EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
AMONG
ORLEANS HOMEBUILDERS, INC.,
MASTERPIECE HOMES, INC.
AND
XXXXXX XXXXXXXXXXX
THE XXXXX X. XXXXXXXX TRUST
AND XXXXX XXXXXXXX
Dated as of July 28, 2003
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TABLE OF CONTENTS
Page
SECTION 1. ACQUISITION OF SHARES..................................................................................4
1.1 Sale and Purchase of Shares.....................................................................4
1.2 Waiver..........................................................................................4
SECTION 2. PURCHASE PRICE AND PAYMENT.............................................................................4
2.1 Purchase Price..................................................................................4
2.2 Payment.........................................................................................5
2.3 Stock Purchase and Stock Options................................................................6
2.4 Guarantees......................................................................................7
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING SELLERS.......................................................7
3.1 Power and Authorization.........................................................................8
3.2 No Conflicts....................................................................................8
3.3 Ownership of the Shares.........................................................................9
3.4 Brokers.........................................................................................9
3.5 Indebtedness....................................................................................9
3.6 Trust Matters...................................................................................9
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING COMPANY.......................................................9
4.1 Organization and Good Standing..................................................................9
4.2 Power and Authorization.........................................................................9
4.3 No Conflicts...................................................................................10
4.4 Capitalization.................................................................................11
4.5 Investments and Subsidiaries...................................................................11
4.6 Compliance with Laws...........................................................................11
4.7 Litigation.....................................................................................11
4.8 Financial Statements...........................................................................12
4.9 Inventory......................................................................................12
4.10 Warranties.....................................................................................12
4.11 Real Property..................................................................................13
4.12 Personal Property..............................................................................15
4.13 List of Properties, Contracts, etc.............................................................15
4.14 Contracts......................................................................................16
4.15 Insurance......................................................................................17
4.16 Previously Constructed Homes...................................................................17
4.17 Suppliers......................................................................................18
4.18 Taxes..........................................................................................18
4.19 Employee Benefits..............................................................................20
4.20 Labor Matters..................................................................................22
4.21 Directors, Officers and Employees..............................................................23
4.22 Affiliate Agreements...........................................................................23
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4.23 Environmental Matters..........................................................................23
4.24 Absence of Certain Changes and Events..........................................................26
4.25 Books and Records..............................................................................27
4.26 Brokers........................................................................................27
4.27 Accounts Receivable............................................................................27
4.28 Financial Projections..........................................................................28
4.29 Masterpiece Homes and Properties, Inc..........................................................28
4.30 Additional Capital Contributions...............................................................28
4.31 Disclosure.....................................................................................28
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................28
5.1 Organization and Good Standing.................................................................28
5.2 Power and Authorization........................................................................28
5.3 No Conflicts...................................................................................29
5.4 Brokers........................................................................................29
5.5 Funds..........................................................................................29
5.6 Investment Purpose.............................................................................29
5.7 Disclosure.....................................................................................29
SECTION 6. OBLIGATIONS OF THE PARTIES............................................................................30
6.1 Conduct of Business Pending Closing............................................................30
6.2 Negative Covenants.............................................................................30
6.3 Access to Information; Confidentiality.........................................................31
6.4 Commercially Reasonable Efforts................................................................33
6.5 Consents.......................................................................................33
6.6 Financial Information..........................................................................33
6.7 Noncompetition, Trade Secrets, etc.............................................................33
SECTION 7. CERTAIN CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS...................................................35
7.1 Representations and Warranties.................................................................35
7.2 Performance of Covenants.......................................................................35
7.3 Approvals......................................................................................35
7.4 Legal Matters..................................................................................35
7.5 Financial Condition............................................................................35
7.6 Employment Agreements..........................................................................35
7.7 Resignation of Directors and Officers..........................................................36
7.8 Opinion of Counsel.............................................................................36
7.9 No Material Adverse Change.....................................................................36
7.10 Indebtedness...................................................................................36
7.11 Intentionally Omitted..........................................................................36
7.12 Tax Affidavits.................................................................................36
7.13 Masterpiece Homes and Properties, Inc..........................................................36
7.14 Estoppel Letters...............................................................................36
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SECTION 8. CERTAIN CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS..................................................36
8.1 Representations and Warranties.................................................................36
8.2 Performance of Covenants.......................................................................37
8.3 Approvals......................................................................................37
8.4 Legal Matters..................................................................................37
8.5 Employment Agreement...........................................................................37
8.6 Opinion of Counsel.............................................................................37
8.7 Release of Guarantees..........................................................................37
SECTION 9. CLOSING...............................................................................................37
9.1 Time and Place of Closing......................................................................37
9.2 Deliveries at the Closing......................................................................37
9.3 Default by Any Seller at the Closing...........................................................39
9.4 Accounts Receivable From Employees of Company..................................................39
9.5 Remittance of Payments.........................................................................40
9.6 Confidential Information.......................................................................40
SECTION 10. INTENTIONALLY OMITTED................................................................................40
SECTION 11. INDEMNIFICATION......................................................................................40
11.1 Indemnification by Sellers and Xxxxxxxx........................................................40
11.2 Indemnification by Buyer.......................................................................41
11.3 Third Party Claims.............................................................................41
11.4 Tax Indemnification and Other Matters..........................................................41
11.5 Tax Treatment of Indemnity Payments............................................................44
11.6 Interest.......................................................................................44
11.7 Reimbursement Separate From Indemnity..........................................................45
11.8 Right of Set-Off...............................................................................45
11.9 Certain Liability Matters......................................................................45
SECTION 12. DEFINITIONS..........................................................................................45
SECTION 13. MISCELLANEOUS........................................................................................48
13.1 Further Assurances.............................................................................48
13.2 Costs and Expenses.............................................................................48
13.3 Notices........................................................................................48
13.4 Assignment and Benefit.........................................................................49
13.5 Amendment, Modification and Waiver.............................................................50
13.6 Governing Law, Venue and Attorneys' Fees and Costs.............................................50
13.7 Section Headings and Defined Terms.............................................................51
13.8 Severability...................................................................................51
13.9 Counterparts...................................................................................51
13.10 Entire Agreement...............................................................................51
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
July 28, 2003 by and among Orleans Homebuilders, Inc., a Delaware corporation
("Buyer"), Masterpiece Homes, Inc., a Florida corporation ("Company") and Xxxxxx
Xxxxxxxxxxx ("Xxxxxxxxxxx"), Xxxxx X. Xxxxxxxx, as trustee under that certain
Xxxxx X. Xxxxxxxx Trust Agreement dated October 21, 1996, as amended, and not
individually (the "Trust," and together with Xxxxxxxxxxx, the "Sellers") and
Xxxxx X. Xxxxxxxx, individually ("Xxxxxxxx").
A. Buyer desires to acquire Company.
B. Collectively the Sellers own all of the issued and outstanding
shares of Common Stock of the Company.
C. The Sellers desire to sell, and Buyer desires to purchase, all of
the issued and outstanding shares of common stock of the Company at the price
and upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. ACQUISITION OF SHARES
1.1 Sale and Purchase of Shares. Subject to the terms and
conditions of this Agreement, at the Closing (as herein defined), each Seller
shall sell, transfer and deliver to Buyer the shares of the common stock of the
Company set forth beside his name on Schedule 1.1 hereto, in the aggregate
constituting all of the outstanding shares of the capital stock of Company
(collectively, the "Shares"), and Buyer shall purchase the Shares for the
consideration set forth in Section 2.
1.2 Waiver. The Company, Sellers and Xxxxxxxx hereby waive any
rights restricting transfer of the Shares under the Shareholders Agreement dated
December 12, 1994, the Stock Restriction and Purchase Agreement dated January
27, 2003, and any other agreement, and hereby agree to the transfer of the
Shares to Buyer as set forth in this Agreement.
SECTION 2. PURCHASE PRICE AND PAYMENT
2.1 Purchase Price. The aggregate purchase price for the Shares
shall be the sum of the following (collectively, the "Purchase Price"):
(a) Three Million Nine Hundred Thousand Dollars ($3,900,000);
(b) the Contingent Stock Payment set forth in Section 2.2(b),
if any; and
(c) the Contingent Profits Payment set forth in Section 2.2(c),
if any.
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2.2 Payment. The Purchase Price shall be paid as follows:
(a) Two Million Six Hundred Thousand ($2,600,000) of the
Purchase Price payable pursuant to subsection 2.1(a) shall be paid to the Trust
and One Million Three Hundred Thousand ($1,300,000) of the Purchase Price
payable pursuant to subsection 2.1(a) shall be paid to Xxxxxxxxxxx, on the
Closing Date (the "Closing Stock Payment") by wire transfer of immediately
available funds pursuant to instructions previously given by Sellers to Buyer
for that purpose. Xxxxxxxxxxx authorizes the Buyer to deduct the purchase price
of the Thirty Thousand (30,000) shares of the Buyer's Common Stock (as defined
below) to be purchased at Closing pursuant to Section 2.3(a) from the portion of
the Closing Stock Payment payable to Xxxxxxxxxxx;
(b) One Million Four Hundred Twenty Thousand Dollars
($1,420,000) of the Purchase Price payable pursuant to subsection 2.1(b) shall
be paid to the Trust and Seven Hundred Ten Thousand Dollars ($710,000) of the
Purchase Price payable pursuant to subsection 2.1(b) shall be paid to
Xxxxxxxxxxx, within ten (10) business days after January 1, 2005 (the
"Contingent Stock Payment") by wire transfer of immediately available funds
pursuant to instructions previously given by Sellers to Buyer for that purpose.
The Contingent Stock Payment shall be payable as set forth herein unless
Xxxxxxxxxxx is terminated for Cause (as such term is defined in his Employment
Agreement) or Xxxxxxxxxxx terminates his employment without Good Reason (as such
term is defined in his Employment Agreement) prior to December 31, 2004;
(c) Pursuant to the provisions of the Employment Agreement,
Buyer shall pay Xxxxxxxxxxx an amount equal to .25 multiplied by the fiscal year
Pre-tax Profits from Operations (as defined below) for the calendar years ended
December 31, 2004, 2005 and 2006 (the "Contingent Profits Payment"). Each
Contingent Profits Payment shall be payable as set forth herein unless
Xxxxxxxxxxx is terminated for Cause (as such term is defined in his Employment
Agreement) or Xxxxxxxxxxx terminates his employment without Good Reason (as such
term is defined in his Employment Agreement) prior to December 31, 2004, 2005 or
2006, as applicable. The parties hereto agree that any Contingent Profits
Payment constitutes compensation to Xxxxxxxxxxx, and consequently, Xxxxxxxxxxx
shall treat such payments, if any, as ordinary income on his personal tax
returns or other related filings. Xxxxxxxx shall not have any right to or
interest in such Contingent Profits Payment, if any. "Pre-tax Profits from
Operations" shall mean the net operating income of the Company as determined in
accordance with GAAP, consistent with Buyer's past practice; provided, however,
that in the event additional capital is jointly determined by Buyer and
Xxxxxxxxxxx to be required to be contributed by Buyer to the Company, the
Pre-Tax Profits from Operations for purposes of making the calculations required
by this 2.2(c) shall be reduced by twenty-five percent (25%) of the average
amount of such contribution outstanding during the applicable fiscal year that
is in excess of the cumulative distributions theretofor made by the Company to
Buyer or any subsidiary thereof. Pre-tax Profits from Operations shall be
determined by Buyer, and such determination shall be final, binding and
conclusive upon all parties, unless disputed by Xxxxxxxxxxx in accordance with
Section 2.2(d) below. Buyer shall cause Xxxxxxxxxxx to receive the final
determination of the Pre-tax Profits from Operations promptly after the receipt
thereof by Buyer.
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(d) In the event Xxxxxxxxxxx claims the Pre-tax Profits from
Operations with respect to any of the calendar years ended December 31, 2004,
2005 or 2006 is greater than the determination of such by Buyer, Xxxxxxxxxxx
shall, within 15 days after receipt of such determination from Buyer with
respect to any such year, provide written notice and the supporting calculations
(the "Dispute Notice") to Buyer disputing Buyer's final determination of the
Pre-tax Profits from Operations, which Dispute Notice must specify in reasonable
detail the basis for such dispute and the amount thereof. In the event
Xxxxxxxxxxx does not timely give Dispute Notice to Buyer in the manner set forth
above, Buyer's determination of the Pre-tax Profits from Operations shall be
deemed to be final, binding and conclusive upon all parties. Upon the timely
receipt of the Dispute Notice by Buyer, Xxxxxxxxxxx and Buyer agree to consult
and resolve in good faith any issues arising as a result of such review. If the
parties are unable to resolve any disputes within fifteen (15) business days
following Buyer's receipt of the Dispute Notice, the parties shall jointly
request the accounting firm of PricewaterhouseCoopers LLP ("PWC") to resolve any
issues in dispute as promptly as possible and the parties shall cooperate with
PWC to resolve such disagreement. PWC shall make a determination with respect to
any disputed issue, and Pre-tax Profits from Operations shall be as determined
by PWC, which determination shall be final, binding and conclusive upon all
parties. The fees and expenses of PWC shall be paid one-half by Buyer and
one-half by Xxxxxxxxxxx.
(e) Buyer shall pay Xxxxxxxxxxx by wire transfer pursuant to
instructions previously given by Xxxxxxxxxxx to Buyer for that purpose the
portion of the Contingent Profits Payment payable pursuant to subsection 2.1(c),
if any, within thirty (30) days after the Pre-tax Profits from Operations has
been determined by Buyer (but no later than ninety (90) days following the end
of the applicable year) or, in the event a Dispute Notice is timely given
pursuant to subsection 2.1(d), within thirty (30) days after Buyer and
Xxxxxxxxxxx receive a written copy of the final determination of Pre-tax Profits
from Operations by PWC (or any earlier resolution of the dispute).
2.3 Stock Purchase and Stock Options.
(a) At the Closing, Xxxxxxxxxxx shall purchase from Buyer
thirty thousand (30,000) shares of Buyer's common stock, par value $.10 per
share (the "Buyer's Common Stock"), at a price equal to Eight Dollars ($8.00)
per share. The certificates evidencing the thirty thousand (30,000) shares of
Buyer's Common Stock to be purchased by Xxxxxxxxxxx pursuant to the preceding
sentence will be issued within four (4) days after the Closing Date. Xxxxxxxxxxx
shall have the right (the "Put Right") to cause Buyer to repurchase such shares
at such price of Eight Dollars ($8.00) per share (as such number of shares and
per-share amount shall be appropriately adjusted to reflect any stock splits,
subdivisions, reorganizations, combinations and similar transactions made after
the date hereof with respect to Buyer's Common Stock) by giving notice (a "Put
Notice") to Buyer no later than the earlier of (i) December 31, 2006, or (ii)
that date which is thirty (30) days after termination by Xxxxxxxxxxx of his
employment without Good Reason or a termination for Cause (as those terms are
defined in Xxxxxxxxxxx' Employment Agreement with Company) by Buyer of
Xxxxxxxxxxx' employment with Buyer. Xxxxxxxxxxx shall not be entitled to
exercise the Put Right in the event that he fails to provide the Put Notice in
the applicable time period as set forth above. On each of December 31, 2004,
2005 and 2006, Xxxxxxxxxxx shall have the right to purchase from Buyer Fifteen
Thousand (15,000) additional shares of the Buyer's Common Stock at a purchase
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price per share equal to the closing price of Buyer's Common Stock on the
American Stock Exchange as of the Closing Date (as such number of shares and
per-share amount shall be appropriately adjusted to reflect any stock splits,
subdivisions, reorganizations, combinations and similar transactions made after
the date hereof with respect to Buyer's Common Stock). Xxxxxxxxxxx option to
purchase up to Forty-Five Thousand (45,000) shares of Buyer's Common Stock shall
vest as set forth herein unless Xxxxxxxxxxx is terminated for Cause (as such
term defined in his Employment Agreement) or Xxxxxxxxxxx terminates his
employment without Good Reason (as such term is defined in his Employment
Agreement) prior to the vesting dates set forth above for each specified
increment. Notwithstanding anything herein to the contrary, Buyer may establish
an alternative date for Xxxxxxxxxxx' option to purchase Buyer's Common Stock
pursuant to this Section 2.3(a) (other than shares which were or could have been
purchased under this Section 2.3(a) prior to such alternative date) in the event
of the liquidation, dissolution, merger, consolidation or sale of Buyer or of
substantially all of Buyer's assets, or any similar transaction; provided,
however, that in the event such an alternative date is established, such date
shall be no earlier than 30 days after notice of such alternative date is
provided to Xxxxxxxxxxx; and further provided that in the event such an
alternative date is established, Xxxxxxxxxxx' option to purchase Buyer's Common
Stock pursuant to this Section 2.3(a) shall be exercisable with respect to all
of the shares subject to such option (other than shares which were or could have
been purchased under this Section 2.3(a) prior to such alternative date) even if
Xxxxxxxxxxx' right to acquire such shares would not otherwise be exercisable as
of such date.
(b) Xxxxxxxxxxx acknowledges that the Buyer's Common Stock to
be purchased pursuant to Section 2.3(a) has not been registered under the
Securities Act of 1933, as amended, and said shares cannot be sold, transferred
or disposed of, pledged or hypothecated in any manner whatsoever unless
registered with the Securities and Exchange Commission or, if in the opinion of
the counsel to Buyer, an exception from the registration requirements is in fact
applicable to such shares of the Buyer's Common Stock, Xxxxxxxxxxx represents to
Buyer that (i) he is an "accredited investor" as such term is defined in
Regulation D of the Securities Act of 1933, as amended, (ii) he will acquire the
shares of the Buyer's Common Stock for its own account and not with a view to a
sale or distribution thereof in violation of any securities laws and will not
sell or distribute any of the shares of Buyer's Common Stock in violation of any
securities laws, and (iii) he has the present intention of holding the shares of
Buyer's Common Stock for investment purposes.
2.4 Guarantees. In addition to the foregoing consideration,
Company's and Sellers' obligations under this Agreement shall be expressly
conditioned upon the release or, in the event a release cannot be secured, the
indemnification by Buyer, on or before Closing, of Sellers from any and all
guarantees of the Company's promissory notes set forth on Exhibit 2.4 attached
hereto.
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING SELLERS
Each Seller and Xxxxxxxx, as to himself or itself only (provided,
however, that the representations relating to Xxxxxxxx and the Trust are being
made by them on a joint and several basis), hereby represents and warrants to
Buyer as of the date of this Agreement and as of the Closing Date as follows:
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3.1 Power and Authorization. Such Seller and Xxxxxxxx have full
capacity, legal right, power and authority to enter into and perform his
obligations under this Agreement and under the other documents required to be
delivered by such Seller and Xxxxxxxx prior to or at the Closing (the "Seller
Transaction Documents"). This Agreement has been duly and validly executed and
delivered by such Seller and Xxxxxxxx and constitutes the legal, valid and
binding obligation of such Seller and Xxxxxxxx enforceable against him in
accordance with its terms, except as limited by applicable bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally, and principles of equity (whether considered and applied in a
proceeding in equity or at law). When executed and delivered as contemplated
herein, each of the Seller Transaction Documents shall constitute the legal,
valid and binding obligation of such Seller and Xxxxxxxx that is a party
thereto, enforceable against him or it in accordance with its terms, except as
limited by applicable bankruptcy, reorganization, insolvency, or similar laws
affecting creditors' rights generally, and principles of equity (whether
considered and applied in a proceeding in equity or at law).
3.2 No Conflicts.
(a) The execution, delivery and performance of this Agreement and
the Seller Transaction Documents do not and will not (with or without the
passage of time or the giving of notice):
(i) violate or conflict with the certificate or articles of
incorporation or bylaws (or other organizational documents) of Company;
(ii) violate or conflict with any law (including, without
limitation, principles of common law), statute, regulation, permit, license,
certificate, judgment, order, award or other decision or requirement of any
arbitrator, court, government or governmental agency or instrumentality
(domestic or foreign) (collectively, "Laws"), binding upon any Seller or
Xxxxxxxx; or
(iii) result in, require or permit the creation or imposition
of any restriction, mortgage, deed of trust, pledge, lien, security interest or
other charge, claim or encumbrance of any nature upon or with respect to the
Shares.
(b) Each consent or approval of, or registration, notification,
filing and/or declaration with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person required to be given or made
by any Seller or Xxxxxxxx in connection with the execution, delivery and
performance of this Agreement and the other agreements and instruments
contemplated herein has been obtained or made or will be obtained or made prior
to the Closing without payment of premium or penalty by, or loss of benefit to,
Company.
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of any
Seller or Xxxxxxxx, threatened, that question any of the transactions
contemplated by, or the validity of, this Agreement or any of the other
agreements or instruments contemplated hereby or which, if adversely determined,
could reasonably be expected to have a material adverse effect upon the ability
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of any Seller or Xxxxxxxx to enter into or perform his or its obligations under
this Agreement or any such other agreements or instruments. Neither Seller nor
Xxxxxxxx have received any request from any governmental agency or
instrumentality for information with respect to the transactions contemplated
hereby.
3.3 Ownership of the Shares. Such Seller owns the Shares ascribed
to him on Schedule 1.1, beneficially and of record, free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance of any kind, and there has been no event or action
taken (or failure to take action) by or against such Seller which might result
in the creation of any restriction, mortgage, deed of trust, pledge, lien,
security interest or other charge, claim or encumbrance of any kind on any
Shares. There are no shareholder or other agreements affecting the right of such
Seller to convey the Shares to Buyer or any other right of such Seller with
respect to the Shares, all of which agreements shall be terminated prior to
Closing, and such Seller has the absolute right, authority, power and capacity
to sell, assign and transfer the Shares ascribed to him on Schedule 1.1 to Buyer
free and clear of any restriction, mortgage, deed of trust, pledge, lien,
security interest or other charge, claim or encumbrance. Upon delivery to Buyer
of the certificates for the Shares at the Closing, Buyer will acquire good,
valid and marketable title to the Shares, free and clear of any restriction,
mortgage, deed of trust, pledge, lien, security interest or other charge, claim
or encumbrance.
3.4 Brokers. No person acting on behalf of such Seller, Xxxxxxxx
or any affiliate of a Seller or Xxxxxxxx or under the authority of any of the
foregoing is or will be entitled to any brokers' or finders' fee or any other
commission or similar fee, directly or indirectly, from any of such parties in
connection with any of the transactions contemplated by this Agreement.
3.5 Indebtedness. There are no notes, advances or other unpaid
indebtedness or obligations, whether written or oral, of the Company in favor of
such Seller, Xxxxxxxx or a Related Party (as defined in Section 4.22) of such
Seller or Xxxxxxxx.
3.6 Trust Matters. Xxxxxxxx established and is the sole trustee of
the Trust.
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING COMPANY
Each Seller and Xxxxxxxx, jointly and severally, hereby represents and
warrants to Buyer as of the date of this Agreement and as of the Closing Date as
follows:
4.1 Organization and Good Standing. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has all necessary corporate power and authority to carry on its
business as presently conducted, to own and lease the assets which it owns and
leases and to perform all its obligations under each agreement and instrument by
which it is bound. The Company is not required to be qualified to do business as
a foreign corporation in any State.
4.2 Power and Authorization. Company has full legal right, power
and authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Company Transaction Documents")
required to be delivered by it prior to or at the Closing. The execution,
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delivery and performance by Company of this Agreement and the Company
Transaction Documents have been duly authorized by all necessary corporate
action by the Company. This Agreement has been duly and validly executed and
delivered by Company and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms. When executed and delivered
as contemplated herein, each of the Company Transaction Documents shall
constitute the legal, valid and binding obligation of Company, enforceable
against it in accordance with its terms, except as limited by applicable
bankruptcy, reorganization, insolvency, or similar laws affecting creditors'
rights generally, and principles of equity (whether considered and applied in a
proceeding in equity or at law).
4.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement
and the Company Transaction Documents do not and will not (with or without the
passage of time or the giving of notice):
(i) violate or conflict with the certificate or articles of
incorporation or bylaws (or other organizational documents) of Company or any
Law binding upon Company;
(ii) violate or conflict with, result in a breach of, or
constitute a default or otherwise cause any loss of benefit under any agreement
or other obligation to which Company is a party or by which it any of them or
their assets are bound, or give to others any rights (including rights of
termination, foreclosure, cancellation or acceleration), in or with respect to
Company or any of their assets; or
(iii) result in, require or permit the creation or
imposition of any restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance upon or with respect to the
Shares, Company or any of their assets.
(b) No approval of, or registration, notification, filing
and/or declaration with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person required to be given or made
by Company in connection with the execution, delivery and performance of this
Agreement and the other agreements and instruments contemplated herein. No such
consents, approvals, registrations, notifications, filings or declarations are
required to be obtained or made or will be required to be obtained or made
involving payment of premium or penalty by, or loss of benefit to, Company. Upon
consummation of the transactions contemplated by this Agreement, Company will be
entitled to continue to use all of the assets and properties now used by them
immediately prior to such consummation.
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of Company,
threatened, that question any of the transactions contemplated by, or the
validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, could reasonably be
expected to have a material adverse effect upon Company's ability to enter into
or perform its obligations under this Agreement or any of the other agreements
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or instruments contemplated hereby. Company has not received any request from
any governmental agency or instrumentality for information with respect to the
transactions contemplated hereby.
4.4 Capitalization. The Company's authorized, issued and
outstanding capital stock or other securities are fully and accurately set forth
in Exhibit 4.4 attached hereto. No person has any preemptive or other similar
rights with respect to any such equity interests or other securities and there
are no offers, options, warrants, rights, agreements or commitments of any kind
(contingent or otherwise) relating to the issuance, conversion, registration,
voting, sale or transfer of any equity interests or other securities of Company
(including, without limitation, the Shares) or obligating Company or any other
person to purchase or redeem any such equity interests or other securities. The
Shares constitute all of the issued and outstanding shares of capital stock of
Company and have been duly authorized and are validly issued and outstanding,
fully paid and non-assessable, and such issuance was not in violation of
applicable securities laws.
4.5 Investments and Subsidiaries. Except for the limited liability
company interests in Shelter Mortgage Company, L.L.C., a Delaware limited
liability company, the Company's business is and has been conducted solely by
and through Company and no other person, and Company does not directly or
indirectly own, control or have any investment or other interest in any
corporation, partnership, joint venture, business trust or other entity and
Company has not agreed, contingently or otherwise, to share any profits, losses,
costs or liabilities, or to indemnify any person or entity or to guaranty the
obligations of any person or entity.
4.6 Compliance with Laws.
(a) To the knowledge of the Company, the Company is in
compliance in all material respects with all Laws applicable to the Company and
the Company has not received any written notice from a governmental authority of
an alleged, actual or potential violation of or failure to comply with any Law.
No representation or warranty is made in this Section 4.6(a) with respect to
compliance with Laws relating to matters covered by Sections 4.16 (Previously
Constructed Homes), 4.18 (Taxes), 4.19 (Employee Benefits), 4.20 (Labor
Matters), or 4.23 (Environmental Matters). Company has complied with all
material provisions of applicable building codes for all homes constructed by
the Company.
(b) To the knowledge of the Company, all federal, foreign,
state, local and other governmental consents, licenses, permits, franchises,
grants and authorizations (collectively, "Authorizations") required for the
operation of the business of Company as currently conducted and as conducted
during the last five years are in full force and effect, and to the knowledge of
Company has not received any written notice of any claim or charge that Company
is in violation of or in default under any such Authorization. No proceeding is
pending or, to the knowledge of Company, threatened by any person to revoke or
deny the renewal of any Authorization of Company.
4.7 Litigation. There are no pending actions, suits, proceedings
(arbitration or otherwise) or investigations to which Company, or its directors,
officers or shareholders in their capacities as such, is a party before or by
- 11 -
any court or governmental agency or instrumentality, or before an arbitrator of
any kind. To the knowledge of Company, no such action, suit, proceeding or
investigation is presently threatened. There are no judgments, penalties or
awards against Company.
4.8 Financial Statements.
(a) Exhibit 4.8 attached hereto includes: (i) the balance sheet
of Company as of December 31, 2002 (including the notes thereto, the "Balance
Sheet"), and the related statements of income and stockholders' equity for each
fiscal year then ended, together with the review report thereon from Xxxxxx
Master and Company, independent accountants (the "Reviewed Financial
Statements"), including all notes thereto, and (ii) the interim balance sheet of
Company as of May 31, 2003 and for the five (5) month period then ended
(including the notes thereto, the "Interim Balance Sheet") and the related
statements of income and stockholders' equity for such period. Such financial
statements and notes accurately and fairly present the financial condition and
results of operations of Company as at the respective dates thereof and for the
periods therein referred to, all in accordance with GAAP consistently applied;
provided, however, that financial statements are prepared on an income tax, not
GAAP, basis.
(b) The Interim Balance Sheet reflects all liabilities of
Company, whether absolute, accrued or contingent, as of the date thereof
required to be reflected or disclosed in a balance sheet (or the notes thereto)
prepared in accordance with GAAP; provided, however, that unaudited interim
financial statements are prepared on an income tax, not GAAP, basis. Company
does not have any liabilities that are not reflected in the Interim Balance
Sheet (or the notes thereto) of the type which would be required to be disclosed
in the financial statements of the Company on an income tax basis other than
current liabilities incurred since the date thereof in the ordinary course of
business, consistent with past practice.
4.9 Inventory.
(a) All inventory of Company is valued on Company's
consolidated books and records at the lower of cost or fair market value
thereof, and is usable or saleable in the ordinary course of business consistent
with past practice. A true and complete listing of all inventory of Company as
of a recent date has been delivered to Buyer.
(b) To the knowledge of the Company, there are no present
design, construction, manufacturing or other defects with respect to homes
currently in inventory, including, without limitation, defects presently
existing as a result of soil conditions. No homes have been sold by Company
under an understanding that such homes would be returnable.
4.10 Warranties. Except for the standard warranty, a copy of which
is attached hereto as Exhibit 4.10, (a) Company has not made any express
warranties to third parties with respect to any homes manufactured, constructed
or sold by Company; and (b) there are no express warranties outstanding with
respect to any such homes or services. The Company has not modified or expanded
its warranty obligations beyond those set forth in the standard warranty.
- 12 -
4.11 Real Property.
(a) The Owned Real Property (as defined below), and, to the
knowledge of Company, the Land Contract Real Property (as defined below) and the
Option Real Property (as defined below) (collectively, the "Real Property"): (i)
have (or do as a matter of right) all necessary access to and from public
highways, streets, and roads, and no pending or threatened proceeding exists
that would reasonably be expected to limit or result in the termination of such
access; (ii) are (or may as a matter of right be) connected to and serviced by
public electric, public gas, public sewage, septic tanks, permitted xxxxx,
public storm drains, public telephone and public water facilities, which
facilities are operational and in compliance, in all material respects, with all
applicable Laws; and (iii) meet the conditions for the issuance of a building
permit for the construction and sale of residential dwellings as proposed by
Company. The Real Property constitutes all of the Real Property that Company
owns or has a right to acquire.
(b) Exhibit 4.11(b) attached hereto lists all of the real
property that Company owns, and Company is the sole owner of good, valid,
marketable and insurable (at standard rates) fee simple title to all such real
property, including, without limitation, all buildings, structures, fixtures and
improvements thereon (the "Owned Real Property"), in each case free and clear of
any restriction, mortgage, deed of trust, pledge, lien, security interest, or
other lien or encumbrance, except Permitted Encumbrances set forth on Exhibit
4.11(b) or as disclosed in title reports and surveys made available to Buyer and
listed on Exhibit 4.11(b). "Permitted Encumbrances" means (i) liens for current
state and local property taxes or assessments not yet due or delinquent or which
are being contested in good faith; (ii) mechanics', carriers', workers',
repairers' and other similar liens arising or incurred in the ordinary course of
business relating to obligations as to which there is no default on the part of
the Company; (iii) exceptions shown on the surveys or other title records made
available to Buyer on or before the date hereof and which do not materially
affect the Seller's proposed use of such Real Property; (iv) mortgages on the
landlord's interest in property leased to the Company; (v) liens and
encumbrances reflected in the Balance Sheet (or notes thereto or the Interim
Balance Sheet); (vii) such other Liens, imperfections in title, charges, rights
of way, land use ordinances and zoning plans which do not materially interfere
with Seller's proposed use of such Real Property.
(c) Exhibit 4.11(c) attached hereto describes each lease
pursuant to which Company is the lessee with respect to any real property (the
"Leased Real Property"). Company has all right, title and interest in all
material leasehold estates and other material rights purported to be granted to
them by the agreements, arrangements, contracts, commitments and leases listed
and set forth in Exhibit 4.11(c).
(d) Exhibit 4.11(d) attached hereto lists all written and oral
agreements, arrangements, contracts and commitments to which Company is a party
pursuant to which Company is obligated to purchase any developed or undeveloped
real property, whether or not subject to conditions precedent (the "Land
Contract Real Property") or possesses an option or other rights to acquire any
developed or undeveloped real property, whether or not subject to conditions
precedent (the "Option Real Property").
- 13 -
(e) With respect to any agreements, arrangements, contracts,
covenants, conditions, deeds of trust, rights-of-way, easements, mortgages,
restrictions, surveys, title insurance policies, and other documents granting
Company title to or an interest in or a right or an option to acquire real
property, no breach or event has occurred that, with or without the giving of
notice or the passage of time, would constitute a breach or event of default, by
Company, or any other party thereto.
(f) No Owned Real Property and no Land Contract Real Property
or Option Real Property is the subject of any condemnation, eminent domain, or
similar proceedings and no condemnation, eminent domain, or similar proceeding
is threatened with respect to the Real Property.
(g) The buildings and other improvements on the Owned Real
Property, and, to the knowledge of Company, the Land Contract Real Property and
the Option Real Property, do not violate (i) any applicable Law, including
without limitation, any building, set-back, or zoning Law, or (ii) any
restrictive covenant affecting any such real property and conform in all
material respects to the appropriate governmental authority's subdivision
standards, except to the extent that any violation of, or nonconformance with an
applicable Law would not inhibit Company's ability to construct and sell
residential homes.
(h) There are no parties in possession of any portion of the
Owned Real Property, the Land Contract Real Property or the Option Real
Property, as lessees, tenants at sufferance, or trespassers.
(i) Except as set forth in Exhibit 4.11(i), there are no
unpaid charges, debts, liabilities, claims or obligations arising from the
construction, occupancy, ownership, use, or operation of the Owned Real
Property, the Land Contract Real Property or the Option Real Property. Except as
set forth in Exhibit 4.11(i), no Owned Real Property, no Land Contract Real
Property and no Option Real Property is subject to any condition or obligation
to any governmental entity or other person requiring Company or any transferee
thereof to donate land, money or other property or to make on-site or off-site
public improvements.
(j) The Company has no obligation to pay any developer related
charges or any charges or assessments for public improvements made to Owned Real
Property, the Land Contract Real Property or the Option Real Property, including
without limitation, any charges or assessments for construction of sewer lines,
water lines, storm drainage systems, electric lines, natural gas lines, roads
and curbs. The Company has no obligation to pay any developer related charges or
any charges or assessments for public improvements made to previously sold
homes, including without limitation, any charges or assessments for construction
of sewer lines, water lines, storm drainage systems, electric lines, natural gas
lines, roads and curbs, except (i) as reflected or reserved for on the Balance
Sheet, or (ii) for homes under construction as of the date of the Closing which
have not been conveyed to the customer purchasing such home for which Company
may be responsible for the customary practice of reimbursing a developer for
impact fees incurred in an amount not to exceed Twelve Thousand Dollars
($12,000) per home, which amounts have been paid or are accrued on the books and
records.
- 14 -
(k) There is no moratorium applicable to any of the Owned Real
Property, the Land Contract Real Property or the Option Real Property on (i) the
issuances of building permits for the construction of houses or certificates of
occupancy therefor, or (ii) the purchase of sewer or water taps.
(l) The Owned Real Property, and, to the knowledge of Company,
the Land Contract Real Property and the Option Real Property (i) are not located
within a "critical," "preservation," "conservation" or similarly designated area
and (ii) the buildable area of the property does not contain wetlands.
(m) None of the Owned Real Property or the Sold Real Property,
and, to the knowledge of Company, the Land Contract Real Property and the Option
Real Property is reclaimed xxxxx or swampland or has been used as a grave site,
land fill or for any industrial purpose whatsoever.
4.12 Personal Property. Company owns all of the personal property
reflected in the Interim Balance Sheet as owned by it and all personal property
acquired after December 31, 2002, except personal property which has been sold
or disposed of in the ordinary course of business since such date, free and
clear of any mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance.
4.13 List of Properties, Contracts, etc. Exhibit 4.13 attached
hereto lists or describes the following:
(a) Each vehicle, item of machinery, equipment and other
tangible asset (other than real property) carried as an asset on the records of
or leased by Company with a fair market value or tax basis in excess of $10,000
in respect of any item;
(b) Each material Authorization;
(c) Each (i) fictitious business name, tradename, registered
and unregistered trademark, service xxxx, patents, copyrights and related
application (together with the names Masterpiece Homes, the "Intellectual
Property"), and (ii) license and permit issued or granted by any person relating
to any of the foregoing; in each case owned, leased, used or held by, granted to
or licensed by Company as either licensor or licensee, together with all other
interests therein granted by Company to any other person, all agreements with
respect to any of the foregoing to which Company is a party and any lien,
encumbrance, adverse claim, opposition or claim of infringement with respect to
any of the foregoing;
(d) Each outstanding loan or advance (excluding certain
advances to employees for ordinary and necessary business expenses made in the
ordinary course of business) by Company to any person (including any Seller,
Xxxxxxxx and any officer, director of employee of Company);
(e) Each contract, agreement, lease, purchase order or other
commitment, withdrawal, involving the performance of services or delivery of
goods or materials by or to Company (excluding contracts for the sale of homes,
but including listing agreements) involving payments of more than $10,000 over
- 15 -
its remaining term and which is not terminable by Company on 90 days' notice,
without premium or penalty (each, a "Material Contract");
(f) Each capital project currently undertaken or which has
been approved by Company involving an estimated expenditure of more than $10,000
and all agreements, contracts, purchase orders or commitments with respect
thereto;
(g) Each contract, agreement, lease or commitment, withdrawal,
to which Company is a party or is otherwise bound providing for payments
(contingent or otherwise) to or by any person or entity based on sales,
purchases or profits, other than direct payments for goods and salesperson's
commission arrangements set forth in the Exhibit 4.13;
(h) Each form of contract, agreement, lease or commitment
currently used by Company as a standard form in the ordinary course of business;
(i) Each policy and binder of insurance (including without
limitation, property, casualty, liability, life, health, accident, workers'
compensation and disability insurance and bonding arrangements) owned by, or
maintained for the benefit of, or respecting which any premiums are paid
directly or indirectly by Company;
(j) Each outstanding power-of-attorney or similar power
granted by Company for any purpose whatsoever;
(k) Each evidence of indebtedness, note, advance, guaranty or
letter of credit entered into, issued or to be issued by Company, and all loan
and other agreements relating thereto;
(l) Each evidence of indebtedness, note, advance, guaranty or
letter of credit entered into, issued or to be issued to the Company, and all
loan and other agreements relating thereto;
(m) Each deed of trust, pledge, lien, security interest or
other charge, claim and encumbrance of any nature relating to the Owned Real
Property or material personal property of Company; and
(n) Each bank or other financial institution in which Company
has a deposit account, line of credit or safe deposit box, the relevant account
or other identifying number, and the names of all persons authorized to act or
deal in connection therewith.
Sellers or Xxxxxxxx have caused Company to make available to Buyer true
and complete copies of each agreement or other document required to be disclosed
on Exhibit 4.13.
4.14 Contracts. Each Material Contract to which Company is a party
was made in the ordinary course of business, is in full force and effect and is
valid, binding and enforceable against the parties thereto in accordance with
its terms. The Company has not received any written notice of cancellation of,
or any written notice of a material dispute under, any Material Contract. No
other party is in default in any material respect under any Material Contract,
and there has not occurred any event which (whether with or without notice,
- 16 -
lapse of time or the happening or occurrence of any other event) would
constitute such a default. Company has performed in all material respects all
obligations required to be performed by it under each such contract, agreement
and commitment, and no condition exists or event has occurred which with notice
or lapse of time would constitute a material default or a basis for delay or
non-performance by Company, or by any other party thereto.
4.15 Insurance.
(a) The insurance policies listed in Exhibit 4.13 are valid
and enforceable policies, no claims have been made against any of such insurance
policies, and such insurance policies will not be affected by, terminate or
lapse by reason of the transactions contemplated by this Agreement.
(b) Company has not received any written notice of
cancellation or modification of any policy or binder of insurance identified in
Exhibit 4.13. Company has not, within the last five years, been refused any
insurance nor has its coverage been limited.
4.16 Previously Constructed Homes.
(a) All of the homes previously Constructed by Company were of
a quality salable in the ordinary course of business, consistent with the
practices and standards of the home building industry and in substantial
compliance with all Laws, including without limitation, any building, setback,
subdivision or zoning Law, consistent with the practices followed in
homebuilding industry in the markets in which the Company operates. As used in
this Agreement "Constructed" means homes for which construction has been
completed and a certificate of occupancy has been issued.
(b) Exhibit 4.16 attached hereto lists all repairs made after
sale of Constructed homes by or on behalf of Company during the 36 month period
ended May 31, 2003, which involved (i) an aggregate repair cost in excess of
$5,000 per home or (ii) a material recurring problem (the same material problem
occurring in more than five (5) homes).
(c) Exhibit 4.16 sets forth (i) the total dollar amount of all
warranty claims paid by Bonded Builders Home Warranty (the "Warranty Company")
or on behalf of Company in each of the three twelve (12) month periods ended May
31, 2001, May 31, 2002 and May 31, 2003, (ii) the total dollar amount of all
deductibles paid by Company in each of the three twelve (12) month periods ended
May 31, 2001, May 31, 2002 and May 31, 2003, and (iii) the total dollar amount
and a brief description of all pending warranty claims, other than claims for
punchlist and similar items involving in any case less than $5,000 in the
aggregate per home. All homes previously Constructed by Company during the three
twelve (12) month periods ended May 31, 2001, May 31, 2002 and May 31, 2003, or
currently in the inventory of the Company were enrolled in the Warranty
Company's warranty program prior to their completion and are currently enrolled
in such program. Exhibit 4.16 sets forth, as of the date hereof, the Warranty
Company's builder rating for Company.
(d) To the knowledge of the Company, there are no design,
construction, manufacturing or other defects with respect to homes previously
Constructed by Company.
- 17 -
4.17 Suppliers. Exhibit 4.17 attached hereto lists the names
of the ten suppliers from whom Company made the most purchases during fiscal
2001 and fiscal 2002 and the aggregate expenditures attributable to each in each
such year. No supplier that accounted for more than $50,000 of the purchases of
Company during the twelve month period ended May 31, 2003, has terminated or
materially reduced, or has given notice that it intends to terminate or
materially reduce, the amount of business done with Company.
4.18 Taxes.
(a) All federal, state, local and foreign Returns (as
defined herein) relating to Taxes (as defined herein), or extensions relating
thereto, required to be filed on or before the Closing Date by or with respect
to Company (including, without limitation, all federal and state consolidated
and combined tax returns and reports for any consolidated group of which Company
has been a member (the "Consolidated Group")) have been or will be timely filed
and are or will be true and complete. For purposes of this Agreement, "Return"
and/or "Returns" shall mean all reports, estimates, information statements and
returns of any nature, including amended versions of any of the foregoing,
relating to or required to be filed in connection with any Taxes pursuant to the
statues or regulations of any federal, state, local or foreign government taxing
authority. "Tax" or "Taxes" shall mean all federal, state (which includes for
this purpose the District of Columbia), local and foreign (which includes for
this purpose possessions, territories and protectorates of the United States of
America) income, profits, capital, franchise, sales, use, payroll, premium,
occupancy, real or personal property, ad valorem, severance, excise,
withholding, customs, unemployment, transfer and other taxes, or other kind of
tax, assessment, levy, imputation or other governmental change in the nature of
a tax (no matter how denominated), including interest, additions to tax and
penalties.
(b) All Taxes imposed upon the Company due with respect
to taxable periods ending on or prior to Closing Date have been fully and timely
paid to the appropriate governmental authority or properly deposited as required
by law, or, in the case of Taxes not yet due, fully provided for on the books of
account of Company; and there are no levies, liens, or other encumbrances
relating to Taxes existing, threatened or pending with respect to any asset of
Company.
(c) No claim of deficiency has been asserted or
threatened by the Internal Revenue Service ("IRS") or any other taxing authority
(or is currently pending), no taxing authority has begun or threatened to begin
any audit or investigation of any Returns filed by Company referred to above, or
requested information with regard thereto or any other Taxes that may be owed by
Company and no waivers of statutes of limitations have been given with respect
to any Returns previously filed by Company. In the event any of Company, Sellers
or Xxxxxxxx become aware of any such asserted or threatened deficiency or
assessment, or any investigation or audit, after the date hereof, it will
immediately notify Buyer and will diligently defend any such action.
(d) Buyer has been furnished complete copies of all
Returns filed by Company for the five year period ending on the date of this
Agreement. No deficiencies have been asserted in writing or, with respect to
deficiencies as to which the Company has received written notice, are currently
under examination by the IRS or by other taxing authorities with respect to all
- 18 -
federal, state, local and foreign income, franchise and sales and use tax
Returns of or with respect to Company. All deficiencies asserted or assessments
made as a result of such examinations have been fully paid, and there are no
other unpaid deficiencies asserted or assessments made by any taxing authority
against Company.
(e) Except as set forth in Exhibit 4.18(e) attached
hereto, Company: has not filed any consent under section 341(f)(1) of the Code
or agreed to have the provisions of Code section 341(f)(2) apply to any
dispositions of "subsection (f) assets" as such term is defined in Code section
341(f)(4); has not agreed to or is required to make any adjustments under Code
section 481(a) by reason of a change in accounting method or otherwise; does not
employ the LIFO method of accounting for inventories for federal income tax
purposes; has not made a transfer of intangible property on which Code section
367(d) or 482 will require the recognition of additional income for any period
after the date hereof; and does not own stock in a "passive foreign investment
company" within the meaning of Code section 1296(a). "Code" for purposes of this
Agreement shall mean the Internal Revenue Code of 1986, as amended.
(f) Company is not, nor has ever been, a member of
consolidated groups for federal income tax purposes.
(g) Company is an "S" corporation and has analogous
status for applicable state income tax purposes.
(h) Company is not required to file a foreign Return.
(i) Company has not made, and will not become obligated
to make, any payments that will be nondeductible under Section 280G of the Code
(or any corresponding provision of federal, state, provincial, local or foreign
income Tax law). Each of Xxxxxxxxxxx, the Trust, each of the beneficiaries of
the Trust and Xxxxxxxx is a United States person as defined in Code
ss.7701(a)(3). Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code ss.6662. Company is not a party to
or bound to any Tax allocation, sharing or similar agreement and has no
contractual obligation to indemnify any other Person with respect to Taxes and
Company has no liability for Taxes arising as a result of Company at any time
being a number of an affiliated group for federal income tax purposes.
(j) Company will not be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any:
(1) change in method of accounting for a taxable period ending on or prior to
the Closing Date; (2) "closing agreement" as described in Code ss.7121 (or any
corresponding or similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (3) intercompany transactions
occurring at or prior to the Closing or any excess loss account in existence at
Closing described in Treasury Regulations under Code ss.1502 (or any
corresponding or similar provision of state, local or foreign income Tax law);
(4) installment sale or open transaction disposition made on or prior to the
Closing Date; or (5) prepaid amount received on or prior to the Closing Date.
- 19 -
(k) As of the first day of its most recently completed
taxable year, Company had adjusted inventories as required by Section 263A of
the Code. Exhibit 4.18 sets forth the amount of each adjustment required under
said Section 263A and the regulations thereunder.
(l) Possible Section 338(h)(10) Election.
(i) At the election of Buyer, the Sellers, Xxxxxxxx
and Company shall file an election under Section 338(h)(10) of the Code and
under any comparable provisions of state, local or foreign law with respect to
the purchase of the Shares (the "Election"). No later than one hundred fifty
(150) days following the Closing, Buyer shall notify Sellers and Xxxxxxxx
whether Buyer will make the Election. If such election is to be made, Buyer
shall also supply to Sellers and Xxxxxxxx within such one hundred fifty (150)
day period Form 8883 prepared by Buyer's regularly employed accountants which
shall be attached to Company's federal income tax return (and the forms if any
to be attached to Company's state income tax return). The Sellers, Xxxxxxxx and
Company shall take no action which is inconsistent with the Election or its
validity under the Code and the applicable Treasury Regulations.
(ii) On the Closing Date, the Sellers and Xxxxxxxx
shall execute and deliver to Buyer five copies of Internal Revenue Service Form
8023-A provided by Buyer and the equivalent forms for state income tax purposes,
and shall thereafter provide any additional or similar forms under applicable
federal, state, local or foreign law (the "Election Forms") to Buyer as Buyer
may reasonably request.
(iii) Buyer shall be responsible for the preparation
and filing of all forms and documents required in connection with the Election.
Buyer shall provide the Sellers and Xxxxxxxx with copies of (a) any necessary
corrections, amendment, or supplements to Form 8023(a), (b) all attachments
required to be filed therewith pursuant to applicable Treasury Regulations, and
(c) any comparable forms and attachments with respect to any applicable state,
foreign, or local elections included as part of the Election. The Sellers and
Xxxxxxxx shall execute and deliver to Buyer within five (5) days of receipt by
the Sellers and Xxxxxxxx such documents or forms as are required properly to
complete the Election.
(iv) The Sellers, Xxxxxxxx and Company shall
cooperate fully with Buyer and make available to Buyer such Tax data and other
information as may be reasonably required by the Buyer or Company in order for
Buyer to timely file the Election and any other required statements or schedules
(or any amendments or supplements thereto) and shall, if requested by Buyer,
attach to the federal income tax Return filed for the Company for the period
ending with the Closing Form 8883 as referred to in Section 4.18(l)(i).
4.19 Employee Benefits.
(a) Exhibit 4.19 attached hereto contains a complete and
correct list of all benefit plans, arrangements, commitments and payroll
practices (whether or not employee benefit plans ("Employee Benefit Plans") as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), including, without limitation, sick leave, vacation pay,
- 20 -
severance pay, salary continuation for disability, consulting or other
compensation arrangements, retirement, deferred compensation, bonus, incentive
compensation, stock purchase, stock option, health including hospitalization,
medical and dental, life insurance and scholarship programs maintained for the
benefit of any present or former employees of Company or any ERISA Affiliate (as
defined below) or to which Company or any ERISA Affiliate has contributed or is
or was within the last three years obligated to make payments. Company has made
available to Buyer, with respect to all such plans, arrangements, commitments
and practices, true, complete and correct copies of the following: all plan
documents, handbooks, manuals, collective bargaining agreements and similar
documents governing employment policies, practices and procedures; the most
recent summary plan descriptions and any subsequent summaries of material
modifications for each Title I plan; Forms series 5500 as filed with the IRS for
the three most recent plan years; the most recent report of the enrolled actuary
for all defined benefit plans, funded welfare plans or other plans requiring
actuarial valuation; all trust agreements with respect to employee benefit
plans; plan contracts with service providers or with insurers providing benefits
for participants or liability insurance for fiduciaries and other parties in
interest or bonding; most recent annual audit and accounting of plan assets for
all funded plans; and most recent IRS determination letter for all plans
intended to be qualified under Code section 401(a). As used herein, "ERISA
Affiliate" shall refer to any trade or business, whether or not incorporated,
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code.
(b) With respect to each Employee Benefit Plan required to be
listed on Exhibit 4.19: (i) each Employee Benefit Plan has been administered in
substantial compliance with its terms, and is in compliance in all material
respects with the applicable provisions of ERISA, the Code and all other
applicable Laws (including, without limitation, funding, filing, termination,
reporting and disclosure and continuation coverage obligations pursuant to Title
V of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA")); (ii) the Company has made or provided for all contributions required
under the terms of such Plans; (iii) no "Employee Pension Benefit Plan" (as
defined in Section 3(2) of ERISA) has been the subject of a "reportable event"
(as defined in Section 4043 of ERISA) and there have been no "prohibited
transactions" (as set forth in Section 4975 of the Code or in Part 4 of Subtitle
B of Title I of ERISA) with respect to any Employee Benefit Plan; (iv) there are
and during the past three years there have been no inquiries, proceedings,
claims or suits pending or threatened by any governmental agency or authority or
by any participant or beneficiary against any of the Employee Benefit Plans, the
assets of any of the trusts under such Plans or the Plan sponsor or the Plan
administrator, or against any fiduciary of any of such Employee Benefit Plans
with respect to the design or operation of the Employee Benefit Plans; (v) the
actuarial present value of accumulated benefits (both vested and unvested) of
each of the Employee Pension Benefit Plans which are defined benefit plans, are
fully funded in accordance with the actuarial assumptions used by the Pension
Benefit Guaranty Corporation ("PBGC") to determine the level of funding required
in the event of the termination of such Plan; (vi) each Employee Pension Benefit
Plan which is intended to be "qualified" within the meaning of Section 401(a) of
the Code is and has from its inception been so qualified, and any trust created
pursuant to any such Employee Pension Benefit Plan is exempt from federal income
tax under Section 401(a) of the Code and the IRS has issued each such Plan a
favorable determination letter which is currently applicable; and (vii) neither
Company nor any ERISA Affiliate is aware of any circumstance or event which
would jeopardize the tax-qualified status of any such Employee Pension Benefit
- 21 -
Plan or the tax-exempt status of any related trust, or which would cause the
imposition of any liability, penalty or tax under ERISA or the Code with respect
to any Employee Benefit Plan.
(c) Neither Company nor any ERISA Affiliate maintains or has
ever maintained or been obligated to contribute to a "Multiemployer Plan" (as
such term is defined by Section 4001(a)(3) of ERISA).
(d) With respect to each Employee Benefit Plan maintained by
Company or any ERISA Affiliate: (i) no unsatisfied liabilities to participants,
the IRS, the United States Department of Labor ("DOL"), the PBGC or to any other
person or entity have been incurred as a result of the termination of any
Employee Benefit Plan; (ii) no Employee Pension Benefit Plan, which is subject
to the minimum funding requirements of Part 3 of subtitle B of Title I of ERISA
or subject to Section 412 of the Code, has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code and there has been no waived funding deficiency within the meaning of
Section 303 of ERISA or Section 412 of the Code; (iii) there has been no event
with respect to an Employee Pension Benefit Plan which would require disclosure
under Sections 4062(c), 4063(a) or 4041(e) of ERISA.
(e) All reports and information required to be filed with the
DOL, IRS and PBGC with respect to each Employee Benefit Plan have been filed and
all annual reports (including Form 5500 series) of such Plans were certified
without qualification by each Plan's accountants and actuaries.
(f) Any bonding required under ERISA with respect to any
Employee Benefit Plan has been obtained and is in full force and effect and no
funds held by or under the control of Company are plan assets.
(g) Neither Company nor any ERISA Affiliate maintains any
retired life and/or retired health insurance plans which provide for continuing
benefits or coverage for any employee or any beneficiary of an employee after
such employee's termination of employment.
(h) The consummation of the transactions contemplated by this
Agreement will not, alone or together with any other event, (i) entitle any
person to severance pay, unemployment compensation or any other payment, (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee, or (iii) result in any liability under
Title IV of ERISA or otherwise.
4.20 Labor Matters.
(a) (i) No application or petition for certification of a
collective bargaining agent is pending and none of the employees of Company are,
or during the last five years have been, represented by any union or other
bargaining representative; (ii) during the last five years, no union has
attempted to organize any group of the Company's employees and no group of the
Company's employees has sought to organize themselves into a union or similar
organization for the purpose of collective bargaining; (iii) during the last
five years there has not been and there is not currently pending any labor
arbitration or proceeding in respect of the grievance of any employee, any
application, charge or complaint filed by any employee or union with the
- 22 -
National Labor Relations Board or any comparable state or local agency, any
strike, slowdown, picketing or work stoppage by any employees at any facility of
Company, any lockout of any such employees (iv) no agreement restricts Company
from relocating, closing or terminating any of its operations or facilities or
any portion thereof, and (v) no such agreement, action, proceeding or occurrence
has been threatened in writing by any person.
(b) The Company has not been cited for violations of the
Occupational Safety and Health Act of 1970, 29 U.S.C. sec. 651 et seq. ("OSHA"),
any regulation promulgated pursuant to OSHA or any other Law establishing
standards of workplace safety, or paid any fines or penalties with respect to
any such citation.
(c) Exhibit 4.20(c) attached hereto contains true and correct
copies of each OSHA record keeping injury/illness report, loss and summary
completed and maintained by Company at its work establishments for the past
three (3) years.
4.21 Directors, Officers and Employees. Exhibit 4.21 attached
hereto sets forth the following information for each director, officer and
employee of Company and each consultant and independent contractor regularly
retained, in each case whose aggregate compensation for the fiscal year ended
December 31, 2002 exceeded $50,000 or whose current aggregate annual rate of
compensation exceeds such amount (including each such person on leave or layoff
status): employer; employee name and job title; current annual rate of
compensation (identifying bonuses separately) and any change in compensation
since the date of the Balance Sheet; accrued vacation pay and any automobile
leased or owned by Company primarily for use by any of the foregoing persons.
None of their employees, directors or officers is a party to, or is otherwise
bound by, any agreement or arrangement with any person or entity other than
Company which limits or adversely affects the performance of his duties, the
ability of Company to conduct their businesses, or his freedom to engage in any
of the businesses conducted by Company. Exhibit 4.21 lists each employment,
severance or change of control agreement to which Company is a party or is
otherwise bound.
4.22 Affiliate Agreements. Except as set forth on Exhibit 4.22
attached hereto, there are no, and since January 1, 1998 there have not been
any, agreements or transactions between Company on the one hand and any Seller
or Xxxxxxxx or any present or former director, shareholder or officer of Company
or any member of such person's immediate family (a "Related Party") providing
for the furnishing of services (other than as an employee) by, rental of any
assets from or to, or otherwise requiring payments to any Related Party. Except
as set forth on Exhibit 4.22 attached hereto, no such Related Party has, or
since January 1, 1998 has had, any interest in any material property (real or
personal, tangible or intangible) sold to, purchased by or otherwise used in or
pertaining to the business of Company, or any direct or indirect interest in any
person or entity which has had business dealings or a financial interest in any
transaction with Company or which is in competition with any business of
Company. Except as set forth on Exhibit 4.22 attached hereto, all agreements
between Company and all Related Parties are terminable by Company upon 30 days'
notice or less, without payment of penalty or premium of any kind.
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4.23 Environmental Matters.
(a) The Company, including all of its businesses and
operations are and always have been operated in compliance with all applicable
Environmental Laws (as defined below); provided that, with respect to periods
prior to the acquisition or lease, or after the disposition, of any Real
Property by the Company, the foregoing representation and warranty is given only
to the knowledge of the Company.
(b) There are no conditions on, about, beneath or arising from
any currently Owned Real Property ("Current Real Property"), which are
reasonably expected, under any applicable Environmental Laws, (A) to give rise
to liability or the imposition of a statutory lien, or (B) to require any
"Response," "Removal" or "Remedial Action" (as those terms are defined below);
(c) At the time of disposition thereof, there were no
conditions on, about, beneath or arising from any real property which was, but
is no longer, owned, used or leased to or by Company, including without
limitation real property that includes homes which were previously constructed
and/or sold by Company ("Former Real Property") which resulted from action taken
by the Company during its period of ownership, use or lease and are reasonably
expected, under any applicable Environmental Laws, (A) to give rise to liability
or the imposition of a statutory lien, or (B) to require any "Response,"
"Removal" or "Remedial Action" (as defined below) pursuant to applicable
Environmental Law;
(d) The Company has not received any written notification of a
"Release" or threat of a "Release of a "Hazardous Substance" (as defined below)
with respect to any Current Real Property or Former Real Property;
(e) No Hazardous Substances have been generated, processed,
treated, stored, released, discharged or disposed of by Company or any third
party on, about or beneath any Current Real Property;
(f) During Company's ownership, use or lease of the Former
Real Property, no Hazardous Substances were generated, processed, treated,
released, discharged or disposed of by Company or any third party on, about or
beneath any Former Real Property;
(g) To the knowledge of the Company, there are and have been
no above or underground storage tanks, asbestos containing materials, lead-based
paint, molds, fungus or other microbial matter at levels which can reasonably be
expected to cause adverse effects to persons or property, or transformers
containing or contaminated with PCB's on, about or beneath the Current Real
Property; provided that, with respect to periods prior to the acquisition or
lease, or after the disposition, of any Real Property by the Company. To the
knowledge of the Company, during Company's ownership, use or lease of the Former
Real Property, there were no above or underground storage tanks, asbestos
containing materials, lead-based paint, molds, fungus or other microbial matter
at levels which can reasonably be expected be cause adverse effects to persons
or property, or transformers containing or contaminated with PCB's on, about or
beneath the Former Real Property; provided that, with respect to periods prior
to the acquisition or lease, or after the disposition, of any Real Property by
the Company.
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(h) There has not been:
(i) any written claim, written demand, investigation,
enforcement action, Response, Removal, Remedial Action, statutory lien or other
governmental or regulatory action instituted or threatened in writing against
Company or the Current, or Former Real Property pursuant to any of the
Environmental Laws;
(ii) any written claim, written demand, written notice or
suit, made or threatened in writing by any person against Company, the Current
Real Property or the Former Real Property claiming (1) damage, loss or injury
resulting from, or claimed to result from, any Hazardous Substance on, about,
beneath or arising from the Current or Former Real Property or (2) any alleged
violation of the Environmental Laws by Company; or
(iii) any written communication to or from any
governmental or regulatory agency arising out of or in connection with Hazardous
Substances on, about, beneath, arising from or generated at the Current Real
Property or Former Real Property, including without limitation, any notice of
violation, citation, complaint, order, directive, request for information or
response thereto, notice letter, demand letter or compliance schedule; provided
that, with respect to periods prior to the acquisition or lease, or after the
disposition, of any Real Property by the Company, the foregoing representation
and warranty is given only to the knowledge of the Company.
(i) To the knowledge of the Company, none of the Current Real
Property contains, and none of the Former Real Property contained at the time it
was sold by Company, a level of radon above action levels of the United States
Environmental Protection Agency; provided that, with respect to periods prior to
the acquisition or lease, or after the disposition, of any Real Property by the
Company.
(j) The Company has not arranged for transportation or
disposal of any Hazardous Substances at any site listed or formally proposed for
listing on the National Priority List promulgated pursuant to "CERCLA" (as
defined below) or to any site listed on any other federal or state list of sites
requiring or recommended for investigation or clean-up. None of the Current Real
Property or Former Real Property is listed on the National Priorities List or
any other federal or state list of sites requiring or recommended for
investigation or clean up.
(k) None of the Current Real Property contains or is located
within a "critical", "preservation," "conservation" or similarly designated
area, habitat for endangered or threatened species or wetlands recognized by
Environmental Laws.
(l) None of the Current Real Property, or any portion thereof,
has been used to dispose or treat wastes or for any industrial purpose
whatsoever.
(m) As used in this Agreement:
(i) the term "Environmental Laws" means all applicable
federal, state and local Laws relating to pollution or contamination of the
environment, including but not limited to CERCLA and XXXX (as defined in clause
(ii) below), or otherwise relating to emissions, discharges, releases or
threatened releases of Hazardous Substances or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
- 25 -
(ii) the terms "Release," "Response," "Removal" and
"Remedial Action" shall have the meanings ascribed to them in Sections
101(23)-101(25) of the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act ("XXXX"), 42 U.S.C. xx.xx. 9601(23)-9601(25).
(iii) The term "Hazardous Substances" or "Hazardous
Substance" shall mean any substance regulated under any of the Environmental
Laws including, without limitation, any substance which is: (A) petroleum,
asbestos or asbestos-containing material, or polychlorinated biphenyls; (B)
defined, designated or listed as a "Hazardous Substance" pursuant to Sections
307 and 311 of the Clean Water Act, 33 U.S.C. ss. 1317, 1321, Section 101(14) of
CERCLA, 42 U.S.C. ss. 9601; (C) listed in the United States Department of
Transportation Hazardous Material Tables, 49 C.F.R. ss. 172.101; (D) defined,
designated or listed as a "Hazardous Waste" under Section 1004(5) of the
Resource and Conservation and Recovery Act, 42 U.S.C. 6903(5).
4.24 Absence of Certain Changes and Events.
(a) Except as set forth on Exhibit 4.24 attached hereto, since
January 1, 2000, Company has conducted its business only in the usual and
ordinary course consistent with past practice and there has not been any:
(i) declaration or payment of any dividend or other
distribution or payment in respect of the shares of capital stock of Company,
other than quarterly dividends to Sellers in an amount equal to forty percent
(40%) of the income of the Company allocable to them by virtue of the Company's
Subchapter S status, or any repurchase or redemption of any such shares of
capital stock or other securities;
(ii) payment by Company of any bonus or increase of any
compensation payable to any shareholder, director or officer or, except in the
ordinary course of business consistent with past practice, employee or entry
into (or amendment of) any employment, severance or similar agreement with any
shareholder, director, officer or employee;
(iii) adoption of or change in any Employee Benefit Plan
or labor policy;
(iv) damage, destruction or loss to any material asset or
property of Company, whether or not covered by insurance;
(v) except for agreements for the construction or sale of
homes in the ordinary course of business, entry into any agreement involving
payments in excess of $10,000;
(vi) sale (other than sales of inventory in the ordinary
course of business), assignment, conveyance, lease, or other disposition of any
material asset or property of Company or mortgage, pledge or imposition of any
lien, on any material asset or property of Company;
- 26 -
(vii) discharge or satisfaction of any lien, claim or
encumbrance, other than in the ordinary course of business consistent with past
practice;
(viii) write-down or write-off of the value of any asset
except for write-downs and write-offs in the ordinary course of business
consistent with past practice and at a rate no greater than that during the
twelve months ended December 31, 2002, or any cancellation or waiver of any
other claim or right with a value in the aggregate in excess of $10,000;
(ix) material change in the business or operations of
Company or in the manner of conducting the same or entry by Company into any
transaction, other than in the ordinary course of business consistent with past
practice; or
(x) material change in the accounting methods, principles
or practices followed by Company, except as required by GAAP, or any change in
any of the assumptions underlying, or methods of calculating, any bad debt,
contingency or other reserve;
(xi) agreement, whether or not in writing, to do any of
the foregoing by Company.
(b) Since the date of the Balance Sheet, there has not been
any material adverse change in the business, operations, properties, assets, or
condition (financial or otherwise) of Company.
4.25 Books and Records.
(a) The copies of the certificate or articles of incorporation
of Company, as certified by the Secretary of State of its jurisdiction of
incorporation, and of its bylaws (or of their other comparable organizational
documents), as certified by its secretary, which have been made available to
Buyer are true, complete and correct and are in full force and effect as of the
date hereof.
(b) The stock records of Company fairly and accurately reflect
the record ownership of all of their outstanding shares of capital stock.
Complete and accurate copies, as of the date hereof, of all minute books and
stock records of the Company have been made available to Buyer.
4.26 Brokers. No person acting on behalf of Company, any Related
Party or any of their affiliates or under the authority of any of the foregoing
is or will be entitled to any brokers' or finders' fee or any other commission
or similar fee, directly or indirectly, from any of such parties in connection
with any of the transactions contemplated by this Agreement.
4.27 Accounts Receivable. Each of the accounts receivable of
Company reflected on the Balance Sheet or arising thereafter constituted at the
Balance Sheet date or as of the date they arose, respectively, a valid claim in
the full amount thereof against the debtor charged therewith on the books of
Company and was acquired in the ordinary course of Company's business. No
account debtor has any valid set-off, deduction or defense with respect thereto
and no account debtor has asserted any such set-off, deduction or defense.
- 27 -
4.28 Financial Projections. The financial projections delivered by
Sellers and Xxxxxxxx to the Buyer for the period from January 1, 2003 to
December 31, 2003 are based on reasonable assumptions and are true and complete.
Xxxxxxxxxxx is not aware of any reason why the projected results are not
reasonably capable of being achieved by the Company.
4.29 Masterpiece Homes and Properties, Inc. Sellers and Xxxxxxxx
have caused the Company to acquire all of the assets (without assuming any
liabilities) of Masterpiece Homes and Properties, Inc., a Florida corporation,
free and clear of liens and encumbrances, for a purchase price of One Hundred
Dollars ($100).
4.30 Additional Capital Contributions. Except as set forth in
Sections 4.2 and 4.3 of the Operating Agreement for Shelter Mortgage Company,
L.L.C. dated as of July 1, 1996, the Company has no obligation to make any
additional capital contributions, loans or advances to Shelter Mortgage Company,
L.L.C. or any other liability, whether fixed, contingent or otherwise, to
Shelter Mortgage Company, L.L.C.
4.31 Disclosure. All documents and other papers delivered by or on
behalf of Company, Xxxxxxxx or Sellers in connection with the transactions
contemplated by this Agreement are accurate and complete in all material
respects and are authentic. None of the representations and warranties of the
Sellers and Xxxxxxxx made in this Section 4 contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers and Xxxxxxxx as of the
date of this Agreement and of the Closing Date as follows:
5.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all necessary corporate power and authority to carry on its
business as presently conducted, to own and lease the assets which it owns and
leases and to perform all of its obligations under each agreement and instrument
by which it is bound.
5.2 Power and Authorization. Buyer has full legal right, power and
authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Buyer Transaction Documents")
required to be delivered by it prior to or at the Closing. The execution,
delivery and performance by Buyer of this Agreement and the Buyer Transaction
Documents have been duly authorized by all necessary corporate action. This
Agreement has been duly and validly executed and delivered by Buyer and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms. When executed and delivered as contemplated herein,
each of the Buyer Transaction Documents shall constitute the legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms, except as limited by applicable bankruptcy, reorganization, insolvency,
or similar laws affecting creditors rights generally, and principles of equity
(whether considered and applied in a proceeding in equity or at law).
- 28 -
5.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement
and the Buyer Transaction Documents do not and will not (with or without the
passage of time or the giving of notice):
(i) violate or conflict with Buyer's certificate of
incorporation or bylaws or any Law binding upon Buyer; or
(ii) violate or conflict with, result in a breach of, or
constitute a default or otherwise cause any loss of benefit under any material
agreement or other material obligation to which Buyer is a party.
(b) Each consent or approval of, or registration, notification,
filing and/or declaration with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person required to be given or made
by Buyer in connection with the execution, delivery and performance of this
Agreement and the other agreements and instruments contemplated herein has been
obtained or made or will be obtained or made prior to the Closing without
payment of premium or penalty by, or loss of benefit to, Buyer.
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of Buyer,
threatened, that question any of the transactions contemplated by, or the
validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, could reasonably be
expected to have a material adverse effect upon the ability of Buyer to enter
into or perform its obligations under this Agreement or any of the other
agreements or instruments contemplated hereby. Buyer has not received any
request from any governmental agency or instrumentality for information with
respect to the transactions contemplated hereby.
5.4 Brokers. No person acting on behalf of Buyer or any of its
affiliates or under the authority of any of the foregoing is or will be entitled
to any brokers' or finders' fee or any other commission or similar fee, directly
or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement, except for Deutsche Bank under a
separate agreement, which commission or fee shall be paid to Deutsche Bank by
Buyer.
5.5 Funds. Buyer will have at the Closing the funds necessary to
consummate, on a timely basis, the transactions contemplated by this Agreement.
5.6 Investment Purpose. Buyer is an "accredited investor" as such
term is defined in Regulation D of the Securities Act of 1933, as amended, and
will acquire the Shares for its own account and not with a view to a sale or
distribution thereof in violation of any securities laws and will not sell or
distribute any of the Shares in violation of any securities laws. Buyer has the
present intention of holding the Shares for investment purposes.
5.7 Disclosure. All documents and other papers delivered by or on
behalf of Buyer in connection with the transactions contemplated by this
Agreement are accurate and complete in all material respects and are authentic.
None of the representations and warranties of Buyer made in this Section 5
- 29 -
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 6. OBLIGATIONS OF THE PARTIES
6.1 Conduct of Business Pending Closing. Except as contemplated
herein, between the date hereof and the Closing, without the prior written
consent of Buyer, Sellers and Xxxxxxxx will cause Company to:
(a) maintain its corporate existence, to pay and discharge all
debts, liabilities and obligations as they become due, operate in the ordinary
course in a manner, including marketing and sales activities, consistent with
past practice, and the provisions of this Agreement and in compliance with all
material respects with all applicable Laws;
(b) maintain its facilities and assets in the same state of
repair, order and condition as they were on the date hereof, reasonable wear and
tear excepted;
(c) maintain its books and records in accordance with past
practice, and maintain in full force and effect all Authorizations and all
insurance policies and binders;
(d) use reasonable efforts to preserve intact its present
business organization and maintain their relations and goodwill with the
suppliers, customers, employees and others having a business relationship with
it any of them;
(e) promptly advise Buyer of the written threat or commencement
against Company, any Seller or Xxxxxxxx of any action, suit, proceeding,
arbitration or investigation known to any Seller or Xxxxxxxx by, against or
affecting Company or any of their operations or assets, or which challenges the
validity of this Agreement or any action taken or to be taken in connection with
this Agreement or the ability of Company, any Seller or Xxxxxxxx to consummate
the transactions contemplated herein or therein; and
(f) promptly advise Buyer in the event it actually knows that
any representation or warranty of Company, Xxxxxxxx or Sellers set forth in this
Agreement is untrue in a material respect.
6.2 Negative Covenants. Except as expressly provided herein,
between the date hereof and the Closing, without the prior written consent of
Buyer, Company shall not, and Sellers or Xxxxxxxx shall not cause or permit
Company to:
(a) make any change in Company's authorized or issued capital
stock; grant any stock option or warrant or other right to purchase shares of
Company's capital stock or other securities; issue or make any commitment to
issue any security by Company, including any security convertible into capital
stock; grant any registration rights; or purchase, redeem, retire or make any
other acquisition of any shares of any capital stock or other securities;
declare or pay any dividend or other distribution or payment in respect of
shares of capital stock of Company, other than (i) quarterly dividends in an
amount equal to forty percent (40%) of the income of the Company allocable to
them by virtue of the Company's Subchapter S status and (ii) the distribution of
- 30 -
interests in Masterpiece LC, a Florida limited liability company, and
concurrently with such distribution all of the liabilities associated with such
entity and the financing thereof shall be assumed by the Sellers (the parties
hereto acknowledge that Xxxxxxxxxxx will purchase from the Company, without the
Company giving any representations, warranties or agreements relating thereto,
the limited liability company interests of Masterpiece LC at Closing for an
amount equal to the book value (before any depreciation thereof) of such
membership interests on the Company's books and records, which amount Sellers
and Xxxxxxxx represent and warrant is Fifty One Thousand Dollars ($51,000));
(b) amend the certificate or articles of incorporation or
bylaws (or equivalent governing documents) of Company;
(c) fail to pay or discharge when due any liability or
obligation of Company;
(d) enter into any agreement, commitment or transaction other
than in the ordinary course of business, consistent with past practice, or which
is material to the business, operations or financial condition of Company,
whether or not in the ordinary course of business;
(e) enter into any contract, agreement, commitment or
arrangement with any party, other than contracts for the sale of merchandise or
services and contracts for the purchase of materials, services and supplies in
the ordinary and usual course of its business, and not waive any rights under,
amend, modify or terminate any such contract, agreement, commitment or
arrangement;
(f) make any capital expenditure in excess of $10,000 as to any
individual obligation or expenditure or any series of related expenditures or
obligations, and not exceeding $100,000 in the aggregate;
(g) increase the current compensation or rate of compensation
payable to any employee of the Company or modify any payments or fringe benefits
payable to such employees; provided, however, that the Company, at Closing,
shall award bonuses to Xxxx XxXxxxxx in the amount of One Hundred Fifty Thousand
Dollars ($150,000), Xxxxx Xxxxx in the amount of Fifty Thousand Dollars
($50,000), Xxxxxxxxx Xxxxx in the amount of Forty Thousand Dollars ($40,000) and
Xxxx Xxxxxxxx in the amount of Ten Thousand Dollars ($10,000), and the total
amount of such bonuses awarded shall be deducted from the Closing Stock Payment,
one-half from Xxxxxxxxxxx and one-half from the Trust. Promptly after the
Closing Date, Buyer shall issue checks to each of the above referenced employees
in the amounts set forth above and send such checks to Xxxxxxxxxxx; or
(h) enter into any contract, agreement, commitment or
arrangement with any Seller or Xxxxxxxx or Related Party thereof or any officer
or director of the Company.
6.3 Access to Information; Confidentiality.
(a) Prior to the earlier of Closing or termination pursuant to
Section 10.1, Company shall, and each Seller and Xxxxxxxx (insofar as each is
able) shall cause Company to, upon reasonable prior notice and during ordinary
- 31 -
business hours, give Buyer and its authorized representatives reasonable access
to all of its personnel, books, records, plants, offices and other facilities
and properties, and permit Buyer to make such inspections thereof as Buyer may
reasonably request, and cause its officers and advisors to furnish Buyer with
such financial, operating and other information regarding Company's business,
agreements, commitments, liabilities, personnel and properties as Buyer may
reasonably request. Buyer shall not contact any of the Company's clients,
customers, vendors, lessors, licensors or suppliers, without the prior consent
of Company, which shall not be unreasonably withheld. Buyer acknowledges that
certain of the information which may be made available to it is proprietary and
includes confidential information.
(b) Buyer agrees at all times, (i) to keep confidential all
information provided to it, (ii) not to use the confidential information on its
own behalf, except in connection with the transactions contemplated hereby, or
on behalf of any other person, firm or entity, and (iii) not to disclose the
confidential information to any third party (other than to Buyer's lenders,
employees, agents, advisors, counsel, accountants and other consultants in
connection with the transactions contemplated hereby) without the advance
written authorization of the Company; provided that Buyer shall have no such
obligations with respect to confidential information that (A) was lawfully
obtained by it not subject to restrictions of confidentiality; (B) is a matter
of public knowledge; (C) has been or is hereafter publicly disclosed other than
by or through Buyer or by a third party in violation of its obligation to the
Company or (D) is required to be disclosed by Buyer pursuant to a subpoena or
order issued by a court of competent jurisdiction, regulatory or administrative
body that has power to compel the disclosure of information, or pursuant to any
other law, rule or regulation. In the event this Agreement is terminated, Buyer
will promptly return to the Company all documents, and other materials furnished
to Buyer or any of its representatives and all copies thereof, and will promptly
and completely destroy all work papers made or prepared by Buyer or any of its
representatives relating to the transactions contemplated hereby, whether
obtained before or after the execution of this Agreement. In the event of a
breach or threatened breach by Buyer of the provisions of this Section 6.3, the
Company shall be entitled to an injunction restraining Buyer from disclosing, in
whole or in part, the confidential information.
(c) Sellers and Xxxxxxxx agree at all times, (i) to keep
confidential all information provided by or on behalf of Buyer to them, (ii) not
to use the confidential information on their own behalf, except in connection
with the transactions contemplated hereby, or on behalf of any other person,
firm or entity, and (iii) not to disclose the confidential information to any
third party (other than to Sellers' lenders, counsel, accountants and other
consultants in connection with the transactions contemplated hereby) without the
advance written authorization of the Company; provided that Sellers and Xxxxxxxx
shall have no such obligations with respect to confidential information that (A)
was lawfully obtained by it not subject to restrictions of confidentiality; (B)
is a matter of public knowledge; or (C) has been or is hereafter publicly
disclosed other than by or through Sellers, Xxxxxxxx or by a third party in
violation of its obligation to Buyer. In the event this Agreement is terminated,
Sellers and Xxxxxxxx will promptly return to Buyer all documents and other
materials furnished to Sellers, Xxxxxxxx or any of their representatives and all
copies thereof, and will promptly and completely destroy all work papers made or
prepared by Sellers, Xxxxxxxx or any of their representatives relating to the
transactions contemplated hereby, whether obtained before or after the execution
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of this Agreement. In the event of a breach or threatened breach by Sellers or
Xxxxxxxx of the provisions of this Section 6.3, the Company shall be entitled to
an injunction restraining Sellers and/or Xxxxxxxx from disclosing, in whole or
in part, the confidential information.
6.4 Commercially Reasonable Efforts. Prior to the earlier of
Closing or termination pursuant to Section 10.1, each party hereto shall use
commercially reasonable efforts to cause to occur the transactions contemplated
hereby and by the Transaction Documents, and to cause all conditions to the
performance of the parties hereto that are within its control to be satisfied.
No party shall take any action to cause any such covenant, agreement,
transaction or condition not to occur, be satisfied or be performed, as the case
may be.
6.5 Consents. Prior to the Closing, Company, each Seller and
Xxxxxxxx shall, and each Seller and Xxxxxxxx (insofar as each is able) shall
cause Company to, use commercially reasonable good faith efforts to obtain (and
cooperate with the other parties hereto in obtaining) all consents, permits,
Authorizations, approvals of, and exemptions by, any regulatory authority or
third party necessary for the consummation of the transactions contemplated by
this Agreement and the Seller Transaction Documents or the Company Transaction
Documents.
6.6 Financial Information. Until the earlier of Closing or
termination pursuant to Section 10.1, Company and Xxxxxxxxxxx shall provide
Buyer, within 20 days after the end of each month, with an unaudited
consolidated balance sheet and income statement of Company as of and for the
month then ended, prepared on the same basis as the interim financial statements
referred to in Section 4.8, and certified as such by the chief financial officer
of Company.
6.7 Noncompetition, Trade Secrets, etc.
(a) The Sellers and Xxxxxxxx hereby agree, from and after the
Closing Date hereunder, as follows:
(i) Until the date which is one (1) year after the date of
Xxxxxxxxxxx' termination or resignation of employment with Buyer, as such period
may be extended as hereinafter set forth (the "Restricted Period"), (i)
Xxxxxxxxxxx shall not directly or indirectly engage in (as a principal,
shareholder, partner, director, officer, agent, employee, consultant or
otherwise) or be financially interested in any business operating within the
State of Florida (the "Restricted Area"), which is engaged in the construction
or marketing of any homes or the acquisition or development of any property for
any such purpose; provided, however, nothing contained in this Section 6.7 shall
prevent Xxxxxxxxxxx from holding for investment no more than two percent (2%) of
any class of equity securities of a company whose securities are publicly traded
on a national securities exchange or in a national market system; (ii) neither
Sellers nor Xxxxxxxx shall not directly or indirectly induce or attempt to
influence any employee, customer, independent contractor or supplier of Company
to terminate employment or any other relationship with Company; and (iii)
Sellers or Xxxxxxxx shall not directly or indirectly induce or attempt to induce
any person who is or was within the preceding year an employee of Company to
establish an employment relationship with any other person or entity.
(ii) The Sellers or Xxxxxxxx shall not use for their
personal benefit, or disclose, communicate or divulge to, or use for the direct
or indirect benefit of any person, firm, association or company other than
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Company, any Confidential Information. For purposes of the preceding sentence,
"Confidential Information" means any information regarding Company's business
methods, business policies, procedures, techniques, research or development
projects or results; historical or projected financial information, budgets,
trade secrets or other knowledge or processes of or developed by Company; any
names and addresses of customers or clients or any data on or relating to past,
present or prospective Company customers or clients; or any other confidential
information relating to or dealing with the business, operations or activities
of Company, excepting in each case information otherwise lawfully known
generally by, or readily accessible to, the trade or the general public, or as
required to be disclosed by law or final, unappealable order of a court of
competent jurisdiction or governmental authority. At no time shall the Sellers
or Xxxxxxxx, directly or indirectly, remove or cause to be removed from the
premises of Company any memorandum, note, list, record, file, document or other
paper, equipment or any like item relating to its business (including copies,
extracts and summaries thereof) except in furtherance of the performance of
Xxxxxxxxxxx duties under the Employment Agreement (as defined in Section 7.6).
The foregoing provisions of this Section 6.7(a)(ii) shall apply during and after
Closing pursuant to Section 10.1 of this Agreement and the period when any
Seller or Xxxxxxxx is an employee of the Company and shall be in addition to
(and not a limitation of) any legally applicable protections of Company's
interest in confidential information, trade secrets and the like. The foregoing
shall not preclude the Sellers or Xxxxxxxx from otherwise engaging in
competitive activities with Buyer following the termination of the Restricted
Period.
(iii) The Sellers and Xxxxxxxx acknowledge that the
restrictions contained in this Section 6.7, in view of the nature of the
business in which the Company is engaged and the purchase to be made by Buyer at
Closing hereunder, are reasonable and necessary in order to protect the
legitimate interests of the Company, that their enforcement will not impose a
hardship on the Sellers or Xxxxxxxx or significantly impair the Sellers' or
Xxxxxxxx'x ability to earn a livelihood, and that any violation thereof would
result in irreparable injuries to the Company. The Sellers and Xxxxxxxx
therefore acknowledge that, in the event of any Sellers' or Xxxxxxxx'x violation
of any of these restrictions, the Company shall be entitled to obtain from any
court of competent jurisdiction preliminary and permanent injunctive relief as
well as damages, including the Company's legal and other costs of enforcing such
Sellers' or Xxxxxxxx'x compliance with these restrictions, and an equitable
accounting of all earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies to which the Company may be entitled.
(iv) If the Restricted Period or the Restricted Area
specified in Section 6.7(a) above should be adjudged unreasonable in any
proceeding, then the period of time shall be reduced by such amount or the area
shall be reduced by the elimination of such portion or both such reductions
shall be made so that such restrictions may be enforced for such time and in
such area as is adjudged to be reasonable. If either Seller or Xxxxxxxx violates
any of the restrictions contained in this Section 6.7(a), the Restricted Period
shall be extended by a period equal to the length of time from the commencement
of any such violation until such time as such violation shall be cured by such
Seller or Xxxxxxxx to the satisfaction of Company. The Company shall have the
right and remedy to require Sellers and Xxxxxxxx to account for and pay over to
the Company all compensation, profits, monies, accruals, increments or other
benefits derived or received by such Seller or Xxxxxxxx as the result of any
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transactions constituting a breach of this Section 6.7, and the Sellers and
Xxxxxxxx shall account for and pay over such amounts to the Company upon the
Company's request therefor. The Sellers and Xxxxxxxx hereby expressly consent to
the jurisdiction of any court within the Restricted Area to enforce the
provisions of this Section 6.7, and agrees to accept service of process by mail
relating to any such proceeding. The Company may supply a copy of Section 6.7 of
this Agreement to any future or prospective employer of each Seller or Xxxxxxxx
or to any person to whom the Sellers or Xxxxxxxx have supplied information if
the Company determines in good faith that there is a reasonable likelihood that
such Seller or Xxxxxxxx has violated or will violate this Section 6.7.
SECTION 7. CERTAIN CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of Buyer to consummate the acquisition of the Shares is
subject to the fulfillment by or at the Closing of each of the following
conditions:
7.1 Representations and Warranties. Each Seller's and Xxxxxxxx'x
representations and warranties contained in this Agreement shall be deemed to
have been made again at and as of the Closing and shall then be true and correct
in all material respects, except for representations and warranties qualified by
materiality, which shall be true and correct in all respects.
7.2 Performance of Covenants. Company, each Seller and Xxxxxxxx
shall have performed or complied in all respects with all of the agreements in
this Agreement to be performed or complied with by them prior to or at the
Closing.
7.3 Approvals. The consents or approvals set forth in Exhibit 7.3
attached hereto shall have been obtained and no such consent or approval: (a)
shall have been conditioned upon the modification, cancellation or termination
of any material lease, commitment, agreement, easement, right or Authorization
of Company; or (b) shall impose on the Buyer or Company any material condition,
provision or requirement not presently imposed upon Sellers, Xxxxxxxx or
Company.
7.4 Legal Matters. The Closing shall not violate any order or
decree of any court or governmental body of competent jurisdiction and no suit,
action, proceeding or investigation, shall be pending or threatened (other than
the Buyer or an affiliate of Buyer) which questions the validity or legality of
this Agreement or the transactions contemplated hereby.
7.5 Financial Condition. The net worth of Company (computed in
accordance with generally accepted accounting principles) as of April 30, 2003
was at least $2,062,000 and is projected to be at least $4,000,000 as of
December 31, 2003 (after distributions described in Section 6.2).
7.6 Employment Agreements. Xxxxxxxxxxx shall have entered into an
Employment Agreement with the Company (the "Employment Agreement") in the form
attached hereto as Exhibit A.
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7.7 Resignation of Directors and Officers. Buyer shall have
received resignations from such of the officers and directors of Company as it
shall have requested in writing no less than five days before the Closing Date.
7.8 Opinion of Counsel. Buyer shall have received opinions
reasonably satisfactory to Buyer of Smith, McKinnon, P.A., as counsel for
Xxxxxxxxxxx, Winterweedle, Xxxxxx, Xxxx & Woodman, P.A., as counsel for Xxxxxxxx
and the Trust, and Xxxxxxx X. Xxxxxxxx, Esquire, as counsel for Company, dated
as of the Closing, with respect to the transactions contemplated by this
Agreement.
7.9 No Material Adverse Change. The shall have been no material
adverse change in the business, assets, financial condition or prospects of the
Company.
7.10 Indebtedness. Sellers and Xxxxxxxx shall deliver to Company
releases for any indebtedness, obligation or claim for which each Seller,
Xxxxxxxx or a Related Party of such Seller or Xxxxxxxx, may be entitled. Each
Seller, Xxxxxxxx and each Related Party of such Seller or Xxxxxxxx shall pay to
the Company all amounts due under any obligations, loans or similar instruments
evidencing indebtedness of such persons to the Company.
7.11 Intentionally Omitted.
7.12 Tax Affidavits. Each of the Sellers and Xxxxxxxx shall deliver
to the Buyer at the Closing an affidavit in a form provided by Buyer which is
consistent with Section 1.1445-2(b)(2) of United States Treasury Regulations,
affirming that each of Sellers and Xxxxxxxx is not a "foreign person" against
whose proceeds the Buyer might otherwise be required to withhold under Section
1445 of the Code.
7.13 Masterpiece Homes and Properties, Inc. Sellers and Xxxxxxxx
shall deliver to Buyer a Xxxx of Sale and other documents evidencing the
purchase by the Company of all of the assets (without assuming any liabilities)
of Masterpiece Homes and Properties, Inc., a Florida corporation, free and clear
of all liens and encumbrances, for a purchase price of One Hundred Dollars
($100).
7.14 Estoppel Letters. The Sellers and Xxxxxxxx shall deliver to
Buyer the estoppel letters from each of the Company's lenders in form and
substance reasonably satisfactory to Buyer.
SECTION 8. CERTAIN CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
The obligation of Sellers to consummate the sale of the Shares is
subject to the fulfillment by or at the Closing of each of the following
conditions:
8.1 Representations and Warranties. Buyer's representations and
warranties contained in this Agreement shall be deemed to have been made again
at and as at the Closing and shall then be true and correct in all material
respects, except for representations and warranties qualified by materiality,
which shall be true and correct in all respects.
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8.2 Performance of Covenants. Buyer shall have performed or
complied in all material respects with all of the agreements in this Agreement
to be performed or complied with by it prior to or at the Closing, except for
agreements, covenants and conditions qualified by materiality, which shall be
conformed and complied with in all respects.
8.3 Approvals. The consents or approvals set forth in Exhibit 7.3
shall have been obtained.
8.4 Legal Matters. The Closing shall not violate any order or
decree of any court or governmental body of competent jurisdiction and no suit,
action, investigation, or legal or administrative proceeding shall be pending
(other than any Seller or an affiliate of any Seller) which questions the
validity or legality of this Agreement or the transactions contemplated hereby.
8.5 Employment Agreement. Company shall have entered into the
Employment Agreement with Xxxxxxxxxxx in the form attached hereto as Exhibit A.
8.6 Opinion of Counsel. Sellers shall have received an opinion
reasonably satisfactory to Sellers of Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP,
counsel for Buyer, dated as of the Closing, with respect to the transactions
contemplated by this Agreement.
8.7 Release of Guarantees. Buyer shall have taken all actions
necessary to obtain a complete release of Sellers and Xxxxxxxx or, in the event
a release cannot be secured, Buyer shall indemnify Sellers and Xxxxxxxx as
personal guarantors of the Company's promissory notes set forth on Exhibit 2.4
attached hereto.
SECTION 9. CLOSING
9.1 Time and Place of Closing. The closing of the purchase and sale
of the Shares (the "Closing") pursuant to this Agreement shall take place at the
offices of Wolf, Block, Xxxxxx and Xxxxx-Xxxxx, 0000 Xxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 commencing at 10:00 A.M., local time,
concurrently with the execution hereof (the "Closing Date").
9.2 Deliveries at the Closing. At the Closing, in addition to the
other actions contemplated elsewhere herein:
(a) Each Seller and Xxxxxxxx shall deliver, or shall cause to
be delivered, to Buyer the following:
(i) certificates representing all of the Shares owned by
such Seller, duly endorsed for transfer or with stock powers affixed thereto
executed in blank in proper form for transfer;
(ii) a certificate, dated the Closing Date and signed by
each Seller and Xxxxxxxx, to the effect set forth in Sections 7.1, 7.2 and 7.3;
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(iii) the signed resignations of all officers and all
directors of the Company, dated and effective as of the Closing Date;
(iv) general releases in favor of Company executed by each
shareholder and by each director and officer of the Company in form and
substance satisfactory to counsel for Buyer, releasing the Company from all
liability to such person except for any liability of Company pursuant to the
Employment Agreement, the verbal agreements with Xxxxxxxx described in numbers
8, 9 and 10 of Exhibit 4.11(d), the Agreement of Sale with Colbert Landings, LLC
described in number 16 of Exhibit 4.11(d) and the quarterly dividends in an
amount equal to forty percent (40%) of the income Company allocable to the
Sellers by virtue of the Company's Subchapter S status to the extent such are
permitted to be made pursuant to Sections 4.24(a)(i) and 6.2(a) of this
Agreement;
(v) such other documents and instruments as Buyer may be
reasonably request to effectuate or evidence the transactions contemplated by
this Agreement.
(b) Sellers and Xxxxxxxx, insofar as each is able, shall cause
Company to deliver to Buyer the following:
(i) a certificate, dated the Closing Date and signed by the
President or Vice President of Company, to the effect set forth in Sections 7.1,
7.2 and 7.3;
(ii) copies of Company's certificates or articles of
incorporation and bylaws, or the corresponding charter documents, and all
amendments thereof to date, certified as of a recent date by the Secretary of
State or corresponding certifying authority of each such entity's respective
jurisdiction of organization and by the Secretary or an Assistant Secretary of
Company each such entity;
(iii) certificates of good standing of a recent date for
Company, certified by the Secretaries of State or corresponding certifying
authorities of each such entity's respective jurisdiction of organization and of
each state in which such entities are qualified to do business;
(iv) copies of the resolutions of the board of directors or
corresponding governing body of Company authorizing the execution, delivery and
performance of this Agreement and the other agreements and instruments referred
to herein, certified as of the Closing Date by the Secretary or an Assistant
Secretary of Company;
(v) the original corporate seals, minute books and stock
transfer and record books of Company as they exist on the Closing Date and such
of their files, books and records as Buyer may request;
(vi) [Intentionally Deleted]
(vii) the releases more fully described in Section 7.10;
(viii) the Employment Agreement duly executed by
Xxxxxxxxxxx and Company; and
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(ix) such other documents and instruments as Buyer may
reasonably request to effectuate or evidence the transactions contemplated by
this Agreement.
(x) [Intentionally Deleted]
(c) Buyer shall deliver, or shall cause to be delivered, to
Sellers the items set forth below:
(i) the Closing Stock Payment;
(ii) a certificate of the Company, signed by the Vice
Chairman of Buyer, to the effect set forth in Sections 8.1, 8.2 and 8.3;
(iii) a copy of Buyer's certificate of incorporation and
bylaws and all amendments thereof to date, certified as of a recent date by the
Secretary of State of Delaware and by the Secretary or an Assistant Secretary of
Buyer, and accompanied by a certificate of good standing as of a recent date for
Buyer, certified by the Secretary of State of Delaware;
(iv) a copy of the resolutions of the board of directors of
Buyer authorizing the execution, delivery and performance by Buyer of this
Agreement and the other agreements and instruments referred to herein, certified
as of the Closing by the Secretary or an Assistant Secretary of Buyer;
(v) such other documents and instruments as Sellers may
reasonably request to effectuate or evidence the transactions contemplated by
this Agreement; and
(vi) the Employment Agreement duly executed by Xxxxxxxxxxx
and Company.
9.3 Default by Any Seller at the Closing. If any Seller shall fail
or refuse to deliver any of the Shares or to take any other action required by
this Agreement to have been taken prior to or at the Closing, such failure or
refusal shall not relieve such Seller or any other Seller of their obligations
under this Agreement and Buyer, at its option and without prejudice to its
rights against any such defaulting Seller, may either (i) acquire all the Shares
which the non-defaulting Sellers have agreed to sell to Buyer hereunder pursuant
to the allocation set forth in Schedule 1.1 hereto (in consideration for which
the Purchase Price shall be reduced by the amount which would otherwise have
been payable to the defaulting Seller), or (ii) determine to not make such
acquisition and terminate all of its obligations hereunder. Sellers acknowledge
that the Shares are unique and agree that in addition to any other remedies
against a defaulting Seller, Buyer shall have the right, without limitation, to
seek and obtain all available equitable remedies to enforce delivery of the
Shares hereunder, including, without limitation, an action or suit for specific
performance.
9.4 Accounts Receivable From Employees of Company. With respect to
any accounts or notes receivable from employees of the Company to the Company
that exist at the close of business on the Closing Date and that remain unpaid
and uncollected 180 days following the Closing (collectively, the "Covered
- 39 -
Receivables"), Xxxxxxxxxxx shall pay to Buyer, within five business days after
receipt of a listing of all such Covered Receivables, the unpaid balance
thereof. If the amount of such payment shall be in dispute, Xxxxxxxxxxx shall
pay the undisputed portion, if any, and the parties shall attempt in good faith
to resolve the dispute. If the parties are unable to resolve the dispute within
30 days following receipt by Xxxxxxxxxxx of such listing of unpaid Covered
Receivables, the dispute shall be resolved by applicable judicial proceedings.
Buyer shall cause any Covered Receivable for which Buyer has been paid under
this Section to be assigned to Xxxxxxxxxxx. Any proceeds received thereafter
with respect to such assigned receivables shall be the property of Xxxxxxxxxxx,
and if received by Buyer, the Company or any other Seller, shall be paid to
Xxxxxxxxxxx. Prior to such assignment, Buyer shall use reasonable efforts to
collect, in accordance with their terms, all Covered Receivables and, upon prior
notice, shall provide Xxxxxxxxxxx or his designated representatives during
normal business hours with reasonable access to Company's books and records
concerning the Covered Receivables.
9.5 Remittance of Payments. From and after the Closing, Sellers and
Xxxxxxxx shall immediately remit to Company, in the form received, any payments
which they or any affiliate may receive (such as payments of accounts
receivable) which properly belong to Company.
9.6 Confidential Information. From and after the Closing, unless
expressly consented to in writing by Buyer, Sellers and Xxxxxxxx shall not, and,
insofar as each is able, shall use commercially reasonable efforts to cause all
affiliates not to, directly or indirectly, use or disclose to any third person,
any trade secret, financial data, customer list, pricing or marketing policies
or plans or other proprietary or confidential information relating to Buyer or
Company.
SECTION 10. INTENTIONALLY OMITTED
SECTION 11. INDEMNIFICATION
11.1 Indemnification by Sellers and Xxxxxxxx. Each Seller and
Xxxxxxxx, jointly and severally, shall indemnify and hold Buyer, Company and
their respective officers, directors and shareholders harmless against and in
respect of any and all losses, costs, expenses, claims, damages, obligations and
liabilities, including interest, penalties and reasonable attorneys fees and
disbursements ("Damages"), which Buyer or any such person may suffer, incur or
become subject to arising out of, based upon or otherwise in respect of any
breach of any covenant, representation or warranty made by such Seller or
Xxxxxxxx in or pursuant to this Agreement. No representation or warranty
contained herein shall be deemed to have been waived, affected or impaired by
any investigation made by or knowledge of Buyer. Sellers and Xxxxxxxx shall also
jointly and severally indemnify and hold Buyer, Company and their respective
officers, directors and shareholders harmless against and in respect of any and
all Damages which Buyer or any such person may suffer, incur or become subject
to arising out of, based upon or otherwise in respect of any breach prior to
Closing of any covenant, representation or warranty of Company pursuant to this
Agreement. The following representations and warranties shall have the following
respective survival periods: (i) the date that is the second anniversary
following the Closing Date - any representations and warranties that are not
specified in any of the succeeding clauses; (ii) the date on which the
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applicable statute of limitations expires - any representation and warranty
related to (x) a breach of any representations or warranties of a party to this
Agreement that were made with an intent to mislead or defraud or with a reckless
disregard of the accuracy thereof; or (y) the representations and warranties set
forth in Section 4.18; (iii) in perpetuity, regardless of the applicable statute
of limitations - the representations and warranties set forth in Sections 3.1,
3.2(a)(i), 3.3, 4.1, 4.3(a)(i), 4.4, 4.2, 4.12, 5.1 and 5.2; (iv) the date that
is the fourth anniversary following the Closing Date - the representations and
warranties set forth in Section 4.23. If more than one of such survival periods
applies to a particular claim, the latest of such survival period shall be the
controlling survival period for such claim. Neither party shall have any
obligation to indemnify the other party pursuant to this Section 11 for a claim
for Damages resulting from a breach of a particular representation and warranty
if the notice of such breach is not submitted to the other party within the
applicable survival period as set forth above.
11.2 Indemnification by Buyer. In the event Closing hereunder is
consummated, Buyer shall indemnify and hold Sellers harmless against and in
respect of any and all Damages which Sellers may suffer, incur or become subject
to arising out of, based upon or otherwise in respect of: (a) any breach of any
representation or warranty of Buyer made in or pursuant to this Agreement; or
(b) any breach of any covenant made by Buyer in this Agreement.
11.3 Third Party Claims.
(a) Each Indemnified Party shall promptly notify the
Indemnifying Party of the assertion in writing by any third party of any claim
(each an "Indemnity Payment") with respect to which the indemnification set
forth in this Section relates (which shall also constitute the notice required
by Section 11.3). The failure of the Indemnified Party to give such notice shall
reduce and limit the Indemnified Party's rights under this Section 11.4(a) only
to the extent failure to give prompt notice prejudices the Indemnifying Party's
ability to defend such third party claim or to mitigate the Damages arising
therefrom. The Indemnifying Party shall have the right, upon notice to the
Indemnified Party within ten business days after the receipt of notice from the
Indemnified Party, to undertake the defense of such claim with counsel
satisfactory to the Indemnified Party or, with the consent, which shall not
unreasonably be withheld or delayed, of the Indemnified Party, to settle or
compromise such claim. The failure of the Indemnifying Party to give such notice
and to so undertake and diligently prosecute the defense of or to settle or
compromise such a claim shall constitute a waiver of the Indemnifying Party's
rights under this Section 11.4(a) and shall preclude the Indemnifying Party from
disputing the manner in which the Indemnified Party may conduct the defense of
such claim or the reasonableness of any amount paid by the Indemnified Party in
satisfaction of such claim.
(b) The election by the Indemnifying Party, pursuant to
Section 11.4(a), to undertake the defense of a third-party claim shall not
preclude the party against which such claim has been made also from
participating or continuing to participate in such defense, so long as such
party bears its own legal fees and expenses for so doing.
- 41 -
11.4 Tax Indemnification and Other Matters.
(a) Sellers and Xxxxxxxx shall be responsible, jointly and
severally, for and shall indemnify and hold harmless Buyer and the Company and
their respective affiliates from and against any and all losses for or in
respect of each of the following:
(i) any and all Taxes (including any Taxes resulting from
the inclusion of Company in a consolidated, combined or unitary Tax Return) with
respect to all taxable periods of Company ending on or prior to the Closing Date
and, to the extent provided in Section 11.4(b) hereof, all taxable periods that
include, and end after, the Closing Date (other than, in each case, Taxes for
which sufficient current accruals have been made on the Balance Sheet); and
(ii) any and all Taxes resulting from any breach of the
representations and warranties contained in this Agreement.
(b) The Sellers, Robinson, Company and Buyer will, to the
extent permitted by applicable law, close the taxable periods of the Company on
the Closing Date at the close of business, and for the purposes of the election
under Section 1362(e)(3) of the Code the first day for which Company shall be
taxed as separate "C" corporations shall be the first day after the Closing
Date. The Closing shall be deemed effective after the close of business on the
Closing Date and the Sellers and Company hereby consent to such election under
Section 1362(e)(3) of the Code. In any case where applicable law does not permit
Company to close its taxable year on the Closing Date, then Taxes, if any,
attributable to the taxable periods of Company beginning on or before and ending
after the Closing Date shall be allocated (i) to the Sellers, jointly and
severally, for the period up to an including the Closing Date, and (ii) to Buyer
for the period subsequent to the Closing Date. For purposes of this Section
11.4(b), Taxes for the period up to and including the Closing Date and for the
period subsequent to the Closing Date shall be determined on the basis of an
interim closing of the books as of the Closing Date or, to the extent not
susceptible to such allocation, by apportionment on the basis of elapsed days.
(c) Buyer shall be responsible for, and shall pay or cause to
be paid, and shall indemnify and hold harmless the Seller and Xxxxxxxx from and
against any and all losses for or in respect of each of the following:
(i) any and all Taxes (including any Taxes resulting from
the inclusion of Company in a consolidated, combined or unitary Tax Return) with
respect to all taxable periods of Company beginning after the Closing Date and,
to the extent provided in Section 11.4(b) hereof, all taxable periods that
include, and end after, the Closing Date (other than, in each case, Taxes for
which the Seller or Xxxxxxxx is responsible pursuant to Section 11.4(a)(ii)
hereof); and
(ii) Taxes for which sufficient current accruals have been
made on the Balance Sheet and are specifically shown therein as accruals for
unpaid taxes; and
(iii) any and all adverse tax consequences resulting from
the Election (i.e., taxes incurred by Sellers, Xxxxxxxx or the Company that
would not have been incurred if the Election had not been made, including but
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not limited to taxes paid with respect to any reimbursement pursuant to this
Section 11.4(c)(iii)).
(d) (i) Sellers and Xxxxxxxx shall be responsible, jointly and
severally, for preparing all Tax Returns required to be filed by or on behalf of
Company and all of its operations and assets on or before the Closing Date
(taking into account applicable extensions of time) and shall pay or cause to be
paid any Taxes shown to be due thereon. All such Tax Returns shall be prepared
in a manner consistent with past practices and copies of such Tax Returns shall
be delivered to Buyer for Buyer's review and comment at least fifteen (15)
business days prior to filing. Upon Buyer's approval of such Tax Returns the
appropriate officers of Company and, if applicable, the Seller, Xxxxxxxx and
Buyer shall sign and file such Tax Returns. Buyer shall be responsible for
filing or causing to be filed all Tax Returns required to be filed by or on
behalf of Company and any of their operations and/or assets after the Closing
Date (taking into account applicable extensions of time).
(ii) With respect to any Tax Return required to be filed by
Buyer for a taxable period of Company beginning on or before and ending on or
after the Closing Date, Buyer shall provide Sellers and Xxxxxxxx with a
statement setting forth the amount of Tax shown on such Return for which Sellers
and Xxxxxxxx are responsible pursuant to Section 11.4(a) hereof or that is
allocable to Sellers and Xxxxxxxx pursuant to Section 11.4(b) hereof (as the
case may be) (the "Statement") at least thirty (30) business days prior to the
due date for filing of such Tax Return (including extensions). Sellers and
Xxxxxxxx shall have the right to review such Tax Return and the Statement prior
to the filing of such Tax Return. Sellers, Xxxxxxxx and Buyer agree to consult
and resolve in good faith any issues arising as a result of the review of such
Tax Return and such Statement and to mutually consent to the filing as promptly
as possible of such Tax Return. If the parties are unable to resolve any
disagreement within fifteen business days following Sellers' and Xxxxxxxx'x
receipt of such Tax Return and Statement, the parties shall jointly request PWC
to resolve any issue in dispute as promptly as possible and shall cooperate with
PWC to resolve such disagreement. If PWC is unable to make a determination with
respect to any disputed issue prior to the due date (including extensions) for
the filing of the Tax Return in question, then Buyer may file such Tax Return on
the due date (including extensions) therefor without such determination having
been made. Notwithstanding the filing of such Tax Return, PWC shall make a
determination with respect to any disputed issue, and the amount of Taxes that
are allocated to Sellers and Xxxxxxxx pursuant to this Section 11.4(d)(ii) shall
be as determined by PWC. The fees and expenses of PWC shall be paid one-half by
Buyer and one-half by Sellers and Xxxxxxxx. Not later than five (5) business
days before the due date (including extensions) for payment of Taxes with
respect to such Tax Return or in the case of a dispute, not later than five (5)
business days after notice to Sellers and Xxxxxxxx of resolution thereof,
Sellers and Xxxxxxxx shall pay to Company an amount equal to the Taxes shown on
the Statement or as shown in such notice, as the case may be, as being the
responsibility of Sellers and Xxxxxxxx pursuant to Section 11.4(a) hereof or
allocable to Sellers and Xxxxxxxx pursuant to Section 11.4(b) hereof (as the
case may be). No payment pursuant to this Section 11.4(d)(ii) shall excuse
Sellers and Xxxxxxxx from their indemnification obligations pursuant to Section
11.4(a) hereof should the amount of Taxes as ultimately determined (on audit or
otherwise), for the periods covered by such Tax Returns and which are the
responsibility of Sellers and Xxxxxxxx, exceed the amount of Sellers' and
Xxxxxxxx'x payment under this Section 11.4(d)(ii).
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(iii) Sellers or Xxxxxxxx may not file any amended Tax
Returns or refund claims in respect of any taxable period of Company ending on
or prior to the Closing Date without the prior written consent of Buyer.
(iv) Sellers and Xxxxxxxx shall cooperate fully with Buyer
and make available to Buyer in a timely fashion such Tax data and other
information as may be reasonably required for the preparation by Buyer of any
Tax Returns required to be prepared and filed by Buyer hereunder. The Seller,
Xxxxxxxx and Buyer shall make available to the other, as reasonably requested,
all information, records or documents in their possession relating to Tax
liabilities of Company for all taxable periods of Company ending on, prior to or
including the Closing Date and shall preserve all such information, records and
documents until the expiration of any applicable Tax statute of limitations or
extensions thereof; provided, however, that if a proceeding has been instituted
for which the information, records or documents is required prior the expiration
of the applicable statue of limitations, such information, records or documents
shall be retained until there is a final determination with respect to such
proceeding.
(e) Buyer shall promptly notify Sellers and Xxxxxxxx in writing
upon receipt by Buyer or Company of notice of any Tax audits of or proposed
assessments against Company for taxable periods of Company ending on or prior to
the Closing Date; provided, however, that the failure of Buyer to give Sellers
and Xxxxxxxx prompt notice as required herein shall not relieve Sellers or
Xxxxxxxx of any of his obligations under this Section 11.4, except to the extent
that Sellers or Xxxxxxxx are actually and materially prejudiced thereby. Buyer
shall represent Company's interests in any such Tax audit or administrative or
court proceeding and shall employ counsel of its choice. Sellers and Xxxxxxxx
agree that they will cooperate fully with Buyer and its counsel in the defense
against or compromise of any claim in any such audit or proceeding.
(f) Any dispute as to any matter covered hereby shall be
resolved by an independent accounting firm chosen by Buyer. The fees and
expenses of such accounting firm shall be borne equally by Sellers and Xxxxxxxx,
on one hand, and Buyer on the other.
(g) The parties hereto agree to furnish or cause to be
furnished to each other, at their own expense, such information, access to books
and records, and assistance, including making employees available during regular
business hours on a mutually convenient basis, as may reasonably be necessary
for the preparation and filing of any Tax Return contemplated by this Section
11.4.
11.5 Tax Treatment of Indemnity Payments. The Seller, Xxxxxxxx and
Buyer agree to treat any indemnity payment made pursuant to this Section 11 as
an adjustment to the Purchase Price for federal, state, local and foreign income
tax purposes.
11.6 Interest. In the event any party fails to make full payment
with respect to an Indemnity Payment within 30 days after a request for such
Indemnity Payment is made by an Indemnified Party, such unpaid Indemnity Payment
shall bear interest until paid at a rate of 10% per annum or, if less, the
highest rate permitted by applicable law.
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11.7 Reimbursement Separate From Indemnity. If the amount of the
out of pocket costs incurred by Company after the Closing Date for repairs and
replacements (including 30-day punchlist items) on homes Completed and for which
closing of the sale thereof has occurred prior to Closing exceeds in the
aggregate $200,000 for the twelve month period following the Closing Date; or
$100,000 for the corresponding twelve-month period ending in June 30, 2005; or
$50,000 for the corresponding twelve-month period ending in June 30, 2006; or
$50,000 for the corresponding twelve-month period ending in June 30, 2007,
respectively, Buyer shall be entitled to reimbursement from Xxxxxxxxxxx for all
such excess expenditures in each of such fiscal years, which shall be paid in
full within 30 days of a request therefor in writing to the Sellers and Xxxxxxxx
accompanied by a listing of such expenditures in reasonable detail; provided,
however, that any amounts required to be reimbursed pursuant to this Section
11.7 shall in no event exceed the amounts of any Contingent Profits Payment paid
or payable to Xxxxxxxxxxx from Buyer pursuant to Section 2.2(c).
11.8 Right of Set-Off. In the event that Buyer determines in good
faith that it is entitled to Damages or reimbursement pursuant to Section 11.7,
Buyer, Buyer's affiliates and Company shall have a right of set-off against the
Contingent Profits Payments due to Xxxxxxxxxxx under Section 2.2(c) hereof with
respect to the amount of such Damages (the "Set-Off Amount"), subject to the
following provisions of this Section. Any Set-Off Amount shall decrease the
payments due under the Contingent Profits Payments, beginning on the next
occurring payment date (the "Set-Off Date"). Upon a final determination of the
actual amount of indemnification (the "Actual Amount") thereon, if the Set-Off
Amount is in excess of the Actual Amount (upon determination thereof), such
excess shall be paid to Xxxxxxxxxxx in accordance with Section 2.2(c) with
payment of such amounts to be due within ten (10) business days of the date on
which the Actual Amount is determined.
11.9 Certain Liability Matters. Notwithstanding the foregoing, no
party will have any liability (for indemnification or otherwise) with respect to
a breach of a representation and warranty until the total of Damages with
respect to such matters exceeds $250,000 in the aggregate (it being agreed and
acknowledged by the parties that for the purpose of determining whether the
foregoing $250,000 threshold has been exceeded in the aggregate, the
representations and warranties of the Sellers and Xxxxxxxx contained herein
shall not be deemed qualified by any references herein to materiality generally,
and the $250,000 Damages amount shall be determined in the aggregate with
respect to the Sellers and Xxxxxxxx on a combined basis), and then only for the
amount by which such Damages resulting from such breach of such representations
and warranties exceeds $250,000 in the aggregate.
SECTION 12. DEFINITIONS
"Actual Amount" shall have the meaning set forth in Section 11.8.
"Authorizations" shall have the meaning set forth in Section 4.6(b).
"Balance Sheet" shall have the meaning set forth in Section 4.8.
"Buyer's Common Stock" shall have the meaning set forth in Section 2.3.
"Buyer Transaction Documents" shall have the meaning set forth in
Section 5.2.
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"Closing" shall have the meaning set forth in Section 9.1.
"Closing Date" shall have the meaning set forth in Section 9.1.
"Closing Stock Payment" shall have the meaning set forth in Section
2.2(a).
"COBRA" shall have the meaning set forth in Section 4.19(b).
"Code" shall have the meaning set forth in Section 4.18(e).
"Company Transaction Documents" shall have the meaning set forth in
Section 4.2.
"Confidential Information" shall have the meaning set forth in Section
6.7(a)(ii).
"Consolidated Group" shall have the meaning set forth in Section
4.18(b).
"Constructed" shall have the meaning set forth in Section 4.16(a).
"Contingent Profits Payment" shall have the meaning set forth in
Section 2.2(c).
"Contingent Stock Payment" shall have the meaning set forth in Section
2.2(b).
"Covered Receivables" shall have the meaning set forth in Section 9.4.
"Current Real Property" shall have the meaning set forth in Section
4.23(b).
"Damages" shall have the meaning set forth in Section 11.1.
"Dispute Notice" shall have the meaning set forth in Section 2.2(d).
"DOL" shall have the meaning set forth in Section 4.19(d).
"Election" shall have the meaning set forth in Section 4.18(l)(i).
"Election Forms" shall have the meaning set forth in Section
4.18(l)(ii).
"Employee Benefit Plans" shall have the meaning set forth in Section
4.19(a).
"Employee Pension Benefit Plan" shall have the meaning set forth in
Section 4.19(b).
"Employment Agreement" shall have the meaning set forth in Section 7.6.
"Environmental Laws" shall have the meaning set forth in Section
4.23(m)(i).
"ERISA" shall have the meaning set forth in Section 4.19(a).
"ERISA Affiliate" shall have the meaning set forth in Section 4.19(a).
"Former Real Property" shall have the meaning set forth in Section
4.23(c).
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"Hazardous Substances" shall have the meaning set forth in Section
4.23(m)(iii).
"Indemnity Payment" shall have the meaning set forth in Section
11.3(a).
"Intellectual Property" shall have the meaning set forth in Section
4.13(c).
"Interim Balance Sheet" shall have the meaning set forth in Section
4.8.
"IRS" shall have the meaning set forth in Section 4.18(c).
"Land Contract Real Property" shall have the meaning set forth in
Section 4.11(d).
"Laws" shall have the meaning set forth in Section 3.2(a)(ii).
"Leased Real Property" shall have the meaning set forth in Section
4.11(c).
"Material Contract" shall have the meaning set forth in Section
4.13(e).
"Multiemployer Plan" shall have the meaning set forth in Section
4.19(c).
"OSHA" shall have the meaning set forth in Section 4.20(b).
"Option Real Property" shall have the meaning set forth in Section
4.11(d).
"Owned Real Property" shall have the meaning set forth in Section
4.11(b).
"PBCG" shall have the meaning set forth in Section 4.19(b).
"Permitted Encumbrances" shall have the meaning set forth in Section
4.11(b).
"Pre-tax Profits from Operations" shall have the meaning set forth in
Section 2.2(c).
"Purchase Price" shall have the meaning set forth in Section 2.1.
"PWC" shall have the meaning set forth in Section 2.2(d).
"Real Property" shall have the meaning set forth in Section 4.11(a).
"Related Party" shall have the meaning set forth in Section 4.22.
"Release" shall have the meaning set forth in Section 4.23(m)(ii).
"Remedial Action" shall have the meaning set forth in Section
4.23(m)(ii).
"Removal" shall have the meaning set forth in Section 4.23(m)(ii).
"Response" shall have the meaning set forth in Section 4.23(m)(ii).
"Restricted Area" shall have the meaning set forth in Section
6.7(a)(i).
- 47 -
"Restricted Period" shall have the meaning set forth in Section
6.7(a)(i).
"Return" shall have the meaning set forth in Section 4.18(a).
"Reviewed Financial Statements" shall have the meaning set forth in
Section 4.8.
"XXXX" shall have the meaning set forth in Section 4.23(b)(ii).
"Seller Transaction Documents" shall have the meaning set forth in
Section 3.1.
"Set-Off Amount" shall have the meaning set forth in Section 11.8.
"Set-Off Date" shall have the meaning set forth in Section 11.8.
"Shares" shall have the meaning set forth in Section 1.1.
"Taxes" shall have the meaning set forth in Section 4.18(a).
"Warranty Company" shall have the meaning set forth in Section 4.16(c).
"Without Cause Termination" shall have the meaning set forth in Section
2.2(b).
SECTION 13. MISCELLANEOUS
13.1 Further Assurances. Each party hereto shall use commercially
reasonable good faith efforts to comply with all requirements imposed hereby on
such party and to cause the transactions contemplated hereby to be consummated
as contemplated hereby and shall, from time to time and without further
consideration, either before or after the Closing, execute such further
instruments and take such other actions as any other party hereto shall
reasonably request in order to fulfill its obligations under this Agreement and
to effectuate the purposes of this Agreement and to provide for the orderly and
efficient transition of the ownership of Company to Buyer. Sellers shall, for
five years after the Closing, retain their various books and records relating to
Company and shall, upon prior notice, provide Buyer and its authorized
representatives reasonable access thereto. Each party shall promptly notify the
other parties of any event or circumstance known to such party that could
prevent or delay the consummation of the transactions contemplated hereby or
which would indicate a breach or non-compliance with any of the terms,
conditions, representations, warranties or agreements of any of the parties to
this Agreement.
13.2 Costs and Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection herewith. Any and
all transfer, sales, use, documentary and similar taxes and recording and filing
fees incurred in connection with the transactions contemplated herein shall be
borne one-half by Buyer and one-half by Sellers (and not by Company).
13.3 Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth below or if sent by
documented overnight delivery service or registered or certified mail, postage
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prepaid, return receipt requested, or by telecopy, receipt acknowledged,
addressed as set forth below or to such other person or persons and/or at such
other address or addresses as shall be furnished in writing by any party hereto
to the others. Any such notice or communication shall be deemed to have been
given as of the date received, in the case of personal delivery, or on the date
shown on the receipt or confirmation therefor in all other cases.
To Buyer: Orleans Homebuilders, Inc.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxx
with a copy to: Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
0000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
To Xxxxxxxx: 0000 Xxxxxxxxxx Xxxxx
or the Trust Xxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Winderweedle, Haines, Xxxx & Xxxxxxx, P.A.
000 Xxxx Xxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esquire
To
Xxxxxxxxxxx: X.X. Xxx 000
Xxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxx Xxxxxxxxx, P.A.
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esquire
- 49 -
13.4 Assignment and Benefit.
(a) Buyer may assign this Agreement in whole to any subsidiary
or to any person which becomes a successor in interest (by purchase of assets or
stock, or by merger or otherwise) to Buyer; provided, however, that any
assignment by the Buyer shall not relieve Buyer of its obligations pursuant to
this Agreement. Neither Company nor either Seller shall assign this Agreement or
any rights hereunder, or delegate any obligations hereunder, without prior
written consent of Buyer. Subject to the foregoing, this Agreement and the
rights and obligations set forth herein shall inure to the benefit of, and be
binding upon, the parties hereto, and each of their respective successors, heirs
and assigns.
(b) This Agreement shall not be construed as giving any
person, other than the parties hereto and their permitted successors, heirs and
assigns, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any of the provisions herein contained, this Agreement and all
provisions and conditions hereof being intended to be, and being, for the sole
and exclusive benefit of such parties, and permitted successors, heirs and
assigns and for the benefit of no other person or entity.
13.5 Amendment, Modification and Waiver. The parties may amend or
modify this Agreement in any respect, and Buyer, on the one hand, and each of
the Sellers, on the other hand, may: (a) extend the time for the performance of
any of the obligations of the other, (b) waive any inaccuracies in
representations and warranties by the other, (c) waive compliance by the other
with any of the obligations contained in this Agreement, or (d) waive the
fulfillment of any condition precedent to the performance under this Agreement
of the waiving party. Any such amendment, modification, extension or waiver
shall be in writing. The waiver by a party of any breach of any provision of
this Agreement shall not constitute or operate as a waiver of any other breach
of such provision or of any other provision hereof, nor shall any failure to
enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof.
13.6 Governing Law, Venue and Attorneys' Fees and Costs. This
Agreement is made pursuant to, and shall be construed and enforced in accordance
with, the laws of the State of Florida (and United States federal law, to the
extent applicable), irrespective of the principal place of business, residence
or domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of law.
EACH OF SELLERS HEREBY AGREES THAT ANY ACTION OR PROCEEDING ARISING IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREUNDER
PERMITTED TO BE BROUGHT IN COURT BY THE TERMS OF THIS AGREEMENT SHALL BE BROUGHT
AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF FLORIDA, IN VOLUSIA
COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF
FLORIDA. SELLERS EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF SUCH
COURTS FOR THE PURPOSE OF ANY SUCH ACTION OR PROCEEDING AND IRREVOCABLY AGREE TO
BE BOUND BY ANY JUDGMENT RENDERED BY SUCH COURTS IN CONNECTION WITH SUCH ACTION
OR PROCEEDING. EACH SELLER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION SUCH SELLER MAY HAVE, NOW OR HEREAFTER, TO THE
VENUE OF ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH ACTION OR
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
- 50 -
In connection with any legal proceedings arising out of this Agreement,
the prevailing party in such proceeding shall be entitled to receive from the
non-prevailing party reimbursement for costs and expenses incurred (including
reasonable attorneys' fees), including in connection with any appellate
proceedings.
13.7 Section Headings and Defined Terms. The section headings
contained herein are for reference purposes only and shall not in any way affect
the meaning and interpretation of this Agreement. The terms defined herein and
in any agreement executed in connection herewith include the plural as well as
the singular and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herewith and
therewith.
13.8 Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
13.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
13.10 Entire Agreement. This Agreement, together with the
agreements, exhibits, schedules and certificates referred to herein or delivered
pursuant hereto, constitute the entire agreement between the parties hereto with
respect to the purchase and sale of the Shares and supersede all prior
agreements and understandings. Without limiting the scope of the foregoing, the
parties specifically acknowledge and agree that all employment agreements,
shareholder agreements, subscription agreements and any similar agreements
regarding the Shares that any Seller entered into at any time prior to the
Closing hereunder, including without limitation the Shareholders Agreement dated
December 12, 1994 and the Stock Restriction and Purchase Agreement dated January
27, 2003, are hereby terminated and superseded in all respects, and the
applicable Sellers hereby waive any and all rights arising under such agreements
with respect to the transactions contemplated by this Agreement. The submission
of a draft of this Agreement or portions or summaries thereof does not
constitute an offer to purchase or sell the Shares, it being understood and
agreed that neither Buyer nor Sellers shall be legally obligated with respect to
such a purchase or sale or to any other terms or conditions set forth in such
- 51 -
draft or portion or summary unless and until this Agreement has been duly
executed and delivered by all parties.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the first date written above.
Buyer: Orleans Homebuilders, Inc.
By: Xxxxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Vice Chairman
Company: Masterpiece Homes, Inc.
By: Xxxxxx Xxxxxxxxxxx
-------------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: President
Sellers: The Xxxxx X. Xxxxxxxx Trust
By: Xxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Trustee
Xxxxxx Xxxxxxxxxxx
------------------------------------
Xxxxxx Xxxxxxxxxxx
Xxxxxxxx: Xxxxx Xxxxxxxx
------------------------------------
Xxxxx Xxxxxxxx
- 52 -
LIST OF OMITTED EXHIBITS AND SCHEDULES
Schedule 1.1 Number of Shares owned by each Seller
Exhibit 2.4 Guarantees
Exhibit 4.4 Capitalization
Exhibit 4.8 Balance Sheet of the Company as of
December 31, 2002 and the Interim Balance
Sheet of the Company as of May 31, 2003
Exhibit 4.10 Warranties
Exhibit 4.11(b) List of Real Property
Exhibit 4.11(c) Leased Real Property
Exhibit 4.11(d) List of all Written and Oral Agreements
Exhibit 4.11(i) Unpaid Charges
Exhibit 4.13 List of Properties, Contracts, etc.
Exhibit 4.16 List of all Repairs
Exhibit 4.17 Names of 10 Suppliers
Exhibit 4.18(e) Consent of 341(f)(1) filing with the IRS
Exhibit 4.19 Employee Benefits
Exhibit 4.20(c) OSHA Reports
Exhibit 4.21 Directors, Officers and Employees
Exhibit 4.22 Affiliate Agreement
Exhibit 4.24 Absence of Certain Changes and Events
Exhibit 7.3 Approvals
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