurst Entity in the ordinary course of business;
and
(8) ab Joint venture or partnership agreements.
(b) ab All of the Contracts are valid and binding obligations of the
applicable Pinehurst Entity, are enforceable in accordance with their
respective terms, are in full force and effect and, except as otherwise
specified in Schedule 4.21(a), 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 4.21(b), (i) none of the Contracts contain any provision that is
triggered by any of the transactions contemplated by this Agreement; (ii) none
of the Contracts contain a provision imposing a penalty if any of the amounts
due thereunder are prepaid; (iii) there is not any existing default or, to the
knowledge of the Pinehurst Entities and the Stockholders, 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; (iv) to the knowledge of the Pinehurst
Entities and the Stockholders, none of the material suppliers, vendors,
subcontractors or service providers used by any Pinehurst Entity has, or
intends to, terminate or change significantly its relationship with any
Pinehurst Entity. Copies of the Contracts in written form have been delivered
or will be delivered to the Purchaser prior to the Closing.
17.22 ab Section. Accounts and Notes Receivable. The Pinehurst
Entities on or before the Closing will deliver to the Purchaser a list of
Accounts Receivable owing to each Pinehurst Entity from its customers and all
other parties as of the date of Closing with such list to be set forth in
Schedule 4.22. Such list shall include the amount of the obligation, date
the obligation was created, date when the obligation is due, and any
applicable penalties or discounts. No Pinehurst Entity nor any Stockholder
has any knowledge of any facts or circumstances which will interfere with the
collection of Accounts Receivable in accordance with their terms.
17.23 ab Section. Permits. Each Pinehurst Entity possesses all
franchises, licenses, permits, certificates, approvals, consents, clearances,
notifications, registrations, and other authorizations necessary to conduct
its business operations as now conducted (the "Permits"). Except as provided
in Schedule 4.23, all builder's 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 such builder's permits.
17.24 ab Section. Intellectual Property. Except as set forth in
Schedule 4.24, each Pinehurst Entity owns or has the right to use all
corporate names, trade names, trademarks, service marks, mailing lists,
copyrights, works of art, trade secrets, computer programs, know-how,
proprietary processes and formulae, technology and all other proprietary
technical information, whether patentable or unpatentable, and all
applications and registrations of the foregoing (collectively, "Intellectual
Property"), necessary to conduct the business of each Pinehurst Entity as
presently operated. Schedule 4.24 also contains a list and brief
description of (i) all Intellectual Property in written form which has been
registered with any state trademark office, with the U.S. Patent and Trademark
Office or with the U.S. Copyright Office and (ii) all computer programs having
a cost to any Pinehurst Entity in excess of One Thousand Dollars ($1,000.00)
per copy. Except as set forth in Schedule 4.24, each copyright claimed to
be owned by any Pinehurst Entity relating to a work of art created prior to
January 1, 1978 has been properly registered by the Pinehurst Entity claiming
ownership with the U.S. Copyright Office. Except as set forth in Schedule
4.24, no Pinehurst Entity is infringing upon or otherwise acting adversely
to, or engaging in the unauthorized use or misappropriation of, any
Intellectual Property, rights of publicity, or rights of privacy which are
owned by any other Person, and there is no claim or action by any such Person
pending or threatened with respect thereto.
17.25 ab Section. Labor Relations: Employees. As of May 29,
1998, the Pinehurst Entities employed a total of 84 employees. As of the
Closing Date, except as set forth in Schedule 4.25:
(a) ab Each Pinehurst Entity 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) ab Each Pinehurst Entity is in compliance with (i) all federal,
state, county, 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) ab There is no unfair labor practice, safety, health,
discrimination, or wage claim, charge, complaint, or suit pending or
threatened against or involving any Pinehurst Entity before the National Labor
Relations Board, Occupational Safety and Health Administration, Equal
Employment Opportunity Commission, Department of Labor, or any other federal,
state, county or local agency;
(d) ab There is no labor dispute, strike, work stoppage, interference
with production, or slowdown in progress, threatened against, or involving any
Pinehurst Entity;
(e) ab 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 any Pinehurst Entity;
(f) ab There is no grievance pending or threatened which might have a
material adverse effect on any Pinehurst Entity, or on the conduct of the
business of any Pinehurst Entity;
(g) ab There exists no collective bargaining agreement to which any
Pinehurst Entity is a party, and there is no collective bargaining agreement
currently being negotiated, subject to negotiation, or renegotiation by any
Pinehurst Entity; and
(h) ab There is no dispute, claim, or proceeding pending with or
threatened by the Immigration and Naturalization Service with respect to any
Pinehurst Entity.
17.26 ab Section. Employee Benefit Plans.
(a) ab Schedule 4.26, 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 any Pinehurst Entity immediately prior to
the Closing, (B) to which any Pinehurst Entity contributed to, or was legally
obligated to contribute to immediately prior to the Closing, or (C) under
which any Pinehurst Entity had any liability immediately prior to Closing,
with respect to its current or former employees or independent contractors.
Solely for purposes of this Section 4.26, 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) ab Each Pinehurst Entity on or before the Closing will provide the
Purchaser with true and correct copies of (i) all Employee Benefit Plans
listed on Schedule 4.26, including all amendments thereto, and (ii) the most
recent summary plan description for each Employee Benefit Plan.
(c) ab 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, 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. All IRS/DOC Form 5500s for each Employee Benefit Plan have been
timely filed.
(d) ab 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) ab No Pinehurst Entity is obligated to contribute to any
multi-employer plan (as defined in ERISA Section 3(37)).
(f) ab Each Pinehurst Entity has complied with the requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(hereinafter referred to as ("COBRA")) and the rules and regulations
thereunder. Each Stockholder shall be solely responsible and liable for
providing any and all benefits to employees or others (or their covered
dependents) of such Pinehurst Entity required under COBRA arising from any
qualifying event as defined under Code Section 4980B(f)(3) and ERISA Section
603 occurring on or before Closing.
17.27 ab Section. Warranty Liability. Except as set forth in
Schedule 4.27, no Pinehurst Entity has (a) incurred any costs in regard to
any Warranty Liability at any time, (b) has been notified, in writing or
orally, of any pending or potential Warranty Liability which has arisen or may
arise in the future, nor (c) has any reason to anticipate any pending or
potential Warranty Liability.
17.28 ab Section. Conduct of the Corporation Since the Interim
Balance Sheet Date. Since the Interim Balance Sheet Date, no Pinehurst
Entity has:
(a) ab incurred any liability, other than liabilities incurred in the
normal and ordinary course of business consistent with past practice, or
discharged or satisfied any Lien or paid any liability, other than in the
normal and ordinary course of business consistent with past practice, or
failed to pay or discharge when due any liabilities of which the failure to
pay or discharge has caused or will cause any material damage or risk of
material loss to it or any of its Assets;
(b) ab sold, encumbered, assigned or transferred any Asset which would
have been included in the Assets, except for the sale of single family or
multi-family homes in the normal and ordinary course of business consistent
with past practice;
(c) ab created, incurred, assumed or guaranteed any indebtedness for
borrowed money, or mortgaged, pledged or subjected any of its Assets to any
Lien;
(d) ab made or suffered any amendment or termination of any material
agreement, contract, commitment, lease or plan to which it is a party or by
which it is bound, or cancelled, modified or waived any substantial debt or
claim held by it or waived any right of material value, whether or not in the
normal and ordinary course of business consistent with past practice;
(e) ab declared, set aside or paid any dividend or made or agreed to
make any other distribution or payment in respect of the securities of any
Pinehurst Entity or issued, redeemed, purchased or otherwise acquired or
agreed to issue, redeem, purchase or acquire any of its shares or any other
securities;
(f) ab suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, Assets or prospects or (ii) of any item or items carried on its
books of account individually or in the aggregate at more than $5,000, or
suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) ab made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $5,000, except
such as may be involved in ordinary repair, maintenance or replacement of its
Assets;
(h) ab increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to,
other benefits to which any of its employees may be entitled;
(i) ab instituted, granted or modified in any respect any (i) bonus,
incentive compensation, service award or other like benefit granted, made or
accrued, contingently or otherwise, for or to the credit of any personnel
engaged in the business of any Pinehurst Entity, (ii) Employee Benefit Plan,
retirement plan, profit-sharing plan or similar payment or arrangement made or
agreed to by any Pinehurst Entity for any personnel engaged in the business of
any Pinehurst Entity other than in the normal and ordinary course of business
consistent with past practice, or (iii) new employment agreement with any
personnel engaged in the business of any Pinehurst Entity to which any
Pinehurst Entity is a party;
(j) ab changed any of the accounting principles followed by it or the
methods of applying such principles;
(k) ab entered into any transaction other than in the normal and
ordinary course of business consistent with past practice; or
(l) ab suffered any material adverse change in its business,
operations, Assets, prospects or condition (financial or otherwise).
17.29 ab Section. Outstanding Debt and Related Matters. All
outstanding Debt of each Pinehurst Entity is set forth on Schedule 4.29
("Existing Debt"). There exists no default under the provisions of any
instrument evidencing such Existing Debt or of any agreement relating thereto,
except as listed on Schedule 4.29. No Pinehurst Entity or any Stockholder
has guaranteed any obligation of any Person, and except as listed on Schedule
4.29, neither the Stockholders nor any other Person has guaranteed any
obligation of any Pinehurst Entity, including obligations with respect to
Existing Debt.
17.30 ab Section. Power of Attorney. Schedule 4.30 contains a
list of the names of all Persons holding general or special written powers of
attorney from any Pinehurst Entity and a summary of the terms thereof.
17.31 ab Section. Absence of Certain Business Practices. Except
as set forth on Schedule 4.31, within the 10 years immediately preceding the
date of this Agreement, none of the Pinehurst Entities, the Stockholders or
the personnel or other Persons acting on behalf of any of them 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 of any Pinehurst Entity (or assist
any Pinehurst Entity in connection with any actual or proposed transaction
relating to its Business), which might subject any Pinehurst Entity 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 its business.
17.32 ab Section. Minute Book and Stock Record Book. The minute
books of each of the Pinehurst Entities contain complete and accurate records
of all official meetings and other official corporate actions of its
stockholders and board of directors, including committees of the board of
directors. The stock record book of each Pinehurst Entity, contains a
complete and accurate record of all transactions involving equity securities
issued by it. All other material books and records each of the Pinehurst
Entities are complete and accurate in all material respects.
17.33 ab Section. Directors and Officers. Schedule 4.33
attached hereto identifies all of the directors and officers of each Pinehurst
Entity on the date hereof.
17.34 ab Section. S Corporation Status. Each Pinehurst Entity
is a small business corporation within the meaning of Section 1361 of the Code
and has had in effect since its initial date of incorporation a valid election
to be treated as an "S" corporation for federal income tax purposes under the
Code and in the jurisdictions listed on Schedule 4.34, and no Pinehurst
Entity nor any Stockholder has taken or caused or permitted to be taken any
action that would have caused a termination of any such S election for any
period.
17.35 ab Section. Investment Intent. Each Stockholder, who is
entitled to Consideration Shares pursuant to Section 3.01, is acquiring the
Consideration Shares to which he may entitled pursuant to Section 3.01, for
his own account for the purpose of investment and not with a view to, or for
sale in connection with, any distribution thereof within the meaning of the
Securities Act. Each Stockholder, who is entitled to Consideration Shares
pursuant to Section 3.01, acknowledges and agrees that the certificates
representing the Consideration Shares shall bear a legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE OR FOREIGN SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH."
17.36 ab Section. Access to Information. Each Stockholder, who
is entitled to Consideration Shares pursuant to Section 3.01, has received
and reviewed a copy of Crossmann's Annual Report on Form 10-K for the fiscal
year ending December 31, 1997 and the proxy statement relating to Crossmann
1998 Annual Meeting of Stockholders. Each Stockholder who is entitled to
Consideration Shares pursuant to Section 3.01 has had an opportunity to the
ask questions of, and receive answers from, the management of Crossmann
concerning the operations and financial condition of Crossmann and its
business to make an informed decision to invest in the Consideration Shares.
17.37 ab Section. Accredited Investor. Each Stockholder, who is
entitled to Consideration Shares pursuant to Section 3.01, is an "accredited
investor" as the term is defined by Rule 501 of Regulation D promulgated by
the Commission.
17.38 ab Section. Sophistication of Each Stockholder. Each
Stockholder, who is entitled to Consideration Shares pursuant to Section
3.01, has such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of an investment in the
Consideration Shares and has been advised by professional advisors, including
attorneys and accountants, with respect to all aspects of owning the
Consideration Shares, including the impact of all relevant securities and tax
laws on such ownership.
17.39 ab Section. Letters of Intent and Sale Discussions.
Except for the Letter of Intent by and between Crossmann, Pinehurst Entities,
River Oaks, True Blue, James T. Callihan, Ralph R. Teal, Jr., Jeffrey H.
Skelley, and H. Gilford Edwards, dated April 1, 1998, no Pinehurst Entity has
entered into any binding letter of intent nor other agreement pursuant to
which such Pinehurst Entity has agreed to merge or consolidate, in whole or in
part, with any other Person, sell or exchange any of the stock of such
Pinehurst Entity, or sell, transfer, or assign any asset of such Pinehurst
Entity, except for sales of residential homes or condominiums made in the
ordinary course of business.
17.40 ab Section. Distributions. No Pinehurst Entity has made
any distributions to its Stockholders since April 30, 1998.
17.41 ab Section. Closings. Except as set forth on Schedule
4.41, no Pinehurst Entity has closed the sale of any multifamily unit since
April 30, 1998.
17.42 ab Section. Brokers Commissions. With the exception of
the fee owed to Michael P. Kahn & Associates, LLC, no Pinehurst Entity,
Stockholder nor any Person acting on behalf of any Pinehurst Entity or any
Stockholder has agreed to pay a commission, finder's fee or similar payment in
connection with this Agreement or any matter related hereto to any Person.
The Stockholders shall be responsible for and shall pay all amounts owed to
Michael P. Kahn & Associates, LLC.
17.43 ab Section. Due Diligence. With respect to all
representations and warranties which are qualified "to the knowledge of the
Pinehurst Entities and/or the Stockholders," "known to the Pinehurst Entities
and/or the Stockholders," or words of similar import, the Pinehurst Entities
and the Stockholders each have made reasonable investigation of the subject
matter of the representation of warranty and, where appropriate, conferred
with appropriate personnel and/or examined appropriate documents.
17.44 ab Section. Disclosure. This 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 or therein not misleading.
17.45 ab Section. Survival. All representations and warranties
contained in this Agreement, except those in Sections 4.07, 4.10, 4.20
4.26 and 4.34 shall survive the execution, delivery, and performance
hereof for a period of three (3) years after the Closing Date, provided,
however, that the representations contained in Section 4.07 and the
Stockholders' obligation to indemnify the Purchaser with respect to a breach
thereof shall survive indefinitely, provided, further, that the
representations contained in Section 4.10, Section 4.26 and Section 4.34
and the Stockholders' obligation to indemnify the Purchaser with respect to a
breach thereof shall survive for so long as the applicable statute of
limitations; and, provided, further, that the representations contained in
Section 4.20 relating to environmental matters and the Stockholders'
obligation to indemnify the Purchaser with respect to a breach thereof shall
survive for so long as any environmental regulatory authority shall have the
power to make any claim, assessment or reassessment with respect thereto.
Notwithstanding the foregoing, the representations contained in Section 4.20
relating to environmental matters and the Stockholders' obligation to
indemnify the Purchaser with respect to a breach thereof relating to any
specific property shall survive for a period of five (5) years from the date
on which the Stockholders have delivered, which delivery may occur after the
Closing, to Purchaser and the Purchaser has accepted in writing from the
Stockholders a reasonably acceptable "Phase I" environmental site assessment
relating to that property, as provided for in Section 6.08.
17.46 ab Section. Other Limitations. The Stockholders'
liability for a breach of a representation or warranty contained in this
Agreement shall be limited as provided for in Section 6.09.
XVIII abARTICLE
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to the Pinehurst Entities and the Stockholders
to enter into this Agreement and to consummate the transactions contemplated
by this Agreement, the Purchaser represents and warrants to the Pinehurst
Entities and the Stockholders that:
18.01 ab Section. Authority: Consent. Each of the Company and
Crossmann has 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 execution and delivery of this Agreement by
the Company and Crossmann and the consummation by the Company and Crossmann of
the transactions contemplated herein have been duly and validly authorized by
all necessary actions on the part of the boards of directors of the Company
and Crossmann. This Agreement constitutes a valid and binding obligation of
the Company 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 Company or Crossmann to make this Agreement valid and binding
upon the Company and Crossmann and enforceable against the Company 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 Company and Crossmann with any of the provisions of this Agreement
will:
(a) ab 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 Company or Crossmann is a party or by which the
Company, Crossmann or any of their respective properties or assets may be
bound;
(b) ab 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 Company, Crossmann or any of their respective properties,
assets, outstanding shares or other securities; or
(c) ab 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
upon any of the assets or properties of the Company or Crossmann, or cause the
maturity of any liability, obligation, or debt of the Company or Crossmann to
be accelerated or increased.
18.02 ab Section. Consents and Approvals. Except as set out in
Schedule 5.02, the execution and delivery of this Agreement by the Company
and Crossmann and the consummation by the Company 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 5.02 have been made and obtained.
18.03 ab Section. Corporate Organization. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of North Carolina and is a wholly-owned subsidiary of
Crossmann. 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 for which no Articles of Dissolution appear as filed
with the Indiana Secretary of State's records.
18.04 ab Section. SEC Documents and Other Reports. Crossmann
has filed all periodic reports required to be filed by it with the Commission
(the "SEC Documents"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of Crossmann included
in the SEC Documents complied as to form in all material respects with the
applicable accounting requirements and the published rules and regulations of
the Commission with respect thereto, have been prepared in accordance with
generally accepted accounting principals (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the Commission) consistently applied
throughout the periods involved (except as may be indicated therein or in the
notes thereto) and fairly present the consolidated financial position, results
of operations and cash flows of Crossmann and its consolidated subsidiaries as
of the dates or for the periods indicated therein, subject, in the case of the
unaudited statements, to normal year-end audit adjustments and the absence of
footnote disclosure. Since December 31, 1997, the Acquiror has not made any
change in the accounting practices or policies applied in the preparation of
its financial statements.
18.05 ab Section. Shares. The issued and outstanding common
shares of Crossmann are, and the Consideration Shares when issued will be,
duly authorized validly issued, fully paid and non-assessable. The
Consideration Shares will not be issued in violation of any preemptive rights
held by any shareholder of Crossmann.
XIX abARTICLE
INDEMNIFICATION
19.01 ab Section. Indemnification by the Stockholders. The
Stockholders shall jointly and severally indemnify and hold harmless the
Purchaser, and their respective successors, shareholders, partners, 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 and costs in respect of any suit to enforce this
provision if the Purchaser prevails in such suit) (each an "Indemnity Loss"),
arising from or relating to (a) any misrepresentation in or any breach of any
representation or warranty of any Pinehurst Entity or any Stockholder, or any
breach or failure of any Pinehurst Entity or any Stockholder to perform any
covenant or obligation of any Pinehurst Entity or any Stockholder contained in
this Agreement or any related agreement, instrument, document, exhibit,
schedule, or certificate furnished or required to be furnished by any
Pinehurst Entity or any Stockholder pursuant to this Agreement, or any
nonfulfillment of any of the covenants or agreements of any Pinehurst Entity
or any Stockholder contained in this Agreement, (b) any misrepresentation in
or any breach of any representation or warranty of River Oaks or any River
Oaks Stockholder, or any breach or failure of River Oaks or any River Oaks
Stockholder to perform any covenant or obligation of River Oaks or any River
Oaks Stockholder contained in the River Oaks Merger Agreement or any related
agreement, instrument, document, exhibit, schedule, or certificate furnished
or required to be furnished by River Oaks or any River Oaks Stockholder
pursuant to the River Oaks Merger Agreement, or any nonfulfillment of any of
the covenants or agreements of River Oaks or any River Oaks Stockholder
contained in the River Oaks Merger Agreement; (c) any misrepresentation in or
any breach of any representation or warranty of True Blue or any True Blue
Member, or any breach or failure of True Blue or any True Blue Member to
perform any covenant or obligation of True Blue or any True Blue Member
contained in the True Blue Agreement or any related agreement, instrument,
document, exhibit, schedule, or certificate furnished or required to be
furnished by True Blue or any True Blue Member pursuant to the True Blue
Agreement, or any nonfulfillment to any of the covenants or agreements of True
Blue or any True Blue Member contained in the True Blue Agreement; (d) any
breach of any of the terms and conditions of any Noncompetition Agreement by
the Stockholders, CTS Real Estate or South Brunswick Farms, LLC, as
appropriate; (e) any breach of any of the terms of the Cox Noncompetition
Agreement by Tony K. Cox; (f) any agreements, written or oral, that True Blue,
or any of the members, may have with Floyd, Jones or Jack Jones; (g) any
agreements, written or oral, that Beach Vacations or CB Communications may
have with Floyd and/or Jack Jones, (h) any lawsuit filed against any Pinehurst
Entity, River Oaks or True Blue on or before the Closing Date or any lawsuit
brought subsequent to the Closing Date asserting claims related to a lawsuit
filed before the Closing Date, including, but not limited to the lawsuits
listed on Schedule 6.01; (i) any Warranty Liability and (j) any and all
actions, suits, investigations, proceedings, demands, assessments, audits, and
judgments arising out of any of the foregoing.
19.02 ab Section. Indemnification by the Purchaser. The
Purchaser shall indemnify and hold harmless the Stockholders and their
respective successors and their respective partners, 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 of the Purchaser, 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.
19.03 ab Section. Notice. If 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 the alleged basis of the action or suit, the
amount of the alleged loss or expense, 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. To the extent failure to
promptly notify the Indemnifying Party of such action or suit can reasonably
be deemed to increase the liability or expense to the Claimant, the
Indemnifying Party shall not be obligated to reimburse Claimant for the amount
of the increase in liability or expense.
19.04 ab Section. Arbitration.
(a) ab If the Indemnifying Party does not agree that the Claimant is
entitled to reimbursement for the full amount specified in the Indemnification
Notice or Litigation Notice, as the case may be, the Indemnifying Party shall
notify the Claimant (the "Disagreement Notice") within twenty (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 acknowledgment 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 independent of
the parties and reasonably experienced in conducting arbitration proceedings
relating to similar matters and all arbitrators shall be selected within
thirty (30) days of the delivery of the Arbitration Notice. An arbitration
hearing shall then be held within thirty (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 thirty (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) ab 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) ab The parties hereby irrevocably consent to be bound by the
decision of the arbitration tribunal with respect to indemnification
determinations.
19.05 ab Section. Defense of Claims. The Indemnifying Party
shall have twenty (20) 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; provided, however, that the right of Claimant to
indemnification hereunder shall not be conclusively established hereby. 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.
19.06 ab Section. Computation of Indemnity Losses. The amount
of Indemnity Losses hereunder shall be computed after giving effect to the
receipt of any and all insurance proceeds with respect thereto.
19.07 ab Section. Payment of Losses. The 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 the trial court or administrative body having jurisdiction
over such proceeding. Each Stockholder hereby agrees that the Purchaser shall
have the right to recoup any amount that either is owed pursuant to the
provisions of this Article VI (in lieu of seeking a cash payment from the
Stockholders pursuant to the preceding sentence) (i) by terminating any
unexercised portion of the Options, (ii) by canceling any Consideration Shares
held back by Crossmann (iii) or by making a claim against the Escrow pursuant
to the terms and conditions of the Escrow Agreement. Notwithstanding anything
to the contrary set forth herein or in the Escrow Agreement, if the amount to
which the Purchaser is entitled pursuant to this Article VI exceeds (i) the
value of the unexercised portion of the Options and (ii) the value the Escrow
Deposit the Purchaser shall have the right to recover the difference from the
Stockholders. For the purposes of this Section 6.07, the value of the
unexercised portion of the Options shall be the amount determined by
multiplying the number of Crossmann common shares underlying the Option by the
difference between (a) the exercise price for the Crossmann common shares as
set forth in the Option Agreement and (b) the average of the closing prices of
the Crossmann common shares as reported by the NASDAQ-NMS for the ten
consecutive trading days immediately prior to the date the Option is
terminated. For the purposes of this Section 6.07, the value of the Escrow
Deposit shall equal to the average of the closing prices of the Crossmann
common shares as reported by the NASDAQ-NMS for the ten consecutive trading
days immediately prior to the date the Crossmann common shares are canceled
and are released from Escrow.
19.08 ab Section. Survival. Notwithstanding 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 three (3) years after the Closing Date; provided, however,
that the Indemnifying Party shall remain liable for any Indemnity Loss arising
from a breach of any representation contained in Section 4.07 and the
obligation to indemnify with respect to a breach thereof shall survive
indefinitely, provided, further, that the Indemnifying Party shall remain
liable for any Indemnity Loss arising from a breach of any representation
contained in Section 4.10, Section 4.26, or 4.34 and the obligation to
indemnify with respect to a breach thereof shall survive for so long as the
applicable statute of limitations, as set forth in the Code; and, provided,
further, that the Indemnifying Party shall remain liable for any Indemnity
Loss arising from a breach of any representation contained in Section 4.20
relating to environmental matters and the obligation to indemnify with respect
to a breach thereof (an "Environmental Obligation") shall survive for so long
as any environmental regulatory authority shall have the power to make any
claim, assessment or reassessment with respect thereto. Notwithstanding the
foregoing, the Indemnifying Party shall have no obligation with respect to an
Environmental Obligation relating to any specific property after the date five
(5) years from the date on which the Stockholders have delivered, which
delivery may occur after the Closing, to Purchaser and the Purchaser has
accepted in writing from the Stockholders a reasonably acceptable "Phase I"
environmental site assessment relating to that property (a "Phase I"). The
scope and performance of each Phase I shall meet or exceed ASTM Standard
practice E1527-94, Standard Practice for Environmental Site Assessment
Process. Each Phase I shall be addressed to Purchaser or accompanied by a
reliance letter addressed to the Purchaser and shall be prepared by a
consulting firm acceptable to Purchaser. The cost and expense of obtaining
such Phase I shall be borne solely by the Stockholders. In the event the
Stockholders elect to obtain an insurance policy or insurance policies to
insure against any Environmental Obligation, the Stockholders shall name
Crossmann and the Company as additional payees.
19.09 ab Section. Other Limitations. Notwithstanding the
foregoing, (i) an Indemnifying Party shall not be liable under this Article
VI unless and until Indemnity Losses incurred by the Claimant exceed
$150,000; and (ii) the Stockholder's aggregate liability shall be limited to
Fifteen Million One Hundred Thousand Dollars ($15,100,000.00), plus forfeiture
and/or cancellation of the Options.
XX abARTICLE
TAXES
20.01 ab Section. Preparation of Return. The Stockholders shall
(at their sole cost and expense) prepare and timely file or cause to be
prepared and timely filed all of the federal and state income Tax Returns for
each Pinehurst Entity for all periods ending on or prior to the Closing Date.
The Stockholders shall prepare and, if required to do so by applicable law,
deliver to the Purchaser for signing and filing any state income Tax Returns
of each Pinehurst Entity with respect to all periods prior to the Closing Date
(including any short period) that have not been filed prior to the Closing
Date. The Stockholders shall timely pay all Taxes due and payable with
respect to all periods ending on or prior to the Closing Date, including but
not limited to any Taxes attributable to CTS Real Estate Contribution and the
transactions contemplated by this Agreement.
20.02 ab Section. Cooperation. The Stockholders and the
Purchaser shall cooperate, and shall cause their respective officers,
employees, agents, auditors and representatives to cooperate, in preparing and
filing Tax Returns with respect to the Pinehurst Entities and CCNC, including
maintaining and making available to each other all records necessary in
connection with Taxes payable with respect to such Tax Returns.
20.03 ab Section. Tax Agreements. Any and all Tax sharing
agreements or practices among or between any Pinehurst Entity or its
affiliates, on the one hand, and any Stockholder, on the other hand, shall be
terminated as of the Closing Date.
XXI abARTICLE
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PINEHURST ENTITIES
AND THE STOCKHOLDERS
The obligations of the Pinehurst Entities and the Stockholders to
consummate the Merger 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 Pinehurst Entities or the Stockholders in their sole
discretion:
21.01 ab Section. Performance of the Obligations of the
Purchaser. The Purchaser shall have performed in all material respects all
obligations under this Agreement on or before the Closing Date, the
representations and warranties of the Purchaser set forth in Article V shall
remain true, correct, and complete in all material respects as of the Closing
Date, and the Pinehurst Entities and the Stockholders 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.
21.02 ab Section. Consents and Approvals. All permits,
consents, waivers, authorizations, and approvals of any governmental or
regulatory authority, state or Federal, and of any other Person (including the
Purchaser and the shareholder of CCNC) 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.
21.03 ab Section. No Violation of Orders. No 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.
XXII abARTICLE
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser to consummate the Merger 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.
22.01 ab Section. Performance of the Obligations of the Pinehurst
Entities and the Stockholders. The Pinehurst Entities and the Stockholders
shall have performed in all material respects all obligations under this
Agreement on or before the Closing Date, the representations and warranties of
the Pinehurst Entities and the Stockholders set forth in Article IV shall
remain true, correct, and complete in all material respects as of the Closing
Date, and the Purchaser shall have received a certificate from each Pinehurst
Entity and each Stockholder to that effect dated the Closing Date and signed
by the President or any other duly authorized officer of each of the Pinehurst
Entities and each Stockholder.
22.02 ab Section. Completion of Due Diligence. The Purchaser,
in its sole discretion, shall be satisfied with the results of its due
diligence review of the Pinehurst Entities, and the business operations of the
Pinehurst Entities, including, but not limited to, the information set forth
on the Schedules to this Agreement.
22.03 ab Section. Consents and Approvals. All Permits necessary
to conduct the business of each Pinehurst Entity as now conducted, 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 (including the Board of Directors and the shareholders of
each Pinehurst Entity), 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. Each party (other than the Pinehurst
Entities) to any of the Contracts specified in Schedule 4.13, Schedule
4.16, Schedule 4.17(a) and Schedule 4.21(a) shall have provided its written
consent to the assignment of the Contract to the Purchaser as provided herein,
to the extent such consent is required.
22.04 ab Section. No Violation of Orders. No 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 Assets or the financial condition of any Pinehurst Entity shall be in
effect, and no proceeding relating to any order shall have commenced.
22.05 ab Section. Title Insurance. Prior to the Closing, the
Pinehurst Entities shall have furnished the Purchaser, 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 (except for the Leased
Real Property, the Land Contract Property, and the Option Real Property) in
the name of the Purchaser.
22.06 ab Section. Employment Agreements. The Purchaser and each
of Callihan, Teal, Skelley and Edwards and Tony K. Cox shall have entered into
an employment agreement in the form of Exhibit 9.06 attached hereto and
incorporated herein by this reference (the "Employment Agreements"); provided,
however, that Callihan, Teal, Skelley, Edwards and Tony K. Cox will remain
employees of the Pinehurst Entities and the Pinehurst Entities will remain
obligated to pay Callihan, Teal, Skelley, Edwards and Tony K. Cox their
appropriate compensation until the Closing Date.
22.07 ab Section. Noncompetition Agreements. The Purchaser and
each of Callihan; Teal; Skelley; Edwards; Callihan, Teal, Skelley & Associates
Real Estate Consultants, Inc. ("CTS Real Estate") and South Brunswick Farms,
LLC, a South Carolina limited liability company shall have entered into a
noncompetition agreement, in the forms attached hereto as Exhibit 9.07(a)
and incorporated herein by reference (the "Noncompetition Agreements"). In
addition, Tony K. Cox and CTS Real Estate shall have entered into a
noncompetition agreement, in the form attached hereto as Exhibit 9.07(b) and
incorporated herein by reference (the "Cox Noncompetition Agreement").
22.08 ab Section. Satisfaction of Fees and Note and Release.
True Blue, Floyd and Jones shall have entered into an agreement(s), in form
and substance, satisfactory to the Purchaser in its sole discretion, that all
amounts owed to Floyd and Jones pursuant to that certain agreement dated as of
January 17, 1997 by and between True Blue, Floyd and Jones ("F&J Agreement")
shall be satisfied upon payment of an aggregate $430,000 to Floyd and Jones
and that all amounts, including all principal and all interest, owed to Floyd
and Jones pursuant to that certain promissory note, dated January 17, 1997,
executed by True Blue in favor of Floyd and Jones ("F&J Note") shall be
satisfied upon the payment of an aggregate of $570,000 to Floyd and Jones.
True Blue, Floyd, Jones and Jack Jones shall have entered into an agreement
pursuant to which such parties agree to release each other from any claims,
causes of actions, liabilities or damages that any party may have against
another party.
22.09 ab Section.. [INTENTIONALLY DELETED]
22.10 ab Section. Lease. Beach Vacations and Callihan, Teal and
Skelley Real Estate Partnership shall have entered into a lease in the form of
Exhibit 9.10 attached hereto and incorporated herein by reference (the
"Lease").
22.11 ab Section.. [INTENTIONALLY DELETED]
22.12 ab Section. Contribution of New Homes Sales Division.
Callihan, Teal and Skelley shall have caused CTS Real Estate to assign the
employees and to contribute the assets related to its new homes sales division
to Pinehurst Builders (the "CTS Real Estate Contribution") in a transaction
which has no negative tax consequences to Pinehurst Builders.
22.13 ab Section. True Blue Acquisition and River Oaks Merger.
All conditions precedent to the Closing of the transactions contemplated by
the True Blue Agreement and the River Oaks Merger Agreement must be satisfied
and the closing of such transactions shall occur simultaneously with the
transactions contemplated by this Agreement.
22.14 ab Section. CTS Acquisitions, Inc. and Callihan, Teal and
Skelley Development, Inc.. CTS Acquisitions, Inc., a South Carolina
corporation, and Callihan, Teal and Skelley Development, Inc., a South
Carolina corporation, each shall have merged with and into Pinehurst Builders
pursuant to the SCBCA.
XXIII abARTICLE
TERMINATION
23.01 ab Section. Termination; Failure to Close. The Purchaser
may terminate this Agreement by giving written notice to the Pinehurst
Entities and the Stockholders at any time prior to the Closing if the
Purchaser is not satisfied, in its sole and absolute discretion with the
results of its due diligence review, with the condition of any of the Assets,
the amount of any of any Debt, or with the continuing operations of the
Pinehurst Entities. 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.
23.02 ab Section. Effect of Termination. In the event of
termination pursuant to Section 10.01, 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.
XXIV abARTICLE
CLOSING
24.01 ab Section. Closing Date. The closing of the transaction
contemplated by this Agreement (the "Closing") shall take place at a mutually
agreeable time and place, on or before May 29, 1998, unless mutually extended
by the parties.
24.02 ab Section. Deliveries by the Pinehurst Entities. At the
Closing, the Pinehurst Entities and the Stockholders 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) ab The certification required in Section 9.01;
(b) ab Articles of Merger conforming to the requirements of the NCBCA
and the SCBCA for the merger of each of the Pinehurst Entities with and into
CCNC.
(c) ab Results of searches dated within ten (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 Assets;
(d) ab All Permits necessary to conduct the business of each Pinehurst
Entity as now conducted, transferred to the Purchaser as required and
permitted by law;
(e) ab The Employment Agreements provided for in Section 9.06;
(f) ab The Noncompetition Agreements and the Cox Noncompetition
Agreement provided for in Section 9.07;
(g) ab [INTENTIONALLY DELETED]
(h) ab The Lease provided for in Section 9.10.
(i) ab [INTENTIONALLY DELETED]
(j) ab Evidence, satisfactory to the Purchaser in its sole and
absolute discretion, that Callihan, Teal and Skelley have caused the assets
related to the new homes sales division of CTS Real Estate to be contributed
to Pinehurst Builders.
(k) ab Evidence, satisfactory to the Purchaser, in its sole and
absolute discretion, that Callihan, Teal and Skelley have purchased the
beneficial interests in of Beach Vacations owned by Floyd and Jones, and have
executed a mutual release related thereto.
(l) ab Evidence, satisfactory to the Purchaser, in its sole and
absolute discretion that all amounts owed to Floyd and Jones pursuant to the
F&J Agreement and the F&J Note have been satisfied and that True Blue,
Callihan, Teal, Skelley, Floyd, Jones and Jack Jones have executed a mutual
release related thereto and have named the Purchaser as a beneficiary to such
release.
(m) ab Evidence, satisfactory to the Purchaser, in its sole and
absolute discretion that CTS Acquisitions, Inc. and Callihan, Teal and Skelley
Development, Inc. have merged with an into Pinehurst Builders, Inc.
(n) ab Copies of resolutions of the Board of Directors of each
Pinehurst Entity and the Stockholders approving the consummation of the
transaction contemplated by this Agreement, certified by the Secretary of each
Pinehurst Entity.
(o) ab A certificate of the Pinehurst Entities and the Stockholders
acknowledging (or waiving) delivery by the Purchaser of the items set forth in
Section 11.03. The failure of the Pinehurst Entities or the Stockholders 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 11.03.
24.03 ab Section. Deliveries by Purchaser. At the Closing, the
Purchaser shall deliver or cause to be delivered to the Pinehurst Entities and
the Stockholders the following duly executed documents and other items in form
satisfactory to the Pinehurst Entities and the Stockholders:
(a) ab The certification required in Section 8.01;
(b) ab The merger consideration provided for in Section 3.01;
(c) ab A certificate of the Purchaser acknowledging (or waiving)
delivery by the Pinehurst Entities and the Stockholders of the items set forth
in Section 11.02. 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 Pinehurst Entities' or the
Stockholders' failure to deliver the items set forth in Section 11.02.
(d) ab Copies of the resolutions of the Board of Directors of the
Purchaser and CCNC and resolutions of the stockholders of CCNC approving the
consummation of the transactions contemplated by this Agreement, certified by
the Secretary of Crossmann and CCNC, respectively.
XXV abARTICLE
POST-CLOSING COVENANTS OF THE STOCKHOLDERS
At all times beginning on the Closing Date, each of the Stockholders, who
will receive Consideration Shares pursuant to Section 3.01, hereby covenants
and agrees to comply with the following provisions:
25.01 ab Section. Acquisition of Additional Consideration Shares.
No Stockholder shall, directly or indirectly, acquire any Voting Securities
if such acquisition will cause any Stockholder to be the beneficial owner (as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
Voting Securities in excess of the amount set forth next to such Stockholders
name on Exhibit 12.01, except (i) by way of stock dividends or other
distributions or offerings made available to holders of Voting Securities
generally, (ii) through the exercise of stock options or other rights to
acquire Voting Securities granted pursuant to any stock option or other
employee benefit plan of Crossmann, or (iii) for other acquisitions approved
by the Board of Directors of Crossmann.
<PAGE>
25.02 ab Section. Voting Agreement.
(a) ab Each Stockholder shall take all such action as may be required
so that (i) all Voting Securities owned by him or any of his Affiliates or any
individual with whom the Stockholder has a family relationship (as defined in
Item 401(d) of Regulation S-K promulgated under the Securities Act) to whom he
transfers any of the Consideration Shares (collectively, "Private
Transferees") are voted for nominees to the Board of Directors and on all
other matters to be voted on by holders of the Voting Securities either (at
the election of the Stockholder) as recommended by a majority of the Board of
Directors of Crossmann or in the same proportion as the votes cast by other
holders of Voting Securities and (ii) the Stockholder and each Private
Transferee shall be present in person or by proxy at all meetings of
Stockholders of Crossmann so that all Voting Securities beneficially owned by
them may be counted for the purpose of determine the presence of a quorum at
such meetings.
(b) ab No Stockholder nor any Private Transferee shall deposit its
Voting Securities in a voting trust or subject any Voting Securities to any
arrangement or agreement with respect to the voting of such Voting Securities,
other than as set forth herein.
(c) ab Each Stockholder hereby agrees that, in addition to any legends
required by this Agreement or applicable law, all certificates representing
the Voting Securities now owned or hereafter acquired by the Stockholder will
contain a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF
THAT CERTAIN AGREEMENT AND PLAN OF MERGER, DATED AS OF MAY 29, 1998, A COPY
OF WHICH IS ON FILE AT THE CORPORATE OFFICES OF CROSSMANN COMMUNITIES, INC."
(d) ab Notwithstanding anything to the contrary stated herein, in the
event that any Stockholder transfers any of the Consideration Shares in
compliance with the provisions of this Agreement and the Securities Act, to
any Person (i) that is not an Affiliate of the Stockholder or an individual
with whom the Stockholder has a family relationship (as defined in Item 401(d)
of Regulation S-K promulgated under the Securities Act) or (ii) who does not
own at or prior to the transfer, or will not own after such transfer, Voting
Securities five percent (5%) or more of the outstanding common shares of
Crossmann Stock, the Stockholder shall not be bound by any of the obligations
and conditions contained in this Section 12.02 and the legend set forth in
Section 12.02 shall be removed from those shares so transferred.
25.03 ab Section. Proxy Solicitations. No Stockholder nor any
Private Transferee shall solicit proxies or become a "participant" in a
"solicitation," (as such term is defined in Regulation 14A under the Exchange
Act), in opposition to the recommendation of a majority of the Board of
Directors of Crossmann with respect to any matter.
25.04 ab Section. Formation of a "Group". No Stockholder nor
any Private Transferee shall join a partnership, limited partnership,
syndicate or other group or otherwise act in concert with any person not a
party to this Agreement for the purpose of acquiring, holding, voting or
disposing of Voting Securities or otherwise become a Stockholder of a
syndicate or group that is deemed to be a "person" within the meaning of
Section 13(d)(3) of the Exchange Act.
25.05 ab Section. Dissolution of Pinehurst Commercial. The
Stockholders shall cause Pinehurst Commercial not to begin any new
construction projects after the date of this Agreement and to dissolve once it
has completed all of its current construction projects.
25.06 ab Section. Net Book Value. At the Closing, the Pinehurst
Entities, River Oaks, and True Blue shall have an aggregate net book value, as
determined by the Purchaser, of at least Two Million Two Hundred Thousand
Dollars ($2,200,000). If the Stockholders do not agree with the aggregate
net book value of the Pinehurst Entities, River Oaks and True Blue at the
Closing (the "Combined Net Book Value") as determined by the Purchaser, the
Stockholders shall deliver notice to the Purchaser within five (5) Business
Days of receiving the Purchaser's determination of the Combined Net Book
Value. If the Stockholders fail to deliver a disagreement notice within such
period, the Stockholders shall be deemed to have accepted the Purchaser's
Combined Net Book Value. The parties shall then work together to reach a
mutually agreeable Combined Net Book Value. If a mutually acceptable
determination cannot be agreed upon within ten (10) Business Days of the
delivery of the disagreement notice by the Stockholders to the Purchaser, the
Combined Net Book Value shall be determined by a nationally recognized
independent accounting firm selected by the Stockholders and the Purchaser.
The cost of obtaining such a determination shall be borne equally by the
Stockholders and the Purchaser. If the Combined Net Book Value of such
entities is less than $2,200,000, then the Purchaser shall have the right to
cancel that number of shares which shall, for the purposes of valuing the
shares, have a per share value of $26.59 to, or to make a claim against the
Escrow for, the difference between $2,200,000 and the actual net book value
immediately after the Closing. The Stockholders' obligation to indemnify the
Purchaser for the amount by which $2,200,000 exceeds the Combined Net Book
Value shall not be subject to the limitations set forth in Section 6.09
hereof.
Section 12.07. North South. The Stockholders, as beneficial owners
of North South, shall use their best efforts to cause North South to execute a
mutually acceptable agreement to purchase land with CCNC.
XXVI abARTICLE
POST CLOSING COVENANTS OF THE PURCHASER
After the Closing Date, the Purchaser covenants and agrees to comply with
the following provisions:
26.01 ab Section. Filing of Registration Statement. Within 90
days of the Closing Date, Crossmann shall file a Registration Statement on
Form S-3 or another available form (the "Registration Statement") for the
purpose of registering the Consideration Shares and the common shares of
Crossmann issuable upon the exercise of the Options (the "Option Shares")
under the Securities Act for resale by the Stockholders. Crossmann shall use
its commercially reasonable best efforts to cause the Registration Statement
to become effective and to remain effective at all times until June 1, 1999;
provided, however, that Crossmann's obligation to maintain the
effectiveness of the Registration Statement as to any particular Consideration
Share or Option Share shall terminate (a) if such Consideration Share or
Option Share were sold (i) by the Stockholder in accordance with such
registration or (ii) pursuant to the provisions of Rule 144 promulgated under
the Securities Act or (b) if such Consideration Share or Option Share were
transferred to another Person pursuant to a written opinion of a counsel
experienced in securities law matters addressed to Crossmann and satisfactory
to Crossmann in its sole discretion that such Consideration Share or Option
Share may be transferred without registration under the Securities Act. All
expenses incurred in effecting the registration provided for in this Section
13.01, including all filing fees, printing expenses, fees and disbursements
of counsel to Crossmann shall, to the extent permitted by applicable law, be
paid by Crossmann, and each Stockholder shall pay all underwriting discounts
and commissions attributable to the securities offered or sold by him and all
fees and expenses of legal counsel retained by him. It shall be a condition
to the obligations of Crossmann under this Section 13.01 that each
Stockholder shall:
(a) ab Cooperate with Crossmann in the preparation and filing of the
documents comprising the Registration Statement (including any amendment or
supplement thereto) in such manner as Crossmann may reasonably request,
including, without limitation, furnishing information regarding the
Stockholder, his ownership of Crossmann's securities, and the distribution of
such securities;
(b) ab Upon receipt of any written notice from Crossmann that the
Registration Statement or prospectus is required to be amended or
supplemented, comply promptly and fully with any directive contained therein
with respect to the discontinuance of the offer and sale of such securities;
and
(c) ab Enter into such undertakings with Crossmann relating to the
conduct of the offering of securities pursuant to the Registration Statement
and not inconsistent with the provisions hereof as Crossmann may reasonably
request in order to assure compliance with the applicable laws.
26.02 ab Section. Piggyback Registrations.
(a) ab Right to Piggyback. Whenever Crossmann agrees to register
any common shares of Crossmann owned by John B. Scheumann or Richard H.
Crosser under the Securities Act at any time after June 1, 1999 and the
registration form to be used may be used for the registration of the
Consideration Shares or Option Shares owned by the Stockholders (the
"Registrable Securities"), it will notify each Stockholder not later than 10
days prior to the anticipated filing date (a "Piggyback Registration").
Subject to the provisions of Section 13.02(c), Crossmann will include in the
Piggyback Registration all Registrable Securities with respect to which
Crossmann has received written requests for inclusion within 5 days after the
applicable holder's receipt of Crossmann's notice. If a Piggyback
Registration is an underwritten offering, each Stockholder must sell his
Registrable Securities on the same terms and conditions as apply to securities
being sold by John B. Scheumann and Richard H. Crosser. At any time and for
any reason, Crossmann may terminate the Piggyback Registration.
(b) ab Expenses. Crossmann shall pay all expenses incurred in
connection with any Piggyback Registration, including all registration filing
fees, professional fees, and other expenses of compliance with federal, state,
and other securities laws, printing expenses, messenger, telephone and
delivery expenses, fees and disbursements of counsel for Crossmann;
provided, however, that Crossmann shall not pay for any fees and
disbursements of counsel for the Stockholders or any fees or commissions of
the underwriters incurred in connection with the sale of Registrable
Securities.
(c) ab Priority. If a Piggyback Registration is an underwritten
registration and the managing underwriters give Crossmann their opinion that
the total number or dollar amount of securities requested to be included in
the registration exceeds the number or dollar amount of securities that can be
sold, Crossmann will include the securities in the registration in the
following order of priority: first, all securities Crossmann proposes to sell;
second, all of the securities Messrs. Scheumann and Crosser propose to sell;
and third, up to the full number or dollar amount of Registrable Securities
requested to be included in the registration (allocated pro rata among the
Stockholders on the basis of the dollar amount or number of Registrable
Securities requested to be included).
(d) ab Selection of Underwriters. If any Piggyback Registration is
an underwritten offering, Crossmann will select the investment banker(s) and
manager(s) that will administer the offering, and the Stockholders hereby
agree as a condition to the registration of the Registrable Securities to
enter into a customary underwriting agreement with the investment banker(s)
and manager(s).
26.03 ab Section. Repayment of Existing Debt. The Purchaser
shall pay off all of the Existing Debt and shall use its reasonable efforts to
have the Stockholders released from any guaranty of any Existing Debt.
XXVII abARTICLE
MISCELLANEOUS
27.01 ab Section. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
27.02 ab Section. Expenses. The Purchaser, the Pinehurst
Entities and the Stockholders 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.
27.03 ab Section. Public Announcements. Before the Closing the
Purchaser, the Pinehurst Entities, the Stockholders 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 Stockholders shall be jointly issued by the
Purchaser and the Stockholders as soon as practicable after the execution of
this Agreement; (ii) that the Purchaser and the Pinehurst Entities 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.
27.04 ab Section. Risk of Loss. Until the Closing, the risks of
ownership and loss of the Assets shall be borne by the Stockholders. If,
prior to the Closing, all or any part of the 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 Stockholders 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
Stockholders either to:
(a) ab consummate the transactions contemplated by this Agreement; or
(b) ab terminate this Agreement.
27.05 ab Section. Index and Captions. The 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.
27.06 ab Section. Notices. All 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 the Purchaser, to:
Crossmann Communities, Inc.
9202 North Meridian Street, Suite 300
Indianapolis, Indiana 46268
Attention: John B. 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) 236-2394
Facsimile No.: (317) 236-5817
If to the Pinehurst Entities or the Stockholders to each of:
James T. Callihan
Ralph R. Teal, Jr.
Jeffrey H. Skelley
H. Gilford Edwards
10239 Beachview Drive, S.W.
Calabash, NC 28467
Tel. No.: 910-579-3121
Facsimile No.: 910-579-7505
With a copy to:
James Sack
Sack & Associates, P.C.
8300 Greensboro Drive, Suite 1080
McLean, Virginia 22102
Tel. No.: 703-883-0102
Facsimile No.: 703-883-0108
Any party may change its address for the purpose of this Section 14.06
by giving the other party written notice of its new address in the manner set
forth above.
27.07 ab Section. Entire Agreement. This Agreement, the
agreements expressly contemplated hereby, including, but not limited to, the
River Oaks Merger Agreement and the True Blue Agreement, 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, including, but not limited to, the
River Oaks Merger Agreement and the True Blue Agreement. 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.
27.08 ab Section. Waiver of Compliance. The 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.
27.09 ab Section. Validity of Provisions. Should 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.
27.10 ab Section. Schedules and Exhibits. Each 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.
27.11 ab Section. No Intention to Benefit Third Parties. The
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.
27.12 ab Section. Successors and Assigns. This Agreement shall
be binding on, and shall inure to the benefit of, the parties and their
respective successors and permitted assigns; provided, however, that no party
may assign any rights or obligations under this Agreement without the prior
written consent of the other parties hereto.
27.13 ab Section. Governing Law. The laws of the State of
Indiana shall govern all aspects of this Agreement notwithstanding any choice
of law provisions to the contrary.
27.14 ab Section. Guaranty. Crossmann hereby guarantees the
performance of all of CCNC's obligations hereunder, including CCNC's
obligations to deliver the Merger Consideration at Closing.
27.15 ab Section. Stockholder Agreements. The Stockholders
hereby waive any and all rights to purchase securities of any Pinehurst Entity
that any Stockholder may have pursuant to a shareholder's agreement relating
to any Pinehurst Entity and by execution of this Agreement hereby terminate
any and all such shareholder agreements.
XXVIII abARTICLE
DEFINITIONS
As used in this Agreement, the following terms have the meanings
indicated below:
"Affiliate" means any Person that directly or indirectly controls or is
under common control with the Purchaser or the Pinehurst Entities. 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" shall have the meaning set forth in the Preamble.
"Arbitration Notice" means a notice for arbitration as provided for in
Section 6.04.
"Assets" means all of the assets, rights and properties of any type or
kind of each of the Pinehurst Entities.
"Beach Vacations" shall mean Beach Vacations, Inc., a South Carolina
corporation.
"Buck Creek" shall mean Buck Creek Development, Inc., a South Carolina
corporation.
"Business Day" means any day other than Saturday, Sunday, and any day on
which commercial banks in Indiana are authorized by law to be closed.
"CCNC" shall have the meaning set forth in the Preamble.
"COBRA" shall have the meaning set forth in Section 4.26.
"CTS Communications" shall mean CTS Communications, Inc., a South
Carolina corporation.
"CTS Real Estate" shall have the meanings set forth in Section 8.07.
"CTS Real Estate Contribution" shall have the meaning set forth in
Section 9.12.
"Callihan" means James T. Callihan, a resident of the State of South
Carolina.
"Claimant" shall have the meaning set forth in Section 6.03.
"Closing" means the closing of the transactions contemplated by this
Agreement as provided for in Section 11.01.
"Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations promulgated thereunder.
"Commission" shall mean the United States Securities and Exchange
Commission and any successor thereto.
"Company" means Crossmann Communities of North Carolina, Inc., a North
Carolina corporation.
"Contracts" shall have the meaning set forth in Section 4.21.
"Cox Noncompetition Agreement" shall have the meaning set forth in
Section 9.07.
"Crossmann" means Crossmann Communities, Inc., an Indiana corporation.
"Consideration Shares" shall have the meaning set forth in Section
3.01.
"Debt" means any obligation for borrowed money (and any noted payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money) or any obligation under any operating or
capital lease, but excluding trade payables and other obligations entered into
in the ordinary course of business.
"Developed Real Property" shall have the meaning set forth in Section
4.14.
"Disagreement Notice" shall have the meaning set forth in Section 6.04.
"Edwards" shall mean H. Gilford Edwards, a resident of the State of North
Carolina.
"Effective Time" shall have the meaning set forth in Section 1.02.
"Election Notice" shall have the meaning set forth in Section 6.05.
"Employee Benefit Plan" shall have the meaning set forth in Section
4.26.
"Employee Pension Benefit Plan" shall have the meaning set forth in
Section 4.26.
"Employee Welfare Benefit Plan" shall have the meaning set forth in
Section 4.26.
"Employment Agreements" shall have the meaning set forth in Section
9.06.
"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 Real 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 Condition, 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 Obligation" shall have the meaning set forth in Section
6.08.
"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" shall have the meaning set forth in Section 3.03.
"Escrow Agent" shall have the meaning set forth in Section 3.03.
"Escrow Agreement" shall mean an escrow agreement in substantially the
same form as attached hereto as Exhibit 3.03.
"Escrow Deposit" shall have the meaning set forth in Section 3.03.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Existing Debt" shall have the meaning set forth in Section 4.29.
"F&J Agreement" shall have the meaning set forth in Section 9.08.
"F&J Note" shall have the meaning set forth in Section 9.08.
"Financial Statements of the Pinehurst Entities" shall have the meaning
set forth in Section 4.08.
"Floyd" shall mean Charles D. Floyd, a resident of the State of South
Carolina.
"GAAP" means generally accepted accounting principles.
"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).
"Homeowner Associations" shall have the meaning set forth in Section
4.19.
"Indemnification Notice" shall have the meaning set forth in Section
6.03.
"Indemnifying Party" shall have the meaning set forth in Section 6.03.
"Indemnity Loss" shall have the meaning set forth in Section 6.01.
"Intellectual Property" shall have the meaning set forth in Section
4.24.
"Interim Balance Sheet" shall have the meaning set forth in Section
4.08.
"Interim Balance Sheet Date" shall have the meaning set forth in Section
4.08.
"Jones" shall mean Ralph C. Jones, a resident of the State of South
Carolina.
"Judgment" means an order by a court of law requiring the payment of
money.
"Land Contract Property" shall have the meaning set forth in Section
4.17.
"Lease" shall have the meaning set forth in Section 9.10.
"Leased Personal Property" shall have the meaning set forth in Section
4.13.
"Leased Real Property" shall have the meaning set forth in Section
4.16.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
(statutory or other), option, easement, encroachment, right-of-way, charge,
claim, conditional sale agreement, rights of third parties or other interests
of any kind or character.
"Litigation Notice" shall have the meaning set forth in Section 6.03.
"Lot" or "Lots" shall have the meaning set forth in Section 4.14.
"Merger" shall collectively refer to the merger of each of the Pinehurst
Entities with and into CCNC, in each case in accordance with the NCBCA or the
SCBCA, as the case may be.
"Merger Consideration" shall have the meaning set forth in Section
3.01.
"NASDAQ-NMS" shall have the meaning set forth in Section 3.01.
"NCBCA" shall have the meaning set forth in Section 1.01.
"Noncompetition Agreements" shall have the meaning set forth in Section
9.07.
"North South" shall mean North South Development, LLC, a North Carolina
limited liability company.
"Option Agreements" shall mean the option agreements by and between
Crossmann and each of the Stockholders setting forth the terms and conditions
of the Options attached hereto as Exhibit 3.01.
"Option Real Property" shall have the meaning set forth in Section
4.17.
"Options" shall have the meaning set forth in Section 3.01.
"Option Shares" shall have the meaning set forth in Section 13.01.
"Permits" shall have the meaning set forth in Section 4.23.
"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" shall have the meaning set forth in Section 4.12.
"Phase I" shall have the meaning set forth in Section 6.08.
"Piggyback Registration" shall have the meaning set forth in Section
13.02.
"Pinehurst Commercial" shall mean Pinehurst Commercial Construction,
Inc., a South Carolina corporation.
"Pinehurst Builders" shall mean Pinehurst Builders, Inc., a North
Carolina corporation, and all of the assets related to CTS Real Estate
contributed or assigned thereto prior to the Closing.
"Pinehurst Entities" shall mean Pinehurst Builders, Inc., Buck Creek, CTS
Communications, and Beach Vacations.
"Pinehurst Stock" shall have the meaning set forth in Section 3.01
"Private Transferees" shall have the meaning set forth in Section
12.02.
"Purchaser" shall have the meaning set forth in the preamble to this
Agreement.
"Real Property" shall have the meaning set forth in Section 4.18.
"Real Property Lease" shall have the meaning set forth in Section 4.16.
"Registrable Securities" shall have the meaning set forth in Section
13.02.
"Registration Statement" shall have the meaning set forth in Section
13.01.
"Returns" shall have the meaning set forth in Section 4.10.
"River Oaks" shall mean River Oaks Golf Development Corporation, a South
Carolina corporation.
"River Oaks Merger" shall mean the merger of River Oaks with and into
CCNC pursuant to the River Oaks Merger Agreement.
"River Oaks Merger Agreement" shall mean that certain Agreement and Plan
of Merger by and among the Purchaser, River Oaks and the River Oaks
Stockholders.
"River Oaks Stockholders" shall mean Callihan, Teal, Skelley, Floyd and
Jones.
"SCBCA" shall have the meaning set forth in Section 1.01.
"SEC Documents" shall have the meaning set forth in Section 5.04.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Skelley" shall mean Jeffrey H. Skelley, a resident of the State of North
Carolina.
"Stockholders" shall refer collectively to James T. Callihan, Ralph R.
Teal, Jr., Jeffrey H. Skelley, and H. Gilford Edwards.
"Substantially Complete" shall have the meaning set forth in Section
4.14.
"Taxes" shall have the meaning set forth in Section 4.10.
"Teal" shall mean Ralph R. Teal, Jr., a resident of the State of South
Carolina.
"Title Company" shall have the meaning set forth in Section 9.05.
"True Blue" shall mean True Blue Development, LLC, a North Carolina
limited liability company.
"True Blue Agreement" shall mean that certain Land Purchase Agreement by
and among the Purchasers, True Blue, Callihan, Teal, Skelley, Floyd and Jones.
"True Blue Member" shall mean Callihan, Teal, Skelley, Floyd and Jones.
"Undeveloped Real Property" shall have the meaning set forth in Section
4.15.
"Voting Securities" means any shares of capital stock of Crossmann
entitled to vote in the election of directors of Crossmann.
"Warranty Liability" means any and all costs incurred as a result of a
warranty claim on a residential home or condominium which was constructed or
sold by the Pinehurst Entities, River Oaks or True Blue. Such costs shall
include, but not be limited to, costs to repair, replace, fix, clean, remove,
or correct any alleged defect in a property upon which a warranty claim is
made and any and all costs to investigate and defend against a warranty claim.
<PAGE>
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: /s/ John B. Scheumann
Title: Chairman of the Board and Chief Executive
Officer
"CCNC"
Crossmann Communities of North Carolina, Inc.
By: /s/ John B. Scheumann
Title: Chairman of the Board and Chief Executive
Officer
"PINEHURST ENTITIES"
Pinehurst Builders, Inc.
By: /s/ Ralph R. Teal, Jr.
Its:
Buck Creek Development, Inc.
By: /s/ Ralph R. Teal, Jr.
Its:
<PAGE>
CTS Communications, Inc.
By: /s/ Ralph R. Teal, Jr.
Its:
Beach Vacations, Inc.
By: /s/ Ralph R. Teal, Jr.
Its:
"STOCKHOLDERS"
/s/ James T. Callihan
James T. Callihan
/s/ Ralph R. Teal, Jr.
Ralph R. Teal, Jr.
/s/ Jeffrey H. Skelley
Jeffrey H. Skelley
/s/H.GilfordEdwards
H. Gilford Edwards
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 3.01
CONSIDERATION BY ENTITY
<S> <C> <C> <C>
CASH COMMON SHARES OPTIONS TO PURCHASE
OF CROSSMANN COMMON SHARES OF
COMMUNITIES, INC. CROSSMANN
COMMUNITIES, INC.
Pinehurst Builders 796,500 163,088 59,000
Buck Creek 337,500 69,105 25,000
Beach Vacations 202,500 41,463 15,000
CTS
Communications 13,500 42,764 1,000
- ------------------ ------- ----------------- -------------------
</TABLE>
<PAGE>
SCHEDULE 3.03
ESCROW DEPOSIT
1. H. Gilford Edwards 3,000 Common Shares of Crossmann Communities,
Inc.
2. Ralph R. Teal, Jr. 9,000 Common Shares of Crossmann Communities,
Inc.
3. Jeffrey H. Skelley 9,000 Common Shares of Crossmann Communities,
Inc.
4. James T. Callihan 9,000 Common Shares of Crossmann Communities,
Inc.
<PAGE>
SCHEDULE 6.01
LAWSUITS
1. Claim of Gloria and Jesse W. Hardwick v. ERA Callihan, Teal, Skelley &
Associates and any subsequent suit related to the claims asserted therein.
2. Ann Warren v. ERA Callihan, Teal, Skelley & Associates and Pinehurst
Builders and any subsequent suit related to the claims asserted therein.
3. Claim of James and Mary Ann Farmer v. ERA, Callihan, Teal & Skelley
and any subsequent suit related to the claims asserted therein.
4. The Barony Company of Pawleys Island, Inc. v. Callihan, Teal, Skelley
& Associates Real Estate Consultants, Inc., and any subsequent suit related
to the claims asserted therein.
5. Jacqueline Holly Stevens, James P. Stevens, Jr. v. Bonnie Black, James
Callihan and Callihan, Teal, Skelley & Associates Real Estate Consultants,
Inc. and any subsequent suit related to the claims asserted therein.
6. The Lakes Property Owners Association v. Pinehurst Builders, et.
al., and any subsequent suit related to the claims asserted therein.
7. S&M Painting Contractors, Inc. v. Pinehurst Builders, Inc., and any
subsequent suit related to the claims asserted therein.
8. Thomas Craig Johnson v. River Oaks Golf Plantation, LLC, Pinehurst
Builders, Inc., River Oaks Homeowners Association and Wright McLeod Property
Management, and any subsequent suit related to the claims asserted therein.
9. Owens Workman's Compensation Claim.
10. McGarrity Workman's Compensation Claim.
<PAGE>
SCHEDULE 12.01
LIMIT ON NUMBER OF CROSSMANN
SHARES STOCKHOLDERS MAY ACQUIRE
1. H. Gilford Edwards 27,642 Common Shares of Crossmann Communities,
Inc.
2. Ralph R. Teal, Jr. 99,850 Common Shares of Crossmann Communities,
Inc.
3. Jeffrey H. Skelley 99,850 Common Shares of Crossmann Communities,
Inc.
4. James T. Callihan 99,849 Common Shares of Crossmann Communities,
Inc.
<PAGE>
EXHIBIT 3.01
OPTION AGREEMENT
<PAGE>
EXHIBIT 3.03
ESCROW AGREEMENT
<PAGE>
EXHIBIT 9.06
EMPLOYMENT AGREEMENT
<PAGE>
EXHIBIT 9.07(A)
NONCOMPETITION AGREEMENTS
<PAGE>
EXHIBIT 9.07(B)
COX NONCOMPETITION AGREEMENT
<PAGE>
EXHIBIT 9.10
LEASE
<PAGE>
EXHIBIT 10.50
PURCHASE AGREEMENT
THIS AGREEMENT is made this 29th day of May, 1998, by and between Crossmann
Communities of North Carolina, Inc., a North Carolina corporation
("Purchaser"), True Blue Development, LLC, a South Carolina limited liability
company ("Seller") and James T. Callihan ("Callihan"), Ralph R. Teal, Jr.
("Teal"), Jeffrey H. Skelley ("Skelley"), Charles D. Floyd and Ralph Jones
(collectively, the "Members").
RECITALS
WHEREAS, Seller is the owner of certain real estate located in Georgetown
County, South Carolina, which includes certain real estate not subject to the
Declaration (as defined herein), as more particularly described in Exhibit
"A" attached hereto and incorporated herein by reference (the "Undeveloped
Real Estate").
WHEREAS, Seller has developed real estate adjacent to the Undeveloped Real
Estate and located in Georgetown County, South Carolina, as more particularly
described in Exhibit "B" attached hereto and incorporated herein by
reference (the "Developed Real Estate"), and subjected the Developed Real
Estate to a horizontal property regime by filing that certain Master Deed For
True Blue Golf & Racquet Resort, Horizontal Property Regime, dated as of July
2, 1997, and recorded in the public records of Georgetown County, South
Carolina on July 28, 1997 in Book 793 Page 1 (the "Declaration").
WHEREAS, Seller has sold 84 Units of the Developed Real Estate to third
parities, and still owns the Units designated on Exhibit "C" attached hereto
and incorporated herein by reference (the "Unsold Units").
WHEREAS, Seller is the owner of all of the assets and liabilities reflected on
the balance sheet of Seller dated as of April 30, 1998 (the "Balance Sheet")
attached hereto as "Exhibit D" and incorporated herein by reference (the
"Balance Sheet Assets");
WHEREAS, Purchaser desires to enter into that certain Agreement and Plan of
Merger by and among Purchaser, Crossmann Communities, Inc. ("Crossmann"), the
Pinehurst Entities (as defined therein) and the Stockholders (as defined
therein) ("Agreement and Plan of Merger") concurrently with the execution of
this Agreement to acquire certain affiliates of Seller engaged in developing
single and multi-family dwellings in South Carolina.
WHEREAS, Purchaser desires to purchase from Seller and Seller desires to sell
to Purchaser the Unsold Units, the Undeveloped Real Estate, and all of
Purchaser's right, title and interest in and to the Declaration, including but
not limited to all of Seller's development rights thereunder (collectively,
the "Property") and the Balance Sheet Assets pursuant to the terms of this
Agreement.
WHEREAS, all capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them in the Agreement and Plan of Merger.
NOW THEREFORE, in consideration of the foregoing premises, and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. PURCHASE PRICE.
1.1 Purchaser agrees to purchase, and Seller agrees to sell the
Property and the Balance Sheet Assets pursuant to the terms and conditions
hereinafter set forth.
1.2 The purchase price for the Property and the Balance Sheet Assets
shall be the sum of Two Million Seven Hundred Thousand Dollars ($2,700,000.00)
plus the assumption of the liabilities specifically set forth on "Exhibit
E", attached hereto and incorporated herein by reference (the "Purchase
Price").
2. TITLE AND SURVEY. Prior to Closing hereunder, Purchaser shall have
reviewed title and surveys of the Property as follows:
2.1 Prior to closing, Seller shall have delivered to Purchaser a
commitment for an ALTA Form B owner's policy of title insurance with respect
to the Undeveloped Real Estate and the Unsold Units (the "Title
Commitment"). The Title Commitment shall include an ALTA Form 4 Condominium
Endorsement for the Unsold Units and indicate that title to the Undeveloped
Real Estate and the Unsold Units are free and clear of any and all liens,
claims and interests of any kind or nature whatsoever, except the following
permitted exceptions:
i) Current real estate taxes not delinquent.
ii) Any items set forth in the Declaration.
iii) Such other liens, claims, encumbrances, interests or
matters as may be approved by Purchaser in writing.
Should Seller be unable to deliver title to the Undeveloped Real Estate
and the Unsold Units in accordance with the provisions of this Agreement, it
is agreed that the obligations of the parties hereto to purchase the Property
shall terminate.
2.2 Prior to closing, Seller, at Seller's sole expense, shall have
delivered to Purchaser a staked survey of the Undeveloped Real Estate (the
"Survey"). Should the Survey reveal any defect, including but not limited to
encroachments or gaps and gores with adjacent parcels, Purchaser's obligation
to purchase the Property pursuant to this Agreement may, at Purchaser's option
upon written notice thereof to Seller, be terminated.
2.3 Prior to closing, Seller, at Seller's sole expense, shall have
delivered to Purchaser a Phase I Environmental Assessment of the Developed
Real Estate and the Undeveloped Real Estate (the "Phase I"). If the Phase I
discloses any environmental defect in the Developed Real Estate or Undeveloped
Real Estate, Purchaser may terminate this Agreement by delivering written
notice thereof to Seller.
3. CONDITIONS PRECEDENT. Purchaser's obligations to purchase the
Property hereunder are contingent upon Purchaser entering into the Agreement
and Plan of Merger. If Purchaser fails to execute and close on the
transactions contemplated in the Agreement and Plan of Merger, Purchaser may
terminate this Agreement.
4. REPRESENTATIONS AND WARRANTIES.
4.1 Seller's Representations and Warranties. Seller and the
Members each, jointly and severally, represents, warrants and covenants to
Purchaser that:
i) Seller is a South Carolina limited liability company duly
organized, existing and in good standing under the laws of the State of South
Carolina, and has all requisite power and authority to consummate the
transactions contemplated hereby.
ii) The execution, delivery, and performance of this Agreement
will not result in any violation or constitute a default under any agreement
or instrument to which Seller is a party.
iii) No consent, authorization or approval of, exemption by, or
filing with any governmental or administrative authority, or any third party,
is required to be obtained or made by Seller in connection with the execution,
delivery and performance of this Agreement.
iv) Except as listed on Exhibit 4.1 attached hereto, there are
no contracts for sale or options to purchase or any other agreements existing
and in force with respect to or in any manner affecting the Property (or any
interest therein) being purchased by Purchaser;
v) Seller owns good and marketable title in fee simple to the
Undeveloped Real Estate and the Unsold Units;
vi) The existing buildings and improvements located on the
Developed Real Estate do not violate (i) any applicable law, including any
building, set-back, or zoning law, ordinance, regulation, or statute, or other
governmental restriction in the nature thereof, or (ii) any enforceable
restrictive covenant affecting any such real estate;
vii) Neither the Developed Real Estate or the Undeveloped Real
Estate is subject to any condition or obligation to any governmental entity or
other person requiring Seller or any transferee thereof to donate land (except
incidental rights-of-way), money or other property or to make off-site public
improvements;
viii) No developer-related charges or assessments by any public
authority or any other person or entity for public improvements or otherwise
made against the Developed Real Estate or Undeveloped Real Estate are unpaid,
including without limitation those for construction of sewer lines, water
lines, storm drainage systems, electric lines, natural gas lines, streets
(including perimeter streets), roads and curbs, excluding homeowner
association dues, utility connection fees, and impact fees;
ix) Seller has the legal right, power and authority to enter
into this Agreement and perform all of its obligations hereunder;
x) No condemnation, eminent domain, or similar proceeding
exists, is pending or, to the knowledge of Seller, is threatened with respect
to, or that could affect, any part of the Developed Real Estate or the
Undeveloped Real Estate or its development or the construction, marketing, or
sale of dwellings situated thereon or the insurability or marketability of the
title thereto;
xi) There are no parties in possession of any portion of the
Unsold Units and the Undeveloped Real Estate except Seller;
xii) Seller has obtained all necessary governmental and zoning
approvals for development of the Developed Real Estate and the Undeveloped
Real Estate as a multi-family condominium project;
xiii) No portion of the Undeveloped Real Estate lies within a
100-year flood elevation designated by the U.S. Army Corps of Engineers, the
Federal Emergency Management Agency or any applicable governmental agency;
xiv) Access to and from public highways, streets, and roads to
the Developed Real Estate and the Undeveloped Real Estate exists;
xv) The Developed Real Estate is connected to and, where
applicable, serviced by electric, gas, sewage or septic, telephone, and public
or private water facilities, and all applicable installation and connection
charges have been paid in full;
xvi) The Undeveloped Real Estate can be serviced by electric,
gas, sewage or septic, telephone, and public or private water facilities, and
Seller has secured all easements and public dedications necessary to connect
the utilities referenced above from their current locations to the boundary of
the Undeveloped Real Estate as such boundaries currently exist;
xvii) There is no litigation or legal proceeding pending or, to
the Seller's knowledge, threatened against Seller or any part of the Developed
Real Estate or the Undeveloped Real Estate;
xviii) There is no moratorium applicable to any part of
Developed Real Estate or the Undeveloped Real Estate on (i) the issuance of
building permits for the construction of condominiums or certificates of
occupancy therefor, or (ii) the purchase of sewer or water taps to the extent
new development is required to rely on public water or sewer facilities.
xix) The Developed Real Estate or the Undeveloped Real Estate is
stable and otherwise suitable for the construction of a up to three story
condominium buildings by customary means and without extraordinary site
preparation measures;
xx) No portion of the Developed Real Estate or the Undeveloped
Real Estate has a gravesite that will materially impede the development of
condominiums and no permanent structures have been constructed on a fill or
borrow area in a manner that materially adversely affects the intended use
thereof or that does not comply with any applicable law.
xxi) Seller has at all times complied with all applicable
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
(as defined below), and (ii) laws relating to the identification, generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
recovery, transport, or other handling of Hazardous Materials (collectively
"Environmental Requirements") in its operation, development, construction and
disposition of the Developed Real Estate and the Undeveloped Real Estate.
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.
Further, to the knowledge of Seller, no current or previous owner of the
Developed Real Estate or the Undeveloped Real Estate violated any
Environmental Requirements;
xxii) No (i) 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)
(collectively "Hazardous Material") has ever been generated, manufactured,
refined, used, transported, treated, stored, handled, disposed, transferred,
produced, or processed at, to, from or on any part of the Developed Real
Estate or the Undeveloped Real Estate and no Hazardous Material has ever been
incorporated into any part of the Developed Real Estate or the Undeveloped
Real Estate;
xxiii) There are no existing or, to the knowledge of Seller,
potential 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 (as defined below) or under Environmental
Requirements (collectively "Environmental Claims") relating to any part of the
Developed Real Estate or the Undeveloped Real Estate, and 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 part of the Developed Real Estate or the Undeveloped Real Estate by
or on behalf of Seller;
xxiv) (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 part of the Developed Real Estate or the
Undeveloped Real Estate 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 part of the Developed Real Estate
or the Undeveloped Real Estate;
xxv) There are no PCBs or friable asbestos located or contained
at, on, or in any part of the Developed Real Estate or the Undeveloped Real
Estate;
xxvi) No lien has been imposed on any part of the Developed Real
Estate or the Undeveloped Real Estate by any federal, state, local, or foreign
governmental agency or authority due to either the presence of any Hazardous
Material on, off, or in any part of the Developed Real Estate or the
Undeveloped Real Estate or a violation of any Environmental Requirement;
xxvii) Seller has not received any notices issued pursuant to
the citizen's suit provision of any Environmental Requirement relating to any
part of the Developed Real Estate or the Undeveloped Real Estate;
xxviii) Seller has not received any request for information,
notice, demand, letter, administrative inquiry, formal or informal complaint,
or claim with respect to 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
(collectively "Environmental Conditions"). 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 Developed Real Estate or the Undeveloped Real
Estate. In addition, Seller has not received any request for information,
notice, demand, letter, administrative inquiry, formal or informal complaint,
or claim with respect to a violation of any Environmental Requirement relating
to any part of the Developed Real Estate or the Undeveloped Real Estate;
xxix) There have been no environmental investigations, site
assessments or audits, or soil or groundwater sampling conducted at any part
of the Developed Real Estate or the Undeveloped Real Estate by Seller or to
Seller's knowledge, by any other person or entity; and
xxx) None of the Developed Real Estate or the Undeveloped Real
Estate on which Seller intends to construct a residential dwelling or building
is located within a "critical," "preservation," "conservation" or similar type
of area which will affect Seller's present development plans therefor. No
wetlands exist which will restrict development of any part of the Developed
Real Estate or the Undeveloped Real Estate as contemplated by Seller nor
render the cost of its development of any part of the Developed Real Estate or
the Undeveloped Real Estate materially in excess of Seller's budget therefor.
No portion of any part of the Developed Real Estate or the Undeveloped Real
Estate which Seller has developed or intends to develop for residential
buildings and dwellings is situated within a "noise cone" such that the
Federal Housing Administration will not approve mortgages due to the noise
level classification of such real estate.
xxxi) The Balance Sheet and the annual financial statement of
the Seller for each of the years 1995, 1996 and 1997 are true and correct in
all material aspects, have been prepared from the books and records of Seller
in accordance with GAAP consistently applied, and contain and reflect all
material adjustments or accruals necessary for a fair presentation of the
financial condition and results of the operations of Seller for the periods
indicated.
xxxii) Each of the representations, warranties and covenants set
forth in the Agreement and Plan of Merger are incorporated herein by reference
with Seller included in the definition of "Pinehurst Entities."
xxxiii) All development costs related to the Real Property,
including all costs of road construction, water mains and pumping stations,
have been paid in full with the exception of $3,100.00 and entrance costs of
$50,000.
4.2 Representations of Purchaser. Purchaser represents, warrants
and covenants to Seller that:
i) Purchaser is a North Carolina corporation duly organized,
existing and in good standing under the laws of the State of North Carolina,
and has all requisite power and authority to consummate the transactions
contemplated hereby.
ii) The execution, delivery, and performance of this Agreement
will not result in any violation or constitute a default under any agreement
or instrument to which Purchaser is a party.
iii) No consent, authorization or approval of, exemption by , or
filing with any governmental or administrative authority, or any third party,
is required to be obtained or made by Purchaser in connection with the
execution, delivery and performance of this Agreement.
4.3 Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall (i) be true
at the closing of the purchase of the Property, (ii) not be merged into any
deed or other document and (iii) shall survive the execution, delivery and
performance of this Agreement.
.
5. CLOSING.
5.1 The closing on the purchase of the Property shall be held at the
same time and location as the closing of the Agreement and Plan of Merger.
5.2 At closing Seller, at its sole cost, shall execute and/or deliver
to Purchaser the following:
i) Warranty deed conveying fee simple title to the Undeveloped
Real Estate and the Unsold Units, subject only to the matters set forth in
this Agreement;
ii) An assignment, in a form reasonably acceptable to Purchaser,
of all of Purchaser's right, title and interest in and to the Declaration,
including but not limited to Seller's development rights.
iii) Vendor's affidavit in a mutually agreeable form;
iv) Mortgage release(s), if necessary, as specified in the Title
Commitment, stating that all mortgages encumbering the Property have been
released and satisfied;
v) Non-Foreign Affidavit in compliance with IRC 1445;
vi) Exclusive possession of the Undeveloped Real Estate and the
Unsold Units;
vii) All other documentation which may reasonably be required by
the title company in order to insure Purchaser with good and marketable title
to the Undeveloped Real Estate and the Unsold Units, which can be furnished by
the Seller without material cost or expense; and
viii) All other documents necessary to complete the transactions
contemplated by this Agreement.
5.3 Seller and Purchaser shall share equally the cost of any state
and/or local transfer conveyance taxes in the amount required by law. Seller
and Purchaser shall share equally the cost of recording all documents required
in Section 5.2 above. Each party shall pay its own attorney fees. Real
estate taxes and assessments and owner association dues or fees, if
applicable, relating to the Unsold Units or the Undeveloped Real Estate for
the calendar year of the closing shall be prorated between Developer and
Builder as of the Closing date.
5.4 Seller and Purchaser shall share equally the cost of obtaining an
owner's policy of title insurance for the Undeveloped Real Estate and the
Unsold Units to be conveyed, as described in the Title Commitment to be issued
by the title company.
6. TERM/CURE AND DEFAULT. No failure or default by either party hereto
concerning any act required by it shall result in the termination of any right
of either party hereunder, until such party shall have failed to remedy such
failure or cure such default within ten (10) days after the receipt of such
written notice. Receipt shall be assumed upon the earlier of actual receipt,
or three (3) days after such notice is placed in the U.S. Mail, as set forth
in Paragraph 7.3, "Notices".
7. POST CLOSING COVENANTS Within five (5) days after the closing, the
Members shall cause Seller to be dissolved pursuant to the laws of the State
of South Carolina.
8. MISCELLANEOUS PROVISIONS.
8.1 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument
8.2 Expenses. Purchaser and 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.
8.3 Public Announcements. Before the Closing Purchaser and Seller
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 Purchaser and Seller shall be jointly issued
by Purchaser and Seller as soon as practicable after the execution of this
Agreement; (ii) that Purchaser and Seller 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.
8.4 Risk of Loss. Until the Closing, the risks of ownership and
loss of the Property shall be borne by the Seller. If, prior to the Closing,
all or any part of the Property is 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, Seller shall promptly give Purchaser written
notice of such damage or taking. In the event of any such damage or taking,
Purchaser shall have the option to require Seller either to:
(a) consummate the transactions contemplated by this Agreement;
or
(b) terminate this Agreement.
8.5 Index and Captions. The 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.
8.6 Notices. All 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 the Purchaser, to:
Crossmann Communities, Inc.
9202 North Meridian Street, Suite 300
Indianapolis, Indiana 46268
Attention: John B. 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) 236-2394
Facsimile No.: (317) 236-5817
If to Seller or the Members to:
James T. Callihan
Ralph R. Teal Jr.
Jeffrey H. Skelley
11239 Beach Drive S.W.
Calabash, North Carolina 28467
Tel. No.: (910) 579-3121
Facsimile No.: (910) 579-4715
With a copy to:
James M. Sack
Sack & Associates
8300 Greensboro Drive, Suite 1080
McLem, Virginia
Tel. No.: (703) 883-0102
Facsimile No.: (703) 883-0108
Any party may change its address for the purpose of this Section 8.6 by
giving the other party written notice of its new address in the manner set
forth above.
8.7 Entire Agreement. This Agreement, the agreements expressly
contemplated hereby, including, but not limited to, the Agreement and Plan of
Merger and that certain Agreement and Plan of Merger of even date herewith by
and among Crossmann Communities, Inc., Purchaser, River Oaks Golf Development
Corporation and the Stockholders (as defined therein) (the "River Oaks Merger
Agreement"), 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 including, but not limited to, the Agreement and Plan of Merger and the
River Oaks Merger Agreement. 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. Callihan, Teal and Skelley expressly acknowledge and agree
that they have an obligation to indemnify the Purchaser for any breach of a
representation, warranty or covenant contained in this Agreement and that such
obligation, with the exception of the survival periods, shall be governed by
Article VI of the Agreement and Plan of Merger.
8.8 Waiver of Compliance. The 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.
8.9 Validity of Provisions. Should 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.
8.10 Schedules and Exhibits. Each 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.
8.11 No Intention to Benefit Third Parties. The 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.
8.12 Successors and Assigns. This Agreement shall be binding on,
and shall inure to the benefit of, the parties and their respective successors
and permitted assigns; provided, however, that no party may assign any rights
or obligations under this Agreement without the prior written consent of the
other parties hereto.
8.13 Relationship of Parties. This Agreement is not intended to
be, and shall not create a partnership or joint venture relationship between
the parties. It is intended that the sole relationship between the parties
shall be that of Seller and Purchaser.
8.14 Time. Time is of the essence in this Agreement.
8.15 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State in which the Undeveloped
Real Estate is located.
8.16 Brokers. Each Party hereunder represents to the other that it has
not contacted or been contacted by, any real estate broker or sales person,
finder or like person, in connection with Purchaser's purchase of the
Property. Each party agrees to indemnify and hold the other party harmless
from and against any and all claims for commissions due any person claiming
by, through or under such indemnifying party.
8.17 Memorandum of Agreement. Neither this Agreement nor
Memorandum of this Agreement shall be placed of record by either party.
IN WITNESS WHEREOF, the parties, by their respective duly authorized
officers or agents, have executed this Agreement on the date first written
above.
SELLER
TRUE BLUE DEVELOPMENT, LLC
a South Carolina limited liability company
By:/s/ James T. Callihan
Its:
By: /s/ Ralph R. Teal, Jr.
PURCHASER
CROSSMANN COMMUNITIES
OF NORTH CAROLINA, INC., an
North Carolina corporation
By:/s/ Jennifer A. Holihen
(printed name and title)
MEMBERS
/s/ James T. Callihan
James T. Callihan
/s/ Ralph R. Teal, Jr.
Ralph R. Teal, Jr.
/s/Jeffrey H. Skelley
Jeffrey H. Skelley
/s/ Charles D. Floyd
Charles D. Floyd
/s/ Ralph C. Jones
Ralph C. Jones
EXHIBIT A
LEGAL DESCRIPTION OF THE UNDEVELOPED REAL ESTATE
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION OF DEVELOPED REAL ESTATE
<PAGE>
EXHIBIT C
LIST OF UNSOLD CONDOMINIUM UNITS
<PAGE>
EXHIBIT D
BALANCE SHEET
<PAGE>
EXHIBIT E
ASSUMED LIABILITIES
<PAGE>
EXHIBIT 4.1
None.
EXHIBIT 10.51
AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 29TH DAY OF MAY, 1998
BY AND AMONG
CROSSMANN COMMUNITIES, INC.
CROSSMANN COMMUNITIES OF NORTH CAROLINA, INC.
AND
RIVER OAKS GOLF DEVELOPMENT CORPORATION
JAMES T. CALLIHAN
RALPH R. TEAL, JR.
JEFFREY H. SKELLEY
CHARLES D. FLOYD
AND
RALPH C. JONES
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER 1
Section 1.01 Merger 1
Section 1.02Effective Time 2
Section 1.03Legal Effect 2
Section 1.04Name 2
Section 1.05Other Actions 2
ARTICLE II CORPORATE GOVERNANCE 2
Section 2.01Articles of Incorporation and Bylaws 2
Section 2.02Directors and Officers 2
ARTICLE III CONVERSION OF AND PAYMENT FOR SHARES 3
Section 3.01Conversion 3
Section 3.02Payment of the Merger Consideration. 3
Section 3.03Certificates 3
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF RIVER OAKS
AND THE STOCKHOLDERS 4
Section 4.01Title to Property 4
Section 4.02Authority; Consent 4
Section 4.03Consents and Approvals 5
Section 4.04Organization 5
Section 4.05Capital Structure of River Oaks and Related Matters 5
Section 4.06No Subsidiaries or Other Interests 5
Section 4.07Title to Shares 5
Section 4.08Financial Statements of River Oaks 6
Section 4.09Absence of Undisclosed Liabilities 6
Section 4.10Tax Matters 6
Section 4.11Compliance with Laws; No Default or Litigation 7
Section 4.12Personal Property Owned 7
Section 4.13Personal Property Leased 8
Section 4.14Developed Real Property 8
Section 4.15Undeveloped Real Property 9
Section 4.16Real Property Leases 9
Section 4.17Land Contracts 9
Section 4.18Real Property Generally 10
Section 4.19Homeowner Associations 12
Section 4.20Environmental Compliance 13
Section 4.21Contracts 14
Section 4.22Accounts and Notes Receivable 15
Section 4.23Permits 15
Section 4.24Intellectual Property 16
Section 4.25Labor Relations: Employees 16
Section 4.26Employee Benefit Plans 17
Section 4.27Warranty Liability 18
Section 4.28Conduct of the Corporation Since the Interim Balance Sheet
Date 18
Section 4.29Outstanding Debt and Related Matters 19
Section 4.30Power of Attorney 20
Section 4.31Absence of Certain Business Practices 20
Section 4.32Minute Book and Stock Record Book 20
Section 4.33Directors and Officers 20
Section 4.34S Corporation Status 20
Section 4.35Investment Intent 20
Section 4.36Access to Information 21
Section 4.37Accredited Investor 21
Section 4.38Sophistication of Each Stockholder 21
Section 4.39Letters of Intent and Sale Discussions 21
Section 4.40Distributions 21
Section 4.41Closings 21
Section 4.42Brokers Commissions 21
Section 4.43Due Diligence 22
Section 4.44Disclosure 22
Section 4.45Survival 22
Section 4.46Other Limitations 22
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 22
Section 5.01Authority: Consent 22
Section 5.02Consents and Approvals 23
Section 5.03Corporate Organization 23
Section 5.04SEC Documents and Other Reports 23
Section 5.05Shares 24
ARTICLE VI [INTENTIONALLY DELETED] 24
ARTICLE VII TAXES 24
Section 7.01Preparation of Return 24
Section 7.02Cooperation 24
Section 7.03Tax Agreements 25
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF RIVER OAKS
AND THE STOCKHOLDERS 25
Section 8.01Performance of the Obligations of the Purchaser 25
Section 8.02Consents and Approvals 25
Section 8.03No Violation of Orders 25
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER 25
Section 9.01Performance of the Obligations of River Oaks and the
Stockholders 26
Section 9.02Completion of Due Diligence 26
Section 9.03Consents and Approvals 26
Section 9.04No Violation of Orders 26
Section 9.05Title Insurance 26
Section 9.06Employment Agreements 26
Section 9.07Noncompetition Agreements 27
Section 9.08Satisfaction of Fees and Note and Release 27
Section 9.09[Intentionally Deleted] 27
Section 9.10Lease 27
Section 9.11.[Intentionally Deleted] 27
Section 9.12Contribution of New Homes Sales Division 27
Section 9.13True Blue Acquisition and Pinehurst Merger 27
Section 9.14CTS Acquisitions, Inc. and Callihan, Teal and
Skelley Development, Inc. 27
ARTICLE X TERMINATION 28
Section 10.01Termination; Failure to Close 28
Section 10.02Effect of Termination 28
ARTICLE XI CLOSING 28
Section 11.01 Closing Date 28
Section 11.02Deliveries by River Oaks 28
Section 11.03Deliveries by Purchaser 30
ARTICLE XII POST-CLOSING COVENANTS OF THE STOCKHOLDERS 30
Section 12.01Acquisition of Additional Consideration Shares 30
Section 12.02Voting Agreement 30
Section 12.03Proxy Solicitations 31
Section 12.04Formation of a "Group" 31
Section 12.05Dissolution of River Oaks Commercial 32
Section 12.06.[Intentionally Deleted] 32
Section 12.07North South 32
ARTICLE XIII POST CLOSING COVENANTS OF THE PURCHASER 32
Section 13.01Filing of Registration Statement 32
Section 13.02Piggyback Registrations 33
Section 13.03Repayment of Existing Debt 34
ARTICLE XIV MISCELLANEOUS 34
Section 14.01Counterparts 34
Section 14.02Expenses 34
Section 14.03Public Announcements 34
Section 14.04Risk of Loss 34
Section 14.05Index and Captions 35
Section 14.06Notices 35
Section 14.07Entire Agreement 36
Section 14.08Waiver of Compliance 37
Section 14.09Validity of Provisions 37
Section 14.10Schedules and Exhibits 37
Section 14.11No Intention to Benefit Third Parties 37
Section 14.12Successors and Assigns 37
Section 14.13Governing Law 37
Section 14.14Guaranty 37
Section 14.15Shareholder Agreements 37
ARTICLE XV DEFINITIONS 38
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of the 29th day
of May, 1998 is by and among CROSSMANN COMMUNITIES, INC., an Indiana
corporation ("Crossmann"), Crossmann Communities of North Carolina, Inc., a
North Carolina corporation ("CCNC" and together with Crossmann, the
"Purchaser"), River Oaks Golf Development Corporation, a South Carolina
corporation ("River Oaks") and James T. Callihan, Ralph R. Teal, Jr., Jeffrey
H. Skelley, Charles D. Floyd and Ralph C. Jones (collectively the
"Stockholders").
WITNESSETH
WHEREAS, River Oaks is engaged in the business of acquiring undeveloped
real estate, developing such real estate, building and selling single family
and multi-family homes built on such real estate and engaging in activities
ancillary thereto.
WHEREAS, the Purchaser, in reliance upon the representations, warranties
and covenants of River Oaks and the Stockholders set forth herein, desires to
acquire all of the outstanding stock of River Oaks by merging River Oaks with
and into CCNC (the "Merger") pursuant to the terms and subject to the
conditions set forth in this Agreement.
WHEREAS, for the purposes of this Agreement the term River Oaks shall
include River Village Development Corporation which was merged with and into
River village on or about May 28, 1998.
WHEREAS, Article XV lists defined terms used in this Agreement.
NOW THEREFORE, in consideration of the representations, warranties,
mutual covenants, and agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Purchaser, River Oaks and the Stockholders hereby agree as follows:
I abARTICLE
THE MERGER
1.01 ab Section. Merger. Upon the terms and subject to the
satisfaction of the conditions precedent contained in this Agreement, River
Oaks shall be merged with and into CCNC, which shall be the surviving
corporation. The Merger shall be effected pursuant to the provisions of and
with the effect provided in the North Carolina Business Corporation Act (the
"NCBCA") and the South Carolina Business Corporation Act of 1988 (the
"SCBCA"). Upon the consummation of the Merger, the separate existence of
River Oaks shall cease, the corporate existence of CCNC with all of its
purposes, powers and objects shall continue unaffected and unimpaired by the
Merger, and River Oaks and CCNC shall be a single corporation. The parties
hereto intend that the Merger shall be treated as a reorganization pursuant to
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
1.02 ab Section. Effective Time. If (a) all of the conditions
precedent to the Merger set forth in Article VIII and Article IX are
satisfied or waived, and (b) this Agreement is not terminated prior to the
Closing as permitted by the provisions of this Agreement, then as soon as
practicable following the Closing, the Purchaser shall cause Articles of
Merger for the merger of River Oaks with and into CCNC conforming to the
requirements of the (a) NCBCA to be filed with the Secretary of State of the
State of North Carolina in the manner provided under the NCBCA and (b) SCBCA
to be filed with the Secretary of State of the State of South Carolina in the
manner provided under the SCBCA. The Merger shall become effective as of
noon, Indianapolis time, on the date of the filing of the Articles of Merger
(the "Effective Time").
1.03 ab Section. Legal Effect. At and after the Effective Time,
CCNC shall possess all of the rights, privileges, immunities, powers and
franchises of River Oaks and shall have all of the duties and liabilities of
River Oaks, in accordance with the NCBCA and SCBCA.
1.04 ab Section. Name. Following the Merger, the name of CCNC
shall remain "Crossmann Communities of North Carolina, Inc.;" provided,
however, that CCNC may, at the sole discretion of the Board of Directors of
CCNC and/or the Board of Directors of Crossmann, file appropriate
documentation with the Secretary of State of the State of South Carolina to do
business in that state as "Pinehurst Builders, a division of Crossmann
Communities, Inc."
1.05 ab Section. Other Actions. The Purchaser, River Oaks, and
the Stockholders shall take all other actions as may be necessary or
appropriate in order to effectuate the transactions contemplated by this
Agreement. If any further action is necessary or desirable to carry out the
purposes of this Agreement after the Effective Time, the officers and
directors of the Purchaser shall have the authority to take that action.
II abARTICLE
CORPORATE GOVERNANCE
2.01 ab Section. Articles of Incorporation and Bylaws. The
Articles of Incorporation and Bylaws of CCNC as in effect immediately prior to
the Effective Time shall continue as the Articles of Incorporation and Bylaws,
respectively, of CCNC following the Effective Time until amended or repealed
as provided by applicable law.
2.02 ab Section. Directors and Officers. The directors and
officers of CCNC immediately prior to the Effective Time shall continue as the
directors and officers of CCNC following the Effective Time, to serve until
their successors shall have been duly elected or appointed and qualified in
the manner provided in the Articles of Incorporation and Bylaws of CCNC, or as
otherwise provided by applicable law.
III abARTICLE
CONVERSION OF AND PAYMENT FOR SHARES
3.01 ab Section. Conversion. At the Effective Time, each share
of common stock of River Oaks ("River Oaks Stock") which shall be outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive cash and common shares of Crossmann (the "Consideration
Shares") as set forth on Schedule 3.01 (the "Merger Consideration"), and all
certificates formerly representing shares of River Oaks Stock shall be deemed
canceled and shall represent only the right to receive the Merger
Consideration. After the Effective Time, the holder of a certificate formerly
representing shares of River Oaks Stock shall have no rights with respect to
such shares other than as provided by this Article III or the laws of the
State of North Carolina or the State of South Carolina. The aggregate number
of Consideration Shares which shall be delivered to the Stockholders pursuant
to this Section 3.01 shall be determined by dividing (a) $1,350,000 by (b)
the average of the average of last bid and ask prices for the common shares of
Crossmann as reported by the National Association of Securities Dealers
Automated Quotation System--National Market System ("NASDAQ-NMS") for the
period beginning on April 30, 1998 and ending on May 13, 1998. The parties
acknowledge that this calculation results in an aggregate of 50,771
Consideration Shares being delivered to the Stockholders.
3.02 ab Section. Payment of the Merger Consideration. The Merger
Consideration shall be delivered by the Purchaser at the Closing.
Certificates representing the Consideration Shares delivered by the Purchaser
in connection with the Merger shall bear a legend indicating the manner in
which such Consideration Shares were acquired by the Stockholders and
requiring compliance with the registration requirements under the Securities
Act prior to resale. No certificates or scrip representing fractional
Consideration Shares shall be issued in the Merger, and no holder of any
fractional share interest shall be entitled to vote, to receive any dividends
or other distributions paid or declared on Consideration Shares, or to
exercise any other rights as a shareholder of Crossmann with respect to such
fractional share interest. Each holder of River Oaks Stock who would
otherwise be entitled to receive a fractional Crossmann Share in exchange for
that holder's River Oaks Stock hereunder shall be entitled, upon surrender of
certificates for River Oaks Stock in accordance with this Agreement, to
receive in lieu of such fractional share interest an amount in cash equal to
the amount of the fractional share interest multiplied by the closing price of
the Crossmann Share on the Closing Date.
3.03 ab Section. Certificates. The Stockholders shall deliver
at the Closing certificates representing the River Oaks Stock outstanding
immediately prior to the Closing or to the extent such certificates are not
available, shall execute such affidavits and indemnities and provide such
bonds as the Purchaser may reasonably require.
IV abARTICLE
REPRESENTATIONS AND WARRANTIES OF RIVER OAKS
AND THE STOCKHOLDERS
As a material inducement to the Purchaser to enter into this Agreement
and other agreements and documents executed by the Purchaser in connection
with this Agreement, and to consummate the transactions contemplated hereby
and thereby, River Oaks and each Stockholder jointly and severally represent
and warrant to the Purchaser that:
4.01 ab Section. Title to Property. Except as set forth in
Schedule 4.01, River Oaks has good, valid and marketable title to all of its
Assets, free and clear of all Liens, except for Liens for property Taxes not
yet due and payable.
4.02 ab Section. Authority; Consent. River Oaks and the
Stockholders 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, and to comply with and fulfill the terms and
conditions of this Agreement. River Oaks has the full capacity, right, power,
and authority to consummate the Merger. The execution and delivery of this
Agreement by River Oaks and the consummation by River Oaks of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action on the part of the Board of Directors of River Oaks and the
Stockholders. This Agreement constitutes a valid and binding obligation of
River Oaks and the Stockholders enforceable against each 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 River Oaks or the Stockholders, or any of them, 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 4.02, neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor compliance by River Oaks or the
Stockholders with any of the provisions of this Agreement will:
(a) ab 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 the Bylaws of River Oaks, or any of the terms, conditions or
provisions of any note, credit agreement, security or pledge agreement, Lien,
bond, mortgage, indenture, license, lease, contract, commitment, agreement,
understanding, arrangement, restriction, or other instrument or obligation to
which River Oaks or any Stockholder is a party or by which River Oaks or any
Stockholder or any of their respective properties or assets may be bound;
(b) ab 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 River Oaks or any Stockholder or any of their respective
properties, assets, or outstanding membership interests shares, or other
securities of River Oaks; or
(c) ab Constitute an event which, with or without notice, lapse of
time, or action by a third party, could trigger a default of any of the Debt,
or any portion thereof, result in the creation of any Lien upon any of the
Assets or any Stockholder, or cause the maturity of any liability, obligation,
or debt of River Oaks or any Stockholder to be accelerated or increased.
4.03 ab Section. Consents and Approvals. Except as set forth on
Schedule 4.03, the execution, delivery, and performance of this Agreement by
River Oaks and the Stockholders and the consummation by River Oaks and the
Stockholders 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 4.03, any and all notices, consents, authorizations, and approvals
set forth on Schedule 4.03 have been made and obtained.
4.04 ab Section. Organization. River Oaks is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization. River Oaks has all the requisite power and authority to
own, lease, and operate its properties and to carry on its business operations
as it is now being conducted. Prior to the Closing, River Oaks will deliver
to the Purchaser (a) a copy of its Articles of Incorporation, including all
amendments thereto, certified as true, complete, and presently in effect by
the Secretary of State of its jurisdiction of organization, (b) a copy of its
Bylaws, including all amendments thereto, certified as true, complete and
presently in effect by its Secretary, and (c) Certificate of Existence issued
by the Secretary of State of its jurisdiction of organization.
4.05 ab Section. Capital Structure of River Oaks and Related
Matters. The total authorized and outstanding capital stock of River Oaks
is set forth on Schedule 4.05. All outstanding shares of the River Oaks
Stock have been duly authorized, validly issued and are fully paid and
non-assessable. No capital stock of River Oaks is entitled to preemptive
rights. River Oaks does not have any outstanding options, warrants or other
rights of any kind to acquire any shares of any River Oaks Entity, or
securities convertible into or exchangeable for, or which otherwise confer on
the holder thereof any right to acquire, any shares of River Oaks, nor is
River Oaks committed to issue any such option, warrant, right or security.
4.06 ab Section. No Subsidiaries or Other Interests. River Oaks
does not have any subsidiaries and does not own, directly or indirectly, any
debt or equity interest in any Person.
4.07 ab Section. Title to Shares. Each of the Stockholders has
legal, valid and marketable title to the shares of common stock of River Oaks
set forth opposite his name on Schedule 4.07, free and clear of all Liens,
buy-sell agreements, cross-purchase agreements, stockholder agreements or
restrictions.
4.08 ab Section. Financial Statements of River Oaks. True and
complete copies of the annual financial statements of River Oaks for each of
the years 1995, 1996 and 1997 and the internally prepared interim balance
sheet (the "Interim Balance Sheet") of River Oaks as of April 30, 1998 (the
"Interim Balance Sheet Date"), are attached hereto as Schedule 4.08
(collectively the "Financial Statements of River Oaks"). The Financial
Statements of River Oaks, and each of them, are true and correct in all
material aspects, have been prepared from the books and records of River Oaks
in accordance with GAAP consistently applied, and contain and reflect all
material adjustments or accruals necessary for a fair presentation of the
financial condition and results of the operations of River Oaks for the
periods indicated.
4.09 ab Section. Absence of Undisclosed Liabilities. River Oaks
has no liabilities or obligations except:
(a) ab those liabilities or obligations set forth on the Interim
Balance Sheet and not heretofore paid or discharged in the normal and ordinary
course of business consistent with past practice;
(b) ab liabilities arising in the normal and ordinary course of
business consistent with past practice under any agreement, contract,
commitment, lease or plan specifically disclosed on Schedule 4.13, Schedule
4.16, Schedule 4.17(a) or Schedule 4.21; and
(c) ab those liabilities or obligations incurred in or as a result of
the normal and ordinary course of business consistent with past practice since
the Interim Balance Sheet Date.
For purposes of this Agreement, the term "liabilities" shall include, without
limitation, any direct or indirect, or matured or unmatured, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, whether absolute, fixed, contingent or
otherwise, known or unknown, asserted or unasserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
4.10 ab Section. Tax Matters. Except as set forth in Schedule
4.10:
(a) ab All federal, state, county, local and other taxes of any kind
or character, including, without limitation, income (including gross and
adjusted gross), receipts, property (including real, personal, and
intangible), transfer, sales, use, franchise, value added, excise, recording,
financial institutions, employees' income and social security withholding, and
all other withholding, social security, unemployment taxes, which have been
incurred or assessed, or which are due and payable, by or on behalf of River
Oaks, and all interest and penalties thereon (collectively, the "Taxes"), have
been paid (and, to the extent applicable, withheld) in full (or are adequately
reflected as a liability in the Interim Balance Sheet);
(b) ab River Oaks 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; and
(c) ab 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 River Oaks or any waiver or agreement by River Oaks for an
extension of time for the assessment of any Tax.
4.11 ab Section. Compliance with Laws; No Default or Litigation.
Except as set forth in Schedule 4.11:
(a) ab River Oaks is not in default or violation (nor is there, to the
knowledge of River Oaks or any Stockholder, 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 any of the Assets 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, domestic or foreign (including,
without limitation, applicable laws, rules and regulations relating to
environmental protection, antitrust, civil rights, health, and occupational
health and safety);
(b) ab There are no actions, suits, claims, investigations, legal
arbitrations or administrative proceedings in progress, pending, or, to the
knowledge of River Oaks or any Stockholder, threatened by or against River
Oaks (or any of the Assets) 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 River Oaks been charged with or
received any notice of any violation of any rule, regulation, ordinance, law,
order, decree, or requirement relating to River Oaks, its properties, assets,
or the transactions contemplated by this Agreement; and
(c) ab No action, suit, or proceeding has been instituted or, to the
knowledge of River Oaks or any Stockholder, threatened to restrain, prohibit,
or otherwise challenge the legality or validity of the transactions
contemplated by this Agreement.
4.12 ab Section. Personal Property Owned. Schedule 4.12
contains a list and brief description of all model homes, tools, furniture,
furnishings, fixtures, machinery, supplies, vehicles, equipment, and all other
items of tangible personal property owned or used by River Oaks (the "Personal
Property").
4.13 ab Section. Personal Property Leased. Schedule 4.13
contains a list and brief description of all leases and other agreements under
which River Oaks 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"). River Oaks on or before the Closing
will deliver to the Purchaser copies of the leases and agreements listed in
Schedule 4.13. Each of such leases and agreements is in full force and
effect and constitutes a legal, valid, and binding obligation of River Oaks,
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 4.13.
Except as disclosed in Schedule 4.13, 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 as to the Leased
Personal Property. None of the Assets is subject to any lease other than as
set forth in Schedule 4.13 or Schedule 4.16.
4.14 ab Section. Developed Real Property. Schedule 4.14 lists
and sets forth the legal description of each parcel of Developed Real Property
in which River Oaks or any entity owned in whole or in part by River Oaks owns
an interest. For purposes of this Agreement, Developed Real Property is real
property, owned in whole or in part by River Oaks or any entity owned in whole
or in part by River Oaks, which (a) has all necessary access to and from
public highways, streets, and roads and for which no pending or threatened
proceeding or other fact or condition exists that could limit or result in the
termination of such access and (b) (i) is or can be connected to and, where
applicable, serviced by electric, gas, sewage or septic, storm sewers,
telephone, and public or private water facilities, and, when so connected,
will be in compliance in all material respects with all applicable laws and
(ii) for which all applicable installation and connection charges have been
paid in full. Developed Real Property shall not include Undeveloped Property,
Land Contract Property and Option Real Property (as those terms are defined
below). Except as set forth on Schedule 4.14, Developed Real Property is
Substantially Complete. For purposes of this Agreement, "Substantially
Complete" means that each and all of the requirements listed below have been
met with respect to the Developed Real Property and each lot contained therein
(a "Lot" or "Lots"):
(a) ab Final subdivision plats have been approved by all applicable
governmental authorities and recorded in the official records of the county,
municipality or applicable governmental authority;
(b) ab Final acceptance letters have been issued by the appropriate
governmental authority which evidence that such authority has accepted for
permanent maintenance all the streets, water lines, sanitary sewer, and storm
sewers for the Lots;
(c) ab The appropriate governmental authority has certified that
operable water and sewer taps are available to each of the Lots;
(d) ab The buildable portion of each Lot is not located in a "Special
Flood Hazard Area" pursuant to the applicable Federal Insurance Rate Map or
the 100 year flood elevation as designated by the U.S. Army Corps of
Engineers, the Federal Emergency Management Agency, or any applicable state
agency;
(e) ab Rough grading of the Lots has been completed to assure that
there is sufficient drainage to eliminate the need for major benching or
filling in order to render the Lots buildable; and
(f) ab The appropriate governmental authority has certified that
building permits are obtainable for the construction of single-family or
multifamily homes on the Lots.
4.15 ab Section. Undeveloped Real Property. Schedule 4.15
lists and sets forth the legal description (or such other description legally
sufficient to identify the subject property) of each parcel of Undeveloped
Real Property in which River Oaks or any entity owned in whole or in part by
River Oaks owns an interest (the "Undeveloped Real Property"). For purposes
of this Agreement, "Undeveloped Real Property" shall be defined as all real
property which is not Developed Real Property, Land Contract Property or
Option Real Property. Except as set forth on Schedule 4.15, no fact,
condition or restriction could preclude or prevent the Undeveloped Real
Property from (a) having all necessary access to and from public highways,
streets, and roads or (b) being connected to and, where applicable, serviced
by electric, gas, sewage or septic, telephone, and public or private water
facilities. Except as set forth on Schedule 4.15, River Oaks has secured
all easements and public dedications necessary to connect the utilities
referenced above from their current locations to the boundary of each parcel
of Undeveloped Real Property as such boundaries currently exist.
4.16 ab Section. Real Property Leases. Schedule 4.16 contains
a list and brief description of all written and oral agreements,
arrangements, contracts, commitments, leases or usufructs (each, a "Real
Property Lease") pursuant to which River Oaks or any entity owned in whole or
in part by River Oaks is the lessor or the lessee (or has an equivalent
interest in the case of usufructs or other arrangements which may not be
leases under applicable law) of any real property (the "Leased Real
Property"). As to each Real Property Lease, (a) River Oaks has not delivered
or received notice that any breach or event of default exists, and (b) no
condition or event has occurred that with the giving of notice, the lapse of
time, or both would constitute a breach or event of default by River Oaks or
any other Person.
4.17 ab Section. Land Contracts.
(a) ab Schedule 4.17(a) contains a list and brief description of all
written and oral agreements, arrangements, contracts, and commitments pursuant
to which River Oaks or any entity owned in whole or part by River Oaks (i) is
obligated to purchase any developed or undeveloped real property (the "Land
Contract Property"), or (ii) possesses an option to acquire any developed or
undeveloped real property (the "Option Real Property") as of the date hereof.
Schedule 4.17(a) also sets forth the legal description of each parcel of
Land Contract Property and Option Real Property, or such other description
legally sufficient to identify the subject property.
(b) ab Each parcel of developed real property included in the Land
Contract Property or Option Real Property, when and if purchased, will satisfy
all of the representations and warranties set forth herein concerning the
Developed Real Property. Each parcel of undeveloped real property included in
the Land Contract Property or Option Real Property, when and if purchased,
will satisfy all of the representations and warranties set forth herein
concerning the Undeveloped Real Property.
(c) ab Schedule 4.17(c) sets forth all letters of intent and similar
proposals relating to the purchase of real property by River Oaks or any
entity owned in whole or in part by River Oaks which have not expired or been
terminated.
4.18 ab Section. Real Property Generally.
(a) ab Good and Marketable Title. River Oaks or any entity owned in
whole or in part by River Oaks has good and marketable title in fee simple to
or a valid leasehold interest in its Developed Real Property, Undeveloped Real
Property, Leased Real Property, Land Contract Property and Option Real
Property (collectively, the "Real Property"), except as set forth on Schedule
4.18(a) and except that River Oaks or any entity owned in whole or in part by
River Oaks will not acquire such title to its Land Contract Property and
Option Real Property until the acquisition thereof. The Real Property
constitutes all of the real property which River Oaks or any entity owned in
whole or in part by River Oaks owns or has a right to acquire or in which
River Oaks or any entity owned in whole or part by River Oaks otherwise has an
interest, except for any easements, rights of way, covenants, servitude,
licenses, or other interests, whether arising by contract, statute,
regulation, common law, equity, or otherwise which are appurtenant to any Real
Property.
(b) ab No Breach or Default. Except as set forth in Schedule
4.18(b), River Oaks has not given nor has it received any written notice
that a breach or an event of default exists under or with respect to any
agreement, arrangement, contract, covenant, condition, deed, deed of trust,
right-of-way, easement, mortgage, restriction, survey, title insurance policy,
and other document granting River Oaks title to or an interest in or otherwise
affecting the Real Property, and, to the knowledge of River Oaks and the each
Stockholder, no condition or event has occurred that with the giving of
notice, the lapse of time, or both would constitute a breach or event of
default of any such agreement or document, by River Oaks or any other Person.
(c) ab No Condemnation. No condemnation, eminent domain, or similar
proceeding exists, is pending or, to the knowledge of River Oaks and the
Stockholders, is threatened with respect to, or that could affect, any Real
Property or its development or the construction, marketing, or sale of
dwellings situated thereon or the insurability or marketability of the title
thereto.
(d) ab Compliance with Laws. The buildings and improvements on and
the subdivision of the Real Property do not violate (i) any applicable law,
including any building, set-back, or zoning law, ordinance, regulation, or
statute, or other governmental restriction in the nature thereof, or (ii) any
enforceable restrictive covenant affecting any such property.
(e) ab Parties in Possession. There are no parties in possession of
any portion of the Real Property as lessees, tenants at sufferance, or
trespassers, except for rightful possessors of the Option Real Property, the
Leased Real Property, or the Land Contract Property.
(f) ab Site Obligations. Except as set forth on Schedule 4.18(f),
no Real Property is subject to any condition or obligation to any governmental
entity or other Person requiring the owner or any transferee thereof to donate
land (except for incidental rights of way), money or other property or to make
off-site public improvements.
(g) ab Assessments. No developer-related charges or assessments by
any public authority or any other Person for public improvements or otherwise
made against the Real Property are unpaid (other than those set forth on the
Interim Balance Sheet or incurred since the date thereof in the ordinary
course of business consistent with past practices), including without
limitation those for construction of sewer lines, water lines, storm drainage
systems, electric lines, natural gas lines, streets (including perimeter
streets), roads and curbs, excluding homeowner association dues, utility
connection fees, and per lot impact fees.
(h) ab Subdivision Standards. Except as set forth on Schedule
4.18(h), the Real Property and all lots included therein conform to the
appropriate governmental authority's subdivision standards, and there is no
material impediment to subdivision approval for the Undeveloped Real Property,
such approval to allow development of the Undeveloped Real Property for
construction and sale of single-family and multifamily homes at the density
and materially in the manner in which River Oaks currently anticipates
building thereon.
(i) ab Moratoria. There is no moratorium applicable to any of the
Real Property, to the extent River Oaks plans further development thereof, on
(i) the issuance of building permits for the construction of condominiums or
houses, or certificates of occupancy therefor, or (ii) the purchase of sewer
or water taps to the extent River Oaks plans or is required to rely on public
water or sewer facilities.
(j) ab Construction Conditions. Except as set forth on Schedule
4.18(j), each of the lots included in the Developed Real Property, developed
real property included in the Land Contract Property and developed real
property included in the Option Real Property is stable and otherwise suitable
for the construction of a residential structure by customary means and without
extraordinary site preparation measures.
(k) ab Certain Prior Uses. Except as set forth on Schedule
4.18(k), none of the Real Property has a gravesite that will materially
impede the development of residential homes or condominiums and no permanent
structures have been constructed on a fill or borrow area in a manner that
materially adversely affects River Oaks' intended use thereof or that does not
comply with any applicable law.
(l) ab Claims. Except as set forth on Schedule 4.18(l), no action
described in Section 4.11 is pending or, to the knowledge of River Oaks and
the Stockholders, threatened against River Oaks with respect to any of the
Real Property. All of the Real Property is in compliance with all applicable
zoning and subdivision ordinances and none of the development-site preparation
and construction work performed on the Real Property has concentrated or
diverted surface water or percolating water improperly onto or from the Real
Property in a manner that affects River Oaks' present or intended use thereof
or the value of the Real Property.
(m) ab Third Party Rights. Except as set forth on Schedule
4.18(m), River Oaks has not granted to any Person any contract or other right
to the use of any portion of the Real Property or to the furnishing or use of
any facility or amenity on or relating to the Real Property, other than sales
contracts in the ordinary course of business.
(n) ab Zoning. Except as set forth on Schedule 4.18(n), all of
the Real Property is zoned to permit single-family or multifamily home
construction and occupancy thereon.
4.19 ab Section. Homeowner Associations.
(a) ab Schedule 4.19 sets forth a list of all homeowner associations
in which River Oaks or any entity owned in whole or part by River Oaks has or
has had declarant rights (the "Homeowner Associations") and all amounts owing
between River Oaks or any entity owned in whole or part by River Oaks on the
one hand and the Homeowner Associations on the other.
(b) ab Except as set forth on Schedule 4.19, (i) all restrictive
covenants and other documents used by River Oaks or any entity owned in whole
or part by River Oaks in connection with the creation and operation of the
Homeowner Associations (A) in which River Oaks or any entity owned in whole
or part by River Oaks previously had declarant rights complied in all
materials respects with applicable laws at the time the same were promulgated,
and (B) in which River Oaks or any entity owned in whole or part by River Oaks
currently has declarant rights currently comply in all material respects with
applicable laws, and (ii) all disclosures and deliveries of information and
documents required by applicable laws as to such Homeowner Associations and
their creation and operation have been materially complied with.
(c) ab To the knowledge of River Oaks and the Stockholders, no other
claims exist by a Homeowner Association against River Oaks or any entity owned
in whole or part by River Oaks, and each Homeowner Association has been
operated, so long as River Oaks or any entity owned in whole or part by River
Oaks has participated therein, in accordance with applicable laws.
4.20 ab Section. Environmental Compliance. Except as set forth
in Schedule 4.20:
(a) ab River Oaks and each entity owned in whole or part by River Oaks
has at all times complied with all applicable Environmental Requirements in
its operation, development, construction and disposition of the Real Property.
Further, to the knowledge of River Oaks and the Stockholders, no current or
previous owner of any Real Property violated any Environmental Requirements;
(b) ab No Hazardous Material has ever been generated, manufactured,
refined, used, transported, treated, stored, handled, disposed, transferred,
produced, or processed at, to, from or on any Real Property and no Hazardous
Material has ever been incorporated into any Real Property;
(c) ab There are no existing or, to the knowledge of River Oaks and
the Stockholders, potential Environmental Claims relating to any Real
Property, and neither River Oaks nor any entity owned in whole or part by
River Oaks has received any notification, nor does it or any Stockholder 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 Real Property by or on behalf of
River Oaks or any entity owned in whole or part by River Oaks;
(d) ab (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 Real 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 Real Property;
(e) ab There are no PCBs or friable asbestos located or contained at,
on, or in any Real Property;
(f) ab No Lien has been imposed on any Real 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 Real Property or a
violation of any Environmental Requirement;
(g) ab Neither River Oaks nor any entity owned in whole or part by
River Oaks has received any notices issued pursuant to the citizen's suit
provision of any Environmental Requirement relating to any Real Property;
(h) ab Neither River Oaks nor any entity owned in whole or part by
River Oaks has 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 Real Property;
(i) ab There have been no environmental investigations, site
assessments or audits, or soil or groundwater sampling conducted at any Real
Property by River Oaks or any entity owned in whole or part by River Oaks, or,
to River Oaks' and the Stockholders'knowledge, by any other Person.
(j) ab None of the Real Property on which River Oaks or any entity
owned in whole or part by River Oaks intends to construct a residential
dwelling is located within a "critical," "preservation," "conservation" or
similar type of area which will affect the present development plans therefor.
No wetlands exist which will restrict development of any of the Real Property
as contemplated by River Oaks or any entity owned in whole or part by River
Oaks nor render the cost of its development of any Real Property materially in
excess of River Oaks' budget therefor. No portion of the Real Property which
River Oaks or any entity owned in whole or part by River Oaks has developed or
intends to develop for residential lots and dwellings is situated within a
"noise cone" such that the Federal Housing Administration will not approve
mortgages due to the noise level classification of such real property. Any
Real Property which cannot be developed in accordance with its official
development plan and preliminary plot without materially increasing
development costs above those contemplated by River Oaks or any entity owned
in whole or part by River Oaks or materially delaying construction shall be
listed on Schedule 4.20.
4.21 ab Section. Contracts.
(a) ab Schedule 4.21(a) lists all material contracts and leases
(other than those described in Schedule 4.13, Schedule 4.16 and Schedule
4.17(a)), including all amendments thereto, to which River Oaks is a party
(all the contracts, leases and amendments thereto listed on 4.13, 4.16,
Schedule 4.17(a) and 4.21(a) are defined as the "Contracts") including,
but not limited to all;
(1) ab Loans, lines of credit, letters of credit, security agreements,
pledges, mortgages, hypothecations, loan agreements, guaranties, or other
payment or collateral obligations;
(2) ab Agreements of guaranty or indemnification;
(3) ab Agreements, contracts, and commitments containing any covenant,
condition, or promise limiting the right of River Oaks to engage in any
activity or compete with any Person;
(4) ab Written employment agreements, contracts, policies, and
commitments with or between River Oaks and any of its employees, directors, or
officers, including without limitation those relating to severance;
(5) ab Material written agreements with employees as a group;
(6) ab Contracts with subcontractors and other service providers;
(7) ab Contracts with suppliers and vendors of parts, equipment, and
other items used by River Oaks in the ordinary course of business; and
(8) ab Joint venture or partnership agreements.
(b) ab All of the Contracts are valid and binding obligations of River
Oaks, are enforceable in accordance with their respective terms, are in full
force and effect and, except as otherwise specified in Schedule 4.21(a),
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 4.21(b), (i) none of the
Contracts contain any provision that is triggered by any of the transactions
contemplated by this Agreement; (ii) none of the Contracts contain a provision
imposing a penalty if any of the amounts due thereunder are prepaid; (iii)
there is not any existing default or, to the knowledge of River Oaks and the
Stockholders, 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;
(iv) to the knowledge of River Oaks and the Stockholders, none of the material
suppliers, vendors, subcontractors or service providers used by River Oaks
has, or intends to, terminate or change significantly its relationship with
River Oaks. Copies of the Contracts in written form have been delivered or
will be delivered to the Purchaser prior to the Closing.
4.22 ab Section. Accounts and Notes Receivable. River Oaks on
or before the Closing will deliver to the Purchaser a list of Accounts
Receivable owing to River Oaks from its customers and all other parties as of
the date of Closing with such list to be set forth in Schedule 4.22. Such
list shall include the amount of the obligation, date the obligation was
created, date when the obligation is due, and any applicable penalties or
discounts. Neither River Oaks nor any Stockholder has any knowledge of any
facts or circumstances which will interfere with the collection of Accounts
Receivable in accordance with their terms.
4.23 ab Section. Permits. River Oaks possesses all franchises,
licenses, permits, certificates, approvals, consents, clearances,
notifications, registrations, and other authorizations necessary to conduct
its business operations as now conducted (the "Permits"). Except as provided
in Schedule 4.23, all builder's 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 such builder's permits.
4.24 ab Section. Intellectual Property. Except as set forth in
Schedule 4.24, River Oaks owns or has the right to use all corporate names,
trade names, trademarks, service marks, mailing lists, copyrights, works of
art, trade secrets, computer programs, know-how, proprietary processes and
formulae, technology and all other proprietary technical information, whether
patentable or unpatentable, and all applications and registrations of the
foregoing (collectively, "Intellectual Property"), necessary to conduct the
business of River Oaks as presently operated. Schedule 4.24 also contains a
list and brief description of (i) all Intellectual Property in written form
which has been registered with any state trademark office, with the U.S.
Patent and Trademark Office or with the U.S. Copyright Office and (ii) all
computer programs having a cost to River Oaks in excess of One Thousand
Dollars ($1,000.00) per copy. Except as set forth in Schedule 4.24, each
copyright claimed to be owned by River Oaks relating to a work of art created
prior to January 1, 1978 has been properly registered by River Oaks claiming
ownership with the U.S. Copyright Office. Except as set forth in Schedule
4.24, River Oaks is not infringing upon or otherwise acting adversely to, or
engaging in the unauthorized use or misappropriation of, any Intellectual
Property, rights of publicity, or rights of privacy which are owned by any
other Person, and there is no claim or action by any such Person pending or
threatened with respect thereto.
4.25 ab Section. Labor Relations: Employees. As of May 29,
1998, River Oaks employed no employees. As of the Closing Date, except as set
forth in Schedule 4.25:
(a) ab River Oaks 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) ab River Oaks is in compliance with (i) all federal, state,
county, 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) ab There is no unfair labor practice, safety, health,
discrimination, or wage claim, charge, complaint, or suit pending or
threatened against or involving River Oaks before the National Labor Relations
Board, Occupational Safety and Health Administration, Equal Employment
Opportunity Commission, Department of Labor, or any other federal, state,
county or local agency;
(d) ab There is no labor dispute, strike, work stoppage, interference
with production, or slowdown in progress, threatened against, or involving
River Oaks;
(e) ab 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 River Oaks;
(f) ab There is no grievance pending or threatened which might have a
material adverse effect on River Oaks, or on the conduct of the business of
River Oaks;
(g) ab There exists no collective bargaining agreement to which River
Oaks is a party, and there is no collective bargaining agreement currently
being negotiated, subject to negotiation, or renegotiation by River Oaks; and
(h) ab There is no dispute, claim, or proceeding pending with or
threatened by the Immigration and Naturalization Service with respect to River
Oaks.
4.26 ab Section. Employee Benefit Plans.
(a) ab Schedule 4.26, 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 River Oaks immediately prior to the Closing,
(B) to which River Oaks contributed to, or was legally obligated to contribute
to immediately prior to the Closing, or (C) under which River Oaks had any
liability immediately prior to Closing, with respect to its current or former
employees or independent contractors. Solely for purposes of this Section
4.26, 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) ab River Oaks on or before the Closing will provide the Purchaser
with true and correct copies of (i) all Employee Benefit Plans listed on
Schedule 4.26, including all amendments thereto, and (ii) the most recent
summary plan description for each Employee Benefit Plan.
(c) ab 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, 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. All IRS/DOC Form 5500s for each Employee Benefit Plan have been
timely filed.
(d) ab 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) ab River Oaks is not obligated to contribute to any multi-employer
plan (as defined in ERISA Section 3(37)).
(f) ab River Oaks has complied with the requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(hereinafter referred to as ("COBRA")) and the rules and regulations
thereunder. Each Stockholder shall be solely responsible and liable for
providing any and all benefits to employees or others (or their covered
dependents) of River Oaks required under COBRA arising from any qualifying
event as defined under Code Section 4980B(f)(3) and ERISA Section 603
occurring on or before Closing.
4.27 ab Section. Warranty Liability. Except as set forth in
Schedule 4.27, River Oaks has not (a) incurred any costs in regard to any
Warranty Liability at any time, (b) has been notified, in writing or orally,
of any pending or potential Warranty Liability which has arisen or may arise
in the future, nor (c) has any reason to anticipate any pending or potential
Warranty Liability.
4.28 ab Section. Conduct of the Corporation Since the Interim
Balance Sheet Date. Since the Interim Balance Sheet Date, River Oaks has
not:
(a) ab incurred any liability, other than liabilities incurred in the
normal and ordinary course of business consistent with past practice, or
discharged or satisfied any Lien or paid any liability, other than in the
normal and ordinary course of business consistent with past practice, or
failed to pay or discharge when due any liabilities of which the failure to
pay or discharge has caused or will cause any material damage or risk of
material loss to it or any of its Assets;
(b) ab sold, encumbered, assigned or transferred any Asset which would
have been included in the Assets, except for the sale of single family or
multi-family homes in the normal and ordinary course of business consistent
with past practice;
(c) ab created, incurred, assumed or guaranteed any indebtedness for
borrowed money, or mortgaged, pledged or subjected any of its Assets to any
Lien;
(d) ab made or suffered any amendment or termination of any material
agreement, contract, commitment, lease or plan to which it is a party or by
which it is bound, or cancelled, modified or waived any substantial debt or
claim held by it or waived any right of material value, whether or not in the
normal and ordinary course of business consistent with past practice;
(e) ab declared, set aside or paid any dividend or made or agreed to
make any other distribution or payment in respect of the Securities of River
Oaks Shares or issued, redeemed, purchased or otherwise acquired or agreed to
issue, redeem, purchase or acquire any of its shares or any other securities;
(f) ab suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, Assets or prospects or (ii) of any item or items carried on its
books of account individually or in the aggregate at more than $5,000, or
suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) ab made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $5,000, except
such as may be involved in ordinary repair, maintenance or replacement of its
Assets;
(h) ab increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to,
other benefits to which any of its employees may be entitled;
(i) ab instituted, granted or modified in any respect any (i) bonus,
incentive compensation, service award or other like benefit granted, made or
accrued, contingently or otherwise, for or to the credit of any personnel
engaged in the business of River Oaks, (ii) Employee Benefit Plan, retirement
plan, profit-sharing plan or similar payment or arrangement made or agreed to
by River Oaks for any personnel engaged in the business of River Oaks other
than in the normal and ordinary course of business consistent with past
practice, or (iii) new employment agreement with any personnel engaged in the
business of River Oaks to which River Oaks is a party;
(j) ab changed any of the accounting principles followed by it or the
methods of applying such principles;
(k) ab entered into any transaction other than in the normal and
ordinary course of business consistent with past practice; or
(l) ab suffered any material adverse change in its business,
operations, Assets, prospects or condition (financial or otherwise).
4.29 ab Section. Outstanding Debt and Related Matters. All
outstanding Debt of River Oaks is set forth on Schedule 4.29 ("Existing
Debt"). There exists no default under the provisions of any instrument
evidencing such Existing Debt or of any agreement relating thereto, except as
listed on Schedule 4.29. Neither River Oaks nor any Stockholder has
guaranteed any obligation of any Person, and except as listed on Schedule
4.29, neither the Stockholders nor any other Person has guaranteed any
obligation of River Oaks, including obligations with respect to Existing Debt.
4.30 ab Section. Power of Attorney. Schedule 4.30 contains a
list of the names of all Persons holding general or special written powers of
attorney from River Oaks and a summary of the terms thereof.
4.31 ab Section. Absence of Certain Business Practices. Except
as set forth on Schedule 4.31, within the 10 years immediately preceding the
date of this Agreement, neither River Oaks, the Stockholders nor the personnel
or other Persons acting on behalf of any of them 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 of River Oaks (or assist River Oaks in connection with
any actual or proposed transaction relating to its Business), which might
subject River Oaks 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 its business.
4.32 ab Section. Minute Book and Stock Record Book. The minute
books of River Oaks contain complete and accurate records of all official
meetings and other official corporate actions of its stockholders and board of
directors, including committees of the board of directors. The stock record
book of River Oaks, contains a complete and accurate record of all
transactions involving equity securities issued by it. All other material
books and records of River Oaks are complete and accurate in all material
respects.
4.33 ab Section. Directors and Officers. Schedule 4.33
attached hereto identifies all of the directors and officers of River Oaks on
the date hereof.
4.34 ab Section. S Corporation Status. River Oaks is a small
business corporation within the meaning of Section 1361 of the Code and has
had in effect since its initial date of incorporation a valid election to be
treated as an "S" corporation for federal income tax purposes under the Code
and in the jurisdictions listed on Schedule 4.34, and neither River Oaks nor
any Stockholder has taken or caused or permitted to be taken any action that
would have caused a termination of any such S election for any period.
4.35 ab Section. Investment Intent. Each Stockholder, who is
entitled to Consideration Shares pursuant to Section 3.01, is acquiring the
Consideration Shares to which he may entitled pursuant to Section 3.01, for
his own account for the purpose of investment and not with a view to, or for
sale in connection with, any distribution thereof within the meaning of the
Securities Act. Each Stockholder, who is entitled to Consideration Shares
pursuant to Section 3.01, acknowledges and agrees that the certificates
representing the Consideration Shares shall bear a legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE OR FOREIGN SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH."
4.36 ab Section. Access to Information. Each Stockholder, who
is entitled to Consideration Shares pursuant to Section 3.01, has received
and reviewed a copy of Crossmann's Annual Report on Form 10-K for the fiscal
year ending December 31, 1997 and the proxy statement relating to Crossmann
1998 Annual Meeting of Stockholders. Each Stockholder who is entitled to
Consideration Shares pursuant to Section 3.01 has had an opportunity to the
ask questions of, and receive answers from, the management of Crossmann
concerning the operations and financial condition of Crossmann and its
business to make an informed decision to invest in the Consideration Shares.
4.37 ab Section. Accredited Investor. Each Stockholder, who is
entitled to Consideration Shares pursuant to Section 3.01, is an "accredited
investor" as the term is defined by Rule 501 of Regulation D promulgated by
the Commission.
4.38 ab Section. Sophistication of Each Stockholder. Each
Stockholder, who is entitled to Consideration Shares pursuant to Section
3.01, has such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of an investment in the
Consideration Shares and has been advised by professional advisors, including
attorneys and accountants, with respect to all aspects of owning the
Consideration Shares, including the impact of all relevant securities and tax
laws on such ownership.
4.39 ab Section. Letters of Intent and Sale Discussions. Except
for the Letter of Intent by and between Crossmann, Pinehurst Entities, River
Oaks, True Blue, James T. Callihan, Ralph R. Teal, Jr., Jeffrey H. Skelley,
and H. Gilford Edwards, dated April 1, 1998, River Oaks has not entered into
any binding letter of intent nor other agreement pursuant to which River Oaks
has agreed to merge or consolidate, in whole or in part, with any other
Person, sell or exchange any of the stock of River Oaks, or sell, transfer, or
assign any asset of River Oaks, except for sales of residential homes or
condominiums made in the ordinary course of business.
4.40 ab Section. Distributions. River Oaks has not made any
distributions to its Stockholders since April 30, 1998.
4.41 ab Section. Closings. River Oaks has not closed the sale
of any multifamily unit since April 30, 1998.
4.42 ab Section. Brokers Commissions. With the exception of the
fee owed to Michael P. Kahn & Associates, LLC, neither River Oaks, Stockholder
nor any Person acting on behalf of River Oaks or any Stockholder has agreed to
pay a commission, finder's fee or similar payment in connection with this
Agreement or any matter related hereto to any Person. The Stockholders shall
be responsible for and shall pay all amounts owed to Michael P. Kahn &
Associates, LLC.
4.43 ab Section. Due Diligence. With respect to all
representations and warranties which are qualified "to the knowledge of River
Oaks and/or the Stockholders," "known to River Oaks and/or the Stockholders,"
or words of similar import, River Oaks and the Stockholders each have made
reasonable investigation of the subject matter of the representation of
warranty and, where appropriate, conferred with appropriate personnel and/or
examined appropriate documents.
4.44 ab Section. Disclosure. This 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 or therein not misleading.
4.45 ab Section. Survival. All representations and warranties
contained in this Agreement, except those in Sections 4.07, 4.10, 4.20,
4.26 and 4.34 shall survive the execution, delivery, and performance
hereof for a period of three (3) years after the Closing Date, provided,
however, that the representations contained in Section 4.07 shall survive
indefinitely, provided, further, that the representations contained in
Section 4.10, Section 4.26 and Section 4.34 shall survive for so long as
the applicable statute of limitations; and, provided, further, that the
representations contained in Section 4.20 relating to environmental matters
shall survive for so long as any environmental regulatory authority shall have
the power to make any claim, assessment or reassessment with respect thereto.
4.46 ab Section. Other Limitations. The Operating Stockholders'
liability for a breach of a representation or warranty contained in this
Agreement shall be limited as provided for in Section 6.09.
V abARTICLE
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to River Oaks and the Stockholders to enter into
this Agreement and to consummate the transactions contemplated by this
Agreement, the Purchaser represents and warrants to River Oaks and the
Stockholders that:
5.01 ab Section. Authority: Consent. Each of the Company and
Crossmann has 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 execution and delivery of this Agreement by
the Company and Crossmann and the consummation by the Company and Crossmann of
the transactions contemplated herein have been duly and validly authorized by
all necessary actions on the part of the boards of directors of the Company
and Crossmann. This Agreement constitutes a valid and binding obligation of
the Company 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 Company or Crossmann to make this Agreement valid and binding
upon the Company and Crossmann and enforceable against the Company 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 Company and Crossmann with any of the provisions of this Agreement
will:
(a) ab 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 Company or Crossmann is a party or by which the
Company, Crossmann or any of their respective properties or assets may be
bound;
(b) ab 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 Company, Crossmann or any of their respective properties,
assets, outstanding shares or other securities; or
(c) ab 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
upon any of the assets or properties of the Company or Crossmann, or cause the
maturity of any liability, obligation, or debt of the Company or Crossmann to
be accelerated or increased.
5.02 ab Section. Consents and Approvals. Except as set out in
Schedule 5.02, the execution and delivery of this Agreement by the Company
and Crossmann and the consummation by the Company 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 5.02 have been made and obtained.
5.03 ab Section. Corporate Organization. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of North Carolina and is a wholly-owned subsidiary of
Crossmann. 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 for which no Articles of Dissolution appear as filed
with the Indiana Secretary of State's records.
5.04 ab Section. SEC Documents and Other Reports. Crossmann
has filed all periodic reports required to be filed by it with the Commission
(the "SEC Documents"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of Crossmann included
in the SEC Documents complied as to form in all material respects with the
applicable accounting requirements and the published rules and regulations of
the Commission with respect thereto, have been prepared in accordance with
generally accepted accounting principals (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the Commission) consistently applied
throughout the periods involved (except as may be indicated therein or in the
notes thereto) and fairly present the consolidated financial position, results
of operations and cash flows of Crossmann and its consolidated subsidiaries as
of the dates or for the periods indicated therein, subject, in the case of the
unaudited statements, to normal year-end audit adjustments and the absence of
footnote disclosure. Since December 31, 1997, the Acquiror has not made any
change in the accounting practices or policies applied in the preparation of
its financial statements.
5.05 ab Section. Shares. The issued and outstanding common
shares of Crossmann are, and the Consideration Shares when issued will be,
duly authorized validly issued, fully paid and non-assessable. The
Consideration Shares will not be issued in violation of any preemptive rights
held by any shareholder of Crossmann.
VI abARTICLE
[INTENTIONALLY DELETED]
VII abARTICLE
TAXES
7.01 ab Section. Preparation of Return. The Stockholders shall
(at their sole cost and expense) prepare and timely file or cause to be
prepared and timely filed all of the federal and state income Tax Returns for
River Oaks for all periods ending on or prior to the Closing Date. The
Stockholders shall prepare and, if required to do so by applicable law,
deliver to the Purchaser for signing and filing any state income Tax Returns
of River Oaks with respect to all periods prior to the Closing Date (including
any short period) that have not been filed prior to the Closing Date. The
Stockholders shall timely pay all Taxes due and payable with respect to all
periods ending on or prior to the Closing Date, including but not limited to
the transactions contemplated by this Agreement.
7.02 ab Section. Cooperation. The Stockholders and the
Purchaser shall cooperate, and shall cause their respective officers,
employees, agents, auditors and representatives to cooperate, in preparing and
filing Tax Returns with respect to River Oaks and CCNC, including maintaining
and making available to each other all records necessary in connection with
Taxes payable with respect to such Tax Returns.
7.03 ab Section. Tax Agreements. Any and all Tax sharing
agreements or practices among or between River Oaks or its affiliates, on the
one hand, and any Stockholder, on the other hand, shall be terminated as of
the Closing Date.
VIII abARTICLE
CONDITIONS PRECEDENT TO OBLIGATIONS OF RIVER OAKS
AND THE STOCKHOLDERS
The obligations of River Oaks and the Stockholders to consummate the
Merger 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
River Oaks or the Stockholders in their sole discretion:
8.01 ab Section. Performance of the Obligations of the Purchaser.
The Purchaser shall have performed in all material respects all obligations
under this Agreement on or before the Closing Date, the representations and
warranties of the Purchaser set forth in Article V shall remain true,
correct, and complete in all material respects as of the Closing Date, and
River Oaks and the Stockholders 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.
8.02 ab Section. Consents and Approvals. All permits, consents,
waivers, authorizations, and approvals of any governmental or regulatory
authority, state or Federal, and of any other Person (including the Purchaser
and the shareholder of CCNC) 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.
8.03 ab Section. No Violation of Orders. No 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.
IX abARTICLE
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser to consummate the Merger 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.
9.01 ab Section. Performance of the Obligations of River Oaks and
the Stockholders. River Oaks and the Stockholders shall have performed in
all material respects all obligations under this Agreement on or before the
Closing Date, the representations and warranties of River Oaks and the
Stockholders set forth in Article IV shall remain true, correct, and
complete in all material respects as of the Closing Date, and the Purchaser
shall have received a certificate from River Oaks and each Stockholder to
that effect dated the Closing Date and signed by the President or any other
duly authorized officer of River Oaks and each Stockholder.
9.02 ab Section. Completion of Due Diligence. The Purchaser, in
its sole discretion, shall be satisfied with the results of its due diligence
review of River Oaks, and the business operations of River Oaks, including,
but not limited to, the information set forth on the Schedules to this
Agreement.
9.03 ab Section. Consents and Approvals. All Permits necessary
to conduct the business of River Oaks as now conducted, 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 (including the Board of Directors and the shareholders of
River Oaks), 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. Each party (other than River Oaks) to any of the Contracts
specified in Schedule 4.13, Schedule 4.16, Schedule 4.17(a) and Schedule
4.21(a) shall have provided its written consent to the assignment of the
Contract to the Purchaser as provided herein, to the extent such consent is
required.
9.04 ab Section. No Violation of Orders. No 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 Assets or the financial condition of River Oaks shall be in effect, and no
proceeding relating to any order shall have commenced.
9.05 ab Section. Title Insurance. Prior to the Closing, River
Oaks shall have furnished the Purchaser, 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 (except for the Leased Real Property,
the Land Contract Property, and the Option Real Property) in the name of the
Purchaser.
9.06 ab Section. Employment Agreements. The Purchaser and each
of Callihan, Teal, Skelley and Edwards shall have entered into an employment
agreement in the form of Exhibit 9.06 attached hereto and incorporated
herein by this reference (the "Employment Agreements"); provided, however,
that Callihan, Teal, Skelley, Edwards and Tony K. Cox will remain employees of
Pinehurst Builders and Pinehurst Builders will remain obligated to pay
Callihan, Teal, Skelley, Edwards and Tony K. Cox their appropriate
compensation until the Closing Date.
9.07 ab Section. Noncompetition Agreements. The Purchaser and
each of Callihan; Teal; Skelley; Edwards; Callihan, Teal, Skelley & Associates
Real Estate Consultants, Inc. ("CTS Real Estate") and South Brunswick Farms,
LLC, a South Carolina limited liability company shall have entered into a
noncompetition agreement, in the forms attached hereto as Exhibit 9.07(a)
and incorporated herein by reference (the "Noncompetition Agreements"). In
addition, Tony K. Cox and CTS Real Estate shall have entered into a
noncompetition agreement, in the form attached hereto as Exhibit 9.07(b) and
incorporated herein by reference (the "Cox Noncompetition Agreement").
9.08 ab Section. Satisfaction of Fees and Note and Release.
True Blue, Floyd and Jones shall have entered into an agreement(s), in form
and substance, satisfactory to the Purchaser in its sole discretion, that all
amounts owed to Floyd and Jones pursuant to that certain agreement dated as of
January 17, 1997 by and between True Blue, Floyd and Jones ("F&J Agreement")
shall be satisfied upon payment of an aggregate $430,000 to Floyd and Jones
and that all amounts, including all principal and all interest, owed to Floyd
and Jones pursuant to that certain promissory note, dated January 17, 1997,
executed by True Blue in favor of Floyd and Jones ("F&J Note") shall be
satisfied upon the payment of an aggregate of $570,000 to Floyd and Jones.
True Blue, Floyd, Jones and Jack Jones shall have entered into an agreement
pursuant to which such parties agree to release each other from any claims,
causes of actions, liabilities or damages that any party may have against
another party.
9.09 ab Section.[INTENTIONALLY DELETED].
9.10 ab Section. Lease. Beach Vacations and Callihan, Teal and
Skelley Real Estate Partnership shall have entered into a lease in the form of
Exhibit 9.10 attached hereto and incorporated herein by reference (the
"Lease").
9.11 ab Section.[INTENTIONALLY DELETED].
9.12 ab Section. Contribution of New Homes Sales Division.
Callihan, Teal and Skelley shall have caused CTS Real Estate to assign the
employees and to contribute the assets related to its new homes sales division
to Pinehurst Builders (the "CTS Real Estate Contribution") in a transaction
which has no negative tax consequences to Pinehurst Builders.
9.13 ab Section. True Blue Acquisition and Pinehurst Merger.
All conditions precedent to the Closing of the transactions contemplated by
the True Blue Agreement and the Pinehurst Merger Agreement must be satisfied
and the closing of such transactions shall occur simultaneously with the
transactions contemplated by this Agreement.
9.14 ab Section. CTS Acquisitions, Inc. and Callihan, Teal and
Skelley Development, Inc.. CTS Acquisitions, Inc., a South Carolina
corporation, and Callihan, Teal and Skelley Development, Inc., a South
Carolina corporation, each shall have merged with and into River Oaks Builders
pursuant to the SCBCA.
X abARTICLE
TERMINATION
10.01 ab Section. Termination; Failure to Close. The Purchaser
may terminate this Agreement by giving written notice to River Oaks and the
Stockholders at any time prior to the Closing if the Purchaser is not
satisfied, in its sole and absolute discretion with the results of its due
diligence review, with the condition of any of the Assets, the amount of any
of any Debt, or with the continuing operations of River Oaks. 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.
10.02 ab Section. Effect of Termination. In the event of
termination pursuant to Section 10.01, 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.
XI abARTICLE
CLOSING
11.01 ab Section. Closing Date. The closing of the transaction
contemplated by this Agreement (the "Closing") shall take place at a mutually
agreeable time and place, on or before May 29, 1998, unless mutually extended
by the parties.
11.02 ab Section. Deliveries by River Oaks. At the Closing,
River Oaks and the Stockholders 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) ab The certification required in Section 9.01;
(b) ab Articles of Merger conforming to the requirements of the NCBCA
and the SCBCA for the merger of River Oaks with and into CCNC.
(c) ab Results of searches dated within ten (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 Assets;
(d) ab All Permits necessary to conduct the business of River Oaks as
now conducted, transferred to the Purchaser as required and permitted by law;
(e) ab The Employment Agreements provided for in Section 9.06;
(f) ab The Noncompetition Agreements and the Cox Noncompetition
Agreement provided for in Section 9.07;
(g) ab [INTENTIONALLY DELETED]
(h) ab The Lease provided for in Section 9.10.
(i) ab [INTENTIONALLY DELETED]
(j) ab Evidence, satisfactory to the Purchaser in its sole and
absolute discretion, that Callihan, Teal and Skelley have caused the assets
related to the new homes sales division of CTS Real Estate to be contributed
to River Oaks Builders.
(k) ab Evidence, satisfactory to the Purchaser, in its sole and
absolute discretion, that Callihan, Teal and Skelley have purchased the
beneficial interests in of Beach Vacations owned by Floyd and Jones, and have
executed a mutual release related thereto.
(l) ab Evidence, satisfactory to the Purchaser, in its sole and
absolute discretion that all amounts owed to Floyd and Jones pursuant to the
F&J Agreement and the F&J Note have been satisfied and that True Blue,
Callihan, Teal, Skelley, Floyd, Jones and Jack Jones have executed a mutual
release related thereto and have named the Purchaser as a beneficiary to such
release.
(m) ab Evidence, satisfactory to the Purchaser, in its sole and
absolute discretion that CTS Acquisitions, Inc. and Callihan, Teal and Skelley
Development, Inc. have merged with an into River Oaks Builders, Inc.
(n) ab Copies of resolutions of the Board of Directors of River Oaks
and the Stockholders approving the consummation of the transaction
contemplated by this Agreement, certified by the Secretary of River Oaks.
(o) ab A certificate of River Oaks and the Stockholders acknowledging
(or waiving) delivery by the Purchaser of the items set forth in Section
11.03. The failure of River Oaks or the Stockholders 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 11.03.
11.03 ab Section. Deliveries by Purchaser. At the Closing, the
Purchaser shall deliver or cause to be delivered to River Oaks and the
Stockholders the following duly executed documents and other items in form
satisfactory to River Oaks and the Stockholders:
(a) ab The certification required in Section 8.01;
(b) ab The merger consideration provided for in Section 3.01;
(c) ab A certificate of the Purchaser acknowledging (or waiving)
delivery by River Oaks and the Stockholders of the items set forth in Section
11.02. 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 River Oaks' or the Stockholders' failure to deliver the
items set forth in Section 11.02.
(d) ab Copies of the resolutions of the Board of Directors of the
Purchaser and CCNC and resolutions of the stockholders of CCNC approving the
consummation of the transactions contemplated by this Agreement, certified by
the Secretary of Crossmann and CCNC, respectively.
XII abARTICLE
POST-CLOSING COVENANTS OF THE STOCKHOLDERS
At all times beginning on the Closing Date, each of the Stockholders, who
will receive Consideration Shares pursuant to Section 3.01, hereby covenants
and agrees to comply with the following provisions:
12.01 ab Section. Acquisition of Additional Consideration Shares.
No Stockholder shall, directly or indirectly, acquire any Voting Securities
if such acquisition will cause any Stockholder to be the beneficial owner (as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
Voting Securities in excess of the amount set forth next to such Stockholders
name on Exhibit 12.01, except (i) by way of stock dividends or other
distributions or offerings made available to holders of Voting Securities
generally, (ii) through the exercise of stock options or other rights to
acquire Voting Securities granted pursuant to any stock option or other
employee benefit plan of Crossmann, or (iii) for other acquisitions approved
by the Board of Directors of Crossmann.
12.02 ab Section. Voting Agreement.
(a) ab Each Stockholder shall take all such action as may be required
so that (i) all Voting Securities owned by him or any of his Affiliates or any
individual with whom the Stockholder has a family relationship (as defined in
Item 401(d) of Regulation S-K promulgated under the Securities Act) to whom he
transfers any of the Consideration Shares (collectively, "Private
Transferees") are voted for nominees to the Board of Directors and on all
other matters to be voted on by holders of the Voting Securities either (at
the election of the Stockholder) as recommended by a majority of the Board of
Directors of Crossmann or in the same proportion as the votes cast by other
holders of Voting Securities and (ii) the Stockholder and each Private
Transferee shall be present in person or by proxy at all meetings of
Stockholders of Crossmann so that all Voting Securities beneficially owned by
them may be counted for the purpose of determine the presence of a quorum at
such meetings.
(b) ab No Stockholder nor any Private Transferee shall deposit its
Voting Securities in a voting trust or subject any Voting Securities to any
arrangement or agreement with respect to the voting of such Voting Securities,
other than as set forth herein.
(c) ab Each Stockholder hereby agrees that, in addition to any legends
required by this Agreement or applicable law, all certificates representing
the Voting Securities now owned or hereafter acquired by the Stockholder will
contain a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF
THAT CERTAIN AGREEMENT AND PLAN OF MERGER, DATED AS OF MAY 29, 1998, A COPY
OF WHICH IS ON FILE AT THE CORPORATE OFFICES OF CROSSMANN COMMUNITIES, INC."
(d) ab Notwithstanding anything to the contrary stated herein, in the
event that any Stockholder transfers any of the Consideration Shares in
compliance with the provisions of this Agreement and the Securities Act, to
any Person (i) that is not an Affiliate of the Stockholder or an individual
with whom the Stockholder has a family relationship (as defined in Item 401(d)
of Regulation S-K promulgated under the Securities Act) or (ii) who does not
own at or prior to the transfer, or will not own after such transfer, Voting
Securities five percent (5%) or more of the outstanding common shares of
Crossmann Stock, the Stockholder shall not be bound by any of the obligations
and conditions contained in this Section 12.02 and the legend set forth in
Section 12.02 shall be removed from those shares so transferred.
12.03 ab Section. Proxy Solicitations. No Stockholder nor any
Private Transferee shall solicit proxies or become a "participant" in a
"solicitation," (as such term is defined in Regulation 14A under the Exchange
Act), in opposition to the recommendation of a majority of the Board of
Directors of Crossmann with respect to any matter.
12.04 ab Section. Formation of a "Group". No Stockholder nor
any Private Transferee shall join a partnership, limited partnership,
syndicate or other group or otherwise act in concert with any person not a
party to this Agreement for the purpose of acquiring, holding, voting or
disposing of Voting Securities or otherwise become a Stockholder of a
syndicate or group that is deemed to be a "person" within the meaning of
Section 13(d)(3) of the Exchange Act.
12.05 ab Section. Dissolution of River Oaks Commercial. The
Stockholders shall cause River Oaks Commercial not to begin any new
construction projects after the date of this Agreement and to dissolve once it
has completed all of its current construction projects.
12.06 ab Section.[INTENTIONALLY DELETED].
12.07 ab Section. North South. The Operating Stockholders, as
beneficial owners of North South, shall use their best efforts to cause North
South to execute a mutually acceptable agreement to purchase land with CCNC.
XIII abARTICLE
POST CLOSING COVENANTS OF THE PURCHASER
After the Closing Date, the Purchaser covenants and agrees to comply with
the following provisions:
13.01 ab Section. Filing of Registration Statement. Within 90
days of the Closing Date, Crossmann shall file a Registration Statement on
Form S-3 or another available form (the "Registration Statement") for the
purpose of registering the Consideration Shares under the Securities Act for
resale by the Stockholders. Crossmann shall use its commercially reasonable
best efforts to cause the Registration Statement to become effective and to
remain effective at all times until June 1, 1999; provided, however, that
Crossmann's obligation to maintain the effectiveness of the Registration
Statement as to any particular Consideration Share shall terminate (a) if such
Consideration Share was sold (i) by the Stockholder in accordance with such
registration or (ii) pursuant to the provisions of Rule 144 promulgated under
the Securities Act or (b) if such Consideration Share were transferred to
another Person pursuant to a written opinion of a counsel experienced in
securities law matters addressed to Crossmann and satisfactory to Crossmann in
its sole discretion that such Consideration Share may be transferred without
registration under the Securities Act. All expenses incurred in effecting the
registration provided for in this Section 13.01, including all filing fees,
printing expenses, fees and disbursements of counsel to Crossmann shall, to
the extent permitted by applicable law, be paid by Crossmann, and each
Stockholder shall pay all underwriting discounts and commissions attributable
to the securities offered or sold by him and all fees and expenses of legal
counsel retained by him. It shall be a condition to the obligations of
Crossmann under this Section 13.01 that each Stockholder shall:
(a) ab Cooperate with Crossmann in the preparation and filing of the
documents comprising the Registration Statement (including any amendment or
supplement thereto) in such manner as Crossmann may reasonably request,
including, without limitation, furnishing information regarding the
Stockholder, his ownership of Crossmann's securities, and the distribution of
such securities;
(b) ab Upon receipt of any written notice from Crossmann that the
Registration Statement or prospectus is required to be amended or
supplemented, comply promptly and fully with any directive contained therein
with respect to the discontinuance of the offer and sale of such securities;
and
(c) ab Enter into such undertakings with Crossmann relating to the
conduct of the offering of securities pursuant to the Registration Statement
and not inconsistent with the provisions hereof as Crossmann may reasonably
request in order to assure compliance with the applicable laws.
13.02 ab Section. Piggyback Registrations.
(a) ab Right to Piggyback. Whenever Crossmann agrees to register
any common shares of Crossmann owned by John B. Scheumann or Richard H.
Crosser under the Securities Act at any time after June 1, 1999 and the
registration form to be used may be used for the registration of the
Consideration Shares owned by the Stockholders (the "Registrable Securities"),
it will notify each Stockholder not later than 10 days prior to the
anticipated filing date (a "Piggyback Registration"). Subject to the
provisions of Section 13.02(c), Crossmann will include in the Piggyback
Registration all Registrable Securities with respect to which Crossmann has
received written requests for inclusion within 5 days after the applicable
holder's receipt of Crossmann's notice. If a Piggyback Registration is an
underwritten offering, each Stockholder must sell his Registrable Securities
on the same terms and conditions as apply to securities being sold by John B.
Scheumann and Richard H. Crosser. At any time and for any reason, Crossmann
may terminate the Piggyback Registration.
(b) ab Expenses. Crossmann shall pay all expenses incurred in
connection with any Piggyback Registration, including all registration filing
fees, professional fees, and other expenses of compliance with federal, state,
and other securities laws, printing expenses, messenger, telephone and
delivery expenses, fees and disbursements of counsel for Crossmann;
provided, however, that Crossmann shall not pay for any fees and
disbursements of counsel for the Stockholders or any fees or commissions of
the underwriters incurred in connection with the sale of Registrable
Securities.
(c) ab Priority. If a Piggyback Registration is an underwritten
registration and the managing underwriters give Crossmann their opinion that
the total number or dollar amount of securities requested to be included in
the registration exceeds the number or dollar amount of securities that can be
sold, Crossmann will include the securities in the registration in the
following order of priority: first, all securities Crossmann proposes to sell;
second, all of the securities Messrs. Scheumann and Crosser propose to sell;
and third, up to the full number or dollar amount of Registrable Securities
requested to be included in the registration (allocated pro rata among the
Stockholders on the basis of the dollar amount or number of Registrable
Securities requested to be included).
(d) ab Selection of Underwriters. If any Piggyback Registration is
an underwritten offering, Crossmann will select the investment banker(s) and
manager(s) that will administer the offering, and the Stockholders hereby
agree as a condition to the registration of the Registrable Securities to
enter into a customary underwriting agreement with the investment banker(s)
and manager(s).
13.03 ab Section. Repayment of Existing Debt. The Purchaser
shall pay off all of the Existing Debt and shall use its reasonable efforts to
have the Stockholders released from any guaranty of any Existing Debt.
XIV abARTICLE
MISCELLANEOUS
14.01 ab Section. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
14.02 ab Section. Expenses. The Purchaser, River Oaks and the
Stockholders 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.
14.03 ab Section. Public Announcements. Before the Closing the
Purchaser, River Oaks, the Stockholders 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 Stockholders shall be jointly issued by the Purchaser
and the Stockholders as soon as practicable after the execution of this
Agreement; (ii) that the Purchaser and River Oaks 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.
14.04 ab Section. Risk of Loss. Until the Closing, the risks of
ownership and loss of the Assets shall be borne by the Stockholders. If,
prior to the Closing, all or any part of the 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 Stockholders 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
Stockholders either to:
(a) ab consummate the transactions contemplated by this Agreement; or
(b) ab terminate this Agreement.
14.05 ab Section. Index and Captions. The 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.
14.06 ab Section. Notices. All 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 the Purchaser, to:
Crossmann Communities, Inc.
9202 North Meridian Street, Suite 300
Indianapolis, Indiana 46268
Attention: John B. 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) 236-2394
Facsimile No.: (317) 236-5817
If to River Oaks or the Stockholders to each of:
James T. Callihan
Ralph R. Teal, Jr.
Jeffrey H. Skelley
Charles D. Floyd
Ralph C. Jones
10239 Beachview Drive, S.W.
Calabash, NC 28467
Tel. No.: 910-579-3121
Facsimile No.: 910-579-7505
With a copy to:
James Sack
Sack & Associates, P.C.
8300 Greensboro Drive, Suite 1080
McLean, Virginia 22102
Tel. No.: 703-883-0102
Facsimile No.: 703-883-0108
Any party may change its address for the purpose of this Section 14.06
by giving the other party written notice of its new address in the manner set
forth above.
14.07 ab Section. Entire Agreement. This Agreement, the
agreements expressly contemplated hereby, including, but not limited to, the
Pinehurst Merger Agreement and the True Blue Agreement, 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, including, but not limited to, the
Pinehurst Merger Agreement and the True Blue Agreement. 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. The Operating Stockholders
expressly acknowledge and agree that they have an obligation to indemnify the
Purchaser for any breach of a representation, warranty or covenant contained
in this Agreement and that such obligation shall be governed by Article VI
of the Pinehurst Merger Agreement.
14.08 ab Section. Waiver of Compliance. The 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.
14.09 ab Section. Validity of Provisions. Should 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.
14.10 ab Section. Schedules and Exhibits. Each 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.
14.11 ab Section. No Intention to Benefit Third Parties. The
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.
14.12 ab Section. Successors and Assigns. This Agreement shall
be binding on, and shall inure to the benefit of, the parties and their
respective successors and permitted assigns; provided, however, that no party
may assign any rights or obligations under this Agreement without the prior
written consent of the other parties hereto.
14.13 ab Section. Governing Law. The laws of the State of
Indiana shall govern all aspects of this Agreement notwithstanding any choice
of law provisions to the contrary.
14.14 ab Section. Guaranty. Crossmann hereby guarantees the
performance of all of CCNC's obligations hereunder, including CCNC's
obligations to deliver the Merger Consideration at Closing.
14.15 ab Section. Shareholder Agreements. The Stockholders
hereby waive any and all rights to purchase securities of River Oaks that any
Stockholder may have pursuant to a shareholder's agreement relating to River
Oaks and by execution of this Agreement hereby terminate any and all such
shareholder agreements.
XV abARTICLE
DEFINITIONS
As used in this Agreement, the following terms have the meanings
indicated below:
"Affiliate" means any Person that directly or indirectly controls or is
under common control with the Purchaser or River Oaks. 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" shall have the meaning set forth in the preamble.
"Assets" means all of the assets, rights and properties of any type or
kind of River Oaks.
"Beach Vacations" shall mean Beach Vacations, Inc., a South Carolina
corporation.
"Buck Creek" shall mean Buck Creek Development, Inc., a South Carolina
corporation.
"Business Day" means any day other than Saturday, Sunday, and any day on
which commercial banks in Indiana are authorized by law to be closed.
"CCNC" shall have the meaning set forth in the preamble.
"COBRA" shall have the meaning set forth in Section 4.26.
"CTS Communications" shall mean CTS Communications, Inc., a South
Carolina corporation.
"CTS Real Estate" shall have the meanings set forth in Section 8.07.
"CTS Real Estate Contribution" shall have the meaning set forth in
Section 9.13.
"Callihan" means James T. Callihan, a resident of the State of South
Carolina.
"Closing" means the closing of the transactions contemplated by this
Agreement as provided for in Section 11.01.
"Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations promulgated thereunder.
"Commission" shall mean the United States Securities and Exchange
Commission and any successor thereto.
"Company" means Crossmann Communities of North Carolina, Inc., a North
Carolina corporation.
"Contracts" shall have the meaning set forth in Section 4.21.
"Cox Noncompetition Agreement" shall have the meaning set forth in
Section 9.07.
"Crossmann" means Crossmann Communities, Inc., an Indiana corporation.
"Consideration Shares" shall have the meaning set forth in Section
3.01.
"Debt" means any obligation for borrowed money (and any noted payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money) or any obligation under any operating or
capital lease, but excluding trade payables and other obligations entered into
in the ordinary course of business.
"Developed Real Property" shall have the meaning set forth in Section
4.14.
"Edwards" shall mean H. Gilford Edwards, a resident of the state of North
Carolina.
"Effective Time" shall have the meaning set forth in Section 1.02.
"Employee Benefit Plan" shall have the meaning set forth in Section
4.26.
"Employee Pension Benefit Plan" shall have the meaning set forth in
Section 4.26.
"Employee Welfare Benefit Plan" shall have the meaning set forth in
Section 4.26.
"Employment Agreements" shall have the meaning set forth in Section
8.06.
"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 Real 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 Condition, 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.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Existing Debt" shall have the meaning set forth in Section 4.29.
"F&J Agreement" shall have the meaning set forth in Section 9.08.
"F&J Note" shall have the meaning set forth in Section 9.08.
"Financial Statements of River Oaks" shall have the meaning set forth in
Section 4.08.
"Floyd" shall mean Charles D. Floyd, a resident of the State of South
Carolina.
"GAAP" means generally accepted accounting principles.
"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).
"Homeowner Associations" shall have the meaning set forth in Section
4.19.
"Intellectual Property" shall have the meaning set forth in Section
4.24.
"Interim Balance Sheet" shall have the meaning set forth in Section
4.08.
"Interim Balance Sheet Date" shall have the meaning set forth in Section
4.08.
"Jones" shall mean Ralph C. Jones, a resident of the State of South
Carolina.
"Judgment" means an order by a court of law requiring the payment of
money.
"Land Contract Property" shall have the meaning set forth in Section
4.17.
"Lease" shall have the meaning set forth in Section 8.12.
"Leased Personal Property" shall have the meaning set forth in Section
4.13.
"Leased Real Property" shall have the meaning set forth in Section
4.16.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
(statutory or other), option, easement, encroachment, right-of-way, charge,
claim, conditional sale agreement, rights of third parties or other interests
of any kind or character.
"Lot" or "Lots" shall have the meaning set forth in Section 4.14.
"Merger" shall collectively refer to the merger of River Oaks with and
into CCNC, in each case in accordance with the NCBCA or the SCBCA, as the case
may be.
"Merger Consideration" shall have the meaning set forth in Section
3.01.
"NASDAQ-NMS" shall have the meaning set forth in Section 3.01.
"NCBCA" shall have the meaning set forth in Section 1.01.
"Noncompetition Agreements" shall have the meaning set forth in Section
8.07.
"North South" shall mean North South Development LLC, a North Carolina
limited liability company.
"Operating Stockholders" shall mean Callihan, Teal and Skelley.
"Option Real Property" shall have the meaning set forth in Section
4.17.
"Permits" shall have the meaning set forth in Section 4.23.
"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" shall have the meaning set forth in Section 4.12.
"Piggyback Registration" shall have the meaning set forth in Section
13.02.
"Pinehurst Builders" shall mean Pinehurst Builders, Inc., a North
Carolina corporation, and all of the assets related to CTS Real Estate
contributed or assigned thereto prior to the Closing.
"Pinehurst Commercial" shall mean Pinehurst Commercial Construction,
Inc., a South Carolina corporation.
"Pinehurst Entities" shall mean Pinehurst Builders, Buck Creek, CTS
Communications, and Beach Vacations.
"Pinehurst Merger" shall mean the merger of each of the Pinehurst
Entities with and into CCNC pursuant to the Pinehurst Merger Agreement.
"Pinehurst Merger Agreement" shall mean that certain Agreement and Plan
of Merger by and among the Purchaser, the Pinehurst Entities and the
Stockholders (as defined therein).
"Pinehurst Stockholders" shall mean Callihan, Teal, Skelley and Edwards.
"Private Transferees" shall have the meaning set forth in Section
12.02.
"Purchaser" shall have the meaning set forth in the preamble to this
Agreement.
"Real Property" shall have the meaning set forth in Section 4.18.
"Real Property Lease" shall have the meaning set forth in Section 4.16.
"Registrable Securities" shall have the meaning set forth in Section
13.02.
"Registration Statement" shall have the meaning set forth in Section
13.01.
"Returns" shall have the meaning set forth in Section 4.10.
"River Oaks" shall have the meaning set forth in the Recitals.
"River Oaks Stock" shall have the meaning set forth in Section 3.01
"SCBCA" shall have the meaning set forth in Section 1.01.
"SEC Documents" shall have the meaning set forth in Section 5.04.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Skelley" shall mean Jeffrey H. Skelley, a resident of the state of North
Carolina.
"Stockholders" shall refer collectively to Callihan, Teal, Skelley,
Floyd and Jones.
"Substantially Complete" shall have the meaning set forth in Section
4.14.
"Taxes" shall have the meaning set forth in Section 4.10.
"Teal shall mean Ralph R. Teal, Jr., a resident of the State of South
Carolina.
"Title Company" shall have the meaning set forth in Section 8.05.
"True Blue" shall mean True Blue Development, LLC, a North Carolina
limited liability company.
"True Blue Agreement" shall mean that certain Land Purchase Agreement by
and among the Purchasers, True Blue, Callihan, Teal, Skelley, Floyd and Jones.
"True Blue Member" shall mean Callihan, Teal, Skelley, Floyd and Jones.
"Undeveloped Real Property" shall have the meaning set forth in Section
4.15.
"Voting Securities" means any shares of capital stock of Crossmann
entitled to vote in the election of directors of Crossmann.
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: /s/ Jennifer A. Holihen
Title:
"CCNC"
Crossmann Communities of North Carolina, Inc.
By: /s/ Jennifer A. Holihen
Title:
"RIVER OAKS"
River Oaks Golf Development Corporation
By: /s/ Ralph R. Teal, Jr.
Its:
"STOCKHOLDERS"
/s/ James T. Callihan
James T. Callihan
/s/ Ralph R. Teal, Jr.
Ralph R. Teal, Jr.
/s/ Jeffrey H. Skelley
Jeffrey H. Skelley
/s/ Charles D. Floyd
Charles D. Floyd
/s/ Ralph C. Jones
Ralph C. Jones
<PAGE>
SCHEDULE 3.01
MERGER CONSIDERATION
$1,350,000 Cash
50,771 Common Shares of Crossmann Communities, Inc.
<PAGE>
SCHEDULE 5.02
CONSENTS AND APPROVALS
None.
<PAGE>
SCHEDULE 12.01
LIMIT ON NUMBER OF CROSSMANN
SHARES STOCKHOLDERS MAY ACQUIRE
1. H. Gilford Edwards 27,642 Common Shares of Crossmann
Communities, Inc.
2. Ralph R. Teal, Jr. 99,850 Common Shares of Crossmann
Communities, Inc.
3. Jeffrey H. Skelley 99,850 Common Shares of Crossmann
Communities, Inc.
4. James T. Callihan 99,849 Common Shares of Crossmann
Communities, Inc.
<PAGE>
EXHIBIT 9.06
EMPLOYMENT AGREEMENT
<PAGE>
EXHIBIT 9.07(A)
NONCOMPETITION AGREEMENTS
<PAGE>
EXHIBIT 9.07(B)
COX NONCOMPETITION AGREEMENT
<PAGE>
EXHIBIT 9.10
LEASE
<PAGE>
EXHIBIT 9.12
LOT PURCHASE AGREEMENT
EXHIBIT 10.52
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and entered
into this 29th day of May, 1998, by and among Crossmann Communities of North
Carolina, Inc., a North Carolina corporation ("CCNC"), Crossmann Communities,
Inc., an Indiana corporation ("Crossmann") and H. Gilford Edwards (the
"Executive").
PRELIMINARY STATEMENTS
CCNC and Crossmann (collectively referred to herein as the "Employers")
have determined that it is in their best interests to employ the Executive as
Vice President of CCNC, and the Executive desires to accept such position and
to devote his loyalty to the Employers 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 hereto agree as
follows:
I. abARTICLE
Employment and Duties
1.1 ab Section. GeneralThe Employers hereby employ the Executive,
and the Executive hereby agrees to serve the Employers in the capacity of Vice
President of CCNC and to perform the executive and management duties that the
Board of Directors of CCNC and/or the Board of Directors of Crossmann
(collectively and individually the "Boards") shall reasonably assign to the
Executive from time to time.
1.2 ab Section .Employment DutiesThroughout the Employment Term,
as defined in Section 2, the Executive shall: (i) devote his working hours, on
a full-time basis, to his duties under this Agreement; (ii) faithfully and
loyally serve the Employers; (iii) comply in all respects with the lawful and
reasonable directions and instructions given to him by the Boards; and (iv)
use his best efforts to promote and serve the interests of the Employers. In
the event the directions and instructions given to the Executive by the Boards
conflict in any manner, the directions and instructions given by the Board of
Directors of Crossmann shall be deemed controlling; full compliance with the
express directions and instructions of the Board of Directors of Crossmann
shall be deemed a defense to any claim of failure to comply with the
directions and instructions of the Board of Directors of CCNC.
1.3 ab Section .Exclusive EmploymentThroughout the Employment
Term, as defined in Section 2, the Executive shall not render his services,
directly or indirectly, for compensation, to any other person or organization
without the prior written consent of the Employers and shall not engage in any
activity which would significantly interfere with the faithful performance of
his duties under this Agreement. The Executive, however, may perform minor
services for which he does not receive compensation, so long as such services
do not significantly interfere with the faithful performance of his duties
under this Agreement or violate the Noncompetition Agreement (as defined
herein).
1.4 ab Section . Location of EmploymentThe Executive hereby agrees
to perform services for the Employers anywhere in the Southeast region of the
United States (the "Southeast") and agrees that the Employers may relocate him
anywhere in the Southeast, provided, however, that the Employers shall not
relocate the Executive out of the Southeast without the Executive's consent.
II. abARTICLE
Employment TermThe Executive's employment hereunder shall commence on the
Closing Date as that term is defined in the Agreement and Plan of Merger by
and among the Employers, the Pinehurst Entities (as defined therein) and the
Stockholders (as defined therein) dated May 29, 1998 (the "Pinehurst Entity
Merger Agreement"), the Agreement and Plan of Merger by and among the
Employers, River Oaks Golf Development Corporation ("River Oaks") and the
Stockholders (as defined therein) dated May 29, 1998 and the Purchase
Agreement by and among the Employers, True Blue Development, LLC and the
Members (as defined therein) dated May 29, 1998 (collectively, the "Purchase
Agreements") and shall continue until May 29, 2003. Notwithstanding the
foregoing, the Executive's employment hereunder shall be subject to
resignation or termination in accordance with the provisions of Section 4
hereof. As used in this Agreement, the term "Expiration Date" shall mean May
29, 2003 and the term "Employment Term" shall mean the period beginning on the
date hereof and ending on the earlier of the Expiration Date, the Termination
Date, the Resignation Date, (both as defined in Section 4 hereof), or other
date the Executive ceases to be employed by the Employers in accordance with
Section 4 hereof.
III. abARTICLE
Compensation and Other BenefitsCCNC or Crossmann, as applicable, shall pay
and provide the following compensation and other benefits to the Executive for
the services rendered by him under this Agreement:
3.1 ab Section . Annual Base SalaryCCNC shall pay to the
Executive, in accordance with the then prevailing payroll practices of CCNC,
an annual salary of not less than One Hundred Thousand Dollars ($100,000) (the
"Annual Base Salary"), subject to required withholdings under Federal, state,
and local laws. CCNC's obligations with respect to payment of the Annual Base
Salary shall not be effective until the Employment Term has commenced. The
Annual Base Salary shall not be reduced during the Employment Term.
3.2 ab Section . BonusThe Executive shall receive a bonus of up to
Fifty Thousand Dollars ($50,000) for each calendar year payable as set forth
on Schedule 3(b) (the "Bonus") based upon the aggregate pretax net income
attributable to the business formerly conducted by the Pinehurst Entities (as
defined in the Pinehurst Merger Agreement), River Oaks, and True Blue
Development, LLC (collectively, the "Target Entities"), as determined by the
Employers (the "Pretax Net Income"). The Executive may make draws against the
Bonus due for a particular calendar year during such calendar year; provided,
however, that if the Employers determine that the draws made by the Executive
exceed the amount to which they are entitled pursuant to Schedule 3(b), then
the Executive shall repay all draws made during the calendar year to the
extent that the draws exceed the amount to which the Executive is entitled
pursuant to Schedule 3(b) within 30 days of the determination of the Pretax
Net Income by the Employers. If the Executive does not repay the draws within
such time period, the Executive shall be deemed to have breached the Pinehurst
Merger Agreement and the Employers shall have the indemnification rights set
forth therein. The Employers shall make a determination as to whether the
Bonus Threshold was met for a calendar year within 45 days after the end of
such calendar year and shall pay the balance of the Bonus after taking into
account all draws made by the Executive during the calendar year within 75
days after the end of the calendar year. For the purposes of this Agreement,
the term calendar year shall mean the period beginning on January 1 and ending
on the following December 31.
3.3 ab Section . Executive BenefitsExcept as otherwise
specifically provided in this Agreement, the Executive shall be eligible to
participate, in accordance with their respective terms and conditions, in all
benefit plans presently available or which may subsequently be made available
to executives of the Employers, including Crossmann's health care, basic life
insurance, supplemental life insurance coverage, disability coverage, business
travel accident insurance and any pension or retirement plan of any kind.
3.4 ab Section . Vacation LeaveThe Executive shall be entitled to
that number of days of vacation leave per year that is generally applicable to
all executive personnel of Crossmann. The Executive shall accrue and receive
full compensation and benefits during his vacation leave periods. Unused
vacation leave time shall not carry over from one year of the Employment Term
to the next and unused vacation leave time shall not entitle the Executive to
any additional compensation.
3.5 ab Section . Stock Option PlanThe Boards may, in their sole
discretion, permit the Executive to participate in stock option plans of
Crossmann at a level consistent with other employees of CCNC or Crossmann
having similar responsibilities as the Executive. The term and conditions of
a grant of a stock option to the Executive will be set forth in a separate
stock option agreement between Crossmann and the Executive.
3.6 ab Section . AutomobileThe Employers shall provide the
Executive with an automobile which is the same or equivalent make and model as
the automobile that the Target Entities currently provide to the Executive for
the Employment Term. The Employers shall reimburse the Executive for all
reasonable expenses associated with the automobile, including gasoline and
normal repair expenses, incurred by the Executive in conducting the Employers'
business, in accordance with the policies of Crossmann.
3.7 ab Section . Business ExpensesThe Employers shall reimburse
the Executive for all reasonable business expenses incurred by the Executive
in conducting the Employers' business in accordance with the policies of
Crossmann.
IV. abARTICLE
Termination of Employment
4.1 ab Section . Termination for Cause
(a) ab The Employers may terminate the Executive's employment with
the Employers pursuant to this Agreement for Cause, as defined herein, by
providing written notice to the Executive at least twenty-four (24) hours
prior to the Termination Date, as defined in subsection (iii) below.
(b) ab A termination for "Cause" means a termination by one of the
Boards for any one or more of the following reasons: (a) theft, fraud,
embezzlement, dishonest or other similar behavior by the Executive; (b) any
material breach by the Executive of the terms of this Agreement, or the
Purchase Agreements or any breach by the Executive of the terms of the
Nondisclosure, Noncompetition and Nonsolicitation Agreement of even date
herewith executed by the Executive (the "Noncompetition Agreement"); (c) any
material neglect of duty, incompetence, insubordination or misconduct of the
Executive in discharging any of his duties and responsibilities hereunder, (d)
any act of theft or dishonesty by the Executive or any criminal conviction or
indictment of the Executive, (e) any occurrence of the Executive reporting to
work under the influence of alcohol or illegal drugs, or the Executive being
under the influence of alcohol or illegal drugs during working hours, (f) any
failure or refusal by the Executive to comply with the policies, rules or
regulations of the Employers whether now in force or hereafter adopted; (g)
any misrepresentation or concealment by the Executive of any material fact for
the purpose of securing this Agreement, or (h) any other material act of
misconduct within the control of the Executive.
(c) ab In the case of a termination for Cause, the term
"Termination Date" as used in this subsection (a) shall mean the actual date
the Executive terminates employment with the Employers as a result of action
taken by one of the Boards, and not as a result of the Executive's
resignation, as provided in Section 4(b).
(d) ab If prior to the Expiration Date the Employers terminate the
Executive's employment for Cause, the Executive shall only be entitled to
payment of that portion of the Annual Base Salary under Section 3(a) that the
Executive earned through and including the Termination Date, at the rate of
the Annual Base Salary in effect or any portion of the year at that time, and
the Executive shall repay all draws made against the Bonus in the calendar
year in which the Executive is terminated for Cause within 10 days after the
Termination Date. If the Executive fails to repay the draws within such time
period, the Executive shall be deemed to have breached the Pinehurst Merger
Agreement and the Employers shall have the indemnification rights set forth
therein.
4.2 ab Section . ResignationThe Executive may resign from his
employment with the Employers pursuant to this Agreement at any time by
providing written notice to the Boards of his resignation at least thirty (30)
days prior to the effective date of the resignation (the "Resignation
Notice"). The effective date of the Executive's resignation shall be that
specified in the Resignation Notice, or the actual date the Executive
terminates employment with the Employers as the result of a resignation,
whichever occurs earlier (the "Resignation Date"). If prior to the Expiration
Date, the Executive resigns his employment, the Executive shall only be
entitled to payment of that portion of the Annual Base Salary under Section
3(a) that the Executive earned through and including the Resignation Date, at
the rate of the Annual Base Salary in effect at that time, and the Executive
shall repay all draws made against the Bonus in the calendar year in which the
Executive resigns within 10 days after the Resignation Date. If the Executive
fails to repay the draws within such time period, the Executive shall be
deemed to have breached the Pinehurst Merger Agreement and the Employers shall
have the indemnification rights set forth therein.
4.3 ab Section . Termination Without CauseThe Employers may, in
their sole discretion, terminate the Executive's employment with the Employers
pursuant to this Agreement at any time without Cause, by providing written
notice to the Executive at least twenty-four (24) hours prior to the
Termination Date, as defined in this subsection (c). If the Employers
terminate the Executive's employment without Cause, CCNC shall be obligated to
continue to pay to him the Annual Base Salary and to pay him an amount equal
to the monthly premium for the Executive's individual health insurance as in
effect on the Termination Date for the period during which the Executive is
bound by the terms and conditions of the Noncompetition Agreement (the
"Severance Payments"). Such payments shall be made as and when the same would
have been due and payable if the Executive's employment had continued through
such date, subject to the provisions of Sections 4(d) and 4(e). If the
Employers terminate the Executive's employment without Cause, the Executive
shall not be entitled to any Bonus payments for any periods after the
Termination Date and the Executive shall be required to repay any draws made
against the Bonus in the calendar year in which he was terminated without
Cause in accordance with the terms of Section 3(b) hereof. If the Executive
fails to repay the draws in the time period set forth in Section 3(b), the
Executive shall be deemed to have breached the Pinehurst Merger Agreement,
the Employers shall have the indemnification rights set forth therein. As a
condition precedent to receiving the Severance Payments, the Executive shall
sign a release of all claims the Executive has or may have against the
Employers in form and substance submitted to the Executive by the Employers.
The term "Termination Date" as used in this subsection (c) shall mean the
actual date the Executive terminates employment with the Employers as a result
of action taken by one of the Employers, and not as a result of the
Executive's resignation as provided in Section 4(b). Except as provided in
this subsection (c), the Executive shall not be eligible to receive any
compensation or benefits under this Agreement with respect to any future
periods beginning on or after the Termination Date.
4.4 ab Section . DeathIf the Executive dies prior to the
Expiration Date, the Executive's estate or personal representative shall be
entitled to receive that portion of the Annual Base Salary, at the rate in
effect at the Executive's death, that portion of the Bonus attributable to the
period prior to the date of the Executive's death payable in accordance with
the terms of Section 3(b) hereof, and any other compensation or benefits that
the Executive earned through and including the date of the Executive's death.
If the Pretax Net Income does not exceed the maximum amount set forth on
Schedule 3(b), then the Executive 's estate or personal representative shall
be required to repay any draws made against the Bonus in the calendar year of
the Executive's death in accordance with the terms of Section 3(b) hereof. If
the Executive's estate or personal representative fails to repay the draws in
the time period set forth in Section 3(b), the Executive shall be deemed to
have breached the Pinehurst Merger Agreement and the Employers shall have the
indemnification rights set forth therein. If the Executive is entitled to
receive payments from the Employers pursuant to Section 4(c) at the time of
his death, the Executive's estate or personal representative shall be entitled
to receive that portion of the Annual Base Salary, at the rate in effect at
the Executive's death, and any other compensation or benefits, that the
Executive would have been entitled to receive under Section 4(c) through and
including the date of the Executive's death. The Executive's estate or
personal representative shall not be entitled to receive any portion of the
Annual Base Salary or any other compensation or benefits under this Agreement,
with respect to any periods ending on or after the date of the Executive's
death, which was not payable in accordance with the provisions thereof prior
to the date of death.
4.5 ab Section . DisabilityIf prior to the Expiration Date the
Executive becomes Permanently Disabled, as defined in this subsection (e), the
Employers may terminate the Executive's employment with the Employers as a
result of the Permanent Disability by providing written notice to the
Executive at least twenty-four (24) hours prior to the Termination Date, as
defined in this subsection (e). If prior to the Expiration Date the Executive
becomes Permanently Disabled, the Executive may resign from his employment
with the Employers pursuant to this Agreement by providing written notice to
the Employers of his resignation at least twenty-four (24) hours prior to the
Resignation Date, as defined in this subsection (e). If the Employers
terminate the Executive's employment as a result of a Permanent Disability or
the Executive resigns from employment with the Employers as a result of a
Permanent Disability, the Executive shall be entitled to receive that portion
of the Annual Base Salary under Section 3(a) that the Executive earned through
and including the Termination Date or Resignation Date, as applicable, at the
rate in effect on such date and that portion of the Bonus attributable to the
period prior to the Termination Date or the Resignation Date, as applicable,
payable in accordance with the terms of Section 3(b) hereof. If the Pretax
Net Income does not exceed the maximum amount set forth on Schedule 3(b), then
the Executive shall be required to repay any draws made against the Bonus in
the calendar year of the Executive's Permanent Disability in accordance with
the terms of Section 3(b) hereof. If the Executive fails to repay the draws
in the time period set forth in Section 3(b), the Executive shall be deemed to
have breached the Pinehurst Merger Agreement and the Employers shall have the
indemnification rights set forth therein. If the Executive is entitled to
receive payments from the Employers pursuant to Section 4(c) at the time he
becomes Permanently Disabled, the Executive shall be entitled to receive the
payments that the Executive would have been entitled to receive under Section
4(c). The Executive shall not be entitled to receive any portion of the
Annual Base Salary or any other compensation or benefits under this Agreement
with respect to any future periods beginning on or after the later of the
Resignation Date, Termination Date, or the date the Executive becomes
Permanently Disabled. The Executive shall be deemed "Permanently Disabled"
when, and only when, he is deemed permanently disabled in accordance with the
disability insurance policy of the Employers 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 of the
Employers last in effect. The definition of Permanently Disabled for purposes
of this Agreement shall comply with all provisions of applicable law. The term
"Termination Date" as used in this subsection (e) shall mean the actual date
the Executive terminates employment with the Employers. The term "Resignation
Date" as used in this subsection (e) shall mean the actual date the Executive
terminates employment with the Employers as the result of a resignation.
V. abARTICLE
Nondisclosure, Noncompetition and Nonsolicitation AgreementOn the date
hereof the Executive entered into the Noncompetition Agreement. All of the
terms and conditions of the Noncompetition Agreement are incorporated herein
by reference and any breach of the Noncompetition Agreement shall be deemed to
be a breach of this Agreement.
Non-assignability, Binding Agreement
5.1 ab Section . By the ExecutiveThe Executive shall not assign or
delegate this Agreement or any right, duty, obligation, or interest under this
Agreement without CCNC's and Crossmann's prior written consent; provided,
however, that nothing shall preclude the Executive from designating
beneficiaries to receive benefits payable under this Agreement upon his death,
and nothing shall preclude the Executive's executors, administrators, or their
legal representatives, from assigning any rights under this Agreement to any
person.
5.2 ab Section . By CCNC or CrossmannCCNC and/or Crossmann may
assign, delegate, or transfer this Agreement and all of their 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 CCNC or Crossmann or to which CCNC
or Crossmann transfers all or substantially all of its assets. Upon
assignment, delegation, or transfer, any affiliate, subsidiary, or business
entity related to CCNC and/or Crossmann shall be deemed to be substituted for
CCNC and/or Crossmann, as applicable, for all purposes of this Agreement.
5.3 ab Section . Binding EffectExcept as limited under Sections
6(a) and 6(b), this Agreement shall be binding upon and inure to the benefit
of the parties, any successors to or assigns of CCNC and/or Crossmann, and the
Executive's heirs and the personal representatives or executor of the
Executive's estate.
VI. abARTICLE
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.
VII. abARTICLE
AmendmentNo provision of this Agreement may be modified, amended, waived, or
discharged in any manner except by an instrument in writing signed by the
Executive and on behalf of CCNC and Crossmann by such officers as may be
specifically designated by the Boards. No agreement or representation, oral
or otherwise, express or implied, with respect to the subject matter hereof
have been made by any party which is not expressly set forth in this
Agreement.
VIII. abARTICLE
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.
IX. abARTICLE
Governing Law and JurisdictionThe laws of the State of Indiana 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.
X. abARTICLE
NoticesAll notices required or desired to be given under this Agreement
shall be in writing and shall be deemed to have been duly given (i) on the
date of service if served personally on the party to whom notice is to be
given, (ii) on the date of receipt by the party to whom notice is to be given
if transmitted to such party by telefax, provided a copy is mailed as set
forth below on the date of transmission, or (iii) on the third day after
mailing if mailed to the party to whom notice is to be given by registered or
certified mail, return receipt requested, postage prepaid, to the following
addresses:
(a) If to CCNC or Crossmann, to:
Crossmann Communities, Inc.
9202 North Meridian St., Suite 300
Indianapolis, IN 46268
Attn: John B. Scheumann
Tel. No.: (317) 843-9514
Fax: (317) 571-2210
(b) If to the Executive, to:
H. Gilford Edwards
10239 Beach Drive, S.W.
Calabash, NC 28467
Tel. No.: 910-579-3121
Fax: 910-579-7505
Any party may, by giving written notice to the other parties, change the
address to which notice shall then be sent.
XI. abARTICLE
Prior AgreementsThis Agreement and the Noncompetition Agreement are a
complete and total integration of the understanding of the parties. This
Agreement and the Noncompetition Agreement supersede all prior or
contemporaneous negotiations, commitments, agreements, writings including
handbooks, and discussions with respect to the subject matter of this
Agreement and the Noncompetition Agreement.
XII. abARTICLE
HeadingsThe 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.
XIII. abARTICLE
CounterpartsThis Agreement may be executed in one or more counterparts, each
of which 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 enforcement is sought needs to be produced to evidence the
existence of this Agreement
XIV. abARTICLE
GuarantyCrossmann hereby guarantees the performance of all of CCNC's
obligations hereunder, including all of CCNC's obligations to make payments to
the Executive hereunder.
<PAGE>
The parties have executed this Agreement on the date first written
above.
"CCNC"
Crossmann Communities of North Carolina, Inc.
By: /s/ Richard H. Crosser
Title:
"CROSSMANN"
CROSSMANN COMMUNITIES, INC.
By: /s/ Richard H. Crosser
Title:
"EXECUTIVE"
/s/ H. Gilford Edwards
H. Gilford Edwards
<PAGE>
SCHEDULE 3(B)
The Executive shall receive the percentage of the Bonus set forth
below for the calendar years set forth below if the Pretax Net Income meets or
exceeds the amounts set forth below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year 40% of Bonus if 80% of Bonus if 100% of Bonus if
- ---- ------------------ ------------------ ------------------
Pretax Net Income Pretax Net Income Pretax Net Income
------------------ ------------------ ------------------
Meets or Exceeds Meets or Exceeds Meets or Exceeds
------------------ ------------------ ------------------
1998 $ 1,500,000 $ 2,200,000 $ 2,775,000
- ---- ------------------ ------------------ ------------------
1999 $ 1,700,000 $ 2,400,000 $ 3,120,000
- ---- ------------------ ------------------ ------------------
2000 $ 2,000,000 $ 2,750,000 $ 3,545,000
- ---- ------------------ ------------------ ------------------
2001 $ 2,400,000 $ 3,200,000 $ 4,075,000
- ---- ------------------ ------------------ ------------------
2002 $ 2,700,000 $ 3,700,000 $ 4,740,000
- ---- ------------------ ------------------ ------------------
</TABLE>
Exhibit 10.53
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and entered
into this 29th day of May, 1998, by and among Crossmann Communities of
North Carolina, Inc., a North Carolina corporation ("CCNC"), Crossmann
Communities, Inc., an Indiana corporation ("Crossmann") and James T. Callihan
(the "Executive").
PRELIMINARY STATEMENTS
CCNC and Crossmann (collectively referred to herein as the
"Employers") have determined that it is in their best interests to employ the
Executive as Vice President of CCNC, and the Executive desires to accept such
position and to devote his loyalty to the Employers 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 hereto agree as
follows:
XV. abARTICLE
Employment and Duties
15.1 ab Section . GeneralThe Employers hereby employ the
Executive, and the Executive hereby agrees to serve the Employers in the
capacity of Vice President of CCNC and to perform the executive and management
duties that the Board of Directors of CCNC and/or the Board of Directors of
Crossmann (collectively and individually the "Boards") shall reasonably assign
to the Executive from time to time.
15.2 ab Section . Employment DutiesThroughout the Employment Term,
as defined in Section 2, the Executive shall: (i) devote his working hours, on
a full-time basis, to his duties under this Agreement; (ii) faithfully and
loyally serve the Employers; (iii) comply in all respects with the lawful and
reasonable directions and instructions given to him by the Boards; and (iv)
use his best efforts to promote and serve the interests of the Employers. In
the event the directions and instructions given to the Executive by the Boards
conflict in any manner, the directions and instructions given by the Board of
Directors of Crossmann shall be deemed controlling; full compliance with the
express directions and instructions of the Board of Directors of Crossmann
shall be deemed a defense to any claim of failure to comply with the
directions and instructions of the Board of Directors of CCNC.
15.3 ab Section . Exclusive EmploymentThroughout the Employment
Term, as defined in Section 2, the Executive shall not render his services,
directly or indirectly, for compensation, to any other person or organization
without the prior written consent of the Employers and shall not engage in any
activity which would significantly interfere with the faithful performance of
his duties under this Agreement. The Executive, however, may perform minor
services for which he does not receive compensation, so long as such services
do not significantly interfere with the faithful performance of his duties
under this Agreement or violate the Noncompetition Agreement (as defined
herein).
15.4 ab Section . Location of EmploymentThe Executive hereby
agrees to perform services for the Employers anywhere in the Southeast region
of the United States (the "Southeast") and agrees that the Employers may
relocate him anywhere in the Southeast, provided, however, that the Employers
shall not relocate the Executive out of the Southeast without the Executive's
consent.
XVI. abARTICLE
Employment TermThe Executive's employment hereunder shall commence on the
Closing Date as that term is defined in the Agreement and Plan of Merger by
and among the Employers, the Pinehurst Entities (as defined therein) and the
Stockholders (as defined therein) dated May 29, 1998 (the "Pinehurst Entity
Merger Agreement"), the Agreement and Plan of Merger by and among the
Employers, River Oaks Golf Development Corporation ("River Oaks") and the
Stockholders (as defined therein) dated May 29, 1998 and the Purchase
Agreement by and among the Employers, True Blue Development, LLC and the
Members (as defined therein) dated May 29, 1998 (collectively, the "Purchase
Agreements") and shall continue until May 29, 2003. Notwithstanding the
foregoing, the Executive's employment hereunder shall be subject to
resignation or termination in accordance with the provisions of Section 4
hereof. As used in this Agreement, the term "Expiration Date" shall mean May
29, 2003 and the term "Employment Term" shall mean the period beginning on the
date hereof and ending on the earlier of the Expiration Date, the Termination
Date, the Resignation Date, (both as defined in Section 4 hereof), or other
date the Executive ceases to be employed by the Employers in accordance with
Section 4 hereof.
XVII. abARTICLE
Compensation and Other BenefitsCCNC or Crossmann, as applicable, shall pay
and provide the following compensation and other benefits to the Executive for
the services rendered by him under this Agreement:
17.1 ab Section . Annual Base SalaryCCNC shall pay to the
Executive, in accordance with the then prevailing payroll practices of CCNC,
an annual salary of not less than One Hundred Thousand Dollars ($100,000) (the
"Annual Base Salary"), subject to required withholdings under Federal, state,
and local laws. CCNC's obligations with respect to payment of the Annual Base
Salary shall not be effective until the Employment Term has commenced. The
Annual Base Salary shall not be reduced during the Employment Term.
17.2 ab Section . BonusThe Executive shall receive a bonus of up
to Seventy Five Thousand Dollars ($75,000) for each calendar year payable as
set forth on Schedule 3(b) (the "Bonus") based upon the aggregate pretax net
income attributable to the business formerly conducted by the Pinehurst
Entities (as defined in the Pinehurst Merger Agreement), River Oaks, and True
Blue Development, LLC (collectively, the "Target Entities"), as determined by
the Employers (the "Pretax Net Income"). The Executive may make draws against
the Bonus due for a particular calendar year during such calendar year;
provided, however, that if the Employers determine that the draws made by the
Executive exceed the amount to which they are entitled pursuant to Schedule
3(b), then the Executive shall repay all draws made during the calendar year
to the extent that the draws exceed the amount to which the Executive is
entitled pursuant to Schedule 3(b) within 30 days of the determination of the
Pretax Net Income by the Employers. If the Executive does not repay the draws
within such time period, the Executive shall be deemed to have breached the
Pinehurst Merger Agreement and the Employers shall have the indemnification
rights set forth therein. The Employers shall make a determination as to
whether the Bonus Threshold was met for a calendar year within 45 days after
the end of such calendar year and shall pay the balance of the Bonus after
taking into account all draws made by the Executive during the calendar year
within 75 days after the end of the calendar year. For the purposes of this
Agreement, the term calendar year shall mean the period beginning on January 1
and ending on the following December 31.
17.3 ab Section . Executive BenefitsExcept as otherwise
specifically provided in this Agreement, the Executive shall be eligible to
participate, in accordance with their respective terms and conditions, in all
benefit plans presently available or which may subsequently be made available
to executives of the Employers, including Crossmann's health care, basic life
insurance, supplemental life insurance coverage, disability coverage, business
travel accident insurance and any pension or retirement plan of any kind.
17.4 ab Section . Vacation LeaveThe Executive shall be entitled to
that number of days of vacation leave per year that is generally applicable to
all executive personnel of Crossmann. The Executive shall accrue and receive
full compensation and benefits during his vacation leave periods. Unused
vacation leave time shall not carry over from one year of the Employment Term
to the next and unused vacation leave time shall not entitle the Executive to
any additional compensation.
17.5 ab Section . Stock Option PlanThe Boards may, in their sole
discretion, permit the Executive to participate in stock option plans of
Crossmann at a level consistent with other employees of CCNC or Crossmann
having similar responsibilities as the Executive. The term and conditions of
a grant of a stock option to the Executive will be set forth in a separate
stock option agreement between Crossmann and the Executive.
17.6 ab Section . AutomobileThe Employers shall provide the
Executive with an automobile which is the same or equivalent make and model as
the automobile that the Target Entities currently provide to the Executive for
the Employment Term. The Employers shall reimburse the Executive for all
reasonable expenses associated with the automobile, including gasoline and
normal repair expenses, incurred by the Executive in conducting the Employers'
business, in accordance with the policies of Crossmann.
17.7 ab Section . Business ExpensesThe Employers shall reimburse
the Executive for all reasonable business expenses incurred by the Executive
in conducting the Employers' business in accordance with the policies of
Crossmann.
XVIII. abARTICLE
Termination of Employment
18.1 ab Section . Termination for Cause
(a) ab The Employers may terminate the Executive's employment with
the Employers pursuant to this Agreement for Cause, as defined herein, by
providing written notice to the Executive at least twenty-four (24) hours
prior to the Termination Date, as defined in subsection (iii) below.
(b) ab A termination for "Cause" means a termination by one of the
Boards for any one or more of the following reasons: (a) theft, fraud,
embezzlement, dishonest or other similar behavior by the Executive; (b) any
material breach by the Executive of the terms of this Agreement, or the
Purchase Agreements or any breach by the Executive of the terms of the
Nondisclosure, Noncompetition and Nonsolicitation Agreement of even date
herewith executed by the Executive (the "Noncompetition Agreement"); (c) any
material neglect of duty, incompetence, insubordination or misconduct of the
Executive in discharging any of his duties and responsibilities hereunder, (d)
any act of theft or dishonesty by the Executive or any criminal conviction or
indictment of the Executive, (e) any occurrence of the Executive reporting to
work under the influence of alcohol or illegal drugs, or the Executive being
under the influence of alcohol or illegal drugs during working hours, (f) any
failure or refusal by the Executive to comply with the policies, rules or
regulations of the Employers whether now in force or hereafter adopted; (g)
any misrepresentation or concealment by the Executive of any material fact for
the purpose of securing this Agreement, or (h) any other material act of
misconduct within the control of the Executive.
(c) ab In the case of a termination for Cause, the term
"Termination Date" as used in this subsection (a) shall mean the actual date
the Executive terminates employment with the Employers as a result of action
taken by one of the Boards, and not as a result of the Executive's
resignation, as provided in Section 4(b).
(d) ab If prior to the Expiration Date the Employers terminate the
Executive's employment for Cause, the Executive shall only be entitled to
payment of that portion of the Annual Base Salary under Section 3(a) that the
Executive earned through and including the Termination Date, at the rate of
the Annual Base Salary in effect or any portion of the year at that time, and
the Executive shall repay all draws made against the Bonus in the calendar
year in which the Executive is terminated for Cause within 10 days after the
Termination Date. If the Executive fails to repay the draws within such time
period, the Executive shall be deemed to have breached the Pinehurst Merger
Agreement and the Employers shall have the indemnification rights set forth
therein.
18.2 ab Section . ResignationThe Executive may resign from his
employment with the Employers pursuant to this Agreement at any time by
providing written notice to the Boards of his resignation at least thirty (30)
days prior to the effective date of the resignation (the "Resignation
Notice"). The effective date of the Executive's resignation shall be that
specified in the Resignation Notice, or the actual date the Executive
terminates employment with the Employers as the result of a resignation,
whichever occurs earlier (the "Resignation Date"). If prior to the Expiration
Date, the Executive resigns his employment, the Executive shall only be
entitled to payment of that portion of the Annual Base Salary under Section
3(a) that the Executive earned through and including the Resignation Date, at
the rate of the Annual Base Salary in effect at that time, and the Executive
shall repay all draws made against the Bonus in the calendar year in which the
Executive resigns within 10 days after the Resignation Date. If the Executive
fails to repay the draws within such time period, the Executive shall be
deemed to have breached the Pinehurst Merger Agreement and the Employers shall
have the indemnification rights set forth therein.
18.3 ab Section . Termination Without CauseThe Employers may, in
their sole discretion, terminate the Executive's employment with the Employers
pursuant to this Agreement at any time without Cause, by providing written
notice to the Executive at least twenty-four (24) hours prior to the
Termination Date, as defined in this subsection (c). If the Employers
terminate the Executive's employment without Cause, CCNC shall be obligated to
continue to pay to him the Annual Base Salary and to pay him an amount equal
to the monthly premium for the Executive's individual health insurance as in
effect on the Termination Date for the period during which the Executive is
bound by the terms and conditions of the Noncompetition Agreement (the
"Severance Payments"). Such payments shall be made as and when the same would
have been due and payable if the Executive's employment had continued through
such date, subject to the provisions of Sections 4(d) and 4(e). If the
Employers terminate the Executive's employment without Cause, the Executive
shall not be entitled to any Bonus payments for any periods after the
Termination Date and the Executive shall be required to repay any draws made
against the Bonus in the calendar year in which he was terminated without
Cause in accordance with the terms of Section 3(b) hereof. If the Executive
fails to repay the draws in the time period set forth in Section 3(b), the
Executive shall be deemed to have breached the Pinehurst Merger Agreement,
the Employers shall have the indemnification rights set forth therein. As a
condition precedent to receiving the Severance Payments, the Executive shall
sign a release of all claims the Executive has or may have against the
Employers in form and substance submitted to the Executive by the Employers.
The term "Termination Date" as used in this subsection (c) shall mean the
actual date the Executive terminates employment with the Employers as a result
of action taken by one of the Employers, and not as a result of the
Executive's resignation as provided in Section 4(b). Except as provided in
this subsection (c), the Executive shall not be eligible to receive any
compensation or benefits under this Agreement with respect to any future
periods beginning on or after the Termination Date.
18.4 ab Section . DeathIf the Executive dies prior to the
Expiration Date, the Executive's estate or personal representative shall be
entitled to receive that portion of the Annual Base Salary, at the rate in
effect at the Executive's death, that portion of the Bonus attributable to the
period prior to the date of the Executive's death payable in accordance with
the terms of Section 3(b) hereof, and any other compensation or benefits that
the Executive earned through and including the date of the Executive's death.
If the Pretax Net Income does not exceed the maximum amount set forth on
Schedule 3(b), then the Executive 's estate or personal representative shall
be required to repay any draws made against the Bonus in the calendar year of
the Executive's death in accordance with the terms of Section 3(b) hereof. If
the Executive's estate or personal representative fails to repay the draws in
the time period set forth in Section 3(b), the Executive shall be deemed to
have breached the Pinehurst Merger Agreement and the Employers shall have the
indemnification rights set forth therein. If the Executive is entitled to
receive payments from the Employers pursuant to Section 4(c) at the time of
his death, the Executive's estate or personal representative shall be entitled
to receive that portion of the Annual Base Salary, at the rate in effect at
the Executive's death, and any other compensation or benefits, that the
Executive would have been entitled to receive under Section 4(c) through and
including the date of the Executive's death. The Executive's estate or
personal representative shall not be entitled to receive any portion of the
Annual Base Salary or any other compensation or benefits under this Agreement,
with respect to any periods ending on or after the date of the Executive's
death, which was not payable in accordance with the provisions thereof prior
to the date of death.
18.5 ab Section . DisabilityIf prior to the Expiration Date the
Executive becomes Permanently Disabled, as defined in this subsection (e), the
Employers may terminate the Executive's employment with the Employers as a
result of the Permanent Disability by providing written notice to the
Executive at least twenty-four (24) hours prior to the Termination Date, as
defined in this subsection (e). If prior to the Expiration Date the Executive
becomes Permanently Disabled, the Executive may resign from his employment
with the Employers pursuant to this Agreement by providing written notice to
the Employers of his resignation at least twenty-four (24) hours prior to the
Resignation Date, as defined in this subsection (e). If the Employers
terminate the Executive's employment as a result of a Permanent Disability or
the Executive resigns from employment with the Employers as a result of a
Permanent Disability, the Executive shall be entitled to receive that portion
of the Annual Base Salary under Section 3(a) that the Executive earned through
and including the Termination Date or Resignation Date, as applicable, at the
rate in effect on such date and that portion of the Bonus attributable to the
period prior to the Termination Date or the Resignation Date, as applicable,
payable in accordance with the terms of Section 3(b) hereof. If the Pretax
Net Income does not exceed the maximum amount set forth on Schedule 3(b), then
the Executive shall be required to repay any draws made against the Bonus in
the calendar year of the Executive's Permanent Disability in accordance with
the terms of Section 3(b) hereof. If the Executive fails to repay the draws
in the time period set forth in Section 3(b), the Executive shall be deemed to
have breached the Pinehurst Merger Agreement and the Employers shall have the
indemnification rights set forth therein. If the Executive is entitled to
receive payments from the Employers pursuant to Section 4(c) at the time he
becomes Permanently Disabled, the Executive shall be entitled to receive the
payments that the Executive would have been entitled to receive under Section
4(c). The Executive shall not be entitled to receive any portion of the
Annual Base Salary or any other compensation or benefits under this Agreement
with respect to any future periods beginning on or after the later of the
Resignation Date, Termination Date, or the date the Executive becomes
Permanently Disabled. The Executive shall be deemed "Permanently Disabled"
when, and only when, he is deemed permanently disabled in accordance with the
disability insurance policy of the Employers 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 of the
Employers last in effect. The definition of Permanently Disabled for purposes
of this Agreement shall comply with all provisions of applicable law. The term
"Termination Date" as used in this subsection (e) shall mean the actual date
the Executive terminates employment with the Employers. The term "Resignation
Date" as used in this subsection (e) shall mean the actual date the Executive
terminates employment with the Employers as the result of a resignation.
XIX. abARTICLE
Nondisclosure, Noncompetition and Nonsolicitation AgreementOn the date
hereof the Executive entered into the Noncompetition Agreement. All of the
terms and conditions of the Noncompetition Agreement are incorporated herein
by reference and any breach of the Noncompetition Agreement shall be deemed to
be a breach of this Agreement.
Non-assignability, Binding Agreement
19.1 ab Section . By the ExecutiveThe Executive shall not assign
or delegate this Agreement or any right, duty, obligation, or interest under
this Agreement without CCNC's and Crossmann's prior written consent; provided,
however, that nothing shall preclude the Executive from designating
beneficiaries to receive benefits payable under this Agreement upon his death,
and nothing shall preclude the Executive's executors, administrators, or their
legal representatives, from assigning any rights under this Agreement to any
person.
19.2 ab Section . By CCNC or CrossmannCCNC and/or Crossmann may
assign, delegate, or transfer this Agreement and all of their 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 CCNC or Crossmann or to which CCNC
or Crossmann transfers all or substantially all of its assets. Upon
assignment, delegation, or transfer, any affiliate, subsidiary, or business
entity related to CCNC and/or Crossmann shall be deemed to be substituted for
CCNC and/or Crossmann, as applicable, for all purposes of this Agreement.
19.3 ab Section . Binding EffectExcept as limited under Sections
6(a) and 6(b), this Agreement shall be binding upon and inure to the benefit
of the parties, any successors to or assigns of CCNC and/or Crossmann, and the
Executive's heirs and the personal representatives or executor of the
Executive's estate.
XX. abARTICLE
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.
XXI. abARTICLE
AmendmentNo provision of this Agreement may be modified, amended, waived, or
discharged in any manner except by an instrument in writing signed by the
Executive and on behalf of CCNC and Crossmann by such officers as may be
specifically designated by the Boards. No agreement or representation, oral
or otherwise, express or implied, with respect to the subject matter hereof
have been made by any party which is not expressly set forth in this
Agreement.
XXII. abARTICLE
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.
XXIII. abARTICLE
Governing Law and JurisdictionThe laws of the State of Indiana 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.
XXIV. abARTICLE
NoticesAll notices required or desired to be given under this Agreement
shall be in writing and shall be deemed to have been duly given (i) on the
date of service if served personally on the party to whom notice is to be
given, (ii) on the date of receipt by the party to whom notice is to be given
if transmitted to such party by telefax, provided a copy is mailed as set
forth below on the date of transmission, or (iii) on the third day after
mailing if mailed to the party to whom notice is to be given by registered or
certified mail, return receipt requested, postage prepaid, to the following
addresses:
(a) If to CCNC or Crossmann, to:
Crossmann Communities, Inc.
9202 North Meridian St., Suite 300
Indianapolis, IN 46268
Attn: John B. Scheumann
Tel. No.: (317) 843-9514
Fax: (317) 571-2210
(b) If to the Executive, to:
James T. Callihan
10239 Beach Drive, S.W.
Calabash, NC 28467
Tel. No.: 910-579-3121
Fax: 910-579-7505
Any party may, by giving written notice to the other parties, change the
address to which notice shall then be sent.
XXV. abARTICLE
Prior AgreementsThis Agreement and the Noncompetition Agreement are a
complete and total integration of the understanding of the parties. This
Agreement and the Noncompetition Agreement supersede all prior or
contemporaneous negotiations, commitments, agreements, writings including
handbooks, and discussions with respect to the subject matter of this
Agreement and the Noncompetition Agreement.
XXVI. abARTICLE
HeadingsThe 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.
XXVII. abARTICLE
CounterpartsThis Agreement may be executed in one or more counterparts, each
of which 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 enforcement is sought needs to be produced to evidence the
existence of this Agreement
XXVIII. abARTICLE
GuarantyCrossmann hereby guarantees the performance of all of CCNC's
obligations hereunder, including all of CCNC's obligations to make payments to
the Executive hereunder.
<PAGE>
The parties have executed this Agreement on the date first written
above.
"CCNC"
Crossmann Communities of North Carolina, Inc.
By:s/s Richard H. Crosser
Title:
"CROSSMANN"
CROSSMANN COMMUNITIES, INC.
By:/s/ Richard H. Crosser
Title:
"EXECUTIVE"
/s/ James T. Callihan
James T. Callihan
<PAGE>
SCHEDULE 3(B)
The Executive shall receive the percentage of the Bonus set forth
below for the calendar years set forth below if the Pretax Net Income meets or
exceeds the amounts set forth below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR 40% of Bonus if 80% of Bonus if 100% of Bonus if
- ---- ------------------ ------------------ ------------------
Pretax Net Income Pretax Net Income Pretax Net Income
------------------ ------------------ ------------------
Meets or Exceeds Meets or Exceeds Meets or Exceeds
------------------ ------------------ ------------------
1998 $ 1,500,000 $ 2,200,000 $ 2,775,000
- ---- ------------------ ------------------ ------------------
1999 $ 1,700,000 $ 2,400,000 $ 3,120,000
- ---- ------------------ ------------------ ------------------
2000 $ 2,000,000 $ 2,750,000 $ 3,545,000
- ---- ------------------ ------------------ ------------------
2001 $ 2,400,000 $ 3,200,000 $ 4,075,000
- ---- ------------------ ------------------ ------------------
2002 $ 2,700,000 $ 3,700,000 $ 4,740,000
- ---- ------------------ ------------------ ------------------
</TABLE>
Exhibit 10.54
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and entered
into this 29th day of May, 1998, by and among Crossmann Communities of
North Carolina, Inc., a North Carolina corporation ("CCNC"), Crossmann
Communities, Inc., an Indiana corporation ("Crossmann") and Ralph R. Teal, Jr.
(the "Executive").
PRELIMINARY STATEMENTS
CCNC and Crossmann (collectively referred to herein as the
"Employers") have determined that it is in their best interests to employ the
Executive as Vice President of CCNC, and the Executive desires to accept such
position and to devote his loyalty to the Employers 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 hereto agree as
follows:
XXIX. abARTICLE
Employment and Duties
29.1 ab Section . GeneralThe Employers hereby employ the
Executive, and the Executive hereby agrees to serve the Employers in the
capacity of Vice President of CCNC and to perform the executive and management
duties that the Board of Directors of CCNC and/or the Board of Directors of
Crossmann (collectively and individually the "Boards") shall reasonably assign
to the Executive from time to time.
29.2 ab Section . Employment DutiesThroughout the Employment Term,
as defined in Section 2, the Executive shall: (i) devote his working hours, on
a full-time basis, to his duties under this Agreement; (ii) faithfully and
loyally serve the Employers; (iii) comply in all respects with the lawful and
reasonable directions and instructions given to him by the Boards; and (iv)
use his best efforts to promote and serve the interests of the Employers. In
the event the directions and instructions given to the Executive by the Boards
conflict in any manner, the directions and instructions given by the Board of
Directors of Crossmann shall be deemed controlling; full compliance with the
express directions and instructions of the Board of Directors of Crossmann
shall be deemed a defense to any claim of failure to comply with the
directions and instructions of the Board of Directors of CCNC.
29.3 ab Section . Exclusive EmploymentThroughout the Employment
Term, as defined in Section 2, the Executive shall not render his services,
directly or indirectly, for compensation, to any other person or organization
without the prior written consent of the Employers and shall not engage in any
activity which would significantly interfere with the faithful performance of
his duties under this Agreement. The Executive, however, may perform minor
services for which he does not receive compensation, so long as such services
do not significantly interfere with the faithful performance of his duties
under this Agreement or violate the Noncompetition Agreement (as defined
herein).
29.4 ab Section . Location of EmploymentThe Executive hereby
agrees to perform services for the Employers anywhere in the Southeast region
of the United States (the "Southeast") and agrees that the Employers may
relocate him anywhere in the Southeast, provided, however, that the Employers
shall not relocate the Executive out of the Southeast without the Executive's
consent.
XXX. abARTICLE
Employment TermThe Executive's employment hereunder shall commence on the
Closing Date as that term is defined in the Agreement and Plan of Merger by
and among the Employers, the Pinehurst Entities (as defined therein) and the
Stockholders (as defined therein) dated May 29, 1998 (the "Pinehurst Entity
Merger Agreement"), the Agreement and Plan of Merger by and among the
Employers, River Oaks Golf Development Corporation ("River Oaks") and the
Stockholders (as defined therein) dated May 29, 1998 and the Purchase
Agreement by and among the Employers, True Blue Development, LLC and the
Members (as defined therein) dated May 29, 1998 (collectively, the "Purchase
Agreements") and shall continue until May 29, 2003. Notwithstanding the
foregoing, the Executive's employment hereunder shall be subject to
resignation or termination in accordance with the provisions of Section 4
hereof. As used in this Agreement, the term "Expiration Date" shall mean May
29, 2003 and the term "Employment Term" shall mean the period beginning on the
date hereof and ending on the earlier of the Expiration Date, the Termination
Date, the Resignation Date, (both as defined in Section 4 hereof), or other
date the Executive ceases to be employed by the Employers in accordance with
Section 4 hereof.
XXXI. abARTICLE
Compensation and Other BenefitsCCNC or Crossmann, as applicable, shall pay
and provide the following compensation and other benefits to the Executive for
the services rendered by him under this Agreement:
31.1 ab Section . Annual Base SalaryCCNC shall pay to the
Executive, in accordance with the then prevailing payroll practices of CCNC,
an annual salary of not less than One Hundred Thousand Dollars ($100,000) (the
"Annual Base Salary"), subject to required withholdings under Federal, state,
and local laws. CCNC's obligations with respect to payment of the Annual Base
Salary shall not be effective until the Employment Term has commenced. The
Annual Base Salary shall not be reduced during the Employment Term.
31.2 ab Section . BonusThe Executive shall receive a bonus of up
to Seventy Five Thousand Dollars ($75,000) for each calendar year payable as
set forth on Schedule 3(b) (the "Bonus") based upon the aggregate pretax net
income attributable to the business formerly conducted by the Pinehurst
Entities (as defined in the Pinehurst Merger Agreement), River Oaks, and True
Blue Development, LLC (collectively, the "Target Entities"), as determined by
the Employers (the "Pretax Net Income"). The Executive may make draws against
the Bonus due for a particular calendar year during such calendar year;
provided, however, that if the Employers determine that the draws made by the
Executive exceed the amount to which they are entitled pursuant to Schedule
3(b), then the Executive shall repay all draws made during the calendar year
to the extent that the draws exceed the amount to which the Executive is
entitled pursuant to Schedule 3(b) within 30 days of the determination of the
Pretax Net Income by the Employers. If the Executive does not repay the draws
within such time period, the Executive shall be deemed to have breached the
Pinehurst Merger Agreement and the Employers shall have the indemnification
rights set forth therein. The Employers shall make a determination as to
whether the Bonus Threshold was met for a calendar year within 45 days after
the end of such calendar year and shall pay the balance of the Bonus after
taking into account all draws made by the Executive during the calendar year
within 75 days after the end of the calendar year. For the purposes of this
Agreement, the term calendar year shall mean the period beginning on January 1
and ending on the following December 31.
31.3 ab Section . Executive BenefitsExcept as otherwise
specifically provided in this Agreement, the Executive shall be eligible to
participate, in accordance with their respective terms and conditions, in all
benefit plans presently available or which may subsequently be made available
to executives of the Employers, including Crossmann's health care, basic life
insurance, supplemental life insurance coverage, disability coverage, business
travel accident insurance and any pension or retirement plan of any kind.
31.4 ab Section . Vacation LeaveThe Executive shall be entitled to
that number of days of vacation leave per year that is generally applicable to
all executive personnel of Crossmann. The Executive shall accrue and receive
full compensation and benefits during his vacation leave periods. Unused
vacation leave time shall not carry over from one year of the Employment Term
to the next and unused vacation leave time shall not entitle the Executive to
any additional compensation.
31.5 ab Section . Stock Option PlanThe Boards may, in their sole
discretion, permit the Executive to participate in stock option plans of
Crossmann at a level consistent with other employees of CCNC or Crossmann
having similar responsibilities as the Executive. The term and conditions of
a grant of a stock option to the Executive will be set forth in a separate
stock option agreement between Crossmann and the Executive.
31.6 ab Section . AutomobileThe Employers shall provide the
Executive with an automobile which is the same or equivalent make and model as
the automobile that the Target Entities currently provide to the Executive for
the Employment Term. The Employers shall reimburse the Executive for all
reasonable expenses associated with the automobile, including gasoline and
normal repair expenses, incurred by the Executive in conducting the Employers'
business, in accordance with the policies of Crossmann.
31.7 ab Section . Business ExpensesThe Employers shall reimburse
the Executive for all reasonable business expenses incurred by the Executive
in conducting the Employers' business in accordance with the policies of
Crossmann.
XXXII. abARTICLE
Termination of Employment
32.1 ab Section . Termination for Cause
(a) ab The Employers may terminate the Executive's employment with
the Employers pursuant to this Agreement for Cause, as defined herein, by
providing written notice to the Executive at least twenty-four (24) hours
prior to the Termination Date, as defined in subsection (iii) below.
(b) ab A termination for "Cause" means a termination by one of the
Boards for any one or more of the following reasons: (a) theft, fraud,
embezzlement, dishonest or other similar behavior by the Executive; (b) any
material breach by the Executive of the terms of this Agreement, or the
Purchase Agreements or any breach by the Executive of the terms of the
Nondisclosure, Noncompetition and Nonsolicitation Agreement of even date
herewith executed by the Executive (the "Noncompetition Agreement"); (c) any
material neglect of duty, incompetence, insubordination or misconduct of the
Executive in discharging any of his duties and responsibilities hereunder, (d)
any act of theft or dishonesty by the Executive or any criminal conviction or
indictment of the Executive, (e) any occurrence of the Executive reporting to
work under the influence of alcohol or illegal drugs, or the Executive being
under the influence of alcohol or illegal drugs during working hours, (f) any
failure or refusal by the Executive to comply with the policies, rules or
regulations of the Employers whether now in force or hereafter adopted; (g)
any misrepresentation or concealment by the Executive of any material fact for
the purpose of securing this Agreement, or (h) any other material act of
misconduct within the control of the Executive.
(c) ab In the case of a termination for Cause, the term
"Termination Date" as used in this subsection (a) shall mean the actual date
the Executive terminates employment with the Employers as a result of action
taken by one of the Boards, and not as a result of the Executive's
resignation, as provided in Section 4(b).
(d) ab If prior to the Expiration Date the Employers terminate the
Executive's employment for Cause, the Executive shall only be entitled to
payment of that portion of the Annual Base Salary under Section 3(a) that the
Executive earned through and including the Termination Date, at the rate of
the Annual Base Salary in effect or any portion of the year at that time, and
the Executive shall repay all draws made against the Bonus in the calendar
year in which the Executive is terminated for Cause within 10 days after the
Termination Date. If the Executive fails to repay the draws within such time
period, the Executive shall be deemed to have breached the Pinehurst Merger
Agreement and the Employers shall have the indemnification rights set forth
therein.
32.2 ab Section . ResignationThe Executive may resign from his
employment with the Employers pursuant to this Agreement at any time by
providing written notice to the Boards of his resignation at least thirty (30)
days prior to the effective date of the resignation (the "Resignation
Notice"). The effective date of the Executive's resignation shall be that
specified in the Resignation Notice, or the actual date the Executive
terminates employment with the Employers as the result of a resignation,
whichever occurs earlier (the "Resignation Date"). If prior to the Expiration
Date, the Executive resigns his employment, the Executive shall only be
entitled to payment of that portion of the Annual Base Salary under Section
3(a) that the Executive earned through and including the Resignation Date, at
the rate of the Annual Base Salary in effect at that time, and the Executive
shall repay all draws made against the Bonus in the calendar year in which the
Executive resigns within 10 days after the Resignation Date. If the Executive
fails to repay the draws within such time period, the Executive shall be
deemed to have breached the Pinehurst Merger Agreement and the Employers shall
have the indemnification rights set forth therein.
32.3 ab Section . Termination Without CauseThe Employers may, in
their sole discretion, terminate the Executive's employment with the Employers
pursuant to this Agreement at any time without Cause, by providing written
notice to the Executive at least twenty-four (24) hours prior to the
Termination Date, as defined in this subsection (c). If the Employers
terminate the Executive's employment without Cause, CCNC shall be obligated to
continue to pay to him the Annual Base Salary and to pay him an amount equal
to the monthly premium for the Executive's individual health insurance as in
effect on the Termination Date for the period during which the Executive is
bound by the terms and conditions of the Noncompetition Agreement (the
"Severance Payments"). Such payments shall be made as and when the same would
have been due and payable if the Executive's employment had continued through
such date, subject to the provisions of Sections 4(d) and 4(e). If the
Employers terminate the Executive's employment without Cause, the Executive
shall not be entitled to any Bonus payments for any periods after the
Termination Date and the Executive shall be required to repay any draws made
against the Bonus in the calendar year in which he was terminated without
Cause in accordance with the terms of Section 3(b) hereof. If the Executive
fails to repay the draws in the time period set forth in Section 3(b), the
Executive shall be deemed to have breached the Pinehurst Merger Agreement,
the Employers shall have the indemnification rights set forth therein. As a
condition precedent to receiving the Severance Payments, the Executive shall
sign a release of all claims the Executive has or may have against the
Employers in form and substance submitted to the Executive by the Employers.
The term "Termination Date" as used in this subsection (c) shall mean the
actual date the Executive terminates employment with the Employers as a result
of action taken by one of the Employers, and not as a result of the
Executive's resignation as provided in Section 4(b). Except as provided in
this subsection (c), the Executive shall not be eligible to receive any
compensation or benefits under this Agreement with respect to any future
periods beginning on or after the Termination Date.
32.4 ab Section . DeathIf the Executive dies prior to the
Expiration Date, the Executive's estate or personal representative shall be
entitled to receive that portion of the Annual Base Salary, at the rate in
effect at the Executive's death, that portion of the Bonus attributable to the
period prior to the date of the Executive's death payable in accordance with
the terms of Section 3(b) hereof, and any other compensation or benefits that
the Executive earned through and including the date of the Executive's death.
If the Pretax Net Income does not exceed the maximum amount set forth on
Schedule 3(b), then the Executive 's estate or personal representative shall
be required to repay any draws made against the Bonus in the calendar year of
the Executive's death in accordance with the terms of Section 3(b) hereof. If
the Executive's estate or personal representative fails to repay the draws in
the time period set forth in Section 3(b), the Executive shall be deemed to
have breached the Pinehurst Merger Agreement and the Employers shall have the
indemnification rights set forth therein. If the Executive is entitled to
receive payments from the Employers pursuant to Section 4(c) at the time of
his death, the Executive's estate or personal representative shall be entitled
to receive that portion of the Annual Base Salary, at the rate in effect at
the Executive's death, and any other compensation or benefits, that the
Executive would have been entitled to receive under Section 4(c) through and
including the date of the Executive's death. The Executive's estate or
personal representative shall not be entitled to receive any portion of the
Annual Base Salary or any other compensation or benefits under this Agreement,
with respect to any periods ending on or after the date of the Executive's
death, which was not payable in accordance with the provisions thereof prior
to the date of death.
32.5 ab Section . DisabilityIf prior to the Expiration Date the
Executive becomes Permanently Disabled, as defined in this subsection (e), the
Employers may terminate the Executive's employment with the Employers as a
result of the Permanent Disability by providing written notice to the
Executive at least twenty-four (24) hours prior to the Termination Date, as
defined in this subsection (e). If prior to the Expiration Date the Executive
becomes Permanently Disabled, the Executive may resign from his employment
with the Employers pursuant to this Agreement by providing written notice to
the Employers of his resignation at least twenty-four (24) hours prior to the
Resignation Date, as defined in this subsection (e). If the Employers
terminate the Executive's employment as a result of a Permanent Disability or
the Executive resigns from employment with the Employers as a result of a
Permanent Disability, the Executive shall be entitled to receive that portion
of the Annual Base Salary under Section 3(a) that the Executive earned through
and including the Termination Date or Resignation Date, as applicable, at the
rate in effect on such date and that portion of the Bonus attributable to the
period prior to the Termination Date or the Resignation Date, as applicable,
payable in accordance with the terms of Section 3(b) hereof. If the Pretax
Net Income does not exceed the maximum amount set forth on Schedule 3(b), then
the Executive shall be required to repay any draws made against the Bonus in
the calendar year of the Executive's Permanent Disability in accordance with
the terms of Section 3(b) hereof. If the Executive fails to repay the draws
in the time period set forth in Section 3(b), the Executive shall be deemed to
have breached the Pinehurst Merger Agreement and the Employers shall have the
indemnification rights set forth therein. If the Executive is entitled to
receive payments from the Employers pursuant to Section 4(c) at the time he
becomes Permanently Disabled, the Executive shall be entitled to receive the
payments that the Executive would have been entitled to receive under Section
4(c). The Executive shall not be entitled to receive any portion of the
Annual Base Salary or any other compensation or benefits under this Agreement
with respect to any future periods beginning on or after the later of the
Resignation Date, Termination Date, or the date the Executive becomes
Permanently Disabled. The Executive shall be deemed "Permanently Disabled"
when, and only when, he is deemed permanently disabled in accordance with the
disability insurance policy of the Employers 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 of the
Employers last in effect. The definition of Permanently Disabled for purposes
of this Agreement shall comply with all provisions of applicable law. The term
"Termination Date" as used in this subsection (e) shall mean the actual date
the Executive terminates employment with the Employers. The term "Resignation
Date" as used in this subsection (e) shall mean the actual date the Executive
terminates employment with the Employers as the result of a resignation.
XXXIII. abARTICLE
Nondisclosure, Noncompetition and Nonsolicitation AgreementOn the date
hereof the Executive entered into the Noncompetition Agreement. All of the
terms and conditions of the Noncompetition Agreement are incorporated herein
by reference and any breach of the Noncompetition Agreement shall be deemed to
be a breach of this Agreement.
Non-assignability, Binding Agreement
33.1 ab Section . By the ExecutiveThe Executive shall not assign
or delegate this Agreement or any right, duty, obligation, or interest under
this Agreement without CCNC's and Crossmann's prior written consent; provided,
however, that nothing shall preclude the Executive from designating
beneficiaries to receive benefits payable under this Agreement upon his death,
and nothing shall preclude the Executive's executors, administrators, or their
legal representatives, from assigning any rights under this Agreement to any
person.
33.2 ab Section . By CCNC or CrossmannCCNC and/or Crossmann may
assign, delegate, or transfer this Agreement and all of their 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 CCNC or Crossmann or to which CCNC
or Crossmann transfers all or substantially all of its assets. Upon
assignment, delegation, or transfer, any affiliate, subsidiary, or business
entity related to CCNC and/or Crossmann shall be deemed to be substituted for
CCNC and/or Crossmann, as applicable, for all purposes of this Agreement.
33.3 ab Section . Binding EffectExcept as limited under Sections
6(a) and 6(b), this Agreement shall be binding upon and inure to the benefit
of the parties, any successors to or assigns of CCNC and/or Crossmann, and the
Executive's heirs and the personal representatives or executor of the
Executive's estate.
XXXIV. abARTICLE
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.
XXXV. abARTICLE
AmendmentNo provision of this Agreement may be modified, amended, waived, or
discharged in any manner except by an instrument in writing signed by the
Executive and on behalf of CCNC and Crossmann by such officers as may be
specifically designated by the Boards. No agreement or representation, oral
or otherwise, express or implied, with respect to the subject matter hereof
have been made by any party which is not expressly set forth in this
Agreement.
XXXVI. abARTICLE
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.
XXXVII. abARTICLE
Governing Law and JurisdictionThe laws of the State of Indiana 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.
XXXVIII. abARTICLE
NoticesAll notices required or desired to be given under this Agreement
shall be in writing and shall be deemed to have been duly given (i) on the
date of service if served personally on the party to whom notice is to be
given, (ii) on the date of receipt by the party to whom notice is to be given
if transmitted to such party by telefax, provided a copy is mailed as set
forth below on the date of transmission, or (iii) on the third day after
mailing if mailed to the party to whom notice is to be given by registered or
certified mail, return receipt requested, postage prepaid, to the following
addresses:
(a) If to CCNC or Crossmann, to:
Crossmann Communities, Inc.
9202 North Meridian St., Suite 300
Indianapolis, IN 46268
Attn: John B. Scheumann
Tel. No.: (317) 843-9514
Fax: (317) 571-2210
(b) If to the Executive, to:
Ralph R. Teal, Jr.
10239 Beach Drive, S.W.
Calabash, NC 28467
Tel. No.: 910-579-3121
Fax: 910-579-7505
Any party may, by giving written notice to the other parties, change the
address to which notice shall then be sent.
XXXIX. abARTICLE
Prior AgreementsThis Agreement and the Noncompetition Agreement are a
complete and total integration of the understanding of the parties. This
Agreement and the Noncompetition Agreement supersede all prior or
contemporaneous negotiations, commitments, agreements, writings including
handbooks, and discussions with respect to the subject matter of this
Agreement and the Noncompetition Agreement.
XL. abARTICLE
HeadingsThe 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.
XLI. abARTICLE
CounterpartsThis Agreement may be executed in one or more counterparts, each
of which 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 enforcement is sought needs to be produced to evidence the
existence of this Agreement
XLII. abARTICLE
GuarantyCrossmann hereby guarantees the performance of all of CCNC's
obligations hereunder, including all of CCNC's obligations to make payments to
the Executive hereunder.
<PAGE>
The parties have executed this Agreement on the date first written
above.
"CCNC"
Crossmann Communities of North Carolina, Inc.
By: /s/ John B. Scheumann
Title:
"CROSSMANN"
CROSSMANN COMMUNITIES, INC.
By: /s/ John B. Scheumann
Title:
"EXECUTIVE"
/s/ Ralph R. Teal, Jr.
Ralph R. Teal, Jr.
<PAGE>
SCHEDULE 3(B)
The Executive shall receive the percentage of the Bonus set forth
below for the calendar years set forth below if the Pretax Net Income meets or
exceeds the amounts set forth below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR 40% of Bonus if 80% of Bonus if 100% of Bonus if
- ---- ------------------ ------------------ ------------------
Pretax Net Income Pretax Net Income Pretax Net Income
------------------ ------------------ ------------------
Meets or Exceeds Meets or Exceeds Meets or Exceeds
------------------ ------------------ ------------------
1998 $ 1,500,000 $ 2,200,000 $ 2,775,000
- ---- ------------------ ------------------ ------------------
1999 $ 1,700,000 $ 2,400,000 $ 3,120,000
- ---- ------------------ ------------------ ------------------
2000 $ 2,000,000 $ 2,750,000 $ 3,545,000
- ---- ------------------ ------------------ ------------------
2001 $ 2,400,000 $ 3,200,000 $ 4,075,000
- ---- ------------------ ------------------ ------------------
2002 $ 2,700,000 $ 3,700,000 $ 4,740,000
- ---- ------------------ ------------------ ------------------
</TABLE>
Exhibit 10.55
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and entered
into this 29th day of May, 1998, by and among Crossmann Communities of
North Carolina, Inc., a North Carolina corporation ("CCNC"), Crossmann
Communities, Inc., an Indiana corporation ("Crossmann") and Jeffrey H. Skelley
(the "Executive").
PRELIMINARY STATEMENTS
CCNC and Crossmann (collectively referred to herein as the
"Employers") have determined that it is in their best interests to employ the
Executive as Vice President of CCNC, and the Executive desires to accept such
position and to devote his loyalty to the Employers 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 hereto agree as
follows:
XLIII. abARTICLE
Employment and Duties
43.1 ab Section . GeneralThe Employers hereby employ the
Executive, and the Executive hereby agrees to serve the Employers in the
capacity of Vice President of CCNC and to perform the executive and management
duties that the Board of Directors of CCNC and/or the Board of Directors of
Crossmann (collectively and individually the "Boards") shall reasonably assign
to the Executive from time to time.
43.2 ab Section . Employment DutiesThroughout the Employment Term,
as defined in Section 2, the Executive shall: (i) devote his working hours, on
a full-time basis, to his duties under this Agreement; (ii) faithfully and
loyally serve the Employers; (iii) comply in all respects with the lawful and
reasonable directions and instructions given to him by the Boards; and (iv)
use his best efforts to promote and serve the interests of the Employers. In
the event the directions and instructions given to the Executive by the Boards
conflict in any manner, the directions and instructions given by the Board of
Directors of Crossmann shall be deemed controlling; full compliance with the
express directions and instructions of the Board of Directors of Crossmann
shall be deemed a defense to any claim of failure to comply with the
directions and instructions of the Board of Directors of CCNC.
43.3 ab Section . Exclusive EmploymentThroughout the Employment
Term, as defined in Section 2, the Executive shall not render his services,
directly or indirectly, for compensation, to any other person or organization
without the prior written consent of the Employers and shall not engage in any
activity which would significantly interfere with the faithful performance of
his duties under this Agreement. The Executive, however, may perform minor
services for which he does not receive compensation, so long as such services
do not significantly interfere with the faithful performance of his duties
under this Agreement or violate the Noncompetition Agreement (as defined
herein).
43.4 ab Section . Location of EmploymentThe Executive hereby
agrees to perform services for the Employers anywhere in the Southeast region
of the United States (the "Southeast") and agrees that the Employers may
relocate him anywhere in the Southeast, provided, however, that the Employers
shall not relocate the Executive out of the Southeast without the Executive's
consent.
XLIV. abARTICLE
Employment TermThe Executive's employment hereunder shall commence on the
Closing Date as that term is defined in the Agreement and Plan of Merger by
and among the Employers, the Pinehurst Entities (as defined therein) and the
Stockholders (as defined therein) dated May 29, 1998 (the "Pinehurst Entity
Merger Agreement"), the Agreement and Plan of Merger by and among the
Employers, River Oaks Golf Development Corporation ("River Oaks") and the
Stockholders (as defined therein) dated May 29, 1998 and the Purchase
Agreement by and among the Employers, True Blue Development, LLC and the
Members (as defined therein) dated May 29, 1998 (collectively, the "Purchase
Agreements") and shall continue until May 29, 2003. Notwithstanding the
foregoing, the Executive's employment hereunder shall be subject to
resignation or termination in accordance with the provisions of Section 4
hereof. As used in this Agreement, the term "Expiration Date" shall mean May
29, 2003 and the term "Employment Term" shall mean the period beginning on the
date hereof and ending on the earlier of the Expiration Date, the Termination
Date, the Resignation Date, (both as defined in Section 4 hereof), or other
date the Executive ceases to be employed by the Employers in accordance with
Section 4 hereof.
XLV. abARTICLE
Compensation and Other BenefitsCCNC or Crossmann, as applicable, shall pay
and provide the following compensation and other benefits to the Executive for
the services rendered by him under this Agreement:
45.1 ab Section . Annual Base SalaryCCNC shall pay to the
Executive, in accordance with the then prevailing payroll practices of CCNC,
an annual salary of not less than One Hundred Thousand Dollars ($100,000) (the
"Annual Base Salary"), subject to required withholdings under Federal, state,
and local laws. CCNC's obligations with respect to payment of the Annual Base
Salary shall not be effective until the Employment Term has commenced. The
Annual Base Salary shall not be reduced during the Employment Term.
45.2 ab Section . BonusThe Executive shall receive a bonus of up
to Seventy Five Thousand Dollars ($75,000) for each calendar year payable as
set forth on Schedule 3(b) (the "Bonus") based upon the aggregate pretax net
income attributable to the business formerly conducted by the Pinehurst
Entities (as defined in the Pinehurst Merger Agreement), River Oaks, and True
Blue Development, LLC (collectively, the "Target Entities"), as determined by
the Employers (the "Pretax Net Income"). The Executive may make draws against
the Bonus due for a particular calendar year during such calendar year;
provided, however, that if the Employers determine that the draws made by the
Executive exceed the amount to which they are entitled pursuant to Schedule
3(b), then the Executive shall repay all draws made during the calendar year
to the extent that the draws exceed the amount to which the Executive is
entitled pursuant to Schedule 3(b) within 30 days of the determination of the
Pretax Net Income by the Employers. If the Executive does not repay the draws
within such time period, the Executive shall be deemed to have breached the
Pinehurst Merger Agreement and the Employers shall have the indemnification
rights set forth therein. The Employers shall make a determination as to
whether the Bonus Threshold was met for a calendar year within 45 days after
the end of such calendar year and shall pay the balance of the Bonus after
taking into account all draws made by the Executive during the calendar year
within 75 days after the end of the calendar year. For the purposes of this
Agreement, the term calendar year shall mean the period beginning on January 1
and ending on the following December 31.
45.3 ab Section . Executive BenefitsExcept as otherwise
specifically provided in this Agreement, the Executive shall be eligible to
participate, in accordance with their respective terms and conditions, in all
benefit plans presently available or which may subsequently be made available
to executives of the Employers, including Crossmann's health care, basic life
insurance, supplemental life insurance coverage, disability coverage, business
travel accident insurance and any pension or retirement plan of any kind.
45.4 ab Section . Vacation LeaveThe Executive shall be entitled to
that number of days of vacation leave per year that is generally applicable to
all executive personnel of Crossmann. The Executive shall accrue and receive
full compensation and benefits during his vacation leave periods. Unused
vacation leave time shall not carry over from one year of the Employment Term
to the next and unused vacation leave time shall not entitle the Executive to
any additional compensation.
45.5 ab Section . Stock Option PlanThe Boards may, in their sole
discretion, permit the Executive to participate in stock option plans of
Crossmann at a level consistent with other employees of CCNC or Crossmann
having similar responsibilities as the Executive. The term and conditions of
a grant of a stock option to the Executive will be set forth in a separate
stock option agreement between Crossmann and the Executive.
45.6 ab Section . AutomobileThe Employers shall provide the
Executive with an automobile which is the same or equivalent make and model as
the automobile that the Target Entities currently provide to the Executive for
the Employment Term. The Employers shall reimburse the Executive for all
reasonable expenses associated with the automobile, including gasoline and
normal repair expenses, incurred by the Executive in conducting the Employers'
business, in accordance with the policies of Crossmann.
45.7 ab Section . Business ExpensesThe Employers shall reimburse
the Executive for all reasonable business expenses incurred by the Executive
in conducting the Employers' business in accordance with the policies of
Crossmann.
XLVI. abARTICLE
Termination of Employment
46.1 ab Section . Termination for Cause
(a) ab The Employers may terminate the Executive's employment with
the Employers pursuant to this Agreement for Cause, as defined herein, by
providing written notice to the Executive at least twenty-four (24) hours
prior to the Termination Date, as defined in subsection (iii) below.
(b) ab A termination for "Cause" means a termination by one of the
Boards for any one or more of the following reasons: (a) theft, fraud,
embezzlement, dishonest or other similar behavior by the Executive; (b) any
material breach by the Executive of the terms of this Agreement, or the
Purchase Agreements or any breach by the Executive of the terms of the
Nondisclosure, Noncompetition and Nonsolicitation Agreement of even date
herewith executed by the Executive (the "Noncompetition Agreement"); (c) any
material neglect of duty, incompetence, insubordination or misconduct of the
Executive in discharging any of his duties and responsibilities hereunder, (d)
any act of theft or dishonesty by the Executive or any criminal conviction or
indictment of the Executive, (e) any occurrence of the Executive reporting to
work under the influence of alcohol or illegal drugs, or the Executive being
under the influence of alcohol or illegal drugs during working hours, (f) any
failure or refusal by the Executive to comply with the policies, rules or
regulations of the Employers whether now in force or hereafter adopted; (g)
any misrepresentation or concealment by the Executive of any material fact for
the purpose of securing this Agreement, or (h) any other material act of
misconduct within the control of the Executive.
(c) ab In the case of a termination for Cause, the term
"Termination Date" as used in this subsection (a) shall mean the actual date
the Executive terminates employment with the Employers as a result of action
taken by one of the Boards, and not as a result of the Executive's
resignation, as provided in Section 4(b).
(d) ab If prior to the Expiration Date the Employers terminate the
Executive's employment for Cause, the Executive shall only be entitled to
payment of that portion of the Annual Base Salary under Section 3(a) that the
Executive earned through and including the Termination Date, at the rate of
the Annual Base Salary in effect or any portion of the year at that time, and
the Executive shall repay all draws made against the Bonus in the calendar
year in which the Executive is terminated for Cause within 10 days after the
Termination Date. If the Executive fails to repay the draws within such time
period, the Executive shall be deemed to have breached the Pinehurst Merger
Agreement and the Employers shall have the indemnification rights set forth
therein.
46.2 ab Section . ResignationThe Executive may resign from his
employment with the Employers pursuant to this Agreement at any time by
providing written notice to the Boards of his resignation at least thirty (30)
days prior to the effective date of the resignation (the "Resignation
Notice"). The effective date of the Executive's resignation shall be that
specified in the Resignation Notice, or the actual date the Executive
terminates employment with the Employers as the result of a resignation,
whichever occurs earlier (the "Resignation Date"). If prior to the Expiration
Date, the Executive resigns his employment, the Executive shall only be
entitled to payment of that portion of the Annual Base Salary under Section
3(a) that the Executive earned through and including the Resignation Date, at
the rate of the Annual Base Salary in effect at that time, and the Executive
shall repay all draws made against the Bonus in the calendar year in which the
Executive resigns within 10 days after the Resignation Date. If the Executive
fails to repay the draws within such time period, the Executive shall be
deemed to have breached the Pinehurst Merger Agreement and the Employers shall
have the indemnification rights set forth therein.
46.3 ab Section . Termination Without CauseThe Employers may, in
their sole discretion, terminate the Executive's employment with the Employers
pursuant to this Agreement at any time without Cause, by providing written
notice to the Executive at least twenty-four (24) hours prior to the
Termination Date, as defined in this subsection (c). If the Employers
terminate the Executive's employment without Cause, CCNC shall be obligated to
continue to pay to him the Annual Base Salary and to pay him an amount equal
to the monthly premium for the Executive's individual health insurance as in
effect on the Termination Date for the period during which the Executive is
bound by the terms and conditions of the Noncompetition Agreement (the
"Severance Payments"). Such payments shall be made as and when the same would
have been due and payable if the Executive's employment had continued through
such date, subject to the provisions of Sections 4(d) and 4(e). If the
Employers terminate the Executive's employment without Cause, the Executive
shall not be entitled to any Bonus payments for any periods after the
Termination Date and the Executive shall be required to repay any draws made
against the Bonus in the calendar year in which he was terminated without
Cause in accordance with the terms of Section 3(b) hereof. If the Executive
fails to repay the draws in the time period set forth in Section 3(b), the
Executive shall be deemed to have breached the Pinehurst Merger Agreement,
the Employers shall have the indemnification rights set forth therein. As a
condition precedent to receiving the Severance Payments, the Executive shall
sign a release of all claims the Executive has or may have against the
Employers in form and substance submitted to the Executive by the Employers.
The term "Termination Date" as used in this subsection (c) shall mean the
actual date the Executive terminates employment with the Employers as a result
of action taken by one of the Employers, and not as a result of the
Executive's resignation as provided in Section 4(b). Except as provided in
this subsection (c), the Executive shall not be eligible to receive any
compensation or benefits under this Agreement with respect to any future
periods beginning on or after the Termination Date.
46.4 ab Section . DeathIf the Executive dies prior to the
Expiration Date, the Executive's estate or personal representative shall be
entitled to receive that portion of the Annual Base Salary, at the rate in
effect at the Executive's death, that portion of the Bonus attributable to the
period prior to the date of the Executive's death payable in accordance with
the terms of Section 3(b) hereof, and any other compensation or benefits that
the Executive earned through and including the date of the Executive's death.
If the Pretax Net Income does not exceed the maximum amount set forth on
Schedule 3(b), then the Executive 's estate or personal representative shall
be required to repay any draws made against the Bonus in the calendar year of
the Executive's death in accordance with the terms of Section 3(b) hereof. If
the Executive's estate or personal representative fails to repay the draws in
the time period set forth in Section 3(b), the Executive shall be deemed to
have breached the Pinehurst Merger Agreement and the Employers shall have the
indemnification rights set forth therein. If the Executive is entitled to
receive payments from the Employers pursuant to Section 4(c) at the time of
his death, the Executive's estate or personal representative shall be entitled
to receive that portion of the Annual Base Salary, at the rate in effect at
the Executive's death, and any other compensation or benefits, that the
Executive would have been entitled to receive under Section 4(c) through and
including the date of the Executive's death. The Executive's estate or
personal representative shall not be entitled to receive any portion of the
Annual Base Salary or any other compensation or benefits under this Agreement,
with respect to any periods ending on or after the date of the Executive's
death, which was not payable in accordance with the provisions thereof prior
to the date of death.
46.5 ab Section . DisabilityIf prior to the Expiration Date the
Executive becomes Permanently Disabled, as defined in this subsection (e), the
Employers may terminate the Executive's employment with the Employers as a
result of the Permanent Disability by providing written notice to the
Executive at least twenty-four (24) hours prior to the Termination Date, as
defined in this subsection (e). If prior to the Expiration Date the Executive
becomes Permanently Disabled, the Executive may resign from his employment
with the Employers pursuant to this Agreement by providing written notice to
the Employers of his resignation at least twenty-four (24) hours prior to the
Resignation Date, as defined in this subsection (e). If the Employers
terminate the Executive's employment as a result of a Permanent Disability or
the Executive resigns from employment with the Employers as a result of a
Permanent Disability, the Executive shall be entitled to receive that portion
of the Annual Base Salary under Section 3(a) that the Executive earned through
and including the Termination Date or Resignation Date, as applicable, at the
rate in effect on such date and that portion of the Bonus attributable to the
period prior to the Termination Date or the Resignation Date, as applicable,
payable in accordance with the terms of Section 3(b) hereof. If the Pretax
Net Income does not exceed the maximum amount set forth on Schedule 3(b), then
the Executive shall be required to repay any draws made against the Bonus in
the calendar year of the Executive's Permanent Disability in accordance with
the terms of Section 3(b) hereof. If the Executive fails to repay the draws
in the time period set forth in Section 3(b), the Executive shall be deemed to
have breached the Pinehurst Merger Agreement and the Employers shall have the
indemnification rights set forth therein. If the Executive is entitled to
receive payments from the Employers pursuant to Section 4(c) at the time he
becomes Permanently Disabled, the Executive shall be entitled to receive the
payments that the Executive would have been entitled to receive under Section
4(c). The Executive shall not be entitled to receive any portion of the
Annual Base Salary or any other compensation or benefits under this Agreement
with respect to any future periods beginning on or after the later of the
Resignation Date, Termination Date, or the date the Executive becomes
Permanently Disabled. The Executive shall be deemed "Permanently Disabled"
when, and only when, he is deemed permanently disabled in accordance with the
disability insurance policy of the Employers 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 of the
Employers last in effect. The definition of Permanently Disabled for purposes
of this Agreement shall comply with all provisions of applicable law. The term
"Termination Date" as used in this subsection (e) shall mean the actual date
the Executive terminates employment with the Employers. The term "Resignation
Date" as used in this subsection (e) shall mean the actual date the Executive
terminates employment with the Employers as the result of a resignation.
XLVII. abARTICLE
Nondisclosure, Noncompetition and Nonsolicitation AgreementOn the date
hereof the Executive entered into the Noncompetition Agreement. All of the
terms and conditions of the Noncompetition Agreement are incorporated herein
by reference and any breach of the Noncompetition Agreement shall be deemed to
be a breach of this Agreement.
Non-assignability, Binding Agreement
By the ExecutiveThe Executive shall not assign or delegate this Agreement or
any right, duty, obligation, or interest under this Agreement without CCNC's
and Crossmann's prior written consent; provided, however, that nothing shall
preclude the Executive from designating beneficiaries to receive benefits
payable under this Agreement upon his death, and nothing shall preclude the
Executive's executors, administrators, or their legal representatives, from
assigning any rights under this Agreement to any person.
By CCNC or CrossmannCCNC and/or Crossmann may assign, delegate, or transfer
this Agreement and all of their 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 CCNC or Crossmann or to which CCNC or Crossmann transfers all or
substantially all of its assets. Upon assignment, delegation, or transfer,
any affiliate, subsidiary, or business entity related to CCNC and/or Crossmann
shall be deemed to be substituted for CCNC and/or Crossmann, as applicable,
for all purposes of this Agreement.
Binding EffectExcept as limited under Sections 6(a) and 6(b), this Agreement
shall be binding upon and inure to the benefit of the parties, any successors
to or assigns of CCNC and/or Crossmann, and the Executive's heirs and the
personal representatives or executor of the Executive's estate.
XLVIII. abARTICLE
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.
XLIX. abARTICLE
AmendmentNo provision of this Agreement may be modified, amended, waived, or
discharged in any manner except by an instrument in writing signed by the
Executive and on behalf of CCNC and Crossmann by such officers as may be
specifically designated by the Boards. No agreement or representation, oral
or otherwise, express or implied, with respect to the subject matter hereof
have been made by any party which is not expressly set forth in this
Agreement.
L. abARTICLE
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.
LI. abARTICLE
Governing Law and JurisdictionThe laws of the State of Indiana 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.
LII. abARTICLE
NoticesAll notices required or desired to be given under this Agreement
shall be in writing and shall be deemed to have been duly given (i) on the
date of service if served personally on the party to whom notice is to be
given, (ii) on the date of receipt by the party to whom notice is to be given
if transmitted to such party by telefax, provided a copy is mailed as set
forth below on the date of transmission, or (iii) on the third day after
mailing if mailed to the party to whom notice is to be given by registered or
certified mail, return receipt requested, postage prepaid, to the following
addresses:
(a) If to CCNC or Crossmann, to:
Crossmann Communities, Inc.
9202 North Meridian St., Suite 300
Indianapolis, IN 46268
Attn: John B. Scheumann
Tel. No.: (317) 843-9514
Fax: (317) 571-2210
(b) If to the Executive, to:
Jeffrey H. Skelley
10239 Beach Drive, S.W.
Calabash, NC 28467
Tel. No.: 910-579-3121
Fax: 910-579-7505
Any party may, by giving written notice to the other parties, change the
address to which notice shall then be sent.
LIII. abARTICLE
Prior AgreementsThis Agreement and the Noncompetition Agreement are a
complete and total integration of the understanding of the parties. This
Agreement and the Noncompetition Agreement supersede all prior or
contemporaneous negotiations, commitments, agreements, writings including
handbooks, and discussions with respect to the subject matter of this
Agreement and the Noncompetition Agreement.
LIV. abARTICLE
HeadingsThe 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.
LV. abARTICLE
CounterpartsThis Agreement may be executed in one or more counterparts, each
of which 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 enforcement is sought needs to be produced to evidence the
existence of this Agreement
GuarantyCrossmann hereby guarantees the performance of all of CCNC's
obligations hereunder, including all of CCNC's obligations to make payments to
the Executive hereunder.
<PAGE>
The parties have executed this Agreement on the date first written
above.
"CCNC"
Crossmann Communities of North Carolina, Inc.
By:/s/ Richard H. Crosser
Title:
"CROSSMANN"
CROSSMANN COMMUNITIES, INC.
By: /s/ Richard H. Crosser
Title:
"EXECUTIVE"
/s/ Jeffrey H. Skelley
Jeffrey H. Skelley
<PAGE>
SCHEDULE 3(B)
The Executive shall receive the percentage of the Bonus set forth
below for the calendar years set forth below if the Pretax Net Income meets or
exceeds the amounts set forth below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR 40% of Bonus if 80% of Bonus if 100% of Bonus if
- ---- ------------------ ------------------ ------------------
Pretax Net Income Pretax Net Income Pretax Net Income
------------------ ------------------ ------------------
Meets or Exceeds Meets or Exceeds Meets or Exceeds
------------------ ------------------ ------------------
1998 $ 1,500,000 $ 2,200,000 $ 2,775,000
- ---- ------------------ ------------------ ------------------
1999 $ 1,700,000 $ 2,400,000 $ 3,120,000
- ---- ------------------ ------------------ ------------------
2000 $ 2,000,000 $ 2,750,000 $ 3,545,000
- ---- ------------------ ------------------ ------------------
2001 $ 2,400,000 $ 3,200,000 $ 4,075,000
- ---- ------------------ ------------------ ------------------
2002 $ 2,700,000 $ 3,700,000 $ 4,740,000
- ---- ------------------ ------------------ ------------------
</TABLE>
Exhibit 21.1
Amended Subsidiaries of the Registrant
1. Merit Realty, Inc.
2. Crossmann Communities of Ohio, Inc.
3. Deluxe Homes of Lafayette, Inc.
4. Deluxe Homes, Inc.
5. Trimark Homes, Inc.
6. Trimark Development, Inc.
7. Crossmann Management, Inc.
8. Deluxe Aviation, Inc.
9. Crossmann Investment, Inc.
10. Crossmann Mortgage Corp.
11. Cutter Homes, LTD.
12. Crossmann Communities of Tennessee, LLC
13. Crossmann Communities of North Carolina, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Crossmann Communities, Inc.
Exhibit 27.1
Article 5 Financial Data Schedule for 1998 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 10641734
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 199765671
<CURRENT-ASSETS> 0
<PP&E> 6371367
<DEPRECIATION> 2640854
<TOTAL-ASSETS> 253092852
<CURRENT-LIABILITIES> 0
<BONDS> 101011994
0
0
<COMMON> 64139430
<OTHER-SE> 63106014
<TOTAL-LIABILITY-AND-EQUITY> 253092852
<SALES> 147549729
<TOTAL-REVENUES> 147549729
<CGS> 116699067
<TOTAL-COSTS> 116699067
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 614383
<INCOME-PRETAX> 13004354
<INCOME-TAX> 5152582
<INCOME-CONTINUING> 7851772
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7851772
<EPS-PRIMARY> .70
<EPS-DILUTED> .69
</TABLE>
