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ASSET PURCHASE AGREEMENT
among
X.X. XXXXXX, INC.
X.X. XXXXXX, INC. - JACKSONVILLE
CH MORTGAGE COMPANY I, LTD.
THE FORTRESS GROUP, INC.
FORTRESS-FLORIDA, INC.
FORTRESS MORTGAGE, INC.
Dated as of May 1, 2001
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TABLE OF CONTENTS
I. PURCHASE OF ASSETS............................................................................................1
Section 1.01 Assets to be Purchased...............................................................1
Section 1.02 Excluded Assets......................................................................4
Section 1.03 Third Party Consents.................................................................4
Section 1.04 Assumed Liabilities..................................................................5
Section 1.05 Retained Liabilities and Obligations.................................................6
II. PURCHASE CONSIDERATION.......................................................................................6
Section 2.01 Purchase Price.......................................................................6
Section 2.02 Final Balance Sheet; Closing Assets Schedule.........................................7
Section 2.03 Tax Reporting and Allocations........................................................8
Section 2.04 Receipt of Consideration by Fortress.................................................9
III. CLOSING.....................................................................................................9
Section 3.01 Closing..............................................................................9
Section 3.02 Execution and Delivery of the Documents..............................................9
Section 3.03 Further Assurances...................................................................9
Section 3.04 Transfer and Other Taxes.............................................................9
Section 3.05 Prorations..........................................................................10
IV. CONDITIONS TO THE CLOSING...................................................................................10
Section 4.01 Conditions to the Purchasers' Obligation to Close...................................10
Section 4.02 Conditions to the Sellers' Obligation to Close......................................13
V. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND XXXXXX...................................................15
Section 5.01 Organization........................................................................15
Section 5.02 Power and Authority.................................................................15
Section 5.03 Authorization, Execution, Delivery, and Enforceability..............................15
Section 5.04 No Conflicts........................................................................16
Section 5.05 No Broker..........................................................................16
Section 5.06 Legal Proceedings...................................................................16
VI. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF FORTRESS.......................................................16
Section 6.01 Organization, Power and Authority...................................................16
Section 6.02 Authorization, Execution, Delivery, and Enforceability..............................17
Section 6.03 No Conflicts........................................................................17
Section 6.04 Opinion of Financial Advisors.......................................................17
Section 6.05 No Broker...........................................................................18
VII. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND FORTRESS.................................................18
Section 7.01 Organization of the Company.........................................................18
Section 7.02 Power and Authority.................................................................18
Section 7.03 Execution, Delivery, and Enforceability of the Documents............................18
Section 7.04 No Conflicts........................................................................18
Section 7.05 No Broker...........................................................................19
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Section 7.06 Financial Statements................................................................19
Section 7.07 Absence of Certain Changes..........................................................19
Section 7.08 Absence of Undisclosed Liabilities..................................................20
Section 7.09 Internal Accounting Controls........................................................20
Section 7.10 Adequacy of Acquired Assets.........................................................20
Section 7.11 Title; Permitted Liens..............................................................20
Section 7.12 Permits.............................................................................21
Section 7.13 Compliance with Applicable Laws.....................................................21
Section 7.14 Absence of Unethical Business Practices.............................................22
Section 7.15 Owned Real Property.................................................................22
Section 7.16 Real Property Leases................................................................22
Section 7.17 Land and Lot Contracts..............................................................23
Section 7.18 Real Property Generally.............................................................23
Section 7.19 Environmental Matters...............................................................25
Section 7.20 Material Contracts..................................................................27
Section 7.21 Acquired Contracts, Etc., Generally.................................................29
Section 7.22 Accounts Receivable.................................................................30
Section 7.23 Intellectual Property...............................................................30
Section 7.24 Litigation and Claims...............................................................31
Section 7.25 Insurance...........................................................................31
Section 7.26 Customers...........................................................................32
Section 7.27 Subcontractors......................................................................32
Section 7.28 Suppliers...........................................................................32
Section 7.29 Warranty Obligations................................................................32
Section 7.30 Taxes...............................................................................32
Section 7.31 Employees...........................................................................33
Section 7.32 Employee Benefit Plans and Related Matters..........................................33
Section 7.33 Labor Relations; Compliance.........................................................33
Section 7.34 Homeowner Associations..............................................................34
Section 7.35 Bank Accounts.......................................................................34
VIII. COVENANTS.................................................................................................34
Section 8.01 Access to Information...............................................................34
Section 8.02 Operation of the Company Pending the Closing........................................34
Section 8.03 Changes to the Information Disclosed on the Schedules...............................35
Section 8.04 Satisfaction of the Closing Conditions..............................................35
Section 8.05 Title Policy........................................................................35
Section 8.06 Surveys.............................................................................36
Section 8.07 Environmental Studies...............................................................36
Section 8.08 Employees...........................................................................37
Section 8.09 COBRA...............................................................................37
Section 8.10 Other Benefit Matters...............................................................37
Section 8.11 Warranty or Other Work..............................................................38
Section 8.12 No Public Announcement..............................................................39
Section 8.13 Use of Names........................................................................39
Section 8.14 Successor Status for Payroll Tax Purposes...........................................39
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Section 8.15 Access..............................................................................39
Section 8.16 Insurance...........................................................................39
IX. NON-COMPETITION AND NON-DISCLOSURE COVENANTS................................................................39
Section 9.01 Covenant Not to Compete.............................................................39
Section 9.02 Non-Compete Period..................................................................40
Section 9.03 Indirect Competition; Certain Exclusions............................................41
Section 9.04 No Disclosure of Confidential Information...........................................41
Section 9.05 Reasonableness......................................................................42
Section 9.06 Judicial Enforcement................................................................42
X. INDEMNIFICATION..............................................................................................42
Section 10.01 Regarding Company Matters...........................................................42
Section 10.02 Indemnification Regarding Mortgage Matters..........................................43
Section 10.03 Regarding Fortress Matters..........................................................43
Section 10.04 Indemnification of the Sellers and Fortress.........................................43
Section 10.05 Indemnification Procedures..........................................................44
Section 10.06 NEGLIGENCE..........................................................................46
Section 10.07 Remedies............................................................................46
Section 10.08 Insurance...........................................................................46
Section 10.09 Limitations of Indemnification......................................................46
Section 10.10 Calculation of Losses...............................................................47
Section 10.11 Survivability.......................................................................47
Section 10.12 No Other Representations............................................................47
XI. GENERAL.....................................................................................................47
Section 11.01 Amendment...........................................................................47
Section 11.02 Attorneys' Fees.....................................................................47
Section 11.03 Counterparts........................................................................48
Section 11.04 Entire Agreement....................................................................48
Section 11.05 Expenses............................................................................48
Section 11.06 Governing Law.......................................................................48
Section 11.07 Headings............................................................................48
Section 11.08 Assignment..........................................................................48
Section 11.09 No Third-Party Beneficiaries........................................................48
Section 11.10 Notices.............................................................................48
Section 11.11 Performance on Business Days........................................................49
Section 11.12 Plural and Singular Words...........................................................49
Section 11.13 Pronouns............................................................................50
Section 11.14 Schedules...........................................................................50
Section 11.15 Set-Off.............................................................................50
Section 11.16 Severability........................................................................50
Section 11.17 Specific Performance................................................................50
Section 11.18 Successors..........................................................................50
Section 11.19 Waiver..............................................................................50
XII. DEFINITIONS................................................................................................51
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EXHIBITS
Exhibit A-1 Company Xxxx of Sale
Exhibit A-2 Mortgage Xxxx of Sale
Exhibit B Warranty Deed
Exhibit C Sublease
Exhibit D Escrow Agreement
Exhibit E Legal Opinion of Counsel for the Sellers and Fortress
Exhibit F Legal Opinion of Counsel for Xxxxxx and Purchasers
Exhibit G-1 Assumption Agreement of DRH
Exhibit G-2 Assumption Agreement of CHM
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of May 1,
2001, is made among (i) X.X. XXXXXX, INC., a Delaware corporation ("Xxxxxx"),
(ii) X.X. XXXXXX, INC. - JACKSONVILLE, a Delaware corporation ("DRH"), (iii) CH
MORTGAGE COMPANY I, LTD., a Texas limited partnership ("CHM"), (iv) THE FORTRESS
GROUP, INC., a Delaware corporation ("Fortress"), (iv) FORTRESS-FLORIDA, INC., a
Delaware corporation (the "Company"), and FORTRESS MORTGAGE, INC., a Delaware
corporation ("Mortgage").
RECITALS
WHEREAS, Fortress owns all of the capital stock of the Company and
Mortgage (collectively, the "Sellers") and Xxxxxx, directly or indirectly, owns
all of the equity interests in DRH and CHM (collectively, the "Purchasers");
WHEREAS, (i) DRH wishes to purchase and acquire from the Company, and
the Company wishes to sell to DRH, the assets of the Company, and (ii) CHM
wishes to purchase and acquire from Mortgage, and Mortgage wishes to sell to
CHM, the Jacksonville assets of Mortgage, all upon the terms and conditions
hereinafter set forth (with certain capitalized terms having the meanings set
forth in Article XII).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
I. PURCHASE OF ASSETS
Section 1.01 Assets to be Purchased. On the basis of the
representations, warranties, covenants and agreements set forth herein, and
subject to the terms and conditions set forth herein, at the Closing:
(a) Company Assets. The Company shall sell, convey,
assign, transfer and deliver to DRH, and DRH shall purchase and pay
for, at the Closing, all of the Company's assets, franchises,
interests, properties, and rights and privileges of every kind and
description, real, personal or mixed, tangible or intangible, whether
owned by the Company or used primarily in connection with the Company's
business, including all right, title and interest of the Company
therein and thereto and all goodwill associated
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therewith (collectively, exclusive of the Excluded Assets, the
"Acquired Company Assets"), free and clear of any Liens other than the
Permitted Liens, including the following:
(i) Balance Sheet Assets. All of the assets
reflected on the March Balance Sheet, and all assets
subsequently acquired, except for the Excluded Assets
reflected thereon and those assets disposed of after March 31,
2001, in the ordinary course of business consistent with past
practices and this Agreement.
(ii) Real Property. All real property described
on Schedule 1.01(a)(ii) hereto (the "Owned Real Property") and
all rights arising out of ownership thereof or appurtenant
thereto, together with (A) all buildings, fixtures, and
improvements located thereon or attached thereto, (B) all
easements and rights-of-way, and (to the extent transferable
under Applicable Law) all franchises, licenses and permits,
appurtenant to or otherwise benefiting the Owned Real Property
or the buildings, fixtures, or improvements located thereon,
and (C) all development rights, mineral rights, water rights,
utility capacity reservations, and other rights and
appurtenances affecting or pertaining to the Owned Real
Property or the buildings, fixtures, or improvements located
thereon.
(iii) Acquired Contracts. Subject to Section 1.03,
All rights and benefits of the Company in each written and
oral agreement, contract, commitment and option that (A) is
described on Schedule 1.01(a)(iii) hereto or (B) has been
entered into by the Company prior to the date hereof in the
ordinary course of business consistent with past practice and
is not required to be described on Schedule 1.01(a)(iii) by an
exclusion contained in Section 7.20 (collectively, the
"Acquired Company Contracts").
(iv) Deposits. All deposits relating to any
Acquired Company Asset or the business of the Company,
including all customer deposits under homebuilding contracts
included in the Assumed Company Liabilities, and all xxxxxxx
money and escrowed amounts under Acquired Company Contracts.
(v) Real Property Leases. Subject to Section
1.03, the leases and subleases of real property described in
Schedule 1.01(a)(v) hereto as to which the Company is the
lessee, together with any options to purchase the underlying
property, any rights to extend the terms thereof, and
leasehold improvements thereon (the "Real Property Leases").
(vi) Personal Property. All equipment, furniture,
furnishings, inventory, machinery, software, supplies, tools,
vehicles, investment property, house plans (provided that
Fortress and its Affiliates shall be
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permitted to continue its current usage of such house plans in
the construction of homes in markets outside of the State of
Florida in which Fortress or its Affiliates currently use such
plans), plats, surveys, land plans, engineering plans,
contract forms, marketing materials and other personal
property used primarily in connection with the business of the
Company, including the items listed on Schedule 1.01(a)(vi).
(vii) Personal Property Leases. Subject to Section
1.03, the leases of personal property described in Schedule
1.01(a)(vii) as to which the Company is the lessee, together
with any options to purchase the underlying property and any
rights to extend the terms thereof (the "Personal Property
Leases").
(viii) Intellectual Property. To the extent
transferable, all rights and benefits in the Company's
Intellectual Property used primarily in the conduct of
business of the Company, including the items of Intellectual
Property listed on Schedule 1.01(a)(viii), including all
goodwill associated therewith.
(ix) Permits. To the extent transferable under
Applicable Law, all approvals, authorizations, certificates,
consents, franchises, licenses, permits, rights, variances,
and waivers acquired or used primarily in connection with the
business of the Company, and all agreements with governmental
and other authorities in the nature thereof.
(x) Cash and Receivables. All of the Company's
cash on hand, on deposit or invested and all accounts and
notes receivable, and other receivables.
(xi) Third Party Warranties. To the extent
transferable, all rights and benefits under any seller's,
manufacturer's, subcontractor's, supplier's, merchant's,
repairmen's, or other third-party representations, warranties,
covenants, guarantees, indemnities and service or replacement
programs relating to any Acquired Company Asset or the
business of the Company.
(xii) Books and Records. All of the books,
instruments, papers, computer files, and records of whatever
nature and wherever located that relate primarily to the
business of the Company, whether in written form or another
storage media, including (A) accounting and financial records,
(B) property records and reports, (C) customer, subcontractor
and supplier lists, (D) environmental records and reports, (E)
personnel and labor relations records, and (F) property, sales
or transfer Tax records and returns, provided that such books,
instruments, papers, and records shall exclude the minute
books, stock transfer books and corporate seal of the Company
and any other books and records relating primarily to the
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Excluded Assets or Expressly Retained Liabilities (the "Books
and Records").
(b) Mortgage Assets. Mortgage shall sell, assign,
transfer and deliver to CHM, and CHM shall purchase and acquire from
Mortgage, the following assets, free and clear of all Liens: (i) all
rights and benefits of Mortgage under loan applications originated by
its operations in the Jacksonville, Florida, metropolitan area
("Mortgage-Jacksonville"), including the loan applications listed on
Schedule 1.01(b)(i) (the "Loan Applications"); (ii) all deposits, fee
payments and prepayments held by Mortgage-Jacksonville; (iii) all
rights and benefits of Mortgage under mandatory delivery commitments
and forward commitments relating to the Loan Applications, including
those listed on schedule 1.01(b)(iii) hereto (the "Takeout/Placement
Commitments"); (iv) all rights and benefits of Mortgage under the
agreements listed on Schedule 1.01(b)(iv) (the "Ancillary Agreements");
(v) all rights and benefits of Mortgage under the lease listed on
Schedule 1.01(b)(v) (the "Mortgage Lease"); (vi) all equipment,
furniture, furnishings, machinery, software, supplies, vehicles and
other property normally held or used by Mortgage-Jacksonville; and
(vii) all of the customer information and files, books, papers,
computer files, and records of whatever nature that relate to the
provisions of mortgage origination services by Mortgage-Jacksonville
(collectively, exclusive of the Excluded Assets, the "Acquired Mortgage
Assets").
(c) Fortress Interests. Fortress shall cause to be
included in the sales and purchases contemplated hereby all assets held
by it, and related books and records, that relate primarily to the
business of the Company or Mortgage-Jacksonville.
Section 1.02 Excluded Assets. Notwithstanding Section 1.01, the Sellers
and Fortress shall retain all of their respective right, title, and interest in,
to, and under the assets, properties, and rights described on Schedule 1.02A
hereto (collectively, with any other items excluded pursuant to this Section
1.02 or Section 1.03, the "Excluded Assets"). If after the Closing Date the
Purchasers discover an asset the existence or description of which is required
to be disclosed by the Sellers pursuant to this Agreement but which has not been
so disclosed, the Purchasers shall have the right (but not the obligation)
either to acquire such asset as an Acquired Asset or to exclude such asset as an
Excluded Asset by notice to the Sellers to such effect.
Section 1.03 Third Party Consents. To the extent that any Acquired
Contract, Real Property Lease, Personal Property Lease or Permit is not
assignable without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof, or any xxxxxxx
money or escrowed amounts thereunder, if such assignment or attempted assignment
would constitute a breach thereof or a default thereunder. The Sellers and the
Purchasers shall use their commercially reasonable efforts to obtain the consent
of such other party to the assignment of any such Acquired Contract, Real
Property Lease, Personal Property Lease or Permit to the Purchasers in all cases
in which such consent is or may be required for such assignment. If any such
consent shall not be obtained, the Sellers shall cooperate with the Purchasers
in any reasonable arrangement designed to provide for the Purchasers the
benefits intended to be assigned to the Purchasers under the relevant Acquired
Contract, Real Property Lease, Personal Property Lease or Permit, including
enforcement at the cost and for the account
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of Purchasers of any and all rights of the Sellers against the other party
thereto arising out of the breach or cancellation thereof by such other party or
otherwise. If and to the extent that such arrangement cannot be made, the
Purchasers shall have no obligation pursuant to Section 1.04 or otherwise with
respect to any such Acquired Contract, Real Property Lease, Personal Property
Lease or Permit. At the Closing, the Company shall sublease to DRH the premises
described in the Sublease on the terms and conditions set forth therein, whether
or not the consent of the landlord with respect thereto has been obtained.
Section 1.04 Assumed Liabilities.
(a) Assumed Company Liabilities. At the Closing, DRH
shall assume and agree to pay, perform and discharge when due the
following obligations of the Company, as the same shall exist on the
Closing Date (the "Assumed Company Liabilities"):
(i) Balance Sheet Liabilities. The accounts
payable and construction liabilities, amounts due to related
parties and accrued expenses of the Company as of the Closing
Date, all as (but only to the extent) set forth on the Final
Balance Sheet.
(ii) Reimbursement Obligations. The Company's
reimbursement obligations under the performance and surety
bonds and the letters of credit that are set forth on Schedule
1.01(a)(iii) hereto. DRH shall use its commercially reasonable
efforts to cause such performance and surety bonds and letters
of credit to be replaced as soon as practicable after Closing
or to otherwise cause the Company to be released from its
reimbursement obligations thereunder. DRH shall indemnify and
hold the Company harmless from all such reimbursement
obligations as provided in Section 10.04(c).
(iii) Executory Obligations. Subject to Section
1.03, the executory obligations of the Company not required to
be performed prior to or as of the Closing Date under the
Acquired Contracts, the Real Property Leases, the Personal
Property Leases and the permits and other agreements
transferred pursuant to Section 1.01(a)(ix), including
obligations relating to customer deposits under homebuilding
contracts.
(iv) Other Identified Liabilities. The
liabilities set forth on Schedule 1.04(a) hereto.
(b) Assumed Mortgage Obligations. At the Closing, CHM
shall assume, subject to Section 1.03, (i) the executory obligations of
Mortgage not required to be performed prior to or as of the Closing
Date (the "Assumed Mortgage Obligations") under the Loan Applications,
the Takeout/Placement Commitments, the Ancillary Agreements, and the
Mortgage Lease, including obligations relating to customer deposits and
prepayments, and (ii) the accrued and unpaid salary, vacation pay and
sick leave for the active employees of Mortgage-Jacksonville hired by
CHM on the Closing Date.
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(c) Certain Limitations. Notwithstanding the foregoing:
(i) DRH shall not assume the notes and mortgages payable of the Company
outstanding as of the Closing Date, but shall acquire the Acquired
Company Assets subject thereto and cause the balances thereof to be
repaid in full on the Closing Date; (ii) DRH may elect not to acquire
real property subject to any Acquired Company Contract where the sole
recourse of the seller is to a security deposit or other credit
arrangement provided for in the Acquired Company Contract; and (iii)
the Purchasers shall have the ability to contest, in good faith, any
claim asserted in respect of the Assumed Liabilities by any Person
other than the Sellers and their Affiliates.
Section 1.05 Expressly Retained Liabilities and Obligations. The
Company and Mortgage shall retain and pay and perform when due the following
liabilities and obligations of the Company or Mortgage: (a) any liabilities or
obligations that either Seller owes to Fortress or any Affiliate thereof, except
to the extent quantified on the Final Balance Sheet, (b) any liabilities or
obligations to the extent they secure or relate to Excluded Assets, (c) any
Employee Liabilities, except to the extent quantified on the Final Balance Sheet
or described in Section 1.04(b)(ii), (d) any liabilities or obligations with
respect to any Employee Plans, except to the extent quantified on the Final
Balance Sheet or described in Section 1.04(b)(ii), (e) any liabilities or
obligations under any Environmental Laws or with respect to Material of
Environmental Concern, except that the Company shall have no obligation to DRH
for violations, remediation obligations or other matters identified by the
Environmental Consultants in the Environmental Reports or in the environmental
reports listed in Schedule 7.19(a) hereto to the extent such matters relate to
the Real Property or the Leased Real Property, (f) any liabilities or
obligations with respect to any pending or threatened Legal Proceedings, (g) any
Taxes, (h) any warranty obligations and product liabilities (whether express or
implied) in respect of construction work performed on homes closed prior to or
as of the Closing Date or development work performed prior to or as of the
Closing Date, except for the work provided for in Section 8.11 and (i) any
mortgage servicing obligations or mortgage repurchase obligations (collectively,
the "Expressly Retained Liabilities"). Notwithstanding the foregoing, the
Sellers shall have the ability to contest, in good faith, any claim asserted in
respect of the Expressly Retained Liabilities by any Person other than the
Purchasers and their Affiliates. Notwithstanding any other provision hereof or
any doctrine of law, neither DRH nor CHM shall assume, or be required to pay,
perform or discharge, the Expressly Assumed Liabilities or any other liability
or obligation of the Company or Mortgage other than those liabilities and
obligations that either Purchaser expressly assumes pursuant to Section 1.04.
II. PURCHASE CONSIDERATION
Section 2.01 Purchase Price.
(a) Cash Consideration. The aggregate purchase price for
the Acquired Assets and for the Covenant Not to Compete shall be the
sum of (i) the Net Book Value of the Acquired Company Assets included
in the Final Balance Sheet, plus (ii) $3,750,000 (the "Premium
Amount"), payable in immediately available funds in accordance with
this Section 2.01. Neither the Purchasers nor Xxxxxx shall have any
obligation or liability for the division of such consideration between
the Sellers.
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(b) Closing Payments. At the Closing, the Purchasers
shall pay to the Sellers the sum of (i) $24,748,313, plus (ii) the
Premium Amount, of which (i) $1,400,000 (the "Escrow Amount") shall be
paid by wire transfer of immediately available funds to the Escrow
Agent to be held under the Escrow Agreement and (ii) the balance shall
be paid by wire transfer of immediately available funds to an account
designated by the Sellers.
(c) Purchase Price Adjustment. If the Net Book Value, as
reflected on the Closing Assets Schedule, of the Acquired Company
Assets included on the Final Balance Sheet is less than $24,748,313
(the amount of such difference being the "Net Worth Deficiency"), the
Sellers shall pay to the Purchasers the amount of the Net Worth
Deficiency. If the Net Book Value, as reflected on the Closing Assets
Schedule, of the Acquired Company Assets included on the Final Balance
Sheet is more than $24,748,313 (the amount of such difference being the
"Net Worth Excess"), the Purchasers shall pay to the Sellers the amount
of the excess. Any payment required by this Section 2.01(c) shall be
made within five days after the Closing Assets Schedule becomes final
and binding on the parties pursuant to Section 2.02. Any Net Worth
Deficiency shall first be paid by the Escrow Agent from amounts held by
it, and any remaining balance shall be paid by the Sellers. The term
"Net Book Value" with respect to any Acquired Company Asset shall mean
the value thereof reflected on the Final Balance Sheet less the
aggregate amount of any liabilities reflected on the Final Balance
Sheet that such asset secures or that relate thereto; provided that all
Assumed Company Liabilities and the notes and mortgages payable of the
Company to be paid by DRH pursuant to Section 1.04(c) shall be
considered to relate to the Acquired Company Assets.
Section 2.02 Final Balance Sheet; Closing Assets Schedule.
(a) Within 45 days following the Closing Date, the
Purchasers shall prepare, at their own expense, and deliver to the
Sellers (i) an unaudited balance sheet of the Company dated as of the
Closing Date, and (ii) a schedule setting forth the Net Book Value of
the Acquired Company Assets included in such balance sheet, together
with a notice (the "Purchaser Notice") stating whether or not there is
a Net Worth Deficiency or Net Worth Excess and specifying the amount
thereof, which notice shall also be delivered to the Escrow Agent.
During the preparation of such balance sheet and schedule (as they may
be adjusted pursuant to this Section 2.02, the "Final Balance Sheet"
and the "Closing Assets Schedule," respectively), the Sellers and their
current independent accounting firm ("Sellers' Accountants") may
consult with the Purchasers' current independent accounting firm
("Purchasers' Accountants"). The Purchaser and Purchasers' Accountants
shall make all of the accounting work papers and other relevant
documents in connection with preparation of the Final Balance Sheet
available to the Sellers and Sellers' Accountants and shall make the
persons in charge of the preparation of the Final Balance Sheet
available for reasonable inquiry by the Sellers and Sellers'
Accountants. The Final Balance Sheet shall be prepared in accordance
with generally accepted accounting principles applied consistently with
those accounting principles used in the preparation of the Financial
Statements, except that it shall exclude any amounts attributable to
the Excluded Assets, the Expressly Retained Liabilities and any other
liability or obligation
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of the Company that DRH does not expressly assume pursuant to Section
1.04 that would otherwise be reflected thereon other than the notes and
mortgages payable to be paid by DRH pursuant to Section 1.04(c).
(b) If the Sellers do not agree with the Net Book Value
reflected on the Final Balance Sheet or the Closing Assets Schedule so
delivered, or otherwise disagree with any line item reflected thereon,
they shall so notify the Purchasers in writing (the "Seller Notice")
within 20 days following receipt of the Final Balance Sheet and the
Closing Assets Schedule. The Seller Notice shall set forth in
reasonable detail the calculations with which the Sellers disagree or
other bases of disagreement of the amount being disputed. If the
Sellers do not so notify the Purchasers within such period, the Final
Balance Sheet and the Closing Assets Schedule shall become final and
binding upon all parties at the end of such period. In such event upon
the expiration of such 20-day period, the Sellers shall notify the
Escrow Agent to distribute the Escrow Amount and all other amounts held
by it in accordance with the Purchaser Notice.
(c) If the Sellers do so notify the Purchasers, the
Sellers and the Purchasers shall attempt in good faith to resolve such
dispute, and if they are able to so resolve the dispute, they shall
jointly give written notice to the Escrow Agent directing the
distribution of the Escrow Amount and all other amounts held by it. If
the Sellers and the Purchasers are unable to resolve any disputed item
within ten days after the receipt of the Seller Notice, such disputed
item shall be submitted within ten days after the expiration of such
ten-day period to one of the five largest nationally recognized
accounting firms or any of their successors (other than the parties'
current auditors or their successors) chosen by lot, which shall be
instructed to resolve such disputed item based upon the presentations
of the Sellers and the Purchasers within 30 days after submission;
provided that the review of such accounting firm will be restricted as
to scope to address only those matters as to which the Sellers and the
Purchasers have not reached agreement pursuant to the preceding
sentence. The resolution of disputes by the accounting firm so selected
shall be set forth in writing (the "Accountant's Notice") and shall be
conclusive and binding upon and non-appealable by the parties, and the
Final Balance Sheet and the Closing Assets Schedule shall become final
and binding upon the date of such resolution. The Accountant's Notice
shall be delivered to the Escrow Agent who shall distribute the Escrow
Amount and all other amounts held by it in accordance with its
directions. The costs of such resolution by such accounting firm shall
be paid by the Purchasers if such accounting firm determines that the
Net Book Value of the Acquired Company Assets exceeds the amount
thereof set forth in the Purchaser Notice by more than $100,000;
otherwise, the Sellers shall bear the costs of such resolution.
Section 2.03 Tax Reporting and Allocations. In connection with the
finalization of the Final Balance Sheet, the parties shall endeavor in good
faith to agree upon an allocation, solely for federal income Tax purposes, to
the Acquired Assets of (a) the consideration to be paid to the Sellers pursuant
hereto and (b) the Assumed Liabilities. The Purchasers and the Sellers shall
each separately prepare and file Form 8594 with the Internal Revenue Service
pursuant to Section 1060 of the Code consistent with the agreed upon allocation.
If the Purchasers or the Sellers are required to make some other allocation at
the direction of the Internal Revenue
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Service or other governmental entity, the parties shall endeavor in good faith
to adopt consistent reporting and allocation positions. Neither the Purchasers
nor the Sellers shall be responsible for any Tax liability or any other expense
of any other party to this Agreement resulting from the reporting and
allocations made by such other party as provided in this Section 2.03.
Section 2.04 Receipt of Consideration by Fortress. Fortress
acknowledges that, as the owner of all of the capital stock of the Sellers, it
will receive consideration for its obligations hereunder as a result of (a) the
consideration to be delivered to the Sellers pursuant hereto and (b) the
assumption of the Assumed Liabilities.
III. CLOSING
Section 3.01 Closing. The closing of the transactions contemplated
hereby (the "Closing") shall occur on the date hereof, or as promptly hereafter
as the conditions described in Article IV are satisfied, or on such other date
as the Purchasers and the Sellers may agree, at the offices of Rogers, Towers,
Xxxxxx, Xxxxx & Gay, Jacksonville, Florida, or at such other place as the
Purchasers and the Sellers may agree. All proceedings to take place at the
Closing shall take place simultaneously, and delivery of the documents and
instruments to be delivered at the Closing shall not occur until the completion
of such proceedings. The term "Closing Date" shall mean the date and time of the
consummation of the transactions contemplated hereby.
Section 3.02 Execution and Delivery of the Documents. At the Closing,
the Purchasers and the Sellers shall execute and deliver each agreement,
certificate, instrument or other document to which this Agreement contemplates
that it will be a party, as provided in Sections 4.01 and 4.02, as applicable.
Section 3.03 Further Assurances. At any time and from time to time
after the Closing Date, upon the request of the Purchasers and without any cost
or expense thereto (other than as specifically provided herein), the Sellers
shall execute and deliver such instruments of conveyance, assignment and
transfer and other documents as the Purchasers may reasonably request to
transfer to and vest in the Purchasers, and to put the Purchasers in possession
of, the Acquired Assets, free and clear of any Liens other than the Permitted
Liens, or otherwise to carry out the intent and purposes of this Agreement. If,
in order properly to prepare its Tax returns, other documents or reports
required to be filed with governmental or regulatory authorities or its
financial statements or to fulfill its obligations hereunder, it is necessary
that a party be furnished with additional information, documents or records
relating to the business of the Company on or before the Closing Date, and such
information, documents or records are in the possession or control of the other
party, such other party shall use its best efforts to furnish or make available
such information, documents or records (or copies thereof) at the recipient's
request, cost and expense. Any information obtained by such party in accordance
with this Section 3.03 shall be held confidential by such party in accordance
with the terms of the Confidentiality Agreement or Section 9.04.
Section 3.04 Transfer and Other Taxes. At the Closing, all Taxes, deed
stamps and recording charges in connection with the conveyance, assignment, or
transfer of the Acquired Assets to the Purchasers and the assumption of the
Assumed Liabilities shall be born equally by
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the Purchasers and the Sellers. If the final amount of any such Tax or recording
charge is not determinable on the Closing Date, such Tax or recording charge
shall be paid on the Closing Date based upon the estimated amount thereof and
the Sellers shall thereafter pay one-half of any balance of such Tax or
recording charge as soon as it becomes determinable by the Purchasers. In
addition, the Company shall be responsible for and shall pay and indemnify and
reimburse DRH against and for any subsequent Taxes, not quantified on the Final
Balance Sheet, that are due and owing for any Tax periods prior to the Tax
period during which the Closing Date occurs which are assessed or reassessed in
respect of the Acquired Company Assets after the Closing Date due to changes in
land use or for any other reason, including interest or penalties thereon.
Section 3.05 Prorations. Any ad valorem, real property, personal
property, or similar Taxes and homeowners' or property owners' association dues
and assessments associated with the Acquired Assets that are imposed or accrue
on a periodic basis and are not quantified on the Final Balance Sheet (the
"Prorated Items") shall be prorated as of the Closing Date in accordance with
this Section 3.05. At the Closing, the Company shall pay to DRH the portion of
the Prorated Items and any amounts due with respect thereto equal to a fraction,
the numerator of which shall be the number of days that have elapsed from the
beginning of the applicable period to the Closing Date and the denominator of
which shall be the number of days in the entire applicable period. If on the
Closing Date the Company possesses the tax statements or other appropriate
information with respect to any Prorated Items, the Company shall pay to DRH its
prorated share of the Prorated Items based upon such Tax statements or other
information. If on the Closing Date the Company does not possess the Tax
statements or other appropriate information for the Prorated Items, the Company
shall pay to DRH its proportionate share of such Prorated Items based upon the
prior period's Prorated Items and any publicly announced Tax rate or other
changes with respect thereto. As soon as the Tax statements or other appropriate
information become available with respect to the actual amount of any such
Prorated Items, the Company shall promptly pay to DRH any excess of their
proportionate share of such Prorated Items over the estimate thereof previously
paid to DRH, or DRH shall promptly refund to the Company the excess of their
prorated share of such Prorated Items previously paid to DRH over their actual
prorated share. DRH shall pay the entire amount of any such Prorated Items
before such Prorated Items become delinquent; provided that DRH may contest the
amount or validity thereof in good faith. If DRH or the Company receives any
refunds of any Prorated Items prorated pursuant to this Section 3.05, such
refund shall be prorated as provided herein and the party receiving such refund
shall remit to the other party its proportionate share thereof.
IV. CONDITIONS TO THE CLOSING
Section 4.01 Conditions to the Purchasers' Obligation to Close. The
obligations of the Purchasers to consummate the transactions contemplated hereby
are subject to the satisfaction of the following conditions (collectively, the
"Purchaser Conditions"), each of which the Purchasers may waive:
(a) Representations and Warranties. The representations
and warranties of the Sellers and Fortress contained herein, and in
each agreement, certificate, instrument and other document to be
delivered pursuant hereto or in connection herewith, shall be
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true and correct in all material respects on and as of the date hereof
and on and as of the Closing Date as though made on and as of the
Closing Date.
(b) Performance of Covenants. The Sellers and Fortress
shall have performed, in all material respects, all agreements,
covenants, and obligations herein that they are required to perform on
or prior to the Closing Date.
(c) Closing Certificate. The Sellers and Fortress shall
have delivered to the Purchasers a certificate confirming the
satisfaction of the conditions set forth in Section 4.01(a).
(d) Officers Certificates. The Sellers and Fortress shall
have delivered to the Purchasers certificates, in a form acceptable to
the Purchasers, which shall include:
(i) Basic Agreements. Copies of the certificates
of incorporation and bylaws for the Sellers and Fortress;
(ii) Resolutions. Copies of the resolutions of
(A) the boards of directors of the Sellers and Fortress and
(B) Fortress as the sole stockholder of the Company approving
the execution, delivery and performance of this Agreement and
each agreement, certificate, instrument and other document to
be delivered pursuant hereto to which they are party; and
(iii) Incumbency Certificates. Incumbency
certificates setting forth the names, titles, and signatures
of the Persons signing on behalf of the Sellers and Fortress.
(e) Third Party Consents. The Sellers shall have received
and delivered to the Purchasers all of the consents listed on Schedule
4.01(e) hereto, in form and substance satisfactory to the Purchasers,
and shall have given all notices required to be given to any Persons
prior to the consummation of the transactions contemplated hereby.
(f) No Prohibition. No action, decree, injunction, order,
proceeding, or writ by or before any court or other governmental entity
shall exist or be pending or threatened that would prohibit
consummation of the transactions contemplated hereby or seek damages in
respect thereof.
(g) No Material Change. Since March 31, 2001, there shall
not have occurred any event or circumstance that has had or is likely
to have a Material Adverse Effect.
(h) Instruments.
(i) Bills of Sale. The Company and Mortgage
shall have executed and delivered Bills of Sale and Assignment
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Agreements in the forms of Exhibit A-1 and A-2 hereto,
respectively, with respect to the Acquired Assets;
(ii) Warranty Deeds. With respect to each parcel
of Owned Real Property, the Company shall have executed and
delivered a Special Warranty Deed of the type set forth on
Exhibit B hereto opposite the description of each parcel;
(iii) Contract Assignments. The Sellers shall
have executed and delivered such further assignments as DRH
may reasonably request with respect to the Acquired Contracts,
the Real Property Leases and the Personal Property Leases;
(iv) FIRPTA Affidavits. The Company and Fortress
shall have executed and delivered affidavits stating, under
penalty of perjury, their respective U.S. taxpayer
identification numbers and that none of them is a "foreign
person" within the meaning of Sections 1445 and 7701 of the
Code;
(v) Title Documents. The Company shall have
executed and delivered such affidavits, indemnities,
confirmations and other documents reasonably necessary to
permit the issuance of the Title Policy contemplated by
Section 8.05;
(vi) Estoppels, Etc. The Purchasers shall have
received such estoppels and other confirmations as the
Purchasers may reasonably request from third parties in
respect of the Assumed Liabilities;
(vii) Assignments of Intellectual Property. The
Company shall have executed and delivered to DRH the
assignment documents necessary to transfer its Copyrights,
Patents and Trademarks, including the goodwill associated with
any Trademarks, to DRH on the records of any appropriate
governmental entity;
(viii) Certificates of Title. The Sellers shall
have properly completed, executed in favor of the Purchasers
and delivered the assignment provisions on each certificate of
title for each automobile, trailer, truck or other vehicle to
which the Company or Mortgage-Jacksonville holds title;
(ix) Warranty Programs, etc. The Company shall
have executed and delivered to DRH such assignments as DRH may
reasonably request to provide the rights and benefits referred
to in Section 1.01(a)(xi);
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(x) Office Sublease. The Company shall have
executed and delivered a sublease in the form of Exhibit C
hereto (the "Sublease"); and
(xi) Affiliate Assets. Fortress and any Affiliate
who possesses any right, title, or interest in any asset
listed on the schedules hereto or any other assets
historically used in the business of the Company or
Mortgage-Jacksonville of the kind described in Section 1.01
(other than Excluded Assets) shall have contributed to and
have executed and delivered to the Company and Mortgage, as
the case may be, the assignment documents necessary to
transfer all right, title, and interest in such assets to the
Company or Mortgage.
(i) Title Policy. The Title Company shall have issued or
shall have committed to issue the Title Policy to DRH as contemplated
by Section 8.05.
(j) Surveys. The Company shall have delivered to DRH the
Surveys described in Section 8.06.
(k) Environmental Matters. DRH shall have received the
Environmental Reports contemplated by Section 8.07.
(l) Employees. DRH shall have entered into employment
arrangements on terms acceptable to it with such employees of the
Company as DRH may identify.
(m) Escrow Agreement. The Sellers shall have executed and
delivered the Escrow Agreement in the form of Exhibit D hereto (the
"Escrow Agreement") with the Title Company, as escrow agent (the
"Escrow Agent").
(n) Transition Agreement. Fortress shall have executed
and delivered a transition services agreement for the provision of
management information and other services on terms reasonably
satisfactory to the Purchasers.
(o) Legal Opinion. Legal counsel for the Sellers and
Fortress shall have delivered to the Purchasers and Xxxxxx a legal
opinion substantially in the form of Exhibit E hereto.
(p) Other. The Sellers and Fortress shall have delivered
to the Purchasers and Xxxxxx such other certificates, documents and
instruments as the Purchasers may reasonably request to effect the
transactions contemplated hereby.
Section 4.02 Conditions to the Sellers' Obligation to Close. The
obligations of the Sellers to consummate the transactions contemplated hereby
are subject to the satisfaction of the
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following conditions (collectively, the "Company Conditions"), each of which the
Sellers may waive:
(a) Representations and Warranties. The representations
and warranties of the Purchasers and Xxxxxx contained herein, and in
each agreement, certificate, instrument and other document to be
delivered pursuant hereto or in connection herewith, shall be true and
correct in all material respects on and as of the date hereof and on
and as of the Closing Date as though made on and as of the Closing
Date.
(b) Performance of Covenants. The Purchasers and Xxxxxx
shall have performed, in all material respects, all agreements,
covenants, and obligations herein that they are required to perform on
or prior to the Closing Date.
(c) Closing Certificate. The Purchasers and Xxxxxx shall
have delivered to the Sellers a certificate confirming the satisfaction
of the conditions set forth in Section 4.02(a).
(d) Secretary's Certificate. The Purchasers and Xxxxxx
shall have delivered to the Sellers certificates, in a form acceptable
to the Company, which shall include:
(i) Organizational Documents. Copies of the
certificates of incorporation and bylaws or other
organizational documents of the Purchasers and Xxxxxx;
(ii) Resolutions. Copies of the resolutions that
the boards of directors or executive committees of DRH and
Xxxxxx and the general partner of CHM approving the execution,
delivery, and performance of this Agreement and each
agreement, certificate, instrument or other document to be
delivered pursuant hereto to which they are party; and
(iii) Incumbency Certificates. Incumbency
certificates setting forth the names, offices, and signatures
of all of the officers signing on behalf of the Purchasers and
Xxxxxx.
(e) No Prohibition. No action, decree, injunction, order,
proceeding or writ by or before any court or other governmental entity
shall exist or be pending or threatened that would prohibit
consummation of the transactions contemplated hereby or seek damages in
respect thereof.
(f) Legal Opinion. Legal counsel for the Purchasers and
Xxxxxx shall have delivered to the Sellers and Fortress a legal opinion
substantially in the form of Exhibit F hereto.
(g) Instruments. The Purchasers shall have executed and
delivered to the Company each of the following documents:
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(i) Assumption Agreement. Assumption Agreements
in the form of Exhibits G-1 and G-2 hereto; and
(ii) Escrow Agreement. The Escrow Agreement.
(h) Guarantees. Fortress shall have been released from
all guarantees of the Assumed Company Liabilities or DRH shall have
caused the guaranteed liabilities to be paid or otherwise discharged.
(i) Other Matters. The Purchasers and Xxxxxx shall have
delivered to the Sellers and Fortress such other certificates,
documents, and instruments as the Sellers may reasonably request to
effect the transactions contemplated hereby.
V. REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS AND XXXXXX
The Purchasers and Xxxxxx, jointly and severally, represent and warrant
to the Sellers and Fortress as follows:
Section 5.01 Organization. Xxxxxx and DRH are corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware. CHM is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Texas. DRH and CHM are, or will be
prior to the Closing Date, qualified to transact business as a foreign
corporation or a limited partnership, respectively, in the State of Florida.
Section 5.02 Power and Authority. Xxxxxx and the Purchasers possess the
corporate power and authority to execute and deliver this Agreement and the
agreements, certificates, instruments and other documents to be delivered
pursuant hereto to which they will be party, to perform their obligations
hereunder and thereunder, and to consummate the transactions contemplated
hereby, without obtaining any approval, authorization, consent, or waiver from
or giving any notice to any governmental authority.
Section 5.03 Authorization, Execution, Delivery, and Enforceability.
Xxxxxx and the Purchasers have duly authorized, executed, and delivered this
Agreement, no other corporate action on the part of Xxxxxx, the Purchasers or
their respective Boards of Directors or their stockholders being necessary. This
Agreement constitutes the valid, legal and binding obligations of Xxxxxx and the
Purchasers, enforceable against them in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors generally. With
respect to each other agreement, certificate, instrument or other document to
which they will be party, Xxxxxx and the Purchasers have duly authorized such
document, and at the Closing Xxxxxx and the Purchasers will duly execute and
deliver such document, which will constitute a valid, legal, and binding
obligation of Xxxxxx and the Purchasers, as the case may be, enforceable against
them in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally.
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Section 5.04 No Conflicts. The execution and delivery by Xxxxxx and the
Purchasers of this Agreement do not, and the execution and delivery by Xxxxxx
and the Purchasers of each agreement, certificate, instrument or other document
to which Xxxxxx or the Purchasers are a party in connection herewith, the
performance by Xxxxxx and the Purchasers of their respective obligations under
this Agreement and each such agreement, certificate, instrument or other
document and the consummation of the transactions contemplated hereby and
thereby will not:
(a) conflict, in any material respect, with or result in
a violation or breach, in any material respect, of any of the terms,
conditions or provisions of the certificate or articles of
incorporation or by-laws (or other comparable charter document) of
Xxxxxx and the Purchasers;
(b) conflict, in any material respect, with or result in
a violation or breach, in any material respect, of any term or
provision of any Applicable Law relevant to Xxxxxx or the Purchasers or
any of their respective assets and properties; or
(c) (i) conflict, in any material respect, with or result
in a violation or breach, in any material respect, of, or result in the
acceleration, cancellation or termination of, (ii) constitute (with or
without notice or lapse of time or both) a default, in any material
respect, under, (iii) require Xxxxxx or the Purchasers to obtain any
consent, approval or action of, make any filing with or give any notice
to any Person as a result or under the terms of, or (iv) result in the
creation or imposition of any Lien upon Xxxxxx or the Purchasers or any
of their respective assets or properties under, any agreement,
contract, franchise, license, authorization, permit, order, decree,
judgment or other obligation to which Xxxxxx or the Purchasers are a
party or by which any of their assets and properties are bound.
Section 5.05 No Broker. Neither Xxxxxx nor the Purchasers has any
obligation or liability to any broker, finder or other Person for any broker or
similar services with respect to the transactions contemplated hereby.
Section 5.06 Legal Proceedings. There are no actions or proceedings
pending or, to the knowledge of Xxxxxx and the Purchasers, threatened against,
relating to or affecting Xxxxxx or the Purchasers or any of their assets and
properties which could reasonably be expected to result in the issuance of an
order restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.
VI. INDIVIDUAL REPRESENTATIONS AND
WARRANTIES OF FORTRESS
Fortress represents and warrants to Xxxxxx and the Purchasers as
follows:
Section 6.01 Organization, Power and Authority. Fortress is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
execute and deliver this Agreement and the agreements, certificates, instruments
and other documents to be delivered pursuant hereto to
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which it will be party, to perform its obligations hereunder and thereunder, and
to consummate the transactions contemplated hereby, without obtaining any
approval, authorization, consent, or waiver from or giving other notice to any
governmental authority.
Section 6.02 Authorization, Execution, Delivery, and Enforceability.
Fortress has duly authorized, executed and delivered this Agreement and no
approval of any stockholders of Fortress is required for the due authorization
of this Agreement or the consummation of the transaction contemplated hereby.
This Agreement constitutes the valid, legal and binding obligation of Fortress
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally. With respect to each
of the other agreements, certificates, instruments and other documents to be
delivered pursuant hereto to which Fortress will be party, Fortress will duly
execute and deliver each such document, which will constitute a valid and
legally binding obligation of Fortress, enforceable against it in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally.
Section 6.03 No Conflicts. The execution and delivery by Fortress of
this Agreement do not, and the execution and delivery by Fortress of each
agreement, certificate, instrument or other document to which Fortress is a
party in connection herewith, the performance by Fortress of its obligations
under this Agreement and each such agreement, certificate, instrument or other
document and the consummation of the transactions contemplated hereby and
thereby will not:
(a) conflict, in any material respect, with or result in
a violation or breach, in any material respect, of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws
of Fortress;
(b) conflict, in any material respect, with or result in
a violation or breach, in any material respect, of any term or
provision of any Applicable Law relevant to Fortress or any of its
assets and properties; or
(c) (i) conflict, in any material respect, with or result
in a violation or breach, in any material respect, of, or result in the
acceleration, cancellation or termination of, (ii) constitute (with or
without notice or lapse of time or both) a default, in any material
respect, under, (iii) require Fortress to obtain any consent, approval
or action of, make any filing with or give any notice to any Person as
a result or under the terms of, or (iv) result in the creation or
imposition of any Lien upon Fortress or any of its assets or properties
under, any agreement, contract, franchise, license, authorization,
permit, order, decree, judgment or other obligation to which Fortress
is a party or by which any of its assets and properties is bound,
except for the consents described on Schedule 6.03 hereto.
Section 6.04 Opinion of Financial Advisors. The board of directors of
Fortress has received the opinion of Fortress's financial advisor, Valuation
Research Corporation, a copy of which is attached hereto as Schedule 6.04, that
the transactions contemplated hereby are fair to Fortress from a financial point
of view.
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Section 6.05 No Broker. Fortress does not have any obligation or
liability to any broker, finder or other Person for any broker or similar
services with respect to the transactions contemplated hereby, except for a fee
payable to Xxxxxxx X. Xxxx & Associates, which will be paid by Fortress.
VII. REPRESENTATIONS AND WARRANTIES OF
THE SELLERS AND FORTRESS
Each Seller (as to itself) and Fortress, jointly and severally,
represent and warrant to Xxxxxx and the Purchasers as follows:
Section 7.01 Organization of the Company. The Sellers are corporations
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and have all requisite corporate power and authority to own
and lease the property and assets they own and lease and to carry on their
businesses and activities as currently conducted. The Sellers are duly qualified
to transact business as foreign corporations in the State of Florida, which, in
the case of the Company, is the only jurisdiction where the ownership of its
assets or the conduct of its business requires such qualification. Except as set
forth on Schedule 7.01 hereto, the Company does not own any beneficial or record
interest in any corporation, joint venture, limited liability company,
partnership, or other Person.
Section 7.02 Power and Authority. The Sellers possess all requisite
corporate power and authority to execute and deliver this Agreement and each
agreement, certificate, instrument or other document to be delivered pursuant
hereto to which they are party, to perform their obligations hereunder or
thereunder, and to consummate the transactions contemplated hereby, without
obtaining any approval, authorization, consent, or waiver from or giving any
notice to any governmental authority.
Section 7.03 Authorization, Execution, Delivery, and Enforceability of
the Documents. The Sellers have duly authorized, executed and delivered this
Agreement. This Agreement constitutes the valid, legal and binding obligations
of the Sellers, enforceable against them in accordance with its terms. With
respect to each other agreement, certificate, instrument or other document to be
delivered pursuant hereto to which the Sellers will be party, the Sellers have
duly authorized such document, and at the Closing the Sellers will duly execute
and deliver such document, which will constitute the valid, legal and binding
obligations of the Sellers, enforceable against the Sellers in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally.
Section 7.04 No Conflicts. The execution and delivery by the Sellers of
this Agreement do not, and the execution and delivery by the Sellers of each
agreement, certificate, instrument or other document to which the Sellers are
party in connection herewith, the performance by the Sellers of their respective
obligations under this Agreement and each such agreement, certificate,
instrument or other document and the consummation of the transactions
contemplated hereby and thereby will not:
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(a) conflict, in any material respect, with or result in
a violation or breach, in any material respect, of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws
of the Sellers;
(b) conflict, in any material respect, with or result in
a violation or breach, in any material respect, of any term or
provision of any Applicable Law relevant to the Sellers or any of their
respective assets and properties; or
(c) (i) conflict, in any material respect, with or result
in a violation or breach, in any material respect, of, or result in the
acceleration, cancellation or termination of, (ii) constitute (with or
without notice or lapse of time or both) a default, in any material
respect, under, (iii) require the Sellers to obtain any consent,
approval or action of, make any filing with or give any notice to any
Person as a result or under the terms of, or (iv) result in the
creation or imposition of any Lien upon the Sellers or any of their
respective assets or properties under, any agreement, contract,
franchise, license, authorization, permit, order, decree, judgment or
other obligation to which the Sellers are party or by which any of
their respective assets and properties is bound, except for the
consents described on Schedule 7.04 hereto.
Section 7.05 No Broker. The Sellers do not have any obligation or
liability to any broker, finder, or other Person for any broker or similar
services with respect to the transactions contemplated hereby, except for a fee
payable to Xxxxxxx X. Xxxx & Associates, which will be paid by the Sellers.
Section 7.06 Financial Statements. The Sellers have delivered to Xxxxxx
and the Purchasers copies of the following financial statements (collectively,
the "Financial Statements") attached as Schedule 7.06 hereto: (a) the unaudited
balance sheets of the Company as of December 31, 1999 and 2000 and the related
unaudited statements of income for the years then ended and the unaudited
balance sheet of the Company as of March 31, 2001 (the "March Balance Sheet")
and the related unaudited statement of income for the three months then ended
and (b) the unaudited statements of income for Mortgage-Jacksonville for the
years ended December 31, 1999 and 2000 and the three months ended March 31,
2001. The Financial Statements (including the related notes thereto) have been
prepared from the books and records of the Sellers and Fortress using generally
accepted accounting principles applied on a basis consistent with such
principles that the Sellers and Fortress have previously used. The Financial
Statements are also consistent with the financial information concerning the
Sellers included in the consolidated financial statements for Fortress and its
consolidated subsidiaries, including the consolidating information reflected in
the audited consolidated financial statements of Fortress and its consolidated
subsidiaries as of and for the years ended December 31, 1999 and 2000. The
Financial Statements present fairly, in all material respects, the financial
position of the Company and Mortgage-Jacksonville as of the dates indicated and
the results of operations of the Company and Mortgage-Jacksonville for the
periods then ended.
Section 7.07 Absence of Certain Changes. Except as set forth on
Schedule 7.07 hereto, since December 31, 2000, the Company has not: (a)
declared, set aside or paid any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased
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or otherwise acquired any of its capital stock; (b) made any capital expenditure
(or series of related capital expenditures) outside the ordinary course of
business or inconsistent with past practice; (c) granted any increase in the
bonus, salaries or other compensation of any of its directors, officers,
employees, agents or consultants outside the ordinary course of business or
inconsistent with past practice or made any other material change in the
employment terms for any of its officers and employees outside the ordinary
course of business or inconsistent with past practice; (d) delayed or postponed
the payment of any accounts payable or other liabilities in a manner
inconsistent with the ordinary course of business or past practice; (e)
experienced any material damage, destruction or loss (whether or not covered by
insurance) to its property; or (f) undergone any other Material Change.
Section 7.08 Absence of Undisclosed Liabilities. Except as disclosed on
Schedule 7.08 hereto, the Company is not subject to any material liabilities or
obligations of any nature, absolute or contingent, or any facts that could
reasonably be expected to give rise to any material liabilities or obligations,
except as disclosed in the Financial Statements or the schedules hereto and
except for liabilities or obligations that have arisen since March 31, 2001, in
the ordinary course of business consistent with past practices and this
Agreement (none of which is reasonably expected to have, singly or in the
aggregate, a Material Adverse Effect).
Section 7.09 Internal Accounting Controls. The Company (a) keeps books,
records and accounts that, accurately, fairly and in reasonable detail, reflect
its assets and transactions and (b) maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
accurately and promptly recorded to permit the preparation of the Company's
financial statements, (ii) transactions are executed in accordance with
management's general or specific authorization, (iii) access to its assets is
permitted only in accordance with management's general or specific
authorization, and (iv) comparisons are made between its fixed asset registers
and its existing assets at reasonable intervals and the Company takes
appropriate action with respect to any differences.
Section 7.10 Adequacy of Acquired Assets. Substantially all of the
Acquired Assets constitute residential real property, developed or undeveloped
land or assets incidental to the Company's residential homebuilding business.
The Acquired Assets include all assets and properties of every kind and
description, real, personal or mixed, tangible or intangible, the use of which
is necessary to enable DRH to conduct the business of the Company substantially
in the same manner conducted prior to the date hereof. The tangible assets of
the Company are, in all material respects, in good working order and condition,
ordinary wear and tear expected. Except as set forth on Schedule 7.10 hereto,
neither Fortress nor any Affiliate thereof (other than Sellers) has any interest
in, or provides or permits the use of, any asset or right used in the business
of the Company.
Section 7.11 Title; Permitted Liens. The Company has (i) good and
marketable title to the Acquired Company Assets constituting real property or
interests in real property (other than leasehold interests), (ii) good, valid
and subsisting leasehold title to the Acquired Company Assets constituting
leased property and (iii) good, valid and subsisting title to all other Acquired
Company Assets, in each case free and clear of all Liens, other than (a) the
Liens listed on Schedule 7.11 hereto, (b) liens for Taxes not yet due and
payable or being contested in good faith
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by appropriate proceedings for which adequate reserves have been established in
accordance with generally accepted accounting principles, (c) such imperfections
of title, pledges, liens and encumbrances, if any, as do not materially detract
from the value or interfere with the present or intended use of the properties
of the Company or otherwise materially impair the Company's business or assets,
and which do not secure obligations for borrowed money, judgments, indemnities,
guaranties, bonds, surety arrangements, reimbursement obligations (including in
connection with letters of credit) or the deferred portion of the purchase price
of acquired property and (d) such other Liens as may be described in the
commitments for title insurance to be delivered pursuant to Section 8.05 (the
items set forth in clauses (a), (b) and (c) above, but not (d) above (unless
acceptable to the Purchasers as evidenced by the Title Policy accepted by DRH),
being referenced to herein as "Permitted Liens"). Mortgage has good, valid and
subsisting title to the Acquired Mortgage Assets, free and clear of all Liens.
Section 7.12 Permits.
(a) Generally. The Sellers possess, or can obtain in the
ordinary course of business consistent with past practice, all material
approvals, authorizations, certificates, consents, franchises,
licenses, permits, rights, variances and waivers necessary for the
lawful conduct of their respective businesses (collectively, the
"Permits"). All such Permits are in full force and effect; no material
violations have occurred and are pending or unresolved with respect
thereto except as set forth on Schedule 7.12 hereto; and to the
Knowledge of the Sellers or Fortress, there is no basis for any
limitation, revocation or withdrawal thereof or any denial of any
extension or renewal with respect thereto.
(b) Mortgage. Mortgage is an approved lender and is in
good standing to make government insured or guaranteed loans
administered under the Department of Housing and Urban Development
through the Federal Housing Authority ("FHA") and the Veterans
Administration ("VA"). Mortgage is in compliance, in all material
respects, with all rules, regulations and guidelines applicable to the
authorities granted Mortgage by FHA and VA. Mortgage is approved to
sell mortgage loans to the Mortgage Agencies and the other parties to
the Takeout/Placement Commitments. Mortgage is in good standing with
the Mortgage Agencies and the other parties to the Takeout/Placement
Commitments and is not in default, in any material respect, of any
warranty made as part of the delivery of a mortgage loan to any
Mortgage Agency or any other party to the Takeout/Placement
Commitments. Mortgage has filed all required registrations, filings or
submissions with any federal or state regulatory authority required to
be filed by Mortgage to originate the Loan Applications. To the
Knowledge of the Sellers and Fortress, all such filings are in
compliance, in all material respects, with Applicable Law, and no
material deficiencies have been asserted to Mortgage by any such
authority with respect to such filings or submissions.
Section 7.13 Compliance with Applicable Laws. Except as disclosed on
Schedule 7.13 hereto, the Sellers have complied, in all material respects, with
all Applicable Laws in the conduct of their respective businesses. Except as
disclosed on Schedule 7.13, no Legal Proceeding has been commenced or, to the
Knowledge of the Sellers and Fortress, threatened against either Seller alleging
a failure to so comply. Schedule 7.13 sets forth all material orders,
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decrees, judgments, awards and decisions of any court, governmental authority or
arbitrator to which the Company or Mortgage-Jacksonville or their respective
operations are subject. No action, decree, injunction, order, proceeding or writ
by or before any governmental entity is existing, pending or, to the Knowledge
of the Sellers and Fortress, threatened that would prohibit the Sellers from
consummating the transactions contemplated hereby.
Section 7.14 Absence of Unethical Business Practices. Neither of the
Sellers nor, to the Knowledge of the Sellers and Fortress, any Affiliate thereof
has directly or indirectly given or agreed to give any gift or similar benefit
to any customer, subcontractor, supplier, government employee or other Person
who was or is in a possible position to help or hinder such Seller, which gift
or benefit (a) might subject such Seller to any material damages or penalties in
any civil or criminal proceeding or (b) might have had, singly or in the
aggregate, a Material Adverse Effect if not given or continued.
Section 7.15 Owned Real Property. Schedule 1.01(a)(ii) hereto sets
forth the legal description of each parcel of Real Property that the Company
owns as of the date hereof. Schedule 7.15(a) sets forth the development status
of each unit or phase of each residential project owned by the Company as of the
date hereof, whether development of such unit or phase is being or was done by
the Company (a "Development Project") or a third party developer (a "Lot
Project"). With respect to each unit or phase of the Development Projects,
Schedule 7.15(a) also sets forth the number of residential lots projected to be
yielded by such unit or phase (the "Projected Lot Yield"), the project costs
paid to the date hereof, a copy of the current development budget and the
projected schedule for completion of such unit or phase. Except as set forth in
Schedule 7.15(a), to the Knowledge of the Sellers and Fortress, there are no
current matters affecting those units or phases of the Development Projects that
do not constitute Finished Lots, which would prevent or prohibit the intended
development, use or occupancy of such Real Property or which would cause the
development budget to be materially exceeded or materially delay the completion
of such unit or phase. Except as set forth on Schedule 7.15(b) (which sets
forth, with respect to the unit or phase of the subdivision in which each such
lot is situated, the status of completion of the public improvements, whether a
bond to cover the unfinished public improvements has been posted with the
applicable governmental authority and whether a final plat has been recorded),
the Company has received "Subdivision Acceptance Letters" for each of the lots
under the heading "Finished Lots" on Schedule 7.15(b), which Subdivision
Acceptance Letters are in form and substance similar to those Subdivision
Acceptance Letters received by the Company in the ordinary course of business
consistent with past practices. Except as set forth on Schedule 7.15(c), with
respect to each of the Finished Lots: (i) the appropriate governmental authority
has accepted all public improvements within the phase or unit of the
subdivision; (ii) building permits can be duly issued for all lots within such
subdivision; (iii) certificates of occupancy can be duly issued upon completion
of the improvements permitted to be constructed by any such building permits;
(iv) water and sewer are available for all lots within the subdivision upon the
payment of legally required tap or other connection fees and charges; and (v)
electric service is available upon compliance with the electric utilities normal
and customary requirements.
Section 7.16 Real Property Leases. Schedule 1.01(a)(v) hereto describes
each agreement, contract, commitment, or lease pursuant to which the Company is
the lessor or the
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lessee with respect to any real property (the "Leased Real Property") as of the
date hereof. To the Knowledge of the Sellers and Fortress as to each Real
Property Lease and the Mortgage Lease, no breach or event of default exists and
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 a Seller or any
other Person, except as set forth on Schedule 7.16 hereto.
Section 7.17 Land and Lot Contracts. Under the heading "Land
Contracts," Schedule 1.01(a)(iii) hereto lists all written and oral agreements,
contracts and commitments to which the Company is a party or entered into on
behalf thereof pursuant to which the Company is obligated to or has an option to
purchase any developed or undeveloped real property (the "Land Contract
Property") as of the date hereof. Schedule 1.01(a)(iii) also sets forth the
legal description of each parcel of Land Contract Property or another
description thereof sufficient to identify the Land Contract Property subject
thereto. Schedule 7.17(a) sets forth the status of Sellers' diligence and
projected closing date with respect to each Land Contract Property including
title and survey or plat review and status of development, entitlement, zoning,
concurrency and permitting. In addition, Schedule 7.17(b) hereto sets forth all
letters of intent and similar proposals relating to the purchase of real
property by the Company submitted, received or entered into by the Company as of
the date hereof, which have not by the terms thereof expired or have not been
terminated or which currently are under consideration by the Company.
Section 7.18 Real Property Generally.
(a) Good and Marketable Title. The Company has good and
marketable title in fee simple to the Owned Real Property, subject to
the Liens referred to in Section 7.11. The Owned Real Property and the
Land Contract Property (collectively, the "Real Property") constitute
all the real property which the Company owns or has a right to acquire
or in which it otherwise has an interest, except for the Leased Real
Property. Except as set forth in Schedule 7.18(a), neither Fortress nor
any of its Affiliates (other than the Company) owns or has a right to
acquire or otherwise has an interest in any real property in the
Jacksonville, Florida, metropolitan area.
(b) No Breach or Default. To the Knowledge of the Sellers
and Fortress, except as set forth on Schedule 7.18(b) hereto, with
respect to any written agreements, contracts, covenants, conditions,
deeds, deeds of trust, rights-of-way, easements, mortgages,
restrictions, and other documents granting to the Company title to or
an interest in or otherwise affecting the Owned Real Property, no
breach or event of default exists, and 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 the Company or any
other Person, except for such breach or event of default which would
not have a Substantial Adverse Effect with respect to such property.
(c) No Condemnation. To the Knowledge of the Sellers and
Fortress, except as set forth on Schedule 7.18(c) hereto, no
condemnation, eminent domain or similar proceeding exists, is pending
or is threatened with respect to, or that could reasonably be expected
to affect, any Owned Real Property, Leased Real Property or Land
Contract Property.
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(d) Compliance with Laws. To the Knowledge of the Sellers
and Fortress, except as set forth on Schedule 7.18(d) hereto, the
subdivisions, buildings and improvements on the Owned Real Property and
the Leased Real Property do not violate (i) any Applicable Law,
including any building, set-back, or zoning or comprehensive planning
law, ordinance, regulation, or statute, or other governmental
restriction in the nature thereof, or (ii) any restrictive covenant
affecting any such property, other than, in either case, violations
that would not have, singly or in the aggregate, a Substantial Adverse
Effect with respect to such property.
(e) Parties in Possession. To the Knowledge of the
Sellers and Fortress, there are no parties in possession of any portion
of the Owned Real Property as lessees, tenants at sufferance, or
trespassers, except as set forth on Schedule 7.18(e) hereto.
(f) Site Obligations. To the Knowledge of the Sellers and
Fortress, except as provided in the agreements listed on Schedule
1.01(a)(iii) hereto or as set forth on Schedule 7.18(f) hereto, no
Owned 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, money or other property or to make
off-site public improvements.
(g) Assessments. To the Knowledge of the Sellers and
Fortress, all charges or assessments made against the owner or
developer of the Owned Real Property or against the Owned Real Property
or any lots included therein for installation of public improvements
serving the subdivision, including those for construction of sewer
lines, water lines, storm drainage systems, electric lines, natural gas
lines, streets (including perimeter streets), roads and curbs, have
been paid or are set forth on the March Balance Sheet or have been
incurred since the date thereof in the ordinary course of the Company's
business consistent with past practices.
(h) Subdivision Standards. To the Knowledge of the
Sellers and Fortress, except as set forth on Schedule 7.15 hereto and
other than as would not have a Substantial Adverse Effect with respect
to such Owned Real Property, the Owned Real Property and all lots
included therein conform or will conform to the appropriate
governmental authority's subdivision standards (except for variances
approved by the applicable governmental authority), and there is no
material impediment to subdivision approval for any undeveloped portion
thereof, such approval to allow development of such portion for
construction and sale of homes which the Company currently anticipates
building thereon.
(i) Moratoria. Except as set forth on Schedule 7.18(i)
hereto, there is no moratorium applicable to any of the Owned Real
Property 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.
(j) Construction Conditions. To the Knowledge of the
Sellers and Fortress, except as set forth on Schedule 7.18 (j) hereto
or in the budgets provided to Purchasers,
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each of the lots included in the Owned Real Property is stable and
otherwise suitable for the construction of a residential structure by
customary means and without extraordinary site preparation measures.
(k) Wetland and Other Matters. To the Knowledge of the
Sellers and Fortress, except as set forth on Schedule 7.18(k) hereto,
the Real Property is not located within a "critical", "preservation",
"conservation" or similar type of area and does not contain wetlands
that, in any case, would materially interfere with the development
thereof in accordance with its official development plan and
preliminary or final plat or materially increase development costs
above those contemplated by the Company or delaying construction. To
the Knowledge of the Sellers and Fortress, no portion of the Real
Property is situated within a "noise cone" such that the FHA will not
approve mortgages due to the noise level classification of such real
property.
(l) Certain Prior Uses. To the Knowledge of the Sellers
and Fortress, none of the Real Property has been used as a gravesite.
(m) Water Issues. To the Knowledge of the Sellers and
Fortress, none of the development-site preparation and construction
work performed on the Owned Real Property has concentrated or diverted
surface water or percolating water improperly onto or from the Owned
Real Property.
(n) Third Party Rights. Except as set forth on Schedule
7.18(n) hereto, the Company has not granted to any Person any contract
or other right to the use of any portion of the Owned Real Property or
to the furnishing or use of any facility or amenity on or relating to
the Owned Real Property.
(o) Zoning. Except as set forth on Schedule 7.18(o)
hereto, all of the Owned Real Property is zoned or located within an
appropriate comprehensive planning district to permit either
single-family home, townhouse or condominium construction and occupancy
thereon.
(p) No Foreign Persons. Neither the Company nor Fortress
is a "foreign person" within the meaning of Sections 1445 and 7701 of
the Code.
(q) Surveys. The Company has delivered or made available
to DRH a recorded plat on each parcel of Owned Real Property that has
been finally platted, a preliminary plat on each parcel that has been
preliminarily platted, and such surveys of the Owned Real Property that
has been preliminary platted but not finally platted as the Company
possesses.
Section 7.19 Environmental Matters.
(a) No Violation of Environmental Laws. Except as set
forth on Schedule 7.19 hereto or in environmental reports identified
thereon, the Company is in compliance, in all material respects, with
all Environmental Laws. Schedule 7.19 lists, and the
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Company has made available to the Purchasers true and complete copies
of, all reports, studies and other materials which the Company or
Fortress possesses or controls which pertain to the environmental
condition of the current assets of the Company.
(b) No Liability. Except as described on Schedule 7.19
hereto or in environmental reports identified thereon, to the Knowledge
of the Sellers and Fortress, neither the Company nor any asset thereof
is subject to any material liability (absolute, contingent, or
otherwise) or Lien in connection with any release or threatened release
of any Material of Environmental Concern into the environment or
subject to any reclamation or remediation requirements under any
Environmental Laws.
(c) Not Named as a Potentially Responsible Party. To the
Knowledge of the Sellers and Fortress, the Company has never received
any notice or claim that it is or may be liable for investigation or
remediation of Materials of Environmental Concern under any
Environmental Laws.
(d) No Materials of Environmental Concern Incorporated
into Any Acquired Assets. Except as described on Schedule 7.19 hereto
or the environmental reports identified thereon, to the Knowledge of
the Sellers and Fortress, no Materials of Environmental Concern were
incorporated into any of the Acquired Assets prior to the acquisition
thereof by the Company, and no Materials of Environmental Concern have
been incorporated into any of the Acquired Company Assets following the
acquisition thereof by the Company.
(e) No Materials of Environmental Concern on the Real
Property. Except as described on Schedule 7.19 hereto or the
environmental reports identified thereon, neither the Company nor, to
the Knowledge of the Sellers and Fortress, any other Person has engaged
in or permitted any activity upon the Real Property or the Leased Real
Property, involving the discharge, disposal, dumping, generation,
handling, manufacture, refining, release, treatment, deposit,
production, storage or use of any Materials of Environmental Concern
on, under, in, or about the Real Property or the Leased Real Property,
or transported any Materials of Environmental Concern to, from, or
across the Real Property or the Leased Real Property. To the Knowledge
of the Sellers and Fortress, no Materials of Environmental Concern have
migrated or threatened to migrate from any other properties, upon,
about, or beneath the Real Property or the Leased Real Property, in
either case following the acquisition of the Real Property or Leased
Real Property by the Company.
(f) No Storage Tanks. Except as described on Schedule
7.19 hereto or the environmental reports identified thereon, to the
Knowledge of the Sellers and Fortress, no underground storage or
treatment tanks exist on or under the Real Property or the Leased Real
Property.
(g) No Notices. Except as described on Schedule 7.19
hereto or the environmental reports identified thereon, none of the
Company, any Affiliate thereof or, to the Knowledge of the Sellers and
Fortress, any prior occupant, owner, tenant, or user
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of the Real Property or the Leased Real Property or any other Person
has received any written notice or other written communication
concerning (i) any violation or alleged or probable violation of any
Environmental Laws or (ii) any alleged liability for environmental
damages, in either case, in connection with the Real Property or the
Leased Real Property. Except as described on Schedule 7.19 hereto or
the environmental reports identified thereon, no citation, claim,
directive, investigation, lawsuit, proceeding, or summons is existing,
pending or, to the Knowledge of the Sellers and Fortress, threatened
relating to the maintenance, operation, ownership, or use of the Real
Property or the Leased Real Property, or relating to any alleged
violation of any Environmental Laws by the Company or, to the Knowledge
of the Sellers and Fortress, any other Person, or the suspected
presence of any Materials of Environmental Concern in, on or under the
Real Property or the Leased Real Property. Except as described on
Schedule 7.19 or the environmental reports listed thereon, to the
Knowledge of the Sellers and Fortress, no circumstance exists that
would provide a basis for the institution or filing of any such
citation, claim, directive, investigation, lawsuit, proceeding, or
summons as described above, and no decree, injunction, judgment, or
writ relating to any of the foregoing is outstanding.
(h) Permitted Use. Notwithstanding anything to the
contrary in Section 7.19, the storage or use of minimal quantities of
Materials of Environmental Concern on the Real Property or the Leased
Real Property shall not be a breach of the representations and
warranties in Section 7.19; provided that such materials are of a type
and are used and stored only in a quantity normally used or stored in
connection with the construction, development, occupancy or operation
of residential developments, houses and related common facilities
(including fuel, paint, cleaning fluids and supplies normally used in
the construction, development, occupancy or operation of residential
developments, houses, and related common facilities), and such
materials are being and have been held, stored and used in compliance,
in all material respects, with all Applicable Laws.
Section 7.20 Material Contracts.
(a) Company Contracts. Under the appropriate subheading
described below, Schedules 1.01(a)(iii) and (a)(vii) hereto list as of
the date hereof all written and oral agreements, contracts,
commitments, options, and leases to which the Company is a party:
(i) Home Contracts and Development Agreements.
Pursuant to which the Company is obligated to construct or
sell a residence or other building or improvement or which
relates to the development of any real property or interest in
real property, including any partnership or joint venture
formed for such purpose;
(ii) Subcontractor Contracts. Pursuant to which
any Person provides services to the Company in connection with
the construction of homes, the development of real property or
the construction of other
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projects, except those which are terminable by the Company
without further liability on not more than 30 days' notice;
(iii) Supplier Contracts. Pursuant to which any
Person provides products or materials to the Company or the
Company is required to purchase products or materials in
connection with the construction of homes or the development
of real property, except those which are terminable by the
Company without further liability on not more than 30 days'
notice;
(iv) Personal Property Leases. Pursuant to which
the Company is the lessor or the lessee of any personal
property, or holds or operates any equipment, machinery,
vehicle, or other tangible personal property owned by a third
party and used in connection with the Company's business;
(v) Data Processing Contracts. Pursuant to which
any Person provides computer or data processing services to
the Company in connection with its accounting and financial
records or otherwise;
(vii) Other Contracts. Other than as previously
described in this Section 7.20 or in Sections 7.16 or 7.17,
any (A) confidentiality, consulting, employment, non-compete,
right of first refusal or first offer, and secrecy agreements
and contracts, (B) indentures, loan or credit agreements,
guarantees, letters of credit, or other agreements or
instruments relating to the borrowing or lending of money or
the extension of credit, together with any documents granting
any Lien or other security therefor, (C) sales agency, broker,
or finder contracts, (D) loan origination or customer referral
agreements, (E) consulting, advisory, marketing, management
and other service agreements, except those which are
terminable by the Company without further liability on not
more than 30 days' notice, (F) performance, completion,
surety, or other bonds or performance guarantees, (G)
indemnity agreements and warranty programs, (H) agreements
between the Company and Fortress or any of its Affiliates, (I)
agreements providing for the acquisition of a substantial
portion of the assets of any Person (or any division thereof)
or business or providing for the payment of any earnout or
other contingent consideration in respect thereof, and (J)
contracts, whether or not made in the ordinary course of
business, that require an aggregate payment in any 12 month
period in excess of $200,000.
(b) Mortgage Contracts. Schedule 1.01(b) sets forth as of
April 30, 2001, all the Loan Applications and Takeout/Placement
Commitments and correctly describes, in all material respects, as to
the Loan Applications, the amount thereof, the deposits, fees and
prepayments related thereto and the status thereof, including: (i)
whether they have been pre-qualified, preliminarily approved or finally
approved (whether by an automated
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approval program or by an individual), (ii) whether they are qualifying
or non-qualifying for resale to a Mortgage Agency or any other party to
a Takeout/Placement Commitment, (iii) whether the interest rates have
been locked in with respect thereto and (iv) whether
Mortgage-Jacksonville has a right or obligation to sell the mortgage
loan (including the loan program or other arrangement through which
sale is anticipated and the material terms of sale) or to transfer
servicing rights. Schedule 7.20(b) hereto includes copies of the
standard loan application forms and related disclosure and other
documents used by Mortgage-Jacksonville in connection with its
origination of mortgage loans.
Section 7.21 Acquired Contracts, Etc., Generally.
(a) Valid and Binding. Each material Acquired Contract,
Real Property Lease and Personal Property Lease is valid, binding, and
in full force and effect. Except as set forth on Schedule 7.21(a)
hereto, no material Acquired Contract, Real Property Lease or Personal
Property Lease has been amended or supplemented in any way and, to the
Knowledge of the Sellers and Fortress, no party thereto has assigned
any of its rights or delegated any of its duties thereunder. True and
complete copies of the Acquired Contracts, Real Property Leases and
Personal Property Leases have been delivered to the Purchasers.
(b) No Breach or Default. Neither the Sellers or Fortress
nor, to the Knowledge of Seller or Fortress, any other party to any
material Acquired Contract, Real Property Lease or Personal Property
Lease is in violation or breach of or default, in any material respect,
under any such Acquired Contract, Real Property Lease or Personal
Property Lease or with notice or lapse of time or both, would be in
violation or breach of or default, in any material respect, under any
such Acquired Contract, Real Property Lease or Personal Property Lease.
(c) No Amounts Owed. As of the Closing Date, neither of
the Sellers will owe any amount (whether absolute, contingent, or
otherwise) with respect to any Acquired Contract, Real Property Lease
or Personal Property Lease, other than amounts required to be set forth
on the March Balance Sheet in accordance with generally accepted
accounting principles consistent with the principles historically
applied by the Company or amounts incurred since the date thereof in
the ordinary course of business consistent with past practices, the
Acquired Contracts, Real Property Leases or Personal Property Leases
and this Agreement, which amounts will have been properly included on
the Final Balance Sheet to the extent required by generally accepted
accounting principles applied on a basis consistent with such
principles that the Company has previously used.
(d) No Burdensome Contracts. Except as set forth on
Schedule 7.21(d) hereto, no Acquired Contract, Real Property Lease or
Personal Property Lease guarantees any obligation of another Person or
provides any type of indemnification or restricts the ability of the
Company or its Affiliates to compete, other than this Agreement.
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(e) Loan Applications. The Loan Applications have been
solicited and processed in the ordinary course of business consistent
with past practice, including the application of credit criteria set
forth on Schedule 7.21(e) hereto. The Loan Applications have also been
solicited and processed in compliance, and the terms thereof comply, in
all material respects, with Applicable Law, private mortgage insurance
requirements, the requirements, guidelines and directives for
origination of the Mortgage Agencies, the FHA, the VA and the other
parties to the Takeout/Placement Commitments, including the Truth in
Lending Act of 1969, Federal Reserve Regulation Z, the Equal Credit
Opportunity Act, the Fair Credit Reporting Act, the Real Estate
Settlement Procedures Act of 1974 (and Regulation X thereunder), the
Flood Disaster Protection Act of 1973, the Fair Housing Act, the Home
Mortgage Disclosure Act, the Financial Institutions Reform Recovery and
Enforcement Act of 1989, and all Applicable Laws relating to usury,
adjustable rates mortgages, negative amortization and graduated payment
mortgages.
(f) Leases. Except as set forth on Schedule 7.21(f)
hereto, the Sellers have paid all rental and other payments due under
each material Personal Property Lease and Real Property Lease and the
Mortgage Lease (collectively, the "Leases") in accordance with their
respective terms. No indulgence, postponement, or waiver of any of the
Sellers' material obligations under any such Lease has been granted by
the lessor except as set forth on Schedule 7.21(g). The Company or
Mortgage is in possession of all real property and personal property
covered by the Leases. To the Knowledge of the Sellers and Fortress,
the Company or Mortgage, as the case may be, possesses full right and
power to occupy or possess, as the case may be, all of the buildings,
equipment, machinery, real property, vehicles, and other tangible
property covered by the Leases.
Section 7.22 Accounts Receivable. The accounts and notes receivable
reflected on the March Balance Sheet and all accounts and notes receivable of
the Company arising since the date thereof, other than accounts and notes
receivable collected since then in the ordinary course of business consistent
with past practices and this Agreement, (a) arose from bona fide sales or
contracting transactions by the Company in the ordinary course of business
consistent with past practices, (b) represent bona fide indebtedness of the
respective debtors, (c) are collectible in full in accordance with their terms
at their recorded amounts in the ordinary course of business after the
respective dates thereof, subject only to the reserve for bad debts set forth in
the March Balance Sheet or the reserve for bad debts to be set forth on the
Final Balance Sheet, and (d) except as set forth on Schedule 7.22 hereto, are
not subject to any defense or offset.
Section 7.23 Intellectual Property. Schedule 1.01(a)(iv) hereto sets
forth a list of all the Intellectual Property owned or used by the Company.
(a) The Company (i) owns all right, title, and interest
in its Intellectual Property, without any obligation to make any
license, royalty, or other payment with respect thereto, including any
license, royalty, or other payment resulting from any infringement of
any third party rights, or (ii) has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the Company's business as presently
conducted.
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(b) (i) The Company has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of any third parties, and (ii) to the
Knowledge of Sellers and Fortress, the Company has not received any
charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including
any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of
Sellers and Fortress, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company in any material respect.
(c) The Company is the owner of the Florida servicemark
"Fortress Homes and Communities of Florida" (the "Company Name").
Except as set forth on Schedule 7.23(c), to the Knowledge of Sellers
and Fortress, no other Person has the right to use the Company Name
either in the identical form or in such near resemblance as to be
likely, when applied to the goods or services of such Person, to cause
confusion, to cause mistake, or to deceive.
(d) The Company has the right to use, without the payment
of further compensation inconsistent with past practice, all housing
plans, blueprints, elevation drawings, diagrams, and the like currently
being used by the Company in the construction of homes.
Section 7.24 Litigation and Claims. Except as described on Schedule
7.24 hereto and except for proceedings and claims in which only damages are
sought not involving, individually or together with similar proceedings or
claims, $15,000 or more in alleged damages, no Legal Proceeding is pending or,
to the Knowledge of the Sellers and Fortress, threatened against or affecting
(a) the Company or (in connection with the businesses of the Sellers) Fortress,
(b) any Acquired Asset, (c) the business of the Company or
Mortgage-Jacksonville, or (d) the execution, delivery, or performance of this
Agreement or any agreement, certificate or other document to be delivered
pursuant hereto by the Sellers or Fortress. Except as described on Schedule
7.24, to the Knowledge of the Sellers and Fortress, there are no acts,
conditions, circumstances, events, or incidences that is likely to result in a
Legal Proceeding that if adversely determined would have a Material Adverse
Effect. Except as described in Schedule 7.24, and in Schedule 1.01(a)(iii)
hereto, there is no material judgment or settlement agreement that a Seller has
entered into or by which it is bound with respect to any administrative or
judicial proceedings. No Legal Proceeding is reasonably expected to have, singly
or in the aggregate, a Material Adverse Effect.
Section 7.25 Insurance. All insurance policies in effect on the date
hereof that provide any type of insurance coverage for the Company, including
insurance coverage with respect to business casualties, business travel, errors
and omissions, workers' compensation, extended coverage, fire, and general
business liabilities are described on Schedule 7.25 hereto (collectively, the
"Insurance Policies"), together with the premiums currently payable thereon and
a description of the coverage limits and periods of coverage with respect
thereto.
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Section 7.26 Customers. Except as disclosed on Schedule 7.26 hereto,
during the last five years neither the Company, Mortgage-Jacksonville nor any
Affiliate thereof has been involved in any material controversy with any group
of similarly situated purchasers of residences or lots from the Company or any
Affiliate thereof or borrowers of Mortgage-Jacksonville. During the last five
years neither the Company or any Affiliate thereof has been involved in any
material controversy as to an Acquired Company Contract or the construction work
performed in connection therewith except as set forth on Schedule 7.26.
Section 7.27 Subcontractors. Except as set forth on Schedule 7.27
hereto, neither the Company or any Affiliate thereof is involved in any
controversy involving $30,000 or more with any subcontractors of the Company.
Schedule 7.27 lists all subcontractors to whom the Company paid more than
$200,000 during the 12 months ended December 31, 2000.
Section 7.28 Suppliers. Except as set forth on Schedule 7.28 hereto,
neither the Company or any Affiliate thereof is involved in any controversy
involving $30,000 or more with any of the suppliers of the business of the
Company. Schedule 7.28 lists all suppliers from whom the Company purchased more
than $200,000 during the 12 months ended December 31, 2000.
Section 7.29 Warranty Obligations. Except as set forth on Schedule
7.29(a) hereto, the Company does not have any warranty claims that will exceed
the amounts reserved therefor on the March Balance Sheet. Except as set forth on
Schedule 7.29(b) hereto, no product constructed, manufactured, sold, leased or
delivered by the Company is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of the Company's
sale, lease or construction contracts. Schedule 7.29(b) includes copies of the
standard terms and conditions of construction contract, sale contracts and
leases of the Company containing applicable guaranty, warranty, and indemnity
provisions. To the Knowledge of the Sellers and Fortress, no events have
occurred or facts exist that could result in a material increase in any future
expense related to the guaranty, warranty, and indemnity obligations of the
Company described on Schedule 7.29(a), except as described on such schedule. The
Company does not have any undisclosed material liability (and, to the Knowledge
of Sellers and Fortress, there is no basis for any present or future material
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Company giving rise to any liability) arising out of any
injury to individuals or property as a result of the ownership, possession,
construction, or use of any product sold, leased, constructed or delivered by
the Company except as described in Schedule 7.29(a).
Section 7.30 Taxes. Except as provided in Schedule 7.30 hereto:
(a) Tax Returns. The Company has or will have duly filed
when due, including any extensions, all material Tax reports and
returns required to be filed for any period prior to the Closing Date
in connection with its assets, business, and employees, and has or will
have timely paid and discharged all Tax obligations shown thereon. Such
Tax reports and returns are accurate, correct, and complete in all
material respects.
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(b) No Notices. Neither the Company nor Fortress has
received any notice of any proposed or outstanding material Tax
deficiency against or allocable to the Company or as to which the
Company has any liability, and the Company has not executed or
consented to any extension agreement or waiver of any statute of
limitations with respect to the assessment or collection of any
material Tax.
(c) No Tax Liens. No Tax Liens exist with respect to any
Acquired Asset except for Liens for Taxes not yet due and payable or
being contested in good faith by appropriate proceedings.
(d) Additional Jurisdictions. No claim is being made by
an authority in a jurisdiction where the Company does not file a return
that it is or may be subject to Taxation by that jurisdiction.
(e) Copies of Returns, etc. The Company has made
available to the Purchasers correct and complete copies of all material
Tax returns filed by the Company and all examination reports and
statements of deficiencies with respect thereto assessed against or
agreed to by the Company for the last three years.
Section 7.31 Employees. The Purchasers have been provided with
a list that, to the Knowledge of Sellers and Fortress, accurately
represents the names of all employees as of the date hereof (including
those on leave of absence or layoff status) of the Company or
Mortgage-Jacksonville, their job title, employment date, and their
current aggregate annual cash compensation showing the components
thereof. To the Knowledge of the Sellers and Fortress, no executive,
key employee, or significant group of employees plans to terminate
employment with the Company during the next 12 months. Schedule 7.31
sets forth a list of each management or employment contract or contract
for personal services between the Company, Mortgage-Jacksonville or any
Affiliate thereof and any officer, consultant, employee, or agent of
the Company or Mortgage-Jacksonville.
Section 7.32 Employee Benefit Plans and Related Matters.
(a) Employee Benefit Plans and Similar Arrangements.
Neither the Company, Mortgage nor any ERISA Affiliate thereof has
incurred any material liability under Title IV of ERISA.
(b) Qualified Plans. The Fortress 401(k) Plan is the only
pension and retirement plan sponsored or maintained by Fortress or any
ERISA Affiliate thereof for the employees of the Sellers.
Section 7.33 Labor Relations; Compliance. Neither the Company, Mortgage
nor Fortress is currently a party to any collective bargaining or other labor
contract affecting the business of the Company or Mortgage-Jacksonville, as the
case may be, except as set forth on Schedule 7.33 hereto. There is not presently
pending or existing, and to the Knowledge of the Sellers and Fortress, there is
not threatened or contemplated any attempts to organize for
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collective bargaining purposes any of employees engaged in the business of the
Company. Since January 1, 1998, there has been no work stoppage, strike or other
concerted action by the employees of the Sellers which materially adversely
affected the respective businesses of the Sellers, nor to the Knowledge of the
Sellers and Fortress are any such events threatened or contemplated.
Section 7.34 Homeowner Associations. Schedule 7.34 hereto sets forth
all homeowner associations (the "Homeowner Associations") in which the Company
has declarant rights with respect to the Real Property as of the date hereof.
Except as described on Schedule 7.34, all restrictive covenants and other
documents used by the Company in connection with the creation and operation of
the Homeowner Associations comply in all material respects with Applicable Laws,
and all disclosures and deliveries of information and documents required by
Applicable Laws as to such Homeowner Associations and their creation and
operation have been complied with in all material respects. Schedule 7.34
contains a schedule of all amounts owing between the Homeowners Associations and
the Company. To the Knowledge of the Sellers and Fortress, each Homeowner
Association as to which the Company is the declarant, when operated by the
Company, was or has been operated in accordance with Applicable Laws.
Section 7.35 Bank Accounts. Schedule 7.35 hereto describes each bank,
money market, mutual fund or similar account that the Company maintains at any
financial or other institution, including any lock box arrangements or safe
deposit boxes. Schedule 7.35 also describes all individuals authorized to draw
upon such accounts or have access to such safe deposit boxes.
VIII. COVENANTS
Section 8.01 Access to Information. From the date hereof through the
Closing Date, the Sellers and Fortress shall provide Xxxxxx and the Purchasers
and their employees, advisors and other representatives with full access, upon
reasonable prior notice, to the Acquired Assets and the business of the Company
and Mortgage-Jacksonville, including the books and records of the Company and
Mortgage-Jacksonville, but only to the extent that such access does not
unreasonably interfere with the operations of the Sellers. During such period
the Sellers and Fortress shall cause their respective officers, employees, and
advisors to furnish promptly to Xxxxxx and the Purchasers such financial and
operating information concerning the Company, including copies of any requested
documents, and to be available to discuss such information as Xxxxxx or the
Purchasers may reasonably request. The Sellers and Fortress shall, and shall
cause their officers and employees to, cooperate fully with, and they shall
request their public accountants and outside legal counsel to cooperate fully
with, the Purchasers and to make a full and complete disclosure to the
Purchasers of all material facts regarding the assets, liabilities, financial
condition, business, operations and prospects of the Sellers.
Section 8.02 Operation Pending the Closing. From the date hereof
through the Closing Date, the Sellers shall:
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(a) Operate the Business in the Ordinary Course. Operate
the business of the Company and Mortgage-Jacksonville in the ordinary
course of business consistent with past practices and this Agreement
and in compliance, in all material respects, with all Applicable Laws;
(b) Maintain Goodwill. Use its commercially reasonable
efforts to preserve intact the business of the Company and
Mortgage-Jacksonville and the goodwill of their customers, employees,
agents, subcontractors, suppliers, and any other Persons having
business relations with them;
(c) Maintain Assets. Maintain in good order and repair
the tangible Acquired Assets subject to ordinary wear and tear;
(d) Insurance Coverage. Continue in effect all
Insurance Policies; and
(e) Representations and Warranties. Use its commercially
reasonable efforts to operate and maintain the Acquired Assets and the
businesses of the Company and Mortgage-Jacksonville in such a manner so
that the representations and warranties of the Sellers and Fortress
contained herein shall continue to be true and correct at all times
prior to the Closing Date as if made on and as of such times.
Section 8.03 Changes to the Information Disclosed on the Schedules.
From the date hereof through the Closing Date, the Sellers shall promptly notify
the Purchasers of:
(a) Information on the Schedules. Any changes to the
information disclosed on any schedule hereto, including changes
occurring after the date hereof (although such disclosure shall not in
any way amend or supplement any schedule); and
(b) Representations and Warranties. Any condition,
circumstance, fact, or other information that may cause the
representations and warranties of the Sellers or Fortress contained
herein to be incomplete or untrue at any time prior to the Closing Date
as if made on and as of any such time or cause the Company or Fortress
to be unable to perform their respective covenants contained herein
required to be performed on or before the Closing Date.
Section 8.04 Satisfaction of the Closing Conditions. The Sellers and
Fortress shall use their commercially reasonable efforts to cause the Purchaser
Conditions to be satisfied as promptly as possible. The Purchasers shall use
their commercially reasonable efforts to cause the Company Conditions to be
satisfied as promptly as possible.
Section 8.05 Title Policy. Prior to the Closing Date, the Company shall
provide DRH with commitments for title insurance from a title insurance company
acceptable to DRH (the "Title Company") for each parcel of Real Property for DRH
to review, together with copies of all documents and exceptions listed thereon.
The Company acknowledges that DRH has the right to object to the Liens (other
than the Liens described in clauses (a), (b) and (c) of Section 7.11),
exceptions and other matters set forth in such commitments notwithstanding the
representations
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and warranties set forth in Section 7.11. At the Closing, for each parcel of
Real Property, the Company shall cause to be delivered to DRH, the cost and
expense of which shall be borne by the Company, an Owner's Policy of Title
Insurance or endorsements to existing policies or a binding commitment by the
Title Company to issue an Owner's Policy of Title Insurance with an effective
date as of the Closing Date (each such policy and endorsement, together with
reinsurance, may be referred to as a "Title Policy") naming DRH as the insured.
The Title Policy shall only be subject to (a) ad valorem and real property Taxes
not yet due and payable, (b) Liens permitted pursuant to clauses (a), (b) and
(c) of Section 7.11, and (c) such other matters as are acceptable to the
Purchasers in the Purchasers' sole discretion; provided, however, that the Title
Policy will not be subject to any subsequent assessments for the current or
prior Tax periods. The Title Policy shall be issued by the Title Company in an
amount equal to the fair market value of such Real Property, but in no event
less than the amount allocated thereto on Schedule 2.03 hereto, together with
reinsurance in amounts, with Persons and on terms acceptable to DRH, and shall
contain an endorsement that excludes any exception, condition or exclusion from
coverage for creditors' rights and such further endorsements as DRH shall
reasonably request.
Section 8.06 Surveys. Prior to the Closing Date, the Company shall
deliver, at the cost and expense of the Company, all of the surveys in its
possession for the Owned Real Property and Land Contract Property, other than
Real Property that has been finally platted (the "Surveys").
Section 8.07 Environmental Studies. Prior to the Closing Date, DRH may
engage, at its sole cost and expense, one or more environmental consulting firms
(the "Environmental Consultants") to investigate, analyze, and report on any
possible violation of Environmental Laws or the possible existence, handling,
generation, processing, refining, manufacture, treatment, storage, use, release,
discharge, disposal, dumping or migration (whether legal or illegal, accidental
or intentional) of any Materials of Environmental Concern on, to, from or
otherwise relating to any Real Property, Leased Real Property, any other real
property that the Company acquires or possesses the right to acquire and any
other real property in the vicinity of such real property. The Company shall
cooperate with the Environmental Consultants in connection with its
investigation, and shall permit the Environmental Consultants to perform such
tests upon such real property as the Environmental Consultants deem appropriate;
provided that such Environmental Consultants may not perform intrusive or
destructive testing without prior written consent (not unreasonably withheld or
delayed), which consent may be subject to reasonable terms, conditions,
limitations and indemnifications appropriate for the extent of testing. DRH
shall use its commercially reasonable efforts to cause the Environmental
Consultants to deliver their reports (the "Environmental Reports") to DRH prior
to the Closing Date. DRH shall deliver to the Company copies of the final
written reports of the Environmental Consultants when received. DRH shall
indemnify and hold harmless the Company and its Affiliates, officers, directors,
employees and agents from and against any and all Losses suffered or incurred
with respect to personal injury or property damage arising out of or in
connection with the investigation, including any site visit and testing by DRH,
the Environmental Consultants or DRH's representatives and resulting from an act
or omission of DRH, the Environmental Consultants or DRH's other representatives
in the course of any on-site environmental diligence inspections; provided that
DRH shall not be obligated to provide
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indemnity under this Section 8.07 to the extent the Loss resulted from the
negligence of the Company or its representatives.
Section 8.08 Employees. DRH and CHM shall offer employment to all
employees of the Company and Mortgage-Jacksonville, respectively, on terms and
conditions acceptable to the Purchasers; provided that, subject to Section
8.10(b), employee benefits shall not be less favorable than those provided to
employees having comparable positions with the Purchasers or other Affiliates of
Xxxxxx. The Sellers shall pay any severance payments or rights, if required, in
respect of any employees who do not become employees of the Purchasers on the
Closing Date. During the period beginning on the date hereof and ending on the
Closing Date, the Sellers shall assist the Purchasers in interviewing the
employees of the Company and Mortgage-Jacksonville. With respect to any such
employee who has an employment agreement with the Company, the Company shall use
commercially reasonable efforts to cause the terms of such employment agreement
to be amended, so that such terms are mutually acceptable to DRH and such
employee and DRH may assume such employment agreement. The Sellers shall be
solely responsible for any notice or other requirements or liabilities relating
to the transactions contemplated hereby (a) under the Worker Adjustment and
Retraining Notification Act or similar state law with respect to employees of
the Sellers who do not become employees of the Purchasers on the Closing Date
and (b) except as quantified in the Final Balance Sheet, under any Employee
Plans.
Section 8.09 COBRA. The Sellers shall be responsible for the health
care continuation coverage provisions of COBRA with respect to any employee of
the Company or Mortgage-Jacksonville, respectively, who does not accept
employment by the Purchasers and who is or becomes a qualified beneficiary under
COBRA prior to, as of or concurrent with the Closing Date, with respect to any
healthcare plan sponsored or maintained by a Seller or Fortress. Except to the
extent quantified on the Final Balance Sheet, the Sellers shall remain liable
with respect to any retiree medical obligations that exist as of the Closing
Date and concern the employees of the Sellers.
Section 8.10 Other Benefit Matters.
(a) Eligibility for Purchaser Plans. The Purchasers shall
cause the employees of the Sellers who accept employment with the
Purchasers to be eligible to participate in all of the benefit plans,
programs and policies sponsored by the Purchasers for the benefit of
their respective employees generally, to the extent they would
otherwise be eligible under such plans, at the same benefit levels as
are generally applicable to other similarly situated employees of the
Purchasers. Such plans, programs, and policies are set forth in
Purchasers' employee handbooks, copies of which have been made
available to the Sellers. The Purchasers are subsidiary corporations
and participating employers for the purposes of the X.X. Xxxxxx, Inc.
Stock Purchase Plan of 1999.
(b) Recognition of Company Service. The Purchasers shall
cause the employees of the Sellers who accept employment with the
Purchasers to receive credit for all of their service prior to the
Closing Date with the Sellers under all employee benefit plans,
programs, and policies sponsored by the Purchasers for the benefit of
employees generally (but not for benefit accrual purposes or early
retirement subsidies,
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and not for vesting under the X.X. Xxxxxx Stock Tenure Plan). Except as
otherwise herein provided, such prior service shall be credited for
both eligibility and vesting purposes, and for purposes of any benefit
schedule based on service (e.g. for vacation pay, sick days and
personal days).
(c) Immediate Participation. The Purchasers shall cause
the employees of the Sellers who accept employment with Purchasers who
have satisfied any applicable service requirements (taking into account
past service credited under paragraph (b) above) to commence
participation in Xxxxxx'x 401(k) Plan within 30 days after the Closing
Date. The Purchasers shall also cause all employees of the Sellers who
accept employment with the Purchasers (and their eligible dependents)
and who are in an eligible employment category to be eligible for
coverage under Purchasers' group health care plan, group term life
insurance plan, and group long-term disability plan without
interruption of coverage and shall waive all pre-existing conditions,
restrictions, and limitation for any medical condition thereof at or
prior to the Closing, except to the extent coverage of such medical
condition would be limited under the Sellers plan applicable to the
affected employee (or eligible dependent) at or prior to the Closing
Date.
(d) Fortress 401(k) Plan. Fortress shall, with respect to
all employees who are participants in The Fortress Group, Inc. 401(k)
Profit Sharing Plan (the "Fortress 401(k) Plan"), contribute and
allocate to the accounts of such participants all employer
contributions (including matching contributions with respect to all
employee contributions and salary deferrals) for the portion of the
current plan year ending on the Closing Date that would otherwise have
been made to the Fortress 401(k) Plan for the current 2001 plan year
but for the transactions contemplated hereby, without regard to any
year of service or last day of year active participant requirements.
Fortress shall cause the accounts of all participants in the Fortress
401(k) Plan to be fully vested as of the Closing Date.
Section 8.11 Warranty or Other Work. DRH shall use its commercially
reasonable efforts to perform warranty work in respect of the customer and site
development warranty obligations retained by the Company pursuant to Section
1.05, to the extent contemplated by this Section 8.11. Warranty work under the
Company's standard one-year customer warranty shall be undertaken in each case
that such work is required by the applicable warranty if (a) the Company
requests such work or (b) as to any warranty work to be performed after the
amount of the customer warranty reserve set forth on the Final Balance Sheet has
been exceeded, DRH provides prior notice to the Company that it has identified
required work so that the parties may discuss in advance any disagreement as to
whether the work is required. The Company shall pay DRH for the materials, labor
and other work performed or to be performed by third parties with respect to all
such work at DRH's costs therefor to the extent the aggregate amount thereof
exceeds the amount of the customer warranty reserve set forth on the Final
Balance Sheet. The Company and DRH shall keep each other reasonably informed as
to any customer warranty claims subject to this Section 8.11. The Company shall
promptly submit any customer warranty claims that are covered by insurance or
another warranty program to the insurance company or other Person obligated to
pay or otherwise perform with respect to such claims. The Company
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shall cause DRH and Xxxxxx to be named as additional insureds with respect
thereto on or before the Closing Date.
Section 8.12 No Public Announcement. The parties hereto shall not issue
any press release or make any public statement concerning this Agreement or the
transactions contemplated hereby without obtaining the prior consent of the
other parties hereto, which consent shall not be unreasonably withheld or
delayed; provided that upon the execution of this Agreement, Fortress and Xxxxxx
shall be entitled to issue such press releases or make any public statements
concerning this Agreement or the transactions contemplated hereby required or
advisable under applicable securities laws or the rules of any exchange or
system on which any securities of Fortress or Xxxxxx are traded.
Section 8.13 Use of Names. Through December 31, 2001, the Purchasers
may continue to use existing supplies of forms, applications, brochures, signage
and advertising of the Sellers, together with all trade names, trademarks,
service marks, logos and the like thereon and the URL "xxx.xxxxxxxxxxxxx.xxx" so
as to permit an orderly transition to DRH's operations.
Section 8.14 Successor Status for Payroll Tax Purposes. The Sellers and
the Purchasers agree that from and after the Closing each shall file all forms,
including Forms W-2, W-3, 940 and 941, and take all additional actions necessary
to permit the Purchasers to obtain successor status under all applicable Federal
and state payroll tax reporting requirements.
Section 8.15 Access. For a period of five years after the Closing Date,
the Purchasers shall permit the Sellers, Fortress and its Affiliates, and their
employees, advisors and other representatives, reasonable access to the books
and records of the Purchasers for the period prior to the Closing Date to permit
the preparation of Tax returns and the resolution of any Tax matters raised by
any Taxing authority. All information so obtained shall be subject to the
Non-Disclosure Obligation.
Section 8.16 Insurance. Fortress shall continue to list or cause to be
listed the Company and Mortgage as named insureds under each Insurance Policy
and any insurance policies of Fortress and its Affiliates that provide coverage
for matters similar to the matters covered thereby. In addition, Fortress shall
cause the Purchasers and Xxxxxx to be named as additional insureds under all
such policies insofar as they relate to the Acquired Assets or the operations of
the Sellers prior to the Closing Date, which policies shall include completed
operations coverage and waivers of transfer of rights of recovery in favor of
the Purchasers and Xxxxxx.
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IX. NON-COMPETITION AND NON-DISCLOSURE COVENANTS
Section 9.01 Covenant Not to Compete.
(a) Company Business. The Company and Fortress, jointly
and severally, covenant and agree that during the Non-Compete Period
neither of them will directly or indirectly:
(i) Engage in Home Building Activities. Own,
manage, operate, engage in, serve as an advisor or consultant
for, control, or otherwise participate in any of the following
activities: (i) the construction or sale of single-family or
multi-family residences, (ii) the development of real property
for use as lots for residential construction, or (iii) any
activities ancillary or related to the foregoing activities
(collectively, "Building Activities"), or be involved as a
stockholder, partner, member, guarantor, or other holder of an
interest in any Person engaging in any such activities, in
each case in the State of Florida within 100 miles of any
county in which the Company currently operates;
(ii) Solicit Employees. Solicit to employ or
employ any employee of DRH, Xxxxxx or any Affiliate thereof
while such Person is employed by any of them; provided that
the foregoing shall not prohibit general solicitations of
employment not specifically directed towards such employees;
(iii) Interfere with Relationships. Cause or
attempt to cause any of the Company's clients, customers or
suppliers to terminate or materially reduce its business with
the Company, DRH or any of its Affiliates.
(b) Mortgage Business. Mortgage and Fortress, jointly and
severally, covenant and agree that during the Non-Compete Period
neither of them will directly or indirectly:
(i) Engage in Mortgage Activities. Own, manage,
operate, engage in, serve as an advisor or consultant for,
control, or otherwise participate in the business of the
origination of mortgage loans (collectively, "Mortgage
Activities"), or be involved as a stockholder, partner,
member, guarantor, or other holder of an interest in any
Person engaging in any such activities, in each case in the
State of Florida within 100 miles of any county in which
property is located for which Mortgage-Jacksonville has
originated mortgage loans within the last two years or in
which Mortgage-Jacksonville operates at the Closing Date; and
(ii) Solicit Employees. Solicit to employ or
employ any employee of Mortgage-Jacksonville while such Person
is employed by
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CHM, Xxxxxx or any Affiliate thereof; provided that the
foregoing shall not prohibit general solicitations of
employment not specifically directed towards such employees.
Section 9.02 Non-Compete Period. The term "Non-Compete Period"
applicable to the provisions of Section 9.01 (the "Covenant Not to Compete")
shall mean the period beginning on the Closing Date and ending on the fifth
anniversary of the Closing Date. Notwithstanding anything to the contrary in
this Article IX, nothing will prevent Fortress during the Non-Compete Period
from considering or entering into a merger transaction or other business
combination or being purchased by an entity which engages in the Building
Activities or Mortgage Activities in the State of Florida, except that such
entity may not use the name "Fortress" or any variation thereof or the house
plans included in the Acquired Assets in the geographic area described in
Section 9.01(a)(i) and that the provisions of Sections 9.01(a)(ii), 9.01(a)(iii)
and 9.01(b)(ii) shall remain binding obligations of Fortress and such entity.
Section 9.03 Indirect Competition; Certain Exclusions.
(a) Indirect Competition. For purposes of this Agreement,
the Company, Mortgage or Fortress shall be deemed to be in default of
its obligations under Section 9.01 if it or any of its Affiliates owns
any beneficial interest in any Person who engages in Building
Activities or Mortgage Activities, as the case may be, at any location
described in Section 9.01.
(b) Certain Exclusions. Notwithstanding the provisions of
Section 9.03(a), the following shall not constitute a violation of the
Covenant Not to Compete: (i) the ownership of securities of any Person
traded on any national exchange or market representing not more than 5%
of the issued and outstanding amount of such securities and (ii) the
sale of the homes currently under construction and the lots located at
Xxxxxxxx Lot 184 and Ridaught Landing Xxxx 0, Xxxx 000, 00, 74A, 75,
75A.
Section 9.04 No Disclosure of Confidential Information. The Sellers and
Fortress covenant and agree that after the date hereof none of them will
disclose any confidential or proprietary information concerning the Acquired
Assets or the businesses of the Sellers, which parties agree shall include any
trade secret, processes, computer information systems, plans, checklists,
documents, pricing information, cost and expense data, customer lists or
information pertaining to customers, financial information and marketing data,
whether such information is embodied in writing or other physical form or in the
memory of employees of the Sellers or Fortress (the "Confidential Information").
The obligations of the Sellers and Fortress under this Section 9.04 (the
"Non-Disclosure Obligation"), however, shall not preclude the Sellers or
Fortress from:
(a) Advisors. Disclosing information to its accountants,
lawyers, and other professional advisors, provided that it shall be
deemed to have breached this Section 9.04 if any such accountant,
lawyer, or other professional advisor discloses such information to any
other Person except as permitted or required in Section 9.04(b), (c) or
(d);
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(b) Public Information. Disclosing information generally
available to the public other than by breach of this Section 9.04;
(c) Required by Law. Disclosing information required by
law or court order after promptly notifying the Purchasers of the
requirement to disclose such information and permitting the Purchasers
a reasonable period to obtain a protective order to prevent such
disclosure; or
(d) Tax Returns. Disclosing information required in any
Tax report or return.
Section 9.05 Reasonableness. The Sellers and Fortress acknowledge that
the terms of the Covenant Not to Compete and the Non-Disclosure Obligation are
reasonable in all respects and necessary to permit the Purchasers to realize the
benefits of the acquisition of the Acquired Assets.
Section 9.06 Judicial Enforcement. Any threatened or actual breach or
violation of the Covenant Not to Compete or the Non-Disclosure Obligation shall
entitle DRH to an injunction restraining any further or continued breach or
violation. Such right to an injunction shall be in addition to and cumulative of
(and not in lieu of) any other remedies to which either Purchaser is entitled
because of such breach or violation. If a court of competent jurisdiction
determines that the Covenant Not to Compete or the Non-Disclosure Obligation is
partially or wholly inoperative, invalid, or unenforceable in a particular case
because of its duration, geographical scope, restricted activity, or any other
parameter, such court shall reform such duration, geographical scope, restricted
activity, or other parameter with respect to such case to permit enforcement of
such reformed Covenant Not to Compete or reformed Non-Disclosure Obligation to
the greatest extent allowable.
X. INDEMNIFICATION
Section 10.01 Indemnification Regarding Company Matters. The Company
and Fortress, jointly and severally, shall indemnify and hold the Purchasers,
Xxxxxx and their Affiliates, agents, employees, directors, officers and
stockholders (collectively, the "Purchaser Indemnitees") harmless from any and
all Losses suffered or incurred by any of them directly or indirectly from or
with respect to:
(a) Breaches. Any breach of any representation or
warranty of the Company contained in this Agreement (other than
Sections 7.19 and 7.30) or any agreement, certificate, instrument or
other document delivered at or in connection with the Closing;
(b) Failure to Perform. Any failure duly to perform or
observe, or other breach of, any covenant or agreement to be performed
or observed by the Company pursuant to this Agreement or any agreement
or instrument delivered at the Closing;
(c) Taxes. (i) Any Tax imposed upon or in respect of the
Company, any Acquired Company Asset, the business of the Company, or
the act of transferring the
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Acquired Company Assets to DRH pursuant hereto; or (ii) any breach of
any representation or warranty contained in Section 7.30;
(d) Environmental Matters. (i) Any breach of any
representation or warranty contained in Section 7.19, (ii) any actual
or alleged failure, on or before the Closing Date, of the Company to
comply with any Environmental Laws as they were in effect at any time
on or prior to the Closing Date or (iii) in each case, whether legal or
illegal, any handling, manufacturing, treatment, storage, use,
generation, release, discharge, refining, transportation, dumping or
disposal of any Materials of Environmental Concern by the Company, or
by any other Person (if contractually assumed by the Company), on or
prior to the Closing Date, except that the Company and Fortress shall
have no obligation for violations, remediation obligations or other
matters identified by the Environmental Consultants in the
Environmental Reports or in the other environmental reports listed on
Schedule 7.19(a) hereto to the extent such identified matters relate to
the Real Property or the Leased Real Property; and
(e) Other Liabilities. Any Expressly Retained Liabilities
(other than those set forth in clause (c) or (d) above).
Section 10.02 Indemnification Regarding Mortgage Matters. Mortgage and
Fortress, jointly and severally, shall indemnify, defend, reimburse, and hold
the Purchaser Indemnitees harmless from any and all Losses suffered or incurred
by any of them directly or indirectly from or with respect to:
(a) Breaches. Any breach of any representation or
warranty of Mortgage contained in this Agreement or any agreement,
certificate, instrument or other document delivered at or in connection
with the Closing;
(b) Failure to Perform. Any failure duly to perform or
observe, or other breach of, any covenant or agreement to be performed
or observed by Mortgage pursuant to this Agreement or any agreement or
instrument delivered at the Closing;
(c) Taxes. Any Tax imposed upon or in respect of
Mortgage, any Acquired Mortgage Asset, the business of
Mortgage-Jacksonville, or the act of transferring the Acquired Mortgage
Assets to CHM pursuant hereto; and
(d) Obligations Not Assumed. Any Other Expressly Retained
Liabilities.
Section 10.03 Indemnification Regarding Fortress Matters. Fortress
shall indemnify and hold the Purchaser Indemnitees harmless from any and all
Losses suffered or incurred by any of them directly or indirectly from or with
respect to:
(a) Breaches. Any breach of any representation or
warranty of Fortress contained in this Agreement or any agreement,
certificate, instrument or other document delivered at or in connection
with the Closing;
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(b) Failure to Perform. Any failure duly to perform or
observe, or other breach of, any covenant or agreement to be performed
or observed by Fortress pursuant to this Agreement or any agreement or
instrument delivered at the Closing; and
(c) Taxes. (i) Any Tax imposed upon or in respect of
Fortress or any Affiliate thereof.
Section 10.04 Indemnification of the Sellers and Fortress. Xxxxxx and
the Purchasers, jointly and severally, shall indemnify and hold the Sellers and
Fortress and their Affiliates, agents, employees, directors, officers and
shareholders (the "Seller Indemnitees") harmless from any and all Losses
suffered or incurred by any of them directly or indirectly from or with respect
to:
(a) Breaches. Any breach of any representation or
warranty of Xxxxxx or the Purchasers contained in this Agreement or any
agreement, certificate, instrument or other document delivered at or in
connection with Closing;
(b) Failure to Perform. Any failure duly to perform or
observe, or other breach of, any covenant or agreement to be performed
or observed by Xxxxxx or the Purchasers pursuant to this Agreement or
any agreement or instrument delivered at the Closing; and
(c) Assumed Liabilities. Any Assumed Liabilities.
Section 10.05 Indemnification Procedures. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) Notification. A party claiming indemnification under
this Agreement (an "Indemnified Party") shall promptly (i) notify the
party from whom indemnification is sought (the "Indemnifying Party") of
any third-party claim or claims asserted against the Indemnified Party
("Third Party Claim") which could give rise to a right of
indemnification under this Agreement and (ii) transmit to the
Indemnifying Party a written notice ("Claim Notice") describing in
reasonable detail the nature of the Third Party Claim, a copy of all
papers served with respect to such claim (if any), and the basis of the
Indemnified Party's request for indemnification under this Agreement.
Within 30 days after receipt of any Claim Notice (the "Election
Period"), the Indemnifying Party shall notify the Indemnified Party (i)
whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article X with respect to such Third Party
Claim and (ii) whether the Indemnifying Party desires, at the sole cost
and expense of the Indemnifying Party, to defend the Indemnified Party
against such Third Party Claim.
(b) Participation of the Indemnifying Party. If the
Indemnifying Party notifies the Indemnified Party within the Election
Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to
defend, at it sole cost and expense, such Third Party Claim by all
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appropriate proceedings, which proceedings shall be prosecuted
diligently by the Indemnifying Party to a final conclusion or settled
at the discretion of the Indemnifying Party in accordance with this
Section 10.05(b). The Indemnifying Party shall have full control of
such defense and proceedings, including any compromise or settlement
thereof, but shall consult in good faith with the Indemnified Party
before entering into any compromise or settlement (provided that the
Indemnifying Party pays the full amount thereof and obtains a full
release of the Indemnified Party), and may not enter into any
settlement that may adversely affect the Acquired Assets or the
business of the Purchasers at any time after the Closing Date without
the prior written consent of the Purchasers. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this
Section 10.05(b), and shall bear its own costs and expenses with
respect to such participation.
(c) Participation of the Indemnified Party. If the
Indemnifying Party fails to notify the Indemnified Party within the
Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to Section 10.05(b), or if the Indemnifying
Party elects to defend the Indemnified Party pursuant to Section
10.05(b) but fails to prosecute or settle the Third Party Claim
diligently, then the Indemnified Party may notify the Indemnifying
Party that the Indemnified Party elects to assume the defense of the
Third Party Claim. The Indemnified Party shall then have the right to
defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings
shall be promptly and vigorously prosecuted by the Indemnified Party to
a final conclusion or settled. The Indemnified Party shall have full
control of such defense and proceedings. Notwithstanding the foregoing,
if the Indemnifying Party has delivered a written notice to the
Indemnified Party to the effect that the Indemnifying Party disputes
its potential liability to the Indemnified Party under this Article X
and if such dispute is resolved in favor of the Indemnifying Party by
final, nonappealable order of a court of competent jurisdiction or by
settlement or other binding non-judicial procedure, the Indemnifying
Party shall not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this Section 10.05 or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section
10.05, and the Indemnifying Party shall bear its own costs and expenses
with respect to such participation.
(d) Claims Between Parties. In the event any Indemnified
Party should have a claim against any Indemnifying Party hereunder
which does not involve a Third Party Claim, the Indemnified Party shall
transmit to the Indemnifying Party a written notice (the "Indemnity
Notice") describing in reasonable detail the nature of the claim, an
estimate of the amount of damages attributable to such claim and the
basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified
Party within 60 days from the Indemnifying Party's receipt of the
Indemnity Notice that the Indemnifying Party
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disputes such claim, the claim specified by the Indemnified Party in
the Indemnity Notice shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed such
claim, as provided above, such dispute shall be resolved by litigation
in an appropriate court of competent jurisdiction.
(e) Payments. Payments of all amounts owing by an
Indemnifying Party pursuant to this Article X relating to a Third Party
Claim shall be made within 30 days after the latest of (i) the
settlement of such Third Party Claim, (ii) the expiration of the period
for appeal of a final adjudication of such Third Party Claim or (iii)
the expiration of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under this
Agreement. Payments of all amounts owing by an Indemnifying Party
pursuant to Section 10.05(d) shall be made within 30 days after the
later of (i) the expiration of the 60-day Indemnity Notice period or
(ii) the expiration of the period for appeal of a final adjudication of
the Indemnifying Party's liability to the Indemnified Party under this
Agreement.
Section 10.06 NEGLIGENCE. THE INDEMNIFICATION PROVIDED IN THIS
AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT NEGLIGENCE OR STRICT LIABILITY OF
THE PERSON ENTITLED TO INDEMNIFICATION HEREUNDER IS ALLEGED OR PROVEN.
Section 10.07 Remedies. The rights and remedies provided in this
Agreement and the other agreements, certificates, instruments and other
documents delivered pursuant hereto are cumulative but shall be the exclusive
remedies of the parties hereto with respect to claims for monetary damages
related to the matters addressed herein and with respect to the transactions
contemplated hereby, except for fraud, and the parties shall have no other
liability for monetary damages to each other, under any statutory or common law
right, except for fraud; provided, however, that nothing herein shall be
construed as limiting the right of a party hereto to equitable relief, other
than monetary damages, for a breach of this Agreement or any agreement,
certificate, instrument or other document delivered in connection herewith,
including specific performance of the terms of such agreements. Notwithstanding
the foregoing, with respect to all liabilities of the Sellers that the
Purchasers do not specifically assume pursuant to Section 1.04, the rights and
remedies so provided shall not be exclusive but shall be in addition to any
other remedies that a party hereto may have pursuant to any statutory or common
law right. Any election of one available remedy by a party hereto shall not
constitute a waiver of any other available remedy.
Section 10.08 Insurance. With respect to any events occurring on or
before the Closing Date that are insured under any Insurance Policy, or any
other insurance policy covering the Company or Mortgage-Jacksonville, the
Purchasers shall be entitled to, and the Sellers and Fortress shall cooperate in
obtaining for the Purchasers, the benefits thereof; provided that such proceeds
shall be credited against any indemnification obligation provided for in Section
10.01 or 10.02, respectively.
Section 10.09 Limitations of Indemnification. The indemnification
provided for in this Article X shall be subject to the following limitations:
(i) the Sellers and Fortress shall not be
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obligated to pay any amounts for indemnification under Sections 10.01(a),
10.02(a) or 10.03(a) (other than with respect to the representations and
warranties provided in Sections 5.01 through 5.03, Sections 6.01 through 6.02
and Sections 7.01 through 7.03) in excess of $10,000,000 in the aggregate, (ii)
an Indemnifying Party shall not be obligated to pay any amounts for
indemnification hereunder relating to a Loss to the extent of any proceeds
received under the Title Policy or any other insurance proceeds received from a
Seller's insurance and any indemnity, contribution or similar payment paid to
the Indemnified Party or any Affiliate thereof from any third party (other than
an insurer of a Purchaser or Xxxxxx) with respect thereto, and (iii) neither the
Seller Indemnitees nor the Purchaser Indemnitees shall be entitled to make any
claim for indemnification under Sections 10.01(a), 10.02(a), 10.03(a) or
10.04(a), as the case may be, (other than with respect to the representations
and warranties provided in Sections 5.01 through 5.03, Sections 6.01 through
6.02 and Sections 7.01 through 7.03) until the sum of all indemnifiable claims
they have under such sections are greater than $500,000 (the "Indemnification
Threshold"), and then only to the extent in excess of the Indemnification
Threshold. Any limitation on indemnification provided in this Section 10.09 that
is expressly applicable to Section 10.01(a), 10.02(a) or 10.03(a) shall not be
applicable to any indemnification as may be available under any other subsection
of Section 10.01, 10.02 or 10.03.
Section 10.10 Calculation of Losses. For the purposes of this Article
X, once a determination has been made that a specific breach of a
representation, warranty, covenant or agreement has occurred for purposes of the
indemnification obligation hereunder, the calculation of Losses with respect to
such specific breach shall be made without regard to any limitation or
qualification as to materially set forth in such representation, warranty,
covenant or agreement.
Section 10.11 Survivability. The representations and warranties,
covenants, agreements, indemnifications and other terms of this Agreement, or in
any agreement, certificate, instrument or other document delivered at or in
connection with the Closing, shall survive the Closing and any investigation by
the parties hereto; provided that no claim may be made for the breach of any
representation or warranty after the second anniversary of the Closing Date,
except for breaches in respect of Sections 7.19 and 7.30, which claims may be
made at any time after the Closing Date.
Section 10.12 No Other Representations. Notwithstanding anything to the
contrary contained in this Agreement, it is the explicit intent of each party
hereto that the Sellers and Fortress are making no representation or warranty,
express or implied, including any implied representation or warranty as to
condition, merchantability or suitability as to any of the Acquired Company
Assets or Acquired Mortgage Assets, except those representations and warranties
contained in Article VI and VII or in any agreement, instrument or other
document delivered pursuant hereto In particular, Sellers and Fortress make no
representation or warranty to Purchasers and Xxxxxx with respect to any
financial projection or forecast (including any financial projection or forecast
contained in the budget and completion schedule set forth on Schedule 7.15(a)
hereto) relating to the business of the Company or Fortress Mortgage, except for
the representations and warranties contained in the third sentence of Section
7.15 other than with respect to the phrase "and the projected schedule for
completion of such unit or phase." With respect to any such projection or
forecast delivered by or on behalf of the Sellers and
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Fortress to the Purchasers and Xxxxxx, Purchasers and Xxxxxx acknowledge that
there are uncertainties inherent in attempting to make such projections and
forecasts.
XI. GENERAL
Section 11.01 Amendment. No amendment or modification of any of the
provisions of this Agreement shall be effective unless in writing and signed by
all of the parties hereto.
Section 11.02 Attorneys' Fees. In the event that any action or
proceeding is commenced by any party hereto for the purpose of enforcing any
provision hereof, the prevailing party to such action or proceeding may receive
as part of any award, judgment, decision, or other resolution of such action or
proceeding its reasonable costs and attorneys' fees as determined by the person
or body making such award, judgment, decision, or resolution. Should any claim
hereunder be settled before the commencement of an action or proceeding, the
parties in such settlement shall be entitled to include as part of their alleged
damages reasonable attorneys' fees incurred in connection with such claim.
Section 11.03 Counterparts. This Agreement and any agreement,
certificate, instrument or other document delivered pursuant hereto may be
executed in any number of counterparts, each of which shall be deemed to be an
original document, but all of which shall constitute one and the same document.
Any party to any such document may execute and deliver such document by an
executed signature page transmitted via facsimile machine; provided that such
party promptly thereafter delivers an originally executed signature page to each
other party thereto.
Section 11.04 Entire Agreement. This Agreement, together with the
Confidentiality Agreement, dated March 2, 2001, between Xxxxxx and Fortress,
constitutes the entire agreement and understanding among the parties hereto and
supersedes all prior agreements and understandings, both written and oral, with
respect to the subject matter contained herein.
Section 11.05 Expenses. Each party hereto shall bear its own accounting
and legal fees and other costs and expenses with respect to the negotiation and
preparation of this Agreement and the consummation of the transactions
contemplated hereby, except as otherwise provided herein. Any provisions hereof
providing for a payment of any cost, expense or other amount by the Company
shall require such payment from the consideration otherwise payable to the
Company hereunder, the Excluded Assets (or the proceeds thereof) or from the
separate assets of Fortress and not from the assets of the Company otherwise
transferable to DRH pursuant hereto.
Section 11.06 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND
INTERPRETED ACCORDING TO, AND GOVERNED BY, THE LAWS OF THE STATE OF FLORIDA,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF THAT MIGHT APPLY
ANY OTHER LAW.
Section 11.07 Headings. Article and section headings are used herein
only as a matter of convenience, are not a part of this Agreement, and shall not
have any effect upon the construction or interpretation hereof.
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Section 11.08 Assignment. No party hereto may assign its benefits or
delegate its duties hereunder without the prior written consent of the other
parties hereto; provided, however, DRH may assign its interest herein to Xxxxxx
or a wholly owned subsidiary of Xxxxxx so long as DRH will remain obligated for
its obligations hereunder.
Section 11.09 No Third-Party Beneficiaries. This Agreement is solely
for the benefit of the parties hereto and no other Person shall have any right,
interest, or claim hereunder.
Section 11.10 Notices. All notices and other communications in
connection with this Agreement shall be in writing and deemed to have been
received on the day of delivery if delivered by hand, overnight express, regular
mail, or facsimile transmission, or three Business Days after the date of
posting if mailed by registered or certified mail, postage prepaid, addressed to
each party at its address set forth below (or to such other address to which
such party has notified each other party in accordance with this Section 11.10
to send such notices or communications):
Xxxxxx and Purchaser: X.X. Xxxxxx, Inc.
X.X. Xxxxxx, Inc. - Jacksonville
CH Mortgage Company I, Ltd.
0000 Xxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxx 00000
Attn: Xx. Xxxxxxx Xxxxxxxx and
Xx. Xxx X. Harbour
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Company and Fortress: The Fortress Group, Inc.
Fortress-Florida Inc.
Fortress Mortgage, Inc.
0000 Xxxxxx Xxxx.
Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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With a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx LLP
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
Section 11.11 Performance on Business Days. If any event or the
expiration of any period provided for herein is scheduled to occur or expire on
a day that is not a Business Day, such event shall occur or such period shall
expire on the next succeeding day that is a Business Day.
Section 11.12 Plural and Singular Words. Whenever the plural of a word
is used herein, that word shall, if appropriate, include the singular of that
word. Whenever the singular of a word is used herein, that word shall, if
appropriate, include the plural of that word.
Section 11.13 Pronouns. Whenever a pronoun of a particular gender is
used herein, that pronoun shall, if appropriate, also refer to the other gender
and the neuter. Whenever a neuter pronoun is used herein, that pronoun shall, if
appropriate, also refer to the masculine and feminine gender.
Section 11.14 Schedules. All references herein to schedules shall mean
the schedules identified in this Agreement, which are incorporated herein and
shall be deemed to be a part of this Agreement for all purposes. A disclosure of
an item in a schedule or under a heading in a schedule corresponding to a
particular section or subsection of this Agreement shall not be a disclosure
under (a) any other item of such schedule, (b) any other schedule, or (c) any
other section or subsection of this Agreement, unless so specifically provided.
Section 11.15 Set-Off. Each party hereto and each Affiliate thereof may
set off any amounts that any other party hereto or its Affiliates owes to it or
its Affiliates (whether because of the breach of any representation, warranty,
covenant or agreement contained in this Agreement or otherwise) against any
amounts that such party or its Affiliates owes to such other party or its
Affiliates.
Section 11.16 Severability. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability (but shall be construed
and given effect to the extent possible), without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 11.17 Specific Performance. The Sellers acknowledge that the
Acquired Assets are unique and irreplaceable, and that the failure of the
Sellers to convey or transfer them in a timely manner to the Purchasers pursuant
to the terms hereof would damage the Purchasers in a
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manner for which monetary damages could not adequately compensate them.
Accordingly, if the Sellers fail to convey or transfer the Acquired Assets to
the Purchasers pursuant hereto in a timely manner, the Purchasers shall be
entitled to seek an order from a court of competent jurisdiction requiring the
Sellers to perform their respective obligations hereunder and to convey and
transfer the Acquired Assets to the Purchasers pursuant hereto. The Sellers,
however, shall not have any right to specific performance in respect hereof.
Section 11.18 Successors. This Agreement shall be binding upon and
shall inure to the benefit of each party hereto and its successors and permitted
assigns; provided that this Section 11.18 shall not permit the assignment or
other transfer of this Agreement, whether by operation of law or otherwise, if
such assignment or other transfer is not otherwise permitted hereunder.
Section 11.19 Waiver. No provision herein shall be considered waived
unless such waiver is in writing and signed by each party hereto that benefits
from the enforcement of such provision. No waiver of any provision herein,
however, shall be deemed a waiver of a subsequent breach of such provision (or
right arising under such provision) or a waiver of a similar provision. A waiver
of any breach or a failure to enforce any term or condition of this Agreement
shall not in any way affect, limit, or waive a party's rights hereunder at any
time to enforce strict compliance thereafter with every term and condition
hereof.
XII. DEFINITIONS
Capitalized terms used in this Agreement and not defined elsewhere
shall have the following meanings:
Accountant's Notice. As defined in Section 2.02(c).
Acquired Assets. The term "Acquired Assets" shall mean the Acquired
Company Assets and the Acquired Mortgage Assets.
Acquired Company Assets. As defined in Section 1.01(a).
Acquired Company Contracts. As defined in Section 1.01(a)(iii).
Acquired Contracts. The term "Acquired Contracts" shall mean the
Acquired Company Contracts and the Acquired Mortgage Contracts.
Acquired Mortgage Assets. As defined in Section 1.01(b).
Acquired Mortgage Contracts. The term "Acquired Mortgage Contracts"
shall mean the Loan Applications, the Takeout/Placement Agreements, the
Ancillary Documents and the Mortgage Lease.
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Affiliate. The term "Affiliate" with respect to a Person shall mean any
other Person that directly or indirectly controls, is controlled by, or is under
common control with, such Person.
Ancillary Agreements. As defined in Section 1.01(b)(iv).
Applicable Laws. The term "Applicable Laws" shall mean all applicable
decrees, injunctions, judgments, discussions and awards, laws, orders,
ordinances, policies, regulations, rules, statutes, and writs of all federal,
state and local governmental entities (and any agencies, departments, and
political subdivisions thereof).
Assumed Company Liabilities. As defined in Section 1.04(a).
Assumed Liabilities. The term "Assumed Liabilities" shall mean the
Assumed Company Liabilities and the Assumed Mortgage Obligations.
Assumed Mortgage Obligations. As defined in Section 1.04(b).
Books and Records. As defined in Section 1.01(a)(xii).
Building Activities. As defined in Section 9.01(a)(i).
Business Day. The term "Business Day" shall mean a day that is not a
Sunday, Saturday, or holiday when banks in the State of Florida, Virginia or
Texas are required or permitted to be closed.
Claim Notice. As defined in Section 10.05(a).
Closing. As defined in Section 3.01.
Closing Assets Schedule. As defined in Section 2.02(a).
Closing Date. As defined in Section 3.01.
Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended.
Company. As defined in the Recitals.
Company Conditions. As defined in Section 4.02.
Company Debt Facilities. As defined in Section 1.04(a)(i).
Company Names. As defined in Section 7.23(c).
Competitor. As defined in Section 9.01(a)(iv).
Confidential Information. As defined in Section 9.04.
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Consents. As defined in Section 1.03.
Contamination. As defined in Section 10.01(g).
Copyright. The term "Copyright" shall mean all copyrights in published
and unpublished works, now or hereafter existing, in the United States of
America or any foreign jurisdiction, and all applications, registrations, and
recordings relating thereto filed in the United States Copyright Office or in
any other government office or agency in the United States of America or any
foreign jurisdiction.
Covenant Not to Compete. As defined in Section 9.02.
Development Project. As defined in Section 7.15.
Election Period. As defined in Section 10.05(a).
Employee Liabilities. The term "Employee Liabilities" shall mean any
cost, liabilities, or obligations relating to any (a) Applicable Law relating to
employees, including laws relating to concerted activity, discrimination, hours,
occupational, immigration, health and safety, wages, and the withholding of
Taxes, (b) collective bargaining agreement, (c) compensation owed to employees,
including salaries, wages, and bonuses, (d) employee disabilities, including
disabilities relating to accidents, exposure to harmful conditions, injuries,
sickness, and torts, (e) employment contracts, whether written or oral, (f)
employment discrimination, (g) employee benefit plans, (h) employee fringe
benefits, (i) employee insurance coverage, (j) compensation, including any
change of control agreements, (k) health and safety, (l) pension plans, (m)
plant closings, (n) retiree medical, (o) severance pay, (p) unfair labor
practices, (q) vacation pay, (r) unemployment benefits, (s) wage and hour laws,
(t) workers' compensation, and (u) wrongful discharge.
Employee Plans. The term "Employee Plans" shall mean each employee
benefit plan (as defined in Section 3(3) of ERISA), and each personnel policy,
stock option or other equity-based plan, collective bargaining agreement, bonus
plan or arrangement, incentive award plan or arrangement, vacation policy, plant
closing, change of control, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation or supplemental
income arrangement, employee loan or loan guarantee, consulting agreement,
employment agreement, and each other employee benefit, fringe benefit, or
compensation plan, agreement, arrangement, program, practice or understanding
whether or not an ERISA plan and that is sponsored, maintained or contributed to
by the Company, or Mortgage, as the case be, or with respect to which the
Company, or Mortgage, as the case be, is bound or has any liability or
obligation for the benefit of the employees, former employees, independent
contractors, or agents of the Company, or Mortgage, as the case be, or has been
so sponsored, maintained or contributed to or with respect to which the Company,
or Mortgage, as the case be, is or has been bound or has any liability or
obligation.
Environmental Consultants. As defined in Section 8.07.
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Environmental Laws. The term "Environmental Laws" shall mean, in each
case, as in effect on the date hereof, any current federal, state or local
codes, regulations, rules, statutes, ordinances or similar items of any
governmental authorities, and any covenants running with the land imposed by
governmental authorities, that relate to environmental, pollution, or public
safety matters, including the Clean Air Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Federal Water Pollution
Control Act, the Resource Conservation and Recovery Act of 1976, and the Toxic
Substances Control Act, and any other applicable laws of any state in which the
Company is conducting or has conducted business, and any judicial or
administrative decrees, interpretations, judgments, or orders with respect
thereto.
Environmental Reports. As defined in Section 8.07.
ERISA Affiliate. The term "ERISA Affiliate", as applied to any Person,
shall mean (i) any corporation or any trade or business (whether or not
incorporated) which is a member of a group of trades or businesses under common
control within the meaning of Section 414(b) or (c) of the Code of which that
Person is a member, and (ii) any member of an affiliated service group within
the meaning of Section 414(m) and (o) of the Code of which that Person or any
trade or business described in clause (i) above is a member.
Escrow Amount. As defined in Section 2.01(b).
Escrow Agent. As defined in Section 4.01(n).
Escrow Agreement. As defined in Section 4.01(n).
Excluded Assets. As defined in Section 1.02.
Expressly Retained Liabilities. As defined in Section 1.05.
FHA. As defined in Section 7.12(a).
Final Balance Sheet. As defined in Section 2.02(a).
Financial Statements. As defined in Section 7.06.
Finished Lots. As defined in Section 7.15.
Fortress 401(k) Plan. As defined in Section 8.10(d).
Homeowner Associations. As defined in Section 7.34.
Indemnification Threshold. As defined in Section 10.09.
Indemnified Party. As defined in Section 10.05(a).
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Indemnifying Party. As defined in Section 10.05(a).
Indemnity Notice. As defined in Section 10.05(d).
Insurance Policies. As defined in Section 7.25.
Intellectual Property. The term "Intellectual Property" shall mean (i)
all inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all Patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (ii)
all Trademarks, service marks, trade dress, logos, and trade names to the extent
not containing the word "Fortress," together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (iii) all copyrightable works, all Copyrights, and all applications,
registrations, and renewals in connection therewith, (iv) all mask works and all
applications, registrations, and renewals in connection therewith, (v) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (vi) all computer software (including data
related documentation), (vii) all other proprietary rights, and (viii) all
copies and tangible embodiments thereof (in whatever form or medium).
Knowledge. The term "Knowledge" shall mean with respect to the Sellers
and Fortress, the actual knowledge of Xxxxxxx Xxxxxx, Xxx Xxxx, Xxxxxx X.
Xxxxxxxx, Xxxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxx, Xx., Xxx Xxxxx, Xxxxxx Xxxxxx,
Xxxx Xxxxxxx, Xxxxxx Xxxxxx or Xxxx X. Xxxxxxx, after inquiry of employees of
the Sellers or Fortress reasonably expected to have relevant knowledge.
Land Contract Property. As defined in Section 7.17.
Leased Real Property. As defined in Section 7.16.
Leases. As defined in Section 7.21(f).
Legal Proceeding. The term "Legal Proceeding" shall mean any action,
alternate dispute resolution process, arbitration, charge, claim, counterclaim,
inquiry, investigation, legal action, litigation, suit, or other proceeding,
whether involving private parties or involving or before any administrative or
other governmental authority.
Liens. The term "Liens" shall mean any charge, claim, equity, judgment,
lease, liability, license, lien, mortgage, pledge, restriction, security
interest, Tax lien, or encumbrance of any kind.
Loan Applications. As defined in Section 1.01(b)(i).
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Losses. The term "Losses" shall mean all losses, liabilities, claims,
damages, fines, penalties, deficiencies and expenses (including reasonable fees
and expenses of attorneys, accountants and other professional advisors, and
expert witnesses and reasonable costs of investigation and preparation) or
diminution of value of any kind or nature whatsoever, whether or not involving a
third-party claim.
Lot Project. As defined in Section 7.15.
March Balance Sheet. As defined in Section 7.06.
Material Adverse Effect. The term "Material Adverse Effect" shall mean
a material adverse condition, event or effect on the assets, liabilities, cash
flows, business, financial condition or operations of the Company or
Mortgage-Jacksonville, as the case may be, taken as a whole.
Material Change. The term "Material Change" with respect to any Person
shall mean that such Person has (a) entered into any material transaction
outside its ordinary course of business consistent with past practices, (b)
undergone a material change with respect to its assets, liabilities, cash flows,
business, financial condition or operations, (c) amended, modified, or
terminated, in any material respect, any material agreement, arrangement,
contract, lease, or permit, to which it is a party, including any certificate of
incorporation or other constituent document creating rights or obligations with
respect to it, (d) materially defaulted under or breached any material
agreement, arrangement, contract, lease, or permit to which it is a party or by
which any of its assets are bound, (e) permitted any material right to lapse
(other than under any Land Contracts under which the Company has no obligation
to purchase), including any material Intellectual Property right, (f) assumed,
created, guaranteed, or incurred any material indebtedness, whether absolute or
contingent (other than to finance the acquisition or construction of real
property or for working capital in the ordinary course of business consistent
with past practice), (g) settled any material lawsuit, or been sued, other than
settlements and lawsuits that have an immaterial effect upon it, (h) changed the
accounting principles used when maintaining its accounting records or presenting
its financial statements, or otherwise altered, in any material respect, the
manner of keeping its accounts, books, and records, or filing its tax returns,
(i) materially increased any compensation or benefits that it pays to any
Person, including any formula upon which compensation or benefits are based,
except in the ordinary course of business consistent with past practice, (j)
declared, set aside or paid or made any distribution in respect of, or
repurchased, redeemed or otherwise acquired any of its capital stock, or (k)
entered into any agreement to take any of the actions described in the foregoing
clauses (a) through (j).
Material of Environmental Concern. The term "Material of Environmental
Concern" shall mean any substance that is (a) subject to investigation or
remediation under any Environmental Laws, constitutes a hazardous waste,
hazardous substance, extremely hazardous substance or toxic substance under any
Environmental Laws, (b) is regulated under Environmental Laws due to
carcinogenic, corrosive, explosive, flammable, infectious, radioactive or toxic
characteristics, (c) diesel fuel, gasoline, or other petroleum hydrocarbons, (d)
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polychlorinated biphenyls in excess of authorized levels, (e) asbestos that is
friable, (f) urea formaldehyde foam insulation or (g) poses or threatens to pose
a hazard to the health or safety of any individual.
Mortgage Activities. As defined in Section 9.01(b)(i).
Mortgage Agencies. The term "Mortgage Agencies" shall mean the Federal
National Mortgage Association, Federal Home Loan Mortgage Corporation, FHA, VA
and Government National Mortgage Association.
Mortgage-Jacksonville. As defined in Section 1.01(b).
Mortgage Lease. As defined in Section 1.01(b)(v).
Net Book Value. As defined in Section 2.01(c).
Net Worth Deficiency. As defined in Section 2.01(c).
Net Worth Excess. As defined in Section 2.01(c).
Non-Compete Period. As defined in Section 9.02.
Non-Disclosure Obligation. As defined in Section 9.04.
Owned Real Property. As defined in Section 1.01(a)(ii).
Patent. The term "Patent" shall mean (a) all Letters Patent of the
United States of America or any similar rights under the laws of any foreign
jurisdiction and any divisions, extensions, or reissues thereof, and (b) all
applications for Letters Patent of the United States of America or any similar
rights under the laws of any foreign jurisdiction and all continuations,
continuations-in-part, or divisions of such applications.
Permits. As defined in Section 7.12.
Permitted Liens. As defined in Section 7.11.
Person. The term "Person" shall mean an association, corporation,
estate, general partnership, governmental entity (or any agency, department, or
political subdivision thereof), individual, joint stock company, joint venture,
limited liability company, limited partnership, trust, or any other organization
or entity.
`
Personal Property Leases. As defined in Section 7.20(a)(vii).
Premium Amount. As defined in Section 2.01(a).
Projected Finished Lot Cost. As defined in Section 7.15.
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Projected Lot Yield. As defined in Section 7.15.
Prorated Items. As defined in Section 3.05.
Purchaser Indemnitees. As defined in Section 10.01.
Purchaser Conditions. As defined in Section 4.01.
Purchaser Notice. As defined in Section 2.02(a).
Purchasers. As defined in the Recitals.
Purchasers' Accountants. As defined in Section 2.02(a).
Real Property. As defined in Section 7.18(a).
Real Property Leases. As defined in Section 1.01(a)(v).
Sellers. As defined in the Recitals.
Sellers' Accountants. As defined in Section 2.02(a).
Seller Indemnitees. As defined in Section 10.02.
Seller Notice. As defined in Section 2.02(b).
Substantial Adverse Effect. The term "Substantial Adverse Effect" means
a condition, event or effect involving a loss or expense of $30,000 or more
affecting the Real Property in any project or an aggregate loss or expense of
$150,000 or more affecting all Real Property in all projects.
Surveys. As defined in Section 8.06.
Takeout/Placement Commitments. As defined in Section 1.01(b)(iii).
Taxes. The term "Taxes" or "Tax" shall mean any federal, state, local,
foreign, or other ad valorem, customs, documentary, duty, employment, excise,
franchise, gross income, gross receipts, lease, license, net income, payroll,
premium, profits, property, occupation, sales, service, service use, stamp,
severance, transaction privilege, transfer, use, or withholding tax, or other
assessments, charges, fees, imposts, levies, or taxes of any kind whatever,
together with any interest and penalties thereon and any additional amounts with
respect thereto.
Third Party Claim. As defined in Section 10.05(a).
Title Company. As defined in Section 8.05.
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Title Policy. As defined in Section 8.05.
Trademark. The term "Trademark" shall mean all business names, logos,
service marks, trademarks, tradenames, trade styles, and other business or
source identifiers, and all combinations, contractions, derivatives, expansions,
modifications, and variations thereof.
VA. As defined in Section 7.12(b).
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
PARENT:
X.X. XXXXXX, INC.
By:
--------------------------------------
Name:
-----------------------------------------
Title:
--------------------------------------
PURCHASERS:
X.X. XXXXXX, INC. - JACKSONVILLE
By:
--------------------------------------
Name:
-----------------------------------------
Title:
--------------------------------------
CH MORTGAGE COMPANY I, LTD.
By: CH Mortgage GP, Inc.,
its sole general partner
By:
--------------------------------------
Name:
-----------------------------------------
Title:
--------------------------------------
FORTRESS:
THE FORTRESS GROUP, INC.
By:
--------------------------------------
Name:
-----------------------------------------
Title:
--------------------------------------
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COMPANY:
FORTRESS-FLORIDA, INC.
By:
--------------------------------------
Name:
-----------------------------------------
Title:
--------------------------------------
MORTGAGE:
FORTRESS MORTGAGE, INC.
By:
--------------------------------------
Name:
-----------------------------------------
Title:
--------------------------------------
61
