Exhibit 2.1
AMEMDED AND RESTATED
PURCHASE AGREEMENT
AMONG
THE FORTRESS GROUP, INC.
XXXXXXXXX CONSTRUCTION, INCORPORATED
RRKTG LUMBER, INC.
XXXXX AND XXXXX TITLE COMPANY
AND
PERSONS NAMED HEREIN
DATED: December 31, 1997
Purchase Agreement
Amended and Restated Purchase Agreement is made and entered effective the
31st day of December, 1997 among The Fortress Group, Inc., a Delaware
corporation ("Fortress" and the "Purchaser"), Xxxxxxxxx Construction,
Incorporated, a Missouri corporation ("Xxxxxxxxx Construction"), RRKTG Lumber,
Inc., a Missouri corporation ("RKG"), Xxxxx and Xxxxx Title Company, a Missouri
corporation ("L&C" and together with Xxxxxxxxx Construction and RKG, the
"Acquired Companies"), Xxxxxx X. Xxxxxxxxx, Xx., Xxxxxxx X. Xxxxxxxxx, Xxxxxxx
X. Xxxxxxxxx, Xxxxxx X. Xxxxxxxxx, Xx., Xxxxxxx X. Xxxxxxxxx, and Xxxxx X.
Xxxxxxxxx, each Missouri residents (collectively, the "Principals" and the
"Sellers") and Xxxxxx X. Xxxxxxxxx, Xx., Trustee under Voting Trust Agreements
among Xxxxxxxxx Construction, Incorporated and Xxxxxxx X. Xxxxxxxxx, Xxxxxxx X.
Xxxxxxxxx, Xxxxxx X. Xxxxxxxxx, Xx., Xxxxxxx X. Xxxxxxxxx, and Xxxxx X.
Xxxxxxxxx (the "Beneficial Owners") and among RKG and the Beneficial Owners (the
"Purchase Agreement").
WHEREAS, the Acquired Companies are engaged in the business of
constructing, selling, financing, and insuring the title to residential
single-family homes and operating a lumber company in St. Xxxxxxx County,
Missouri (the "Business"),
WHEREAS, the Principals desire to sell, and the Purchaser desires to
purchase, all of the issued and outstanding shares of capital stock (the
"Shares") of the Acquired Companies for the consideration and on the terms set
forth in this Agreement,
NOW, THEREFORE, in consideration of the mutual covenants of the parties set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
SALE OF SHARES AND ASSETS
1.1 Shares. Upon the terms and subject to the conditions set forth herein
and in reliance on the respective representations and warranties of the parties,
the Principals will sell and transfer all of the issued and outstanding Shares
to Purchaser, and Purchaser will purchase the Shares from the Principals on the
Closing Date and at the time and place of Closing referred to below, for the
consideration and in accordance with the provisions of Section 2.1 hereof.
1.2 Consents. Promptly after the date hereof and except as otherwise
provided herein, the Principals shall use reasonable efforts to obtain all
approvals, consents, notices, and waivers required to transfer the shares to the
Purchaser (collectively, the "Consents"), in form and substance satisfactory to
the Purchaser. Schedule 4.5-1 hereto describes each Consent.
1.3 Transfer to the Purchaser Subsidiaries. At the election of the
Purchaser, at Closing the Principals shall transfer the Shares to such direct or
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indirect subsidiaries of the Purchaser as Purchaser shall designate in writing
to Sellers before the Closing date (the "Purchaser Subsidiaries"). Purchaser is
considering having the Shares of Xxxxxxxxx Construction, RKG, and L&C
transferred to three separate Purchaser Subsidiaries. In such case the
agreements, covenants, indemnifications, and representations and warranties of
the Sellers set forth herein shall also be for the benefit of the Purchaser
Subsidiaries. If Purchaser elects to have title transferred at Closing to
Purchaser Subsidiaries, Fortress shall remain subject to and bound by the
duties, covenants, indemnifications, liabilities, representations, and
warranties of Purchaser set forth herein.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Purchase Price. The purchase price (the "Purchase Price") for the
Shares and the terms of payment will be as follows:
(a) Cash. Subject to a post-closing adjustment pursuant to
Section 2.2, below, Purchaser shall pay to Principals $12,750,000 cash
as follows:
(i) Xxxxxxx Money.
(A) 1st Deposit. By 12:00 midnight January
5, 1998 Purchaser shall wire transfer $500,000 in
immediately available funds to an account or accounts
designated by Principals (the "Xxxxxxx Money
Deposit"). It shall be nonrefundable and shall
constitute liquidated damages in the event the
Purchaser fails to close for any reason other than a
material breach by the Sellers of their duties under
the Agreement. At Closing the Xxxxxxx Money Deposit
shall be credited against the $12,750,000 cash
purchase price at Closing. In the event Purchaser
fails to deliver the Xxxxxxx Money Deposit by 12:00
midnight January 5, 1998, this Agreement will
terminate. All obligations of the parties hereunder
shall end, and each party will be relieved on any and
all claims from and duties to the other party growing
out of this Agreement except the confidentiality
provisions contained in Section 8.3(d). Each party
will bear its own expenses and respective fees and
costs.
(B) 2d Deposit. Not later than 5:00 p.m.,
Central Standard Time, February 27, 1998 Purchaser
shall wire transfer $500,000 in immediately available
funds to an account or accounts designated by
Principals (the "2d Xxxxxxx Money Deposit"). It shall
be nonrefundable, and $300,000 shall be credited
against the $12,750,000 cash purchase price at
Closing, with $200,000 of it being an extension
payment to extend the Closing Date to March 6, 1998.
Once the 2d Xxxxxxx Money Deposit is deposited, the
two deposits, totaling $1,000,000, shall constitute
liquidated damages in the event the Purchaser fails
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to close for any reason other than a material breach
by the Sellers of their duties under the Agreement.
In the event Purchaser fails to deliver the 2d
Xxxxxxx Money Deposit by 5:00 p.m. Central Standard
Time, February 27, 1998, this Agreement will
terminate. All obligations of the parties hereunder
shall end, and each party will be relieved on any and
all claims from and duties to the other party growing
out of this Agreement except the confidentiality
provisions contained in Section 8.3(d). Each party
will bear its own expenses and respective fees and
costs
(ii) Closing Date Cash. At Closing Purchaser shall
wire transfer $10,750,000 in immediately available funds to an
account or accounts designated by Principals and $1,000,000 to
U. S. Title & Guaranty Company of St. Xxxxxxx, Inc., Escrow
Agent pursuant to the Escrow Agreement attached hereto as
Exhibit H.
(b) Pre-Closing Distributions. As more fully described in
Section 6.2(i), below, and subject to the limitations therein, it is
contemplated by the parties that Principals will cause the Acquired
Companies to make Pre-Closing Distributions of the estimated combined
net worth of the Acquired Companies as of the Closing and will repay
personal loans to the Principals. These Pre-Closing Distributions were
part of the Purchase Price negotiations.
2. 2. Adjustments to the Purchase Price.
(a) Closing Combined Balance Sheet. (1) Within forty-five (45)
days of Closing, the Principals who are senior executives of Xxxxxxxxx
Construction, post-closing, shall prepare under the supervision of
Fortress an unaudited combined balance sheet for the Acquired Companies
as of the close of business on the date of the Closing. Purchaser's
public auditor (the "Auditor") shall then, within sixty (60) days of
receipt of such balance sheet, audit such closing combined balance
sheet of the Acquired Companies (as it may be adjusted pursuant to
subsection 2.2(c) below, the "Closing Combined Balance Sheet"), which
Closing Combined Balance Sheet shall set forth the financial condition,
assets, and liabilities of the Acquired Companies as of the close of
business on the date of the Closing, but shall exclude any value
associated with tap fee rebates arising from the Village of Dardene
development, which are to be assigned to Principals as of the Closing.
The Closing Combined Balance Sheet shall be prepared in accordance with
generally accepted accounting principles ("GAAP"); provided, however,
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no adjustment will be recognized for purposes of this Section 2.2 based
upon a change in accounting treatment or policy with respect to an item
that is in accordance with GAAP. The Closing Combined Balance Sheet
shall include footnotes and shall include all adjustments, which would
be made if the date of the Closing were the end of a fiscal period. The
Auditor shall deliver a copy of the audit to the Principals along with
a copy of the combined audited financials of the Acquired Companies for
the period ended December 31, 1997 prepared by the Auditor on behalf of
Purchaser in connection with its public disclosure of the proposed
transaction (the "Audited 1997 Financials"). The fee charged by the
Auditor for the audit shall be Fortress' expense. In addition, an
auditor selected by the Principals ("Principals' Auditor") shall
determine the increase in State and Federal Taxes payable by the
Principals caused by Purchaser's election of Section 338(a) treatment
for the purchase of the shares of Xxxxxxxxx Construction (the "Section
338 Tax Increase") and deliver its determination (the "Tax
Determination") to the parties at the time the Auditor delivers the
Closing Combined Balance Sheet. The fee charged by Principals' Auditor
for the Tax Determination shall be Fortress' expense.
(b) If the Principals dispute any of the calculations or
conclusions of the Auditor with respect to either the Closing Combined
Balance Sheet or the Audited 1997 Financials, they shall notify
Purchaser in writing thereof ("Sellers' Notice") within thirty (30)
days after delivery of the audit documents to them, which notice shall
set forth in reasonable detail the procedures and the amount(s) in
dispute. If they do not so notify Purchaser within such period, the
Closing Combined Balance Sheet shall become final and binding upon all
parties at the end of such period. If the Purchaser disputes any of the
calculations or conclusions of the Principals' Auditor, it shall notify
the Principals in writing thereof ("Purchaser's Notice") within thirty
(30) days after delivery of the Tax Determination to them, which notice
shall set forth in reasonable detail the amount in dispute. If it does
not so notify Principals within such period, the Tax Determination
shall become final and binding upon all parties at the end of such
period.
(c) If the Principals do so notify Purchaser or the Purchaser
does so notify the Principals, as the case may be, the Principals and
Purchaser shall attempt in good faith to resolve such dispute(s). If
Purchaser and the Principals are unable to resolve any disputed item
within ten (10) days after receipt of the respective Notice, such
disputed item(s) shall be submitted to one of the five largest
nationally recognized accounting firms or any of their successors
(other than the Auditor or the Principals' Auditor or their successors)
chosen by lot which shall be instructed to arbitrate such disputed
item(s) and determine the Net Worth of the Acquired Companies (as
defined below) or the Section 338 Tax Increase, or both, within thirty
(30) days, in a manner consistent with the provisions of Sections
2.2(a) and (c). The dispute may include issues relating to the 1997
Financials which have a bearing on the Closing Combined Balance Sheet.
The resolution of disputes by the accounting firm so selected shall be
set forth in writing and shall be conclusive and binding upon and
non-appealable by the parties, and the Closing Combined Balance Sheet
and, if subject to the dispute resolution, the Section 338 Tax Increase
determination shall become final and binding upon the date of such
resolution. The costs of such resolution by such accounting firm shall
be borne equally by the two sets of parties. The term "Net Worth" means
the excess of the total combined assets of the Acquired Companies over
their total combined liabilities, determined in accordance with GAAP,
but excluding the aforementioned tap fee rebates; provided, however, no
adjustment will be recognized for purposes of this Section 2.2 based
upon a change in accounting treatment or policy with respect to an item
that is in accordance with GAAP.
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(d) Adjustment. (i) Upon its determination, the
amount of Net Worth (after giving effect to the Pre-Closing
Distributions), if any, will be distributed to the Principals
in cash by Purchaser within 10 business days from the date the
amount is determined; and
(ii) The amount of Net Worth will be added to the
Pre-Closing Distributions to determine the "Cash Adjustment
Amount". To the extent that the Cash Adjustment Amount is less
than $13,000,000, the difference will be paid to the
Principals in cash by Purchaser within 10 business days from
the date the amount is determined. In addition, an adjustment
will be made for the difference between the Section 338 Tax
Increase and $750,000. If the Section 338 Tax Increase is less
than $750,000, the difference will be paid by the Principals
to Purchaser within 10 business days from the date the amount
is determined. If the Section 338 Tax Increase is more than
$750,000, the difference will be paid by the Purchaser to
Principals within 10 business days from the date the amount is
determined.
2.3 Tax Reporting and Allocations. Subject to Purchaser's payment to the
Principals of the Section 338 Tax Increase pursuant to Sections 2.1 and 2.2,
above, Purchaser and Principals agree to treat the transaction for tax purposes
as if the Acquired Companies sold all of their assets in a single transaction
and to make elections under Sections 338(a) and (h)(10) of the Code. Schedule
2.6 constitutes the parties' agreement concerning allocation among the assets of
the consideration to be paid to the Principals.
ARTICLE III
CLOSING
3.1 Time and Place of Closing. The purchase and sale provided for in this
Agreement will take place at the offices of Xxxxxxxxx Construction,
Incorporated, 000X Xxx Xxxxxx Xxxx Xxxxx, Xx. Xxxxxx, XX 00000, or at such other
place as the parties may agree upon, at 10:00 a.m. (local time) on March 6, 1998
(the "Closing", sometimes referred to as the "Closing Date") or such sooner date
as Fortress may elect by giving at least three business days notice to Sellers,
with a Closing Effective Date of 12:01 A.M. March 1, 1998.
3.2 Deliveries. At Closing, the Principals, Acquired Companies and
Purchaser will respectively deliver the closing documents as set forth in the
Deliveries Check List attached as Exhibit A hereto and hereby incorporated by
reference (the "Deliveries Check List").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIRED COMPANIES,
AND PRINCIPALS
The Acquired Companies, Xxxxxx X. Xxxxxxxxx, Xx., Xxxxxxx X. Xxxxxxxxx,
Xxxxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxxxxx, Xx., Xxxxxxx X. Xxxxxxxxx, and Xxxxx
X. Xxxxxxxxx each jointly and severally represent and warrant that all of the
following representations and warranties in this Article IV are true and correct
at the date of this Agreement, shall be true at the time of Closing, and
Principals further represent that such representations and warranties as made at
the time of Closing shall survive the Closing for the period of three years
following the Closing Date.
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4.1 Corporate Power and Authority; Effect of Agreement. The Acquired
Companies are corporations duly organized, validly existing, and in good
standing under the laws of the State of Missouri and have all requisite power
and authority to carry on their operations as they are now being conducted, to
own or use the properties and assets they purport to own or use and to perform
all of their obligations under the Material Contracts. They have all requisite
corporate power and authority to consummate the transactions contemplated hereby
and thereby, and to perform their respective obligations hereunder. The
execution and delivery of this Agreement by the Acquired Companies and
performance by them of their obligations under this Agreement and the
consummation by them of the transaction contemplated hereby have been duly
authorized by all necessary action on the part of each, in accordance with
applicable law and Articles of Incorporation and By-laws. This Agreement has
been duly and validly executed and delivered by the Acquired Companies and
constitutes the valid and binding obligations of each, enforceable in accordance
with their respective terms, except to the extent that such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium, or other
similar laws of general applicability relating to or affecting creditors' rights
generally, or the application of equitable principles.
4.2 Minute Books of Each Acquired Company. The minute books of the Acquired
Companies contain true and correct copies of (i) the minutes of each meeting of
and (ii) all written consents of the board of directors and stockholders of each
Acquired Company.
4.3 Capitalization. The entire authorized and issued capital stock of each
Acquired Company is listed on Schedule 4.3, and is issued only to the holders
reflected on such Schedule. No legend or other reference to any purported
Encumbrance appears upon any certificate representing the Shares of the Acquired
Companies. All of the outstanding equity securities and interests of the
Acquired Companies have been duly authorized and validly issued and are fully
paid and nonassessable. Except for the Voting Trust Agreements, there are no
voting agreements, voting trusts or other agreements (including cumulative
voting rights), commitments or understandings with respect to any of the stock
reflected on Schedule 4.3. The Voting Trust Agreements will be terminated prior
to Closing.
4.4 Articles of Incorporation, Bylaws, Officers and Directors. True and
complete copies of the Articles of Incorporation, and all amendments thereof to
date, and Bylaws of the Acquired Companies, have been delivered to Purchaser.
Schedule 4.4 is a true and complete list of all of the officers and directors of
each Acquired Company.
4.5 Authority; No Conflict. Except to the extent consents are required from
third parties or Governmental Authorities (the "Consents"), the execution,
delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby will not:
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(i) Violate or conflict with or result in a breach of
any provision of any Law, order, permit, judgment, injunction,
decree or other decision of any court or other tribunal or any
Governmental Authority binding on the Acquired Companies, or
any of their respective Affiliates, or conflict with or result
in the breach of any of the terms, conditions or provisions
thereof.
(ii) Constitute a default under the respective
Articles of Incorporation or the By-laws of the Acquired
Companies or of any material contract, agreement, commitment,
indenture, mortgage, note, bond, license or other instrument
or obligation to which an Acquired Company is a party.
(iii) Constitute an event that would permit any
person to terminate any Material Contract or accelerate the
maturity of any material indebtedness or other material
obligation.
(iv) Result in the creation or imposition of any
material Encumbrance upon the assets of the Acquired
Companies.
(v) Require any authorization, consent, approval,
exemption or other action by or notice to any court or
Governmental Authority.
Under a heading "Consents", Schedules 4.5-1 and 4.5-2 describes each Consent. As
used in this Agreement, "Governmental Authority" shall mean the United States or
any state, local or foreign government, or any subdivision, agency or authority
of any thereof.
4.6 Financial Statements. (a) Except as set forth in Schedule 4.6, each
Acquired Company has delivered to Fortress as part of Schedule 4.6 copies of the
following financial statements (the "Financial Statements"):
(i) Unaudited Financial Statements for the years ended
December 31, 1994, 1995, and 1996.
(ii) Unaudited Financial Statements for the month ended
October 31, 1997.
(iii) Unaudited Financial Statements for the three months
ended March 31, 1996 and 1997, the three months ended June 30, 1996 and
1997, the three months ended September 30, 1996 and 1997.
(iv) Unaudited Financial Statements for the six months ended
June 30, 1996.
(v) Unaudited Financial Statements for the nine months ended
September 30, 1996 and 1997.
Each Financial Statement is accurate and complete in all material respects,
is consistent with the books and records of the respective Acquired Company
(which, in turn, are accurate and complete in all material respects) and fairly
presents the Acquired Company's financial condition, assets and liabilities, as
of the respective dates, and the results of operations for the periods related
thereto.
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(b) Except as reflected on Schedule 4.6, as of the date hereof and as of
the Closing, no Acquired Company has any material debts, liabilities or
obligations of any nature (whether accrued, absolute, contingent, direct,
indirect, perfected, inchoate, unliquidated or otherwise), except
(i) to the extent clearly and substantially reflected
and accrued for or fully reserved against in the Financial
Statements,
(ii) for liabilities specifically delineated as to
nature and amount on the Schedules to this Agreement or
liabilities not assumed pursuant to Section 2.8,
(iii) for liabilities and obligations which have
arisen after October 31, 1997 in the Ordinary Course of
Business (none of which is a liability resulting from an
undisclosed breach of contract, material breach of warranty,
tort, infringement claim, or law suit, not otherwise disclosed
in Schedule 4.14).
4.7 Taxes.
(a) Definitions.
(i) The term "Tax" shall mean any federal, state,
local or foreign income, gross receipts, franchise, estimated,
alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal
property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding,
or other tax of any kind whatsoever, including any interest,
penalties or additions to tax or additional amounts in respect
to the foregoing.
(ii) The term "Tax Return(s)" shall mean returns,
declarations, reports, claims for refund, information returns
or other documents (including any related or supporting
schedules, statements or information) filed or required to be
filed in connection with the determination, assessment or
collection of any Taxes of each Acquired Company or the
administration of any laws, regulations or administrative
requirements relating to any Taxes.
(b) Tax Returns and Audits. Except as set forth in Schedule 4.7, each
Acquired Company has timely filed all Tax Returns for all periods ended on or
before the date of Closing and paid all Taxes shown to have become due pursuant
to such Tax Returns.
(c) The charges, accruals, and reserves with respect to Taxes on the books
of the Acquired Companies are or, by the Closing, will be, in the judgment of
the Acquired Companies' Chief Financial Officer, adequate (determined in
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accordance with GAAP). There exists no proposed tax assessment relating to the
Acquired Companies other than real property taxes and other taxes incurred in
the ordinary course of business. No consent to the application of Section
341(f)(2) of the Code has been filed with respect to any property or assets
held, acquired, or to be acquired by the Acquired Companies. All Taxes that the
Acquired Companies are or were required by Law to withhold or collect have been
duly withheld or collected and, to the extent required, have been paid to the
proper Governmental Authority or other Person.
(d) All Tax Returns filed by (or that include on a consolidated basis) the
Acquired Companies are true, correct, and complete in all material respects.
There is no tax sharing agreement that will require any payment by the Acquired
Companies after the date of this Agreement.
4.8 Material Contracts. Except as listed or described on Schedule 4.8 or
any other Schedule (the "Material Contracts"), as of or on the date hereof the
Acquired Companies are not party to any Applicable Contract that is of a type
described below:
(a) any collective bargaining arrangement with any labor union
or any such agreements currently in negotiation or proposed;
(b) any contract for capital expenditures or the acquisition
or construction of fixed assets for or in respect to real property
other than in the Ordinary Course of Business in excess of $50,000;
(c) any contract with a term in excess of one year for the
purchase, maintenance, acquisition, sale or furnishing of materials,
supplies, merchandise, machinery, equipment, parts or other property or
services (except that the Acquired Companies need not list any such
contract made in the Ordinary Course of Business which requires
aggregate future payments of less than $250,000, and in lieu of
providing each individual contract, the Acquired Companies has provided
to Fortress its standard subcontractor form and a list of each
subcontractor).
(d) any contract relating to the borrowing of money, or the
guaranty of another person's borrowing of money, including, without
limitation, all notes, mortgages, indentures and other obligations,
agreements and other instruments for or relating to any lending or
borrowing, including assumed indebtedness;
(e) any contract granting any person an Encumbrance on any of
the assets of the Acquired Companies, in whole or in part, other than
an Encumbrance arising in the Ordinary Course of Business as a result
of the Acquired Companies entering into an agreement to sell a home to
a potential buyer;
(f) any contract for the cleanup, abatement or other actions
in connection with Hazardous Materials (as defined in Section 4.18),
the remediation of any existing environmental liabilities or relating
to the performance of any environmental audit or study, other than
those arising in the Ordinary Course of Business;
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(g) any contract granting to any person a first-refusal,
first-offer or similar preferential right to purchase or acquire any
material asset of the operations of the Acquired Companies, other than
in the Ordinary Course of Business;
(h) any contract under which an Acquired Company is -
(i) a lessee or sublessee of any machinery,
equipment, vehicle or other tangible personal property or real
property, or
(ii) a lessor of any real property or tangible
personal property owned by an Acquired Company,
in either case having an original value in excess of $50,000;
(i) any contract providing for the indemnification of any
officer, director, employee or other person where such indemnification
may exceed the sum of $50,000;
(j) any joint venture or partnership contract.
The Acquired Companies have made available to Fortress a true and complete
copy of each written Material Contract, including all amendments or other
modifications thereto. Except as set forth on Schedule 4.8, each Material
Contract is a valid and binding obligation of the respective Acquired Company
enforceable in accordance with its terms, and is in full force and effect,
subject to bankruptcy, reorganization, receivership and other laws affecting
creditors' rights generally and the application of equitable principles. Except
as set forth on Schedule 4.8, the respective Acquired Company has performed all
obligations required to be performed by it under each Material Contract and it
is not, nor, to the Knowledge of the Acquired Companies, is any other party to
any Material Contract (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder; and
there exists no condition which, to the Knowledge of the Acquired Companies,
would constitute a breach or default thereunder. The Acquired Companies have not
been notified that any party to a Material Contract intends to cancel,
terminate, not renew, or exercise an option under any Material Contract, whether
in connection with the transactions contemplated hereby or otherwise.
4.9 Home Contracts. Schedule 4.9 will list as of the Closing date all
Contracts the Acquired Companies are a party to or entered into on behalf
thereof pursuant to which they are obligated to construct a residence in
connection with the Business.
4.10 Permits. To the Knowledge of Sellers, each Acquired Company possesses
all approvals, authorizations, certificates, consents, franchises, licenses,
permits, rights, variances, and waivers necessary for the lawful conduct of its
Business, the absence of which would materially adversely affect the operations
of the Acquired Companies (collectively, the "Permits"). To the Knowledge of
Sellers, each of the Permits is listed on Schedule 4.10 hereto. To the Knowledge
of Sellers, all Permits are in full force and effect, no violations have
occurred with respect thereto, and no basis exists for any limitation,
revocation, or withdrawal thereof or any denial of any extension or renewal with
respect thereto.
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4.11 Properties. Schedule 4.11.1 hereto contains a complete and accurate
list and legal description of all real property, leaseholds, or other interests
in real property owned or held by the Acquired Companies. Schedule 4.11-1 shall
be organized into five categories: Developed Real Property, Undeveloped Real
Property, Leased Real Property, Land Contracts, and Option Property. Solely for
purposes of categorizing the property being developed as either Developed Real
Property or Undeveloped Real Property, Developed Real Property shall mean the
property that meets the definition of "Substantially Complete" as defined in
Article X. Under the heading "Developed Real Property" Schedule 4.11-1 shall
also disclose the estimated cost basis of each lot and the current list price of
each (x) display house, (y) `spec' house, and (z) pre-sold house. The Acquired
Companies will deliver or make available to Fortress copies of deeds and other
instruments (as recorded) by which the Acquired Companies acquired such real
property interests and copies of all title insurance policies, opinions,
abstracts, and surveys in the possession of Sellers and relating to such
property or interests. For purposes of this Agreement, the Developed Real
Property and Undeveloped Real Property shall be collectively referred to as the
"Property".
(a) Access. The Developed Real Property has all necessary
access to and from public highways, streets, and roads, and no pending
or, to the best Knowledge of the Sellers, threatened proceeding or
other fact or condition exists that could limit or result in the
termination of such access. The Developed Real Property is connected to
and serviced by electric, gas, sewage, telephone, and water facilities,
which facilities are in compliance, in all material respects, with all
applicable Laws and installation and connection charges with respect
thereto have been paid as required by the applicable utility provider.
With respect to any Developed Real Property acquired or created by the
Acquired Companies after the date hereof but before Closing, such
Developed Real Property will satisfy all of the representations and
warranties set forth herein concerning the Developed Real Property.
With respect to the Undeveloped Real Property, there is no fact or
condition that would preclude (a) the Undeveloped Real Property from
having access to and from public highways, streets, or roads and (b)
the Undeveloped Real Property from being connected to and serviced by
electric, gas, sewage, telephone, and water facilities. With respect to
any Undeveloped Real Property acquired by the Acquired Companies after
the date hereof but before Closing, such Undeveloped Real Property will
satisfy all of the representations and warranties set forth herein
concerning the Undeveloped Real Property as of the Closing.
(b) Good and Marketable Title. To the Knowledge of the
Principals and the Acquired Companies, the Acquired Companies have good
and marketable title in fee simple to their respective Developed Real
Property and Undeveloped Real Property; and the Developed Real Property
and Undeveloped Real Property are free and clear of all Encumbrances
other than those of record and are not subject to rights of way, use
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restrictions, exceptions, variances, reservations, or limitations of
any nature except (i) mortgages or security interests shown on the
Acquired Companies' October 31, 1997 Balance Sheet as securing
specified liabilities or obligations, with respect to which no material
default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (ii) mortgages or security interests
incurred in connection with the purchase of property or assets after
October 31, 1997, with respect to which no material default (or event
that, with notice or lapse of time or both, would constitute a default)
exists, (iii) liens for current taxes not yet due, and (iv) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of the Acquired Companies,
and (v) zoning laws, annexation agreements and other land use
restrictions that do not prevent the present or anticipated use of the
property subject thereto; (vi) escrow agreements and recoupment
agreements relating to the development of the Property, (vii)
regulations and requirements imposed as part of the approval of the
development of the Property by State, local and federal governments.
(c) No Breach or Default. With respect to any agreements,
arrangements, contracts, covenants, conditions, deeds, deeds of trust,
rights-of-way, easements, mortgages, restrictions, surveys, title
insurance policies, and other documents granting to the Acquired
Companies an interest in or otherwise affecting their property, no
breach or event has occurred that with the giving of notice, the lapse
of time, or both, would constitute a breach or event of default by an
Acquired Company, or, to the best Knowledge of the Acquired Companies,
any other Person.
(d) No Condemnation. No condemnation, eminent domain, or
similar proceeding exists, is pending or, to the best Knowledge of the
Acquired Companies, is threatened with respect to, or that could
affect, any Developed or Undeveloped Property, Leased Real Property, or
property held pursuant to a Land Contract.
(e) Compliance with Laws. To the Knowledge of the Acquired
Companies and Principals, the buildings and improvements on the
Developed Real Property and the Leased Real Property and the
subdivisions and improvements of the Developed Real Property do not
violate (i) any applicable Law, including any building, set-back, or
zoning law, ordinance, regulation, or statute, or other governmental
restriction in the nature thereof, or (ii) any restrictive covenant
affecting any such property.
(f) Parties in Possession. To the Knowledge of the Acquired
Companies and Principals, there are no parties in possession of any
portion of the Property owned by or occupied by such Acquired Company,
respectively, as lessees, tenants at sufferance, or trespassers.
(g) Assessments. Except as set forth on Schedule 4.11(g) or
accrued or reported in the Closing Combined Balance Sheet, no
developer-related charges or assessments for public improvements or
otherwise made against the Developed Real Property or any lots included
therein are currently due and unpaid, including without limitation
those for construction of sewer lines, water lines, storm drainage
systems, electric lines, natural gas lines, streets (including
perimeter streets), roads and curbs.
13
(h) Moratoria. There is no moratorium applicable to any of the
Developed or Undeveloped Real Property on (i) the issuance of building
permits for the construction of houses, or certificates of occupancy
therefor, or (ii) the purchase of sewer or water taps.
(i) Construction Conditions. To the Knowledge of Xxxxxxxxx
Construction each Lot included in the listing of Developed Real
Property is stable and otherwise suitable for the construction of a
residential structure by customary means and without extraordinary site
preparation measures. Sellers make no representation as to the presence
of rocks in or at building sites and disclaim Knowledge of the rock
conditions.
(j) Environmental Matters. To the Knowledge of the Acquired
Companies and Principals, except as disclosed in Schedule 4.11(j), the
Developed and Undeveloped Real Property does not contain wetlands or a
level of radon above action levels of the U.S. Environmental Protection
Agency and is not located within a "critical", "preservation",
"conservation" or similar type of area. To the Knowledge of the
Acquired Companies and Principals no portion of the Developed or
Undeveloped Real Property is situated within a "noise cone" such that
the Federal Housing Administration will not approve mortgages due to
the noise level classification of such Developed or Undeveloped Real
Property.
(k) Certain Prior Uses. Other than isolated cemetery plots
that Xxxxxxxxx Construction has left undisturbed, none of the Developed
or Undeveloped Real Property has been used as a gravesite or sanitary
land fill.
(l) Claims. Except as otherwise disclosed to Purchaser in this
Agreement, no legal proceeding is pending or, to the best Knowledge of
the Acquired Companies, threatened which involves any of the Property
or against an Acquired Company with respect to any of the Property;
except for allegations associated with High Grove, Emerald Place, the
Summit and the Presidio, none of the site-preparation and construction
work performed on the Developed or Undeveloped Real Property has
concentrated or diverted surface water or percolating water improperly
onto or from the Property.
(m) No Foreign Sellers. No Seller is a "Foreign Person"
within the meaning of Sections 1445 and 7701 of the Code.
Schedule 4.11-3 is a true and complete list of each of the trucks,
automobiles, machinery, equipment, furniture, supplies, tools, and other
tangible personal property, and assets owned by, in the possession of, or used
by the Acquired Companies in connection with the Business with a value in excess
of $2,500 located on the real property or reflected on the October 31, 1997
Balance Sheet (except property sold or otherwise disposed of in the ordinary
course of Business consistent with past custom and practices). The Acquired
Companies have good and marketable title to, or a valid leasehold interest in
(as indicated on such Schedule), each item listed on Schedule 4.11-3.
14
4.12 Trademarks Service Marks, Trade Names, and Copyrights. To the
Knowledge of Sellers and the Acquired Companies -
a) all trademarks, service marks, trade names, and copyrights (including
computer software and data) ("Trade Marks") used by the Acquired Companies in
the conduct of the Business is described and set forth with particularity in
Schedule 4.12, along with information as to the ownership thereof;
b) all such trademarks, service marks, trade names, and copyrights are
owned by the Acquired Companies, except for such as are licensed under licenses
referred to in Schedule 4.12;
c) all such trademarks, service marks, trade names, and copyrights are
valid and in good standing, free and clear of any Encumbrances other than in the
Ordinary Course of Business and are not being overtly challenged in any way;
d) the Acquired Companies have not infringed on nor are they now infringing
on any trade xxxx, service xxxx, trade name, or copyright of or belonging to
another person; and
e) there is no claim pending or overtly threatened against the Acquired
Companies with respect to alleged infringement of any trademark, service xxxx,
trade name, or copyright owned by any person nor does the operation or any
aspect to the Business in the manner in which it has heretofore been operated or
is presently operated give rise to any such infringement.
4.13 Patents and Other Intellectual Property. To the Knowledge of Sellers
and the Acquired Companies -
(a) all patents and other intellectual property ("Intellectual Properties")
including all inventions, designs, models, processes, and applications for
patents owned or used by the Acquired Companies or in which or to which they has
any rights, licenses or immunities are described and set forth with
particularity in Schedule 4.13, along with information as to the ownership
thereof or licenses, rights or immunities therein and registrations thereof;
(b) the Acquired Companies have not infringed on, misappropriated, or
otherwise conflicted with and are not now infringing on, misappropriating or
otherwise conflicting with any patent or other intellectual property right
belonging to any person;
(c) the Acquired Companies are not party to any license agreement or
arrangement, whether as licensee, licensor or otherwise, with respect to any
patent, application for patent, invention, design, model, process, trade secret
or formula not set forth in Schedule 4.13; and
15
(d) the Acquired Companies have the right and authority to use all patents,
applications for patents, inventions, trade secrets, processes, models, designs,
formulas and other intellectual property rights as are necessary to enable them
to conduct and to continue to conduct all phases of the Business in the manner
presently conducted and such use does not and will not conflict with, infringe
on or misappropriate any patent or other rights of any person.
4.14 Litigation. Except as set forth in Schedule 4.14 (which shall disclose
the parties to, nature of, and relief sought for each matter to be disclosed on
Schedule 4.14) or other Schedule to this Agreement:
(a) There is no suit, action, proceeding, investigation, claim
or order pending or, to the Knowledge of the Sellers, overtly
threatened against the Acquired Companies with respect to the Business
or proposed business activities or to which the Acquired Companies are
otherwise a party, or which individually or in the aggregate could have
a materially adverse effect on either the Acquired Companies, their
assets, or the Business, before any court or before any Governmental
Authority (collectively, "Claims"); nor, to the Sellers' Knowledge, is
there any basis for any such Claims.
(b) The Acquired Companies are not subject to any judgment,
order, or decree of any court or Governmental Authority. The Acquired
Companies have not received any opinion or memorandum from legal
counsel to the effect that they are exposed, from a legal standpoint,
to any liability or disadvantage which may be material to the Business.
Except as disclosed in Schedule 4.14, the Acquired Companies are not
engaged in any legal action to recover money due them or for damages
sustained by them.
(c) To the Knowledge of Sellers and the Acquired Companies,
the Acquired Companies have given all required notice of such Claims to
the appropriate insurance carrier(s) and/or all such Claims have in the
judgment of the Acquired Companies' Chief Financial Officer, been fully
reserved for on the financial statements of the Acquired Companies,
taking into account preliminary GAAP adjustments, as delivered to
Fortress pursuant to the terms of this Agreement. Schedule 4.14 lists
the insurer for each Claim covered by insurance or designates each
Claim, or portion of each Claim, as uninsured and the individual and
aggregate policy limits for the insurance covering each insured Claim
and the applicable policy deductibles for each insured Claim.
(d) Schedule 4.14 sets forth all closed litigation matters
(other than workers compensation claims) to which the Acquired
Companies were a party during the three years preceding the Closing
that involved a judgment in excess of $100,000, the date such
litigation was commenced and concluded, and the nature of the
resolution thereof (including amounts paid in settlement or judgment).
16
4.15 Compliance with Applicable Laws. To the Knowledge of Sellers and the
Acquired Companies, except as set forth on Schedule 4.15, the Acquired Companies
have complied in all material respects with all laws, rules, regulations, writs,
injunctions, decrees, and orders applicable to it or to the operation of the
Business (collectively, "Laws") and have not received any notice of any alleged
claim or threatened claim, violation of, liability or potential responsibility
under, any such Law which has not heretofore been cured and for which there is
no remaining liability other than those not having a material adverse effect on
the Business taken as a whole.
4.16 Employee Benefits.
(a) As used in this Section 4.16, the following terms have the meanings set
forth below:
"Company Other Benefit Obligation" means an Other Benefit Obligation owed,
adopted, or followed by the Acquired Companies or an ERISA Affiliate of the
Acquired Companies.
"Company Plan" means all Plans of which the Acquired Companies or an ERISA
Affiliate of the Acquired Companies is or was a Plan Sponsor, or to which the
Acquired Companies or an ERISA Affiliate of the Acquired Companies otherwise
contributes or has contributed, or in which the Acquired Companies or an ERISA
Affiliate of the Acquired Companies otherwise participates or has participated.
All references to Plans are to Company Plans unless the context requires
otherwise.
"Company VEBA" means a VEBA whose members include employees of the Acquired
Companies or any ERISA Affiliate of the Acquired Companies.
"ERISA Affiliate" means, with respect to the Acquired Companies, any other
person that, together with the Company, would be treated as a single employer
under IRC ss. 414.
"Multi-Employer Plan" has the meaning given in ERISA ss. 3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, or agents, other than obligations, arrangements, and
practices that are Plans. Other Benefit Obligations include consulting
agreements under which the compensation paid does not depend upon the amount of
service rendered sabbatical policies, severance payment policies, and fringe
benefits within the meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Pension Plan" has the meaning given in ERISA ss. 3(2)(A).
"Plan" has the meaning given in ERISA ss. 3(3).
"Plan Sponsor" has the meaning given in ERISA ss. 3(16)(B).
17
"Qualified Plan" means any Plan that meets or purports to meet the
requirements or IRC ss.401(a).
"Title IV Plans" means all Pension Plans that are subject to Title IV of
ERISA, 29 U.S.C. 1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC ss.
501 (c)(9).
"Welfare Plan" has the meaning given in ERISA ss. 3(l).
(b)(i) Schedule 4.16-1 contains a complete and accurate list of all Company
Plans, Company Other Benefit Obligations, and Company VEBAS, and identifies as
such all Company Plans that are (A) defined benefit Pension Plans, (B) Qualified
Plans, (C) Title IV Plans, or (D) Multi-Employer Plans.
(ii) Schedule 4.16-2 contains a complete and accurate list of
(A) all ERISA Affiliates of the Acquired Companies, and (B) all Plans
of which any such ERISA Affiliate is or was a Plan Sponsor, in which
any such ERISA Affiliate participates or has participated, or to which
any such ERISA Affiliate contributes or has contributed.
(iii) Schedule 4.16-3 identifies that for each Multi-Employer
Plan there may be potential withdrawal liability for the Acquired
Companies and the Acquired Companies' other ERISA Affiliates.
(iv) Schedule 4.16-4 sets forth a calculation of the liability
of the Acquired Companies for post-retirement benefits other than
pensions, made in accordance with Financial Accounting Statement 106 of
the Financial Accounting Standards Board, regardless of whether any
Acquired Companies is required by this Statement to disclose such
information.
(v) Schedule 4.16-5 sets forth the financial cost of all
obligations owed under any Company Plan or Company Other Benefit
Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
(c) Sellers have made available to Purchaser, or will make available to
Purchaser within ten days of the date of this Agreement all of the following
documents relating to Company Plans which are not Multi-Employer Plans. With
respect to the Multi-Employer Plans, Sellers have made available or will make
available to Purchaser only such documents as Sellers have in their possession:
(i) all documents that set forth the terms of each Company
Plan, Company Other Benefit Obligation, or Company VEBA and of any
related trust, including (A) all plan descriptions and summary plan
descriptions of Company Plans for which Sellers or the Acquired
Companies are required to prepare, file, and distribute plan
descriptions and summary plan descriptions, and (B) all summaries and
descriptions furnished to participants and beneficiaries regarding
Company Plans, Company Other Benefit Obligations, and Company VEBAs for
which a plan description or summary plan description is not required;
18
(ii) all personnel, payroll, and employment manuals and
policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including both
pension and welfare benefits) by the Acquired Companies and the ERISA
Affiliates of the Acquired Companies, and all collective bargaining
agreements pursuant to which contributions are being made or
obligations are owed by such entities;
(iv) a written description of any Company Plan or Company
Other Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any
Company Plan;
(vi) all insurance policies purchased by or to provide
benefits under any Company Plan,
(vii) all contracts with third party administrators,
actuaries, investment managers, consultants, and other independent
contractors that relate to any Company Plan, Company Other Benefit
Obligation, or Company VEBA;
(viii) all reports submitted within the four years preceding
the date of this Agreement by third party administrators, actuaries,
investment managers, consultants, or other independent contractors with
respect to any Company Plan, Company Other Benefit Obligation, or
Company VEBA;
(ix) all notifications to employees of their rights under
ERISA ss. 601 et seq. and IRC ss. 498OB;
(x) the Form 5500 filed in each of the most recent three plan
years with respect to each Company Plan, including all schedules
thereto;
(xi) all notices that were given by any Acquired Companies or
any ERISA Affiliate of an Acquired Companies or any Company Plan to the
IRS, the PBGC, or any participant or beneficiary, pursuant to statute,
within the four years preceding the date of this Agreement, including
notices that are expressly mentioned elsewhere in this Section 4.16;
(xii) all notices that were given by the IRS, the PBGC, or the
Department of Labor to any Acquired Companies, any ERISA Affiliate of
the Acquired Companies, or any Company Plan within the four years
preceding the date of this Agreement;
19
(xiii) with respect to Qualified Plans and VEBAS, the most
recent determination letter for each Plan of the Acquired Companies
that is a Qualified Plan; and
(xiv) with respect to Title IV Plans, the Form PBGC-1 filed
for each of the three most recent plan years.
(d) Except as set forth in Schedule 4.16-6:
(i) The Acquired Companies have performed all of its
obligations under all Company Plans, Company Other Benefit Obligations,
and Company VEBAS. The Acquired Companies have made appropriate entries
in their financial records and statements for all obligations and
liabilities under such Plans, VEBAS, and Obligations that have accrued
but are not due.
(ii) To the Knowledge of the Principals and the Acquired
Companies, no statement, either written or oral, has been made by the
Acquired Companies to any Person with regard to any Plan or Other
Benefit Obligation that was not in accordance with the Plan or Other
Benefit Obligation and that could have an adverse economic consequence
to the Acquired Companies or to Purchaser.
(iii) The Acquired Companies, with respect to all Company
Plans, Company Other Benefits Obligations, and Company VEBAS, are, and
each Company Plan, Company Other Benefit Obligation, and Company VEBA
is, in material compliance with ERISA, the IRC, and other applicable
Laws including the provisions of such Laws expressly mentioned in this
Section 4.16, and with any applicable collective bargaining agreement.
(A) No transaction prohibited by ERISA ss. 406 and no
"prohibited transaction" under IRC ss. 4975(c) have occurred
with respect to any Company Plan.
(B) No Seller or Acquired Companies has any liability
to the IRS with respect to any Plan, including any liability
imposed by Chapter 43 of the IRC.
(C) No Seller or Acquired Company has any liability
to the PBGC with respect to any Plan or has any liability
under ERISA ss. 502 or ss. 4071.
(D) All filings required by ERISA and the IRC as to
each Plan have been timely filed, and all notices and
disclosures to participants required by either ERISA or the
IRC have been timely provided.
(E) All contributions and payments made or accrued
with respect to all Company Plans, Company Other Benefit
Obligations, and Company VEBAs are deductible under IRC ss.
162 or ss. 404. No amount, or any asset of any Company Plan or
Company VEBA. is subject to tax as unrelated business taxable
income.
20
(iv) Each Company Plan can be terminated within thirty days
without payment of any additional contribution or amount, other than
accrued contributions.
(v) Since October 31, 1997 there has been no establishment or
amendment of any Company Plan, Company VEBA, or Company Other Benefit
Obligation.
(vi) No event has occurred or circumstance exists that could
result in a material increase in premium costs of Company Plans and
Company Other Benefit Obligations that are insured, or a material
increase in benefit costs of such Plans and Obligations that are self-
insured.
(vii) Other than claims for benefits submitted by participants
or beneficiaries, no claim against, or legal proceeding involving, any
Company Plan, Company Other Benefit Obligation, or Company VEBA is
pending or, to Sellers' Knowledge, is Threatened.
(viii) No Company Plan is a stock bonus, pension, or
profit-sharing plan within the meaning of IRC ss. 401(a).
(ix) Each Qualified Plan of each Acquired Companies is
qualified in form and operation under IRC ss. 401(a); each trust for
each such Plan is exempt from federal income tax under IRC ss. 501 (a).
Each Company VEBA is exempt from federal income tax. No event has
occurred or circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Plan or
trust.
(x) Each Acquired Company and each ERISA Affiliate of the
Acquired Companies has met the minimum funding standard, and has made
all contributions required, under ERISA ss. 302 and IRC ss. 402.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) The Acquired Companies have paid all amounts due to the
PBGC pursuant to ERISA ss. 4007.
(xiii) No Acquired Company or any ERISA Affiliate of the
Acquired Companies has ceased operations at any facility or has
withdrawn from any Title IV Plan in a manner that would subject to any
entity or Sellers to liability under ERISA ss. 4062(e), ss. 4063, or
ss. 4064.
(xiv) Neither the Acquired Companies nor any ERISA Affiliate
of the Acquired Companies has filed a notice of intent to terminate any
Plan or has adopted any amendment to treat a Plan as terminated. The
PBGC has not instituted proceedings to treat any Company Plan as
terminated. No event has occurred or circumstance exists that may
constitute grounds under ERISA ss. 4042 for the termination of, or the
appointment of a trustee to administer, any Company Plan.
21
(xv) No amendment has been made, or is reasonably expected to
be made, to any Plan that has required or could require the provision
of security under ERISA ss. 307 or IRC ss. 401(a)(29).
(xvi) No accumulated funding deficiency, whether or not
waived, exists with respect to any Company Plan; no event has occurred
or circumstance exists that may result in an accumulated funding
deficiency as of the last day of the current plan year of any such
Plan.
(xvii) The actuarial report for each defined benefit Pension
Plan of each Acquired Company and each ERISA Affiliate of each Acquired
Companies fairly presents the financial condition and the results of
operations of each such Plan in accordance with GAAP.
(xviii) Since the last valuation date for each Pension Plan of
each Acquired Company and each ERISA Affiliate of the Acquired
Companies, no event has occurred or circumstance exists that would
increase the amount of benefits under any such Plan or that would cause
the excess of Plan assets over benefit liabilities (as defined in ERISA
ss. 4001) to decrease, or the amount by which benefit liabilities
exceed assets to increase.
(xiv) No reportable event (as defined in ERISAss.4043
and in regulations issued thereunder) has occurred.
(xx) No Seller or any Acquired Company has Knowledge of any
facts or circumstances that may give rise to any liability of any
Seller, any Acquired Companies, or Purchaser to the PBGC under Title IV
of ERISA.
(xxi) No Acquired Company or any ERISA Affiliate of the
Acquired Companies has ever established, maintained, or contributed to
or otherwise participated in, or had an obligation to maintain,
contribute to, or otherwise participate in, any Multi-Employer Plan.
(xxii) No Acquired Company or any ERISA Affiliate of the
Acquired Companies has withdrawn from any Multi-Employer Plan with
respect to which there is any outstanding liability as of the date of
this Agreement. No event has occurred or circumstance exists that
presents a risk of the occurrence of any withdrawal from any
Multi-Employer Plan that could result in any liability of either any
Acquired Companies or Purchaser to a Multi-Employer Plan.
(xxiii) Neither the Acquired Companies nor any ERISA Affiliate
of the Acquired Companies have received notice from any Multi-Employer
Plan that it is in reorganization or is insolvent, that increased
contributions may be required to avoid a reduction in plan benefits or
the imposition of any excise tax, or that such Plan intends to
terminate or has terminated.
22
(xxiv) Neither the Acquired Company nor any ERISA Affiliate
has received any notice from any Multi-Employer Plan to which the
Acquired Companies or any ERISA Affiliate of the Acquired Companies
contribute or has contributed that such Plan is a party to any pending
merger or asset or liability transfer or is subject to any proceeding
brought by the PBGC.
(xxv) Except to the extent required under ERISA ss. 601 et
seq. and IRC ss. 4980B, no Acquired Company provides health or welfare
benefits for any retired or former employee or is obligated to provide
health or welfare benefits to any active employee following such
employee's retirement or other termination of service.
(xxvi) The Acquired Companies have the right to modify and
terminate benefits to retirees (other than pensions) with respect to
both retired and active employees.
(xxvii) Sellers and the Acquired Companies have complied with
the provisions of ERISA ss. 601 et seq. and IRC ss. 4980B.
(xxviii) No payment that is owed or may become due to any
director, officer, employee, or agent of the Acquired Companies will be
non-deductible to the Acquired Companies or subject to tax under IRC
ss. 28OG or ss. 4999; nor will the Acquired Companies be required to
"gross up" or otherwise compensate any such person because of the
imposition of any excise tax on a payment to such person.
(xxiv) The consummation of the Contemplated Transactions will
not result in the payment, vesting, or acceleration of any benefit.
4.17 Insurance Policies.
(a) The Acquired Companies have made available to Fortress:
(i) true and complete copies of all policies of
insurance to which the Acquired Companies are a party or any
director of an Acquired Company is or has been covered at any
time within two years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of the Acquired
Companies' financial statements with regard to the adequacy of
such entity's coverage or of the reserves for claims.
(b) Schedule 4.17(b) sets forth, by year, for the current policy year and
each of the preceding two policy years:
23
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $50,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim;
and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost
of such claims.
4.18 Environment.
(a) Except as set forth in Schedule 4.18,
(i) to its Knowledge, each Acquired Company is and at all
times has been in material compliance with, and has not been and is not
in material violation of or materially liable under, all Environmental
Requirements, and
(ii) each Acquired Company possesses all required permits,
licenses and certificates, and have filed all notices or application
required thereby.
As used herein, "Environmental Requirements" shall mean all applicable
federal, state and local laws, rules, regulations, ordinances and requirements
relating to pollution and protection of the environment, all as amended or
hereafter amended.
(b) Except as disclosed in Schedule 4.18,
(i) No Acquired Company has been subject to or received any
notice of any private, administrative or judicial action or notice of
any intended private, administrative, or judicial action relating to
the presence or alleged presence of Hazardous Materials in, under, or
upon any real estate currently or formerly owned, leased or used by (A)
the Acquired Company, or (B) any other person that has at any time
disposed of Hazardous Materials on behalf of an Acquired Company; and
(ii) to its respective Knowledge, no Acquired Company has any
basis for any such notice or action; and,
(iii) there are no pending or, to the Knowledge of Sellers,
threatened actions or proceedings (or notice of potential actions or
proceedings) from any Governmental Authority or any other entity
regarding any matter relating to health or protection of the
environment.
24
"Hazardous Materials" for purposes of this Agreement shall include, without
limitation: (A) hazardous materials, hazardous substances, extremely hazardous
substances or hazardous wastes, as those terms are defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.9601 et
seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. ss.6901
et seq. ("RCRA"), and any other Environmental Requirements; (B) petroleum,
including, without limitation, crude oil or any fraction thereof which is liquid
at standard conditions of temperature and pressure (60 degrees Fahrenheit and
14.7 pounds per square inch absolute); (C) any radioactive material, including,
without limitation, any source, special nuclear, or by-product material as
defined in 42 U.S.C. ss.2011 et seq.; and (D) asbestos in any form or condition.
(c) To the Knowledge of the Sellers and the Acquired Companies, there are
and have been no past or present events, conditions, circumstances, activities,
practices, incidents, or actions which could reasonably be expected to interfere
with or prevent continued compliance with any Environmental Requirements, give
rise to any legal obligation or liability, or otherwise form the basis of any
claim, action, suit, proceeding, hearing or investigation against or involving
the Acquired Companies or any real estate presently or previously owned or used
by the Acquired Companies under any of the Environmental Requirements or related
common law theories, except as identified in Schedule 4.18.
(d) To Sellers' Knowledge, Schedule 4.18 sets forth the name and principal
place of business of every off-site waste disposal organization, and each of the
haulers, transporters or cartage organization engaged now or in the preceding
three years by the Business to dispose of Hazardous Materials to any such
off-site waste disposal location on behalf of the Acquired Companies.
4.19 Compensation: Employment Agreements. The Acquired Companies have
delivered to Fortress an accurate schedule (Schedule 4.19) showing (i) all
current officers, directors and key employees of the Acquired Companies in the
Business, and the rate of compensation (and the portions thereof attributable to
salary, bonus and other compensation, respectively) of each of such persons as
of December 31, 1996 and the date hereof and (ii) separately listing all
employment agreements with such officers, directors and key employees. The
Acquired Companies have provided to Fortress true, complete and correct copies
of any employment agreements for persons listed on Schedule 4.19.
4.20 Labor Matters. To its Knowledge, except as set forth in Schedule 4.20,
within the last three years the Acquired Companies have not experienced any
strike, picketing, boycott, work stoppage or slowdown, other labor dispute,
union organizational activity, allegation, charge or complaint of unfair labor
practice or employment discrimination. To Sellers' Knowledge no allegation,
charge or complaint of unfair labor practice or employment discrimination is
threatened, and to Sellers' Knowledge there is no basis for any such allegation,
charge, or complaint. The Acquired Companies have complied in all material
respects with all applicable laws relating to the employment of labor, including
provisions thereof relating to wages, hours, equal opportunity, collective
bargaining, and the payment of social security and other taxes. The Acquired
Companies are not liable for any arrears of wages or any taxes or penalties for
failure to comply with any such laws, ordinances or regulations.
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4.21 Representation as to Ownership of Shares. The Principals represent and
warrant to Purchaser that the following statements are, as of the date hereof
(giving effect to the termination of the Voting Trusts) and will be as of the
Closing date, true and correct:
(a) Ownership of Shares and Interests. Except as set forth in
Schedule 4.21(a) hereof, each Principal owns of record and beneficially
the number of Shares of the Acquired Companies indicated opposite
Seller's name in Schedule 4.21(a) hereto, with full right and authority
to sell such Shares hereunder, and upon delivery of such Shares
hereunder, the Purchaser will receive good title thereto, free and
clear of all liens, mortgages, pledges or security interests or the
rights of any third person and not subject to any agreements or
understandings among any persons with respect to the voting or transfer
of such Shares, other than those arising under agreements to which the
Purchaser is a party.
(b) Execution, Delivery and Enforceability of Agreement;
Violation. This Agreement has been duly executed and delivered by or on
behalf of Principals and at the Closing any other documents required
hereunder to be executed and delivered by or on behalf of Principals
will have been duly executed and delivered. This Agreement constitutes
the legal, valid and binding obligation of Principals, enforceable
against each Principal in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws
affecting creditors' rights generally and the application of equitable
principles. Any other agreements required hereto to be executed and
delivered by the Principals at Closing will constitute the legal, valid
and binding agreements of the Principals executing the same,
enforceable against such Principal in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws
affecting creditors' rights generally and the application of equitable
principles. Neither the execution of this Agreement nor the
consummation of the transactions provided for herein by the Principals
will violate or constitute a default under, or permit the acceleration
or maturity of, except to the extent waived, the Acquired Companies'
organizational documents or any indentures, mortgages, promissory
notes, contracts or agreements to which Principals are a party or by
which such Principals' properties are bound.
(c) Residence and Domicile; Bankruptcy. The Principals are
residents of, and domiciled in, the state of Missouri. No bankruptcy,
insolvency, or receivership proceedings have been instituted or are
pending against Principals, and Principals are able to satisfy his
respective liabilities as they become due.
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4.22 Misrepresentation. None of the representations and warranties set
forth in this Agreement or in any of the certificates, schedules, exhibits,
lists, documents, exhibits, or other instruments delivered, or to be delivered,
by the Sellers as contemplated by any provision hereof, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FORTRESS
Fortress represents and warrants that the representations and warranties
set forth below are true and correct as of the date of this Agreement and shall
be true and correct at the time of Closing and that such representations and
warranties as made at the time of Closing shall survive the Closing.
5.1 Organization. Fortress is and at Closing each Purchaser Subsidiary will
be duly organized, validly existing, and in good standing under the laws of the
state of Delaware.
5.2 Authorization. Fortress and at Closing each Purchaser Subsidiary has
full power, right and authority to execute and deliver this Agreement and to
perform their respective obligations hereunder and thereunder. The execution and
delivery of this Agreement by Fortress and the performance of the obligations
under this Agreement have been duly and properly authorized by all requisite
corporate action in accordance with applicable law and with the Certificate of
Incorporation and by-laws of each. This Agreement is valid and binding upon
Fortress in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights generally.
5.3 Transaction Not a Breach. Neither the execution and delivery of this
Agreement, nor its performance will violate, conflict with, or result in a
breach of any provision of any Law, rule, regulation, order, permit, judgment,
injunction, decree or other decision of any court or other tribunal or any
Governmental Authority binding on or conflict with or result in the breach of
any of the terms, conditions or provisions of the Certificate of Incorporation
or the By-laws of Fortress or any Purchaser Subsidiary or of any contract,
agreement, mortgage or other instrument or obligation of any nature to which
either is a party or by which either is bound.
5.4 Misrepresentation. None of the representations and warranties set forth
in this Agreement or in any of the certificates, schedules, exhibits, lists,
documents, exhibits, or other instruments delivered, or to be delivered, to the
Sellers as contemplated by any provision hereof, contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
5.5 Economic Risk: Sophistication. Fortress is able to bear the economic
risk of an investment in the Acquired Companies' capital stock exchanged
pursuant to this Agreement and can afford to sustain a total loss of such
investment and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment in the Acquired Companies' common stock. Fortress or its purchaser
representative has had an adequate opportunity to ask questions and receive
answers from the officers of the Acquired Companies concerning any and all
matters relating to the background and experience of the current and proposed
officers and directors of the Acquired Companies, the business, operations and
financial condition of it. Fortress or its purchaser representative has asked
any and all questions in the nature described in the preceding sentence and all
questions have been answered to its satisfaction. Fortress represents that after
taking into consideration the information and advice provided herein it has the
requisite knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of this investment and is an
"accredited investor" as defined in Regulation D of the Securities Act of 1933,
as amended (the "Securities Act").
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ARTICLE VI
COVENANTS PRIOR TO CLOSING
6.1 Access and Cooperation; Due Diligence. Between the date of this
Agreement and the Closing, Sellers will afford to the officers and authorized
representatives of Fortress reasonable access to all of the Acquired Companies'
sites, properties, books and records during normal business hours and with prior
notice and will furnish Fortress with such additional financial and operating
data and other information as to the business and properties of each Acquired
Company as Fortress may from time to time reasonably request. Sellers will
cooperate with Fortress, its representatives, engineers, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. Fortress
and Sellers will treat with strict confidence all information obtained in
connection with the negotiation and performance of this Agreement. In the event
this transaction does not close, at Sellers' request Fortress will provide them
with copies of all analyses and information provided to Fortress that Fortress
made of the Acquired Companies and the Business, conditioned upon receipt of a
full and total release by all Sellers from liability for or related to any and
all statements, conclusions, assessments, opinions, or projections made by
Fortress in the analyses.
6.2 Business Conduct. From the date hereof through the date of Closing,
except as otherwise provided for in, or contemplated by, this Agreement, the
Acquired Companies covenant and agree that:
(a) Each Acquired Company will operate the Business in the
Ordinary Course in substantially the same manner as it is presently
operated.
(b) Except in the Ordinary Course of Business or as required
by Law or contractual obligations or other understandings or
arrangements existing on the date hereof, the Acquired Companies will
not (i) increase in any manner the base compensation of, or enter into
any new bonus or incentive agreement or arrangement with any of the
employees at the Business; (ii) pay or agree to pay any additional
pension, retirement allowance or other employee benefit to any such
employee, whether past or present, (iii) enter into any new employment,
severance, consulting, or other compensation agreement with any
existing employee of the Business, or (iv) engage in any Affiliate
Transaction, except in the Ordinary Course of Business. Purchaser
acknowledges that the Acquired Companies historically have given pay
increases to its employees and that the granting of pay increases
between the date of this Agreement and Closing, consistent with past
practices and the financial projections submitted to Purchaser as part
of the negotiations of this transaction, will not constitute a breach
of this Section 6.2(b).
(c) Subject to the terms and conditions of this Agreement, the
Acquired Companies will use their reasonable efforts to keep available
the services of its present employees of the Business, and preserve the
goodwill, reputation and present relationships of the Business with its
suppliers, customers, and others having business relations with the
Business.
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(d) The Acquired Companies will (i) use their reasonable
efforts to maintain and keep in full force existing insurance, (ii)
maintain the Acquired Companies' records in the Ordinary Course of
Business, and (iii) perform and comply in all material respects with
their respective obligations under all Material Contracts.
(e) Except in the Ordinary Course of Business or as otherwise
provided for in, or contemplated by this Agreement, no Acquired Company
will (i) sell, lease, transfer or otherwise dispose of any of the
Assets of the Business, (ii) enter into any joint venture, partnership
or other similar arrangement or form any other new arrangement for the
operation of the assets of the Business, or (iii) accelerate or delay
the sale or construction of any inventory in a manner inconsistent with
past practices.
(f) The parties will use their reasonable efforts between the
date hereof and the Closing to secure fulfillment of all of the
conditions precedent to each party's respective obligations hereunder.
(g) No party to this Agreement shall undertake any action or
fail to take any action that will result in a breach of the
representations and warranties set forth in Articles IV hereof as made
again as of the Closing.
(h) Each Acquired Company will comply with all material Laws.
(i) It is acknowledged and contemplated by the parties that
after the signing of this Agreement and up to the Closing Date the
Acquired Companies will (x) Make or declare dividends or other
distributions with respect to the stock of the Acquired Companies to
their shareholders in an amount approximately equal to the combined net
worth of the Acquired Companies based upon their balance sheets as of
December 31, 1997, with preliminary GAAP adjustments, (y) will Issue
notes to each of the Principals to pay off personal loans, including
accrued interest, made to the Acquired Companies by the Principals, and
(z) will make or declare a dividend just prior to Closing of the
estimated increase of Net Worth in the Company as a result of income
realized for the period of time between December 31, 1997 and the
Closing date (the "Pre-Closing Distributions"). Schedule 6.2(i) lists
assets that will be sold to Xxxxxx X. Xxxxxxxxx, Xx., or one or more of
the Principals and the price for which these assets will be
transferred. Fortress covenants that at the Closing, it will fund to
Xxxxxxxxx Construction, Incorporated any Cash ShortFall, as defined
herein. For purposes of this Section 6.2(i), "Cash Short-Fall" shall be
the difference between a and b where "a" is the sum of (y) the Acquired
Companies' combined net worth as of December 31, 1997 (after
subtracting in-kind distributions) and (z) the outstanding loan
balances (including accrued interest) on the Acquired Companies' books
personally owing to the Principals and "b" is the Acquired Companies'
Available Cash. For purposes of this Section 6.2(i), "Available Cash"
shall mean the Acquired Companies' total cash on hand less a reasonable
amount reserved for working capital which shall not be less than
$2,000,000, not including funds set aside as xxxxxxx money but shall
include workers compensation money market funds. As of Closing or
immediately following Closing Fortress shall invest sufficient capital
in the Acquired Companies in the form of equity to enable the Acquired
Companies to meet minimum net worth requirements and leverage ratios
of, for, or on obligations to which the Acquired Companies are indebted
as well as additional funds for working capital on an as needed basis.
It is understood that such capital shall not be taken into account in
determining the Net Worth of the Acquired Companies for purposes of
Section 2.2.
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6.3 Non-Negotiation. In consideration of the substantial expenditure of
time, effort and expense undertaken by Fortress in connection with its due
diligence review and the preparation and execution of this Agreement, the
Sellers agree that neither they nor their representatives, agents or employees
will, after the execution of this Agreement until the earlier of (i) the
termination of this Agreement, (ii) the Closing, or (iii) March 6, 1998,
directly or indirectly, solicit, encourage, negotiate or discuss with any third
party (including by way of furnishing any information concerning the Acquired
Companies) any acquisition proposal relating to or affecting the Acquired
Companies, or any direct or indirect interests in the Acquired Companies ,
whether by purchase of assets or stock, purchase of interest, merger or other
transaction ("Acquisition Transaction"), and that Sellers will promptly advise
Fortress of the terms of any communications Principals or the Acquired Companies
may receive or become aware of relating to any bid for all or any part of the
Assets of the Business.
6.4 Schedules. Notwithstanding language that implies otherwise, as of the
execution of this Agreement, most Schedules referred to in this Agreement have
not been delivered to the other party and have not yet been attached to the
Agreement. The Schedules will be provided within a reasonable time from the date
hereof and in all events prior to Closing. Each party hereto agrees that with
respect to the material representations and material warranties of such party
contained in this Agreement, such party shall have the continuing obligation
until the Closing timely to supplement or amend promptly all the schedules to
this Agreement (the "Schedules"), to correct any matter which would constitute a
material breach of any such party's representations and warranties herein, or to
reflect any change in the information disclosed therein. For all purposes of
this Agreement, including without limitation for purposes of determining whether
the conditions set forth in Sections 7.1 and 7.2 have been fulfilled, the
Schedules hereto shall be deemed to be the Schedules as amended or supplemented
pursuant to this Section 6.4.
6.5 Wire Instructions. Sellers shall provide in writing at least one (1)
business day prior to the Closing the wire instructions for wiring cash pursuant
to Section 2.1 to the account or accounts of the bank specified by Sellers.
6.6 Fortress' Covenants. Fortress will use its best efforts between the
date hereof and the Closing to secure fulfillment of all of the conditions
precedent to each party's respective obligations hereunder. It will not
undertake any action or fail to take any action that will result in a breach of
the representations and warranties set forth in Articles V hereof as made again
as of the Closing.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Purchaser. The obligations of
Purchaser under this Agreement to consummate the transactions contemplated
hereby will be subject to the satisfaction, at or prior to the Closing, of all
of the following conditions, any one or more of which may be waived at the
option of Fortress:
(a) No Breach of Covenants; True and Correct Representations
and Warranties. There shall have been no material breach by Sellers in
the performance of any of their covenants herein to be performed by
them in whole or in part prior to Closing, and the representations and
warranties of Sellers contained in this Agreement shall be true and
correct in all material respects as of the Closing, except for
representations or warranties that are made by their terms as of a
specified date, which shall be true and correct in all material
respects as of the specified date. Purchaser shall receive at the
Closing a certificate dated and validly executed on behalf of each
Company by an executive officer certifying, substantially in the form
of Exhibit B attached hereto, the fulfillment of the foregoing
conditions, and restating and reconfirming as of the Closing all of the
representations and warranties of the Acquired Companies contained in
this Agreement.
(b) Delivery of Documents. Purchaser shall have received all
documents and other items to be delivered under section (a) of the
Deliveries checklist (Exhibit A).
(c) No Legal Obstruction. The Consents required for Purchaser
to conduct the Business in the Ordinary Course after the Closing shall
have been given or obtained, as the case may be. No suit, action or
proceeding by any person or Governmental Authority shall be pending or
threatened in writing, which if determined adverse to the Acquired
Companies' interest, could have a material adverse effect upon (i) the
Acquired Companies or the Business, (ii) Purchaser, or (iii) the
benefits to Purchaser of the transactions contemplated hereby. No
injunction, restraining order or order of any nature shall have been
issued by or be pending before any court of competent jurisdiction or
any Governmental Authority challenging the validity or legality of the
transactions contemplated hereby or restraining or prohibiting the
consummation of such transactions or compelling Purchaser to dispose of
or discontinue or materially restrict the operations of a significant
portion of the Business or of the Business conducted by Purchaser as a
result of the consummation of the transactions contemplated hereby.
(d) Office Lease. Xxxxxx Xxxxxxxxx, Xx.has executed
a written lease with Xxxxxxxxx Construction for its offices as
set forth in Exhibit C.
(e) Employment Agreement. Employment Agreements have been
executed with Xxxxxxx Xxxxxxxxx and Xxxxxx X. Xxxxxxxxxxx, attached
hereto as Exhibit D-1 and D-2.
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(f) Consulting Agreement. A Consulting Agreement has been
executed with Xxxxxx X. Xxxxxxxxx, Xx., attached hereto as Exhibit E.
(g) Xxxxxxx Xxxxxxxxx and Xxxxxx X. Xxxxxxxxx, Xx. have
entered into a Right of First Refusal as set forth in Exhibits F-1 and
F-2.
(h) The joint ventures of Whitmoor and Bluffs have agreed in
writing to provide to the management of the Acquired Companies club
memberships, greens fees and cart privileges, and preferred tee times
on terms satisfactory to Fortress.
(i) At Closing Xxxx Xxxx acquires 5,000 shares of newly
authorized preferred stock of Fortress, $100.00 per share liquidation
value, having terms substantially conforming to the terms summarized in
Exhibit I and he has executed a promissory notes containing terms and
conditions summarized in Exhibit J.
7.2 Conditions Precedent to Obligations of Principals. The obligations of
the Sellers under this Agreement to consummate the transactions contemplated
hereby will be subject to the satisfaction, at or prior to the Closing, of all
the following conditions, any one or more of which may be waived at the option
of the Sellers:
(a) Xxxxxxx Money Timely Deposited. Purchaser has deposited a
total of $1,000,000 xxxxxxx money pursuant to Section 2.1(a)(i),
$500,000 by January 5, 1998 and an additional $500,000 by 5:00 p.m.,
February 27, 1998.
(b) No Breach of Covenants; True and Correct Representations
and Warranties. There shall have been no material breach by Fortress in
the performance of any of the covenants herein to be performed by them
in whole or in part prior to the Closing, and the representations and
warranties of Fortress contained in this Agreement shall be true and
correct in all material respects as of the Closing, except for
representations or warranties that are made by their terms as of a
specified date, which shall be true and correct in all material
respects as of the specified date. The Sellers shall receive at Closing
a certificate dated as of the Closing and executed by an executive
officer on behalf of Fortress certifying, substantially in the form of
Exhibit B attached hereto, the fulfillment of the foregoing conditions,
and restating and reconfirming as of Closing all of the representations
and warranties of Fortress contained in this Agreement.
(c) Delivery of Documents. The Sellers shall have received all
documents and other items to be delivered by Purchaser under Section
(b) of the Deliveries Check List (Exhibit A).
(d) No Legal Obstruction. The conditions of Section 7.1(c)
have been met.
32
(e) Release of Personal Guarantees. Working with Sellers,
Fortress will have secured Releases from all obligations personally
guaranteed by Xxxxxx X. Xxxxxxxxx, Xx., Xxxxxxx X. Xxxxxxxxx, Xxxxxx X.
Xxxxxxxxx, Xx., Xxxxxxx X. Xxxxxxxxx, Xxxxx Xxxxxxxxx, and their
respective spouses or any of them ("Guaranteed Obligations") identified
on Schedule 7.2(d) as personally guaranteed. "Releases" shall mean an
absolute, unconditional and complete release of Xxxxxx X. Xxxxxxxxx,
Xx., Xxxxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxxxxx, Xx., Xxxxxxx X.
Xxxxxxxxx, Xxxxx Xxxxxxxxx, and their respective spouses from any
liability, obligation or lien and obligation to supply or pledge
collateral related to the Guaranteed Obligations.
(f) Employment Agreement. Exhibits D-1 and D-2 have been
executed.
(g) Consulting Agreement. Exhibit E has been executed.
(h) Xxxxxxx Xxxxxxxxx and Xxxxxx X. Xxxxxxxxx, Xx. have
entered into a Right of First Refusal as set forth in Exhibits F-1 and
F-2.
(i) Fortress has loaned $500,000 to Xxxx Xxxx for the purpose
of providing the cash for him to acquire 5,000 shares of preferred
stock of Fortress with terms summarized in Exhibit I.
ARTICLE VIII
OTHER AGREEMENTS
8.1 Post Closing Covenants Relating to Loyalty, Non-Solicitation, Covenant
Not to Compete, Covenant not to Discuss, and Confidentiality.
(a) Each Principal hereby agrees that from the date of Closing through
December 31, 2001 (the "Restrictive Period"), he or she shall not without the
approval of Fortress, for any reason whatsoever, directly or indirectly, for
himself or herself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature
engage, as an officer, director, shareholder, owner, partner, joint venturer, or
in a managerial capacity, whether as an Principal, independent contractor,
consultant or advisor, or as a sales representative, in any business which
constructs or sells single-family residential homes, townhouses, villas, or
condominium units or single-family residential homes or units adjacent to, part
of, or contiguous to golf courses in St. Xxxxxxx County, Missouri and in those
counties identified in Section 1 of Exhibit G ("Territory").
Notwithstanding the above, the foregoing covenant (i) shall have no
application whatsoever with respect to the real estate described in Section 2 of
Exhibit G and (ii) shall not be deemed to prohibit a Principal from acquiring as
an investment not more than one (1%) percent of the capital stock of a competing
business whose stock is traded on a national securities exchange or over the
counter so long as the Principal does not consult with or is not employed by
such competitor.
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(b) The provisions of subsection 8.1(a) notwithstanding, neither this
Agreement nor any of the provisions and recitals contained therein shall
prohibit a Principal or his Affiliates from engaging, as an officer, director,
shareholder, owner, partner, joint venturer, or in a managerial capacity,
whether as an employee, independent contractor, consultant or advisor, or as a
sales representative, in any business which develops real estate for commercial
or industrial uses, including golf courses. It is understood between the parties
that the acquisition of raw, unimproved land and its improvement up to, but not
including the construction of a residential structure, is not prohibited under
this Section 8.
(c) The provisions of subsection 8.1(a) notwithstanding, Xxxxxxx Xxxxxxxxx
may personally supervise and have Xxxxxxxxx Construction build one home designed
and intended for use as his personal residence, provided the sales price to
Xxxxxxx Xxxxxxxxx is at least equal to Xxxxxxxxx Construction's cost of goods
sold for the house and lot, plus 10%.
(d) Other than in the performance of his duties as an employee or
consultant, as the case may be, of the Acquired Companies, during the
Restrictive Period, each Principal shall not, directly or indirectly, as seller,
agent, consultant, stockholder, director, co-partner or in any other individual
or representative capacity solicit or encourage any present or future customer,
supplier or other third party to terminate or otherwise alter his, her or its
relationship with the Acquired Companies with respect to the Business engaged in
by the Acquired Companies.
(e) Other than in the performance of his duties as an employee for the
Acquired Companies during the Restrictive Period and thereafter, each Principal
shall keep secret and retain in strictest confidence, and shall not, without the
prior written consent of Fortress, furnish, make available or disclose to any
third party or use for the benefit of himself or any third party, any
Confidential Information. As used in this Agreement, "Confidential Information"
shall mean any information relating to the business or affairs of Fortress, the
Acquired Companies and their respective subsidiaries, including, but not limited
to, information relating to financial statements, suppliers, construction,
manufacturing and servicing methods, equipment, programs, strategies and
information, analyses, profit margins, or other proprietary information used by
Fortress or any other subsidiary thereof in connection with the Business;
provided, however, that Confidential Information shall not include any
information which is in the public domain or becomes known in the industry
through no wrongful act on the part of the Principal. Each Principal
acknowledges that the Confidential Information is vital, sensitive, confidential
and proprietary to Fortress, the Acquired Companies and their respective
subsidiaries.
(f) If any court of competent jurisdiction shall at any time deem the term
of this Section 8.1 or any particular Restrictive Covenant (as defined) too
lengthy or the territory too extensive, the other provisions of this Section 8.1
shall nevertheless stand, the Restrictive Period herein shall be deemed to be
the longest period permissible by law under the circumstances and the territory
herein shall be deemed to comprise the largest territory permissible by law
under the circumstances. The court in each case shall reduce the time period
and/or territory to permissible duration or size.
34
(g) Each Principal acknowledges and agrees that the covenants set forth in
this Section 8.1 (collectively, the "Restrictive Covenants") are reasonable and
necessary for the protection of Fortress' business interests, that irreparable
injury will result to it if a Principal breaches any of the terms of said
Restrictive Covenants, and that in the event a Principal breaches or threatens
to breach any such Restrictive Covenants, Fortress will have no adequate remedy
at law. Principals accordingly agree that in the event a Principal breaches or
threatens to breach any of the Restrictive Covenants, Fortress shall be entitled
to immediate temporary injunctive and other equitable relief, without bond and
without the necessity of showing actual monetary damages, subject to hearing as
soon thereafter as possible. Nothing contained herein shall be construed as
prohibiting Fortress or a Purchaser Subsidiary from pursuing any other remedies
available to them for such breach or the threat of such a breach by a Principal,
including the recovery of any damages which it is able to prove.
(h) Covenant Not To Solicit Corporate Employees, Agents or Representatives.
During the Restrictive Period Principals shall not, directly or indirectly,
alone or in concert with others, on their own behalf or on behalf of others seek
to induce, solicit or attempt to solicit any of Fortress' employees, agents,
independent contractors or other personnel of Fortress or its affiliates, to
terminate his, her or their relationship with Fortress, or to violate any
employment agreement, or recruit or attempt to recruit such persons to accept
employment or contract with any company that competes with Fortress or another
business that would have the effect of terminating his, his or their
relationship with Fortress. For the purpose of this covenant "Fortress" shall
mean The Fortress Group, Inc., a Delaware corporation and all of its
subsidiaries and other owned entities, including the Acquired Companies.
(j) Covenant Not to Discuss and/or Comment. Each party recognizes and
acknowledges that the success of Fortress' business is largely dependent upon
and attributable to the goodwill that it has established with its customers,
business relations and contractors over a period of years and at great expense.
Therefore, each party agrees that he, she, or it will not, during the term of
this Agreement or at any time thereafter disparage The Principals, the Fortress
Group, Inc., the Acquired Companies, or any of their directors, officers,
shareholders, agents, employees, methods and techniques of doing business, their
business practices or their character, their financial information, financial
condition and/or their capabilities. For the purpose of this covenant "Fortress"
shall mean The Fortress Group, Inc., a Delaware corporation and all of its
subsidiaries and other owned entities, including the Acquired Companies.
(k) Disclosure and reasonableness of covenants.
(i) Principals expressly agree, if Fortress so
requests, to inform any and all potential employers,
principals, entities, contractors, co-shareholders or partners
of the existence of these restrictions. Principals further
consent to Fortress providing written notice to any third
parties, of the existence of a Principal's post-closing
obligations and that Fortress will enforce those obligations
and seek legal redress against any other party who assists a
Principal in interfering with the obligations owed to Fortress
by the Principal under any of these covenants contained in
this Section 8.1. Principals further agree that the covenants
as agreed to herein shall not be argued by them to a court of
law or to an arbitration panel as being overly broad in their
territorial, time and/or competitive related restrictions.
Once again, Principals acknowledges that Fortress' business in
material purchases, design, marketing, sale and repair of its
products has certain unique aspects associated with it.
35
(ii) Principals acknowledges that Fortress desires to
know, and by this Agreement is entitled to know, of all events
or circumstances that may potentially create a conflict of
interest during the Restrictive Period between a Principal and
his or her duties to Fortress provided for herein. If
requested in writing by Fortress, the Principal shall provide
it written notification of the following:
a. any part-time or full time employment
with any other entity other than Fortress of its
Affiliates;
b. any ownership interest in any entity or
business which:
1. is in competition with any
business of the Fortress or its
Affiliates;
2. is a customer of Fortress or its
Affiliates;
3. is a customer of any competitor
of Fortress or its Affiliates;
4. receives any services or
goods from the Fortress or its
Affiliates; or
5. receives any services or goods
from any competitor of Fortress or
its Affiliates.
c. Any filing, declaration or determination
of personal bankruptcy or insolvency, or any other
significant or material event which may materially
impose a Principal's ability to meet debt obligations
as they come due.
8.2 Covenants with respect to Qualified Plans. Purchaser covenants that
within 180 days from the Closing Date it will cause Xxxxxxxxx Construction
Profit Sharing Plan (the "Profit Sharing Plan") to be terminated in accordance
with the requirements of the Plan and ERISA. Purchaser further covenants that it
will maintain the Xxxxxxxxx Construction Money Purchase Pensions Plan for a
period of at least four years from the Closing Date under current contribution
levels without any modification thereto. Purchaser acknowledges that Seller may
terminate the Profit Sharing Plan prior to Closing and it is stipulated that the
termination and processes associated with it will not be a violation of any of
the Sellers' covenants contained in Section 4.16, above.
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8.3 Defense of Litigation.
(a) Principals covenant to pay on a timely basis the litigation costs
associated with the defense of the suit identified in Section 9.1(b).
(b) Purchaser covenants that it will facilitate and permit the General
Counsel of Xxxxxxxxx Construction, Xxxx Xxxx, to be involved in the defense of
the litigation described in Section 9.1(b).
8.4. Real Estate Broker's License. Purchaser covenants that within six
months from the Closing Date it will cause Xxxxxxxxx Construction to take all
necessary steps to insure that one of its senior executives secures a real
estate broker's license in the State of Missouri under which Xxxxxxxxx
Construction's licensed sales persons may sell its homes, and further that it
will immediately upon Closing initiate the process to accomplish the change.
Xxxxxx X. Xxxxxxxxx, Xx. covenants that he will maintain his real estate
broker's license until such time an executive of Xxxxxxxxx Construction secures
a broker's license but not beyond a year from the Closing Date and, further, he
warrants that Xxxxxxxxx Construction's licensed sales persons may sell the
company's homes under his broker's license during this interim period.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Sellers. From and after the Closing, the Principals
jointly and severally agree to indemnify, defend and save the Acquired
Companies, Fortress, and its officers, directors, employees, and agents (each, a
"Purchaser Indemnified Party"), forever harmless from and against, and to
promptly pay to a Purchaser Indemnified Party or reimburse a Purchaser
Indemnified Party for, any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments, losses,
costs, expenses, filing fees, interest, fines, penalties, actual or punitive
damages or costs or expenses of any and all investigations, proceedings
(including appeals, arbitration and mediation), judgments, environmental
analyses, remediations, settlements and compromises (including reasonable fees
and expenses of attorneys, accountants and other experts) (individually and
collectively, the "Losses") sustained or incurred by any Purchaser Indemnified
Party relating to, resulting from, arising out of or otherwise by virtue of any
of the following:
(a) any misrepresentation or breach of a representation or
warranty made herein by a Principal, or non-compliance with or breach
by a Seller of any of the covenants or agreements contained in this
Agreement or other agreements to be performed by Principals;
(b) Any Loss identified and described in Section 1 of
Exhibit H attached hereto, the Escrow Agreement; and
37
(c) the greater of (x) 1/2 of the fee of Xxxxxxx Xxxx &
Associates ("Xxxx'x Fee") or (y) Xxxx'x Fee minus $175,000.
9.2 Indemnification by Purchaser. From and after the Closing, Fortress and
any assignee agrees to indemnify, defend and save the Acquired Companies, their
officers, directors, employees and agents, and the Principals and their
respective spouses (each, an "Acquired Companies Indemnified Party") forever
harmless from and against, and to promptly pay to an Acquired Companies
Indemnified Party or reimburse an Acquired Companies Indemnified Party for, any
and all Losses sustained or incurred by any Acquired Companies Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
(a) any misrepresentation or breach of a representation
or warranty made herein by Purchaser or any assignee;
(b) non-compliance with or breach by Fortress or any assignee
of any of the covenants or agreements contained in this Agreement;
(c) an assessment by either the Internal Revenue Service or
the State of Missouri to the extent it reflects a determination that
the Section 338 Tax Increase is in excess of the determination made
pursuant Section 2.2, above; and
(d) 1/2 of Xxxx'x Fee or $175,000, whichever is less;.
(e) other than with respect to the litigation described in
Section 9.1(b), all liabilities and obligations of the Acquired
Companies.
9.3 Indemnification Procedure --Third Party Claims. In the event that
subsequent to the Closing any person or entity entitled to indemnification under
this Agreement (an "Indemnified Party") receives notice of the assertion of any
claim or of the commencement of any action or proceeding by an entity who is not
a party to this Agreement or an Affiliate of such a party (including, but not
limited to any domestic or foreign court, government, or Governmental Authority
or instrumentality, federal state or local) (a "Third Party Claim") against such
Indemnified Party, against which a party to this Agreement is required to
provide indemnification under this Agreement (an "Indemnifying Party"), the
Indemnified Party shall give written notice together with a statement of any
available information regarding such claim to the Indemnifying Party within
sixty (60) days after learning of such claim (or within such shorter time as may
be necessary to give the Indemnifying Party a reasonable opportunity to respond
to such claim. The Indemnifying Party shall have the right, upon written notice
to the Indemnified Party (the "Defense Notice") within thirty (30) days after
receipt from the Indemnified Party of notice of such claim, which notice by the
Indemnifying Party shall specify the counsel it will appoint to defend such
claim ("Defense Counsel"), to conduct at its expense the defense against such
claim in its own name, or if necessary in the name of the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to approve
the Defense Counsel, which approval shall not be unreasonably withheld, and in
the event the Indemnifying Party shall propose an alternate Defense Counsel,
which shall be subject again to the Indemnified Party's approval.
38
(a) In the event that the Indemnifying Party shall fail to
give such notice, it shall be deemed to have elected not to conduct the
defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith and to
compromise and settle the claim without prior consent of the
Indemnifying Party and the Indemnifying Party will be liable for all
costs, expense, settlement amounts or other Losses paid or incurred in
connection therewith.
(b) In the event that the Indemnifying Party does elect to
conduct the defense of the subject claim, the Indemnified Party will
cooperate with and make available to the Indemnifying Party such
assistance and materials as may be reasonably requested by it, all at
the expense of the Indemnifying Party, and the Indemnified Party shall
have the right at its expense to participate in the defense assisted by
counsel of its own choosing, provided that the Indemnified Party shall
have the right to compromise and settle the claim only with the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. Without the prior written consent of
the Indemnified Party, the Indemnifying Party will not enter into any
settlement of any Third Party Claim or cease to defend against such
claim, if pursuant to or as a result of such settlement or cessation,
(i) injunctive or other equitable relief would be imposed against the
Indemnified Party, or (ii) such settlement or cessation would lead to
liability or create any financial or other obligation on the part of
the Indemnified Party for which the Indemnified Party is not entitled
to indemnification hereunder. The Indemnifying Party shall not be
entitled to control, and the Indemnified Party shall be entitled to
have sole control over, the defense or settlement of any claim to the
extent that claim seeks an order, injunction or other equitable relief
against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party (and the cost of
such defense shall constitute an Loss for which the Indemnified Party
is entitled to indemnification hereunder). If a firm decision is made
to settle a Third Party Claim, which offer the Indemnifying Party is
permitted to settle under this Section 9.3 and the Indemnifying Party
desires to accept and agree to such offer, the Indemnifying Party will
give written notice to the Indemnified Party to that effect. If the
Indemnified Party fails to consent to such firm offer within 30
calendar days after its receipt of such notice, the Indemnified Party
may continue to contest or defend such third Party Claim and, in such
event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will not exceed the amount of such settlement offer, plus
costs and expenses paid or incurred by the Indemnified Party through
the end of such 30 day period.
(c) Any judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to
which the Indemnified Party is entitled to prompt indemnification
hereunder.
39
9.4 Indemnification Procedure -- Other Claims. A claim for indemnification
for any matter not involving a Third-Party Claim may be asserted by giving the
Indemnifying Party reasonably prompt written notice thereof, and the
Indemnifying Party will have a period of 30 calendar days within which to
satisfy such Direct Claim. If the Indemnifying Party does not so respond within
such 30 calendar day period, the Indemnifying Party will be deemed to have
rejected such claim, in which event the Indemnitee will be free to pursue such
remedies as may be available to the Indemnitee under this Article IX. It is
recognized by the parties and it is hereby agreed that the law suit identified
in Section 9.1(b) is a Third Party Claim for which the Acquired Companies and
Fortress effective the Closing Date shall be entitled to indemnification
pursuant to Section 9.3 and no formal notice will be required to invoke the duty
to indemnify.
9.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
give timely, complete or accurate notice as provided in Sections 9.3 and 9.4
will not affect the rights or obligations of any party hereunder except and only
to the extent that, as a result of such failure, any party entitled to receive
such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise directly and materially damaged
as a result of such failure to give timely notice.
9.6 Reduction of Loss. To the extent any Loss of an Indemnified Party is
reduced by receipt of payment (i) under insurance policies which are not subject
to retroactive adjustment or other reimbursement to the insurer in respect of
such payment, or (ii) from third parties not Affiliated with the Indemnified
Party, such payments (net of the expenses of the recovery thereof) (such net
payment being referred to herein as a "Reimbursement") shall be credited against
such Loss; provided, however, (x) the pendency of such payments shall not delay
or reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Loss, and (y) the Indemnified Party shall
have no obligation, hereunder or otherwise, to pursue payment under or from any
insurer or third party in respect of such loss. If any Reimbursement is obtained
subsequent to payment by an Indemnifying Party in respect of a Loss, such
Reimbursement shall be promptly paid over to the Indemnifying Party.
9.7 Limitation of Indemnification. Notwithstanding anything in this
Agreement to the contrary:
(a) Limitation of Years. A party's duty to indemnify under
this Article IX shall cease thirty-six (36) months from the date of
Closing, and, moreover, --
(i) Principals will have no liability for
indemnification with respect to any representation, warranty,
or Loss unless on or before thirty-six (36) months from the
Date of Closing Purchaser notify Principals in writing of a
claim specifying the factual basis of that claim in reasonable
detail; and
(ii) Fortress will have no liability for
indemnification with respect to any representation or warranty
unless on or before thirty-six (36) months from the Date of
Closing any Principal notifies Fortress in writing of a claim
specifying the factual basis of that claim in reasonable
detail.
40
The duty to indemnify pursuant to Section 9.1(b) shall continue until there
is a final and complete resolution of the matters giving rise to the causes of
action.
(b) Threshold. In all cases except a duty arising under
Section 9.1(b), a party's duty to indemnify under this Article IX shall
not arise until the total of all Losses sustained or incurred by an
Indemnified Party exceed $50,000 and then only for the amount by which
such Losses exceed $50,000. With respect to Section 9.1(b), the duty to
indemnify shall not be limited by any minimum threshold amount.
(c) Dollar Limitation for Breach. The total Losses for which
Sellers, in the aggregate, shall provide indemnification under this
Article IX and any other provision of this Agreement shall be
$2,700,000, inclusive of the $1,000,000 deposited in escrow pursuant to
Section 9.10.
(d) Consequential or Special Damages. Except for a Loss
arising under Section 9.1(b) with respect to punitive damages, no
Indemnifying Party shall have any liability to an Indemnified Party for
any incidental, special, consequential, punitive, or statutorily
trebled damages.
(e) Exclusive Remedy. Except for its right to enforce the
covenants contained in Section 8.1, enforceable through injunctive or
other equitable relief under Section 8.1(f), which Fortress does not
waive, the indemnification obligations of Sellers under this Article IX
are the sole and exclusive remedy of Fortress, and Fortress waives any
other remedies, whether available at law or in equity.
9.8 Subrogation. The Indemnifying Party shall be subrogated to the
Indemnified Party's rights of recovery to the extent of any Loss satisfied by
the Indemnifying Party. The Indemnified Party shall execute and deliver such
instruments and papers as are necessary to assign such rights and assist in the
exercise thereof, including access to books and records of the Acquired
Companies.
9.9 Arbitration. Excluding the right of the Purchaser or Principals to seek
injunctive relief, all claims (pursuant to Federal or state statutes or by
common law), controversies, differences or disputes between the Purchaser and
Principals arising out of or relating to this Agreement or related or referenced
exhibits or the alleged breach thereof including, but not limited to,
indemnification claims under Article 9.3 and/or 9.4 and the Escrow Agreement
relating thereto (Exhibit H) (but excluding audit disputes under Article 2.2(c))
shall be settled by arbitration in accordance with the rules then in effect of
the American Arbitration Association at the time of the dispute. After an award
is rendered by the arbitrator(s), a judgment may be entered in any court of
competent Jurisdiction. The arbitration shall occur in the greater St. Louis,
Missouri area to the exclusion of all other locations. The arbitrators can only
award actual and not punitive, trebled or exemplary damages and cannot add to or
subtract from the terms of this Agreement. The parties agree that the
arbitrators may include provisions for the payment of costs and expenses,
including reasonable attorneys' fees as part of any ruling or award made
thereunder. The parties acknowledge that arbitration shall be the sole, final,
binding and exclusive remedy of the parties with respect to any such matter for
which arbitration is undertaken hereunder. In preparation for the arbitration
process described herein, the parties shall be given at least 120 days for
discovery and each party may utilize all methods of discovery authorized by the
procedural rules and statutes of the State of Missouri for civil litigation and
may enforce the right to obtain such discovery in the manner provided by such
rules and statutes.
9.10 Security for Indemnification. As security for their duties pursuant to
Section 9.1(b), Principals agree that $1,000,000 of the cash purchase price
shall be deposited in escrow with an escrow agent pursuant to the terms of
Exhibit H attached hereto and made a part hereof. This sum is not in addition to
but part of the $2,700,000 limitation described in Section 9.7(c).
41
ARTICLE X
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
referred to in this Article 10:
"Acquired Companies" - as defined on page 2.
"Acquired Companies Indemnified Party" - as defined in Section 9.2
"Acquisition Transaction" - as defined in Section 6.3.
"Affiliate" - With respect to a Person, any other Person that directly or
indirectly controls, is controlled by, or is under common control with, such
Person.
"Affiliate Transaction" - a transaction between an Acquired Company and any
other Person or entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, an
Acquired Company.
"Applicable Contract" - any Contract (a) under which a Company has or may
acquire any rights, (b) under which a Company has or may become subject to any
obligation or liability, or (c) by which a Company or any of the Assets used by
it is or may become bound.
"Auditor" - as defined in Section 2.2(a).
"Available Cash" - as defined in Section 6.2(i).
"Beneficial Owners" - as defined on page 2.
"Board" - as defined in Section 7.1(j).
"Business" - as defined on page 2.
"Cash Adjustment Amount" - as defined in Section 2.2(d).
"Cash Short-Fall" - as defined in Section 6.2(i).
"CERCLA" - as defined in Section 4.18(b).
"Claims" - as defined in Section 4.14(a).
"Closing" - as defined in Section 3.1.
"Closing Date" - as defined in Section 3.1.
42
"Closing Combined Balance Sheet" - as defined in Section 2.2(a).
"Closing Effective Date" - as defined in Section 3.1.
"Code" - 1986 Internal Revenue Code, as amended, and regulations issued by the
Internal Revenue Service pursuant to the Internal Revenue Code of 1986, as
amended.
"Company" and "Acquired Companies" as defined in Section 4.1.
"Company Other Benefit Obligation" - as defined in Section 4.16.
"Company Plan" - as defined in Section 4.16.
"Company VEBA" - as defined in Section 4.16.
"Confidential Information" - as defined in Section 8.1(d).
"Consents" - as defined in Sections 1.3 and 4.5.
"Contract" - any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Defense Counsel" - as defined in Section 9.3.
"Defense Notice" - as defined in Section 9.3.
"Deliveries Check List" - Schedule A.
"Developed Real Property"- as described in Section 4.11.
"Encumbrance" - any charge, claim, equity, judgment, lease, liability, lien,
mortgage, pledge, restriction, security interest, Tax lien, or encumbrance of
any kind.
"Environmental Requirements" - as defined in Section 4.18.
"ERISA Affiliate"- as defined in Section 4.16.
"Financial Statements" - as defined in Section 4.6.
"Xxxxxxx Money Deposit" - as defined in Section 2.1(a)(i).
"Foreign Person" - as defined in Section 4.11(m).
"Fortress" - The Fortress Group, Inc.
"GAAP" - as defined in Section 2.2(a).
43
"Government Authority" - the United States or any state, local, or foreign
government, or any subdivision, agency, or authority of any thereof.
"Governmental Consents" - as defined in Section 4.5.
"Guaranteed Obligations" - as defined in Section 7.2(d).
"Hazardous Materials" -- as defined in Section 4.18.
"Intellectual Properties" - as defined in Section 4.13.
"Indemnified Party" - as defined in Section 9.3.
"Indemnifying Party" - as defined in Section 9.3
"Xxxx" - as defined in Section 12.18.
"Xxxx'x Fee" - as defined in Section 9.1(c).
"Knowledge" -- an individual will be deemed to have "Knowledge" of a particular
fact if:
(a) Such individual is actually aware of such fact or
other matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter, provided the individual had
Reasonable Grounds for believing there to be such circumstances where
an investigation should be conducted. For purposes of this definition,
"Reasonable Grounds" are those consistent with normal business
practices.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or any time had, Knowledge of such fact
or other matter.
"Land Contracts" - as listed in Section 4.11.
"Laws" - as defined in Section 4.15.
"Leased Property" - as defined in Section 4.11.
"Legal Requirement" -- any federal, state, local, municipal, foreign, or other
administrative order, constitution, law, ordinance, principle of common law,
regulation, statute, or treaty.
"Losses" - as defined in Section 9.1.
44
"L & C" - Xxxxx and Xxxxx Title Company.
"Material Contracts" - as defined in Section 4.8.
"Multi-Employer Plan"- as defined in Section 4.16.
"Net Worth" - "- as defined in Section 2.2(c).
"Option Property" - as listed in Section 4.11.
"Ordinary Course of Business" -an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if-
a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is similar in nature and magnitude to actions
customarily taken in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business as
such Person.
"Other Benefit Obligations" - as defined in Section 4.16
"Owned Property" - as defined in Section 4.11.
"PBGC" - as defined in Section 4.16.
"Pension Plan" - as defined in Section 4.16
"Permits" - as defined in Section 4.10.
"Person" -- any individual, corporation (including non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity of
Governmental Body.
"Plan" - as defined in Section 4.19.
"Plan Sponsor" - as defined in Section 4.19
"Pre-Closing Distributions" - as defined in Section 6.2(i).
"Principals" - as defined on page 2.
"Principals' Auditor" - as defined in Section 2.2(a).
45
"Purchase Price" - as defined in Section 2.1
"Purchaser" - The Fortress Group, Inc.
"Purchaser Indemnified Party" - as defined in Section 9.1.
"Purchaser Subsidiary" - as defined in Section 1.3.
"Purchaser's Notice" - as defined in Section 2.2(b).
"Qualified Plan" - as defined in Section 4.16.
"RCRA" - as defined in Section 4.18(b).
"Real Estate" - as defined in Section 4.11
"Reimbursement" - as defined in Section 9.6.
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in whom such specified Person holds a Material
Interest;
46
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b)
or (c).
For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual (ii) the individual's spouse and
former spouses, (iii) any other natural person who is related to the
individual or the individual's spouse within the second degree, and (iv) any
other natural person who resides with such individual, and (b) "Material
Interest' means direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of voting securities or
other voting interests representing at least 10% of the outstanding voting
power of a Person or equity securities or other equity interests
representing at least 10% of the outstanding equity securities or equity
interests in a Person.
"Releases" - as defined in Section 7.2(d).
"Restrictive Covenant" - as defined in Section 8.1(f).
"Restrictive Period" - as defined in Section 8.1(a).
"RKG" - RRKTG Lumber, Inc.
"Schedules" - as defined in Section 6.4.
"Section 338 Tax Increase" - as defined in Section 2.2
"Securities Act" - as defined in Section 5.5.
"Sellers" - as defined on page 2.
"Sellers' Notice" - as defined in Section 2.2(b).
"Selling Indemnified Party" - as defined in Section 9.2.
"Shares" - as defined on page 2.
"Substantially Complete" - That each and all of the requirements listed in this
definition have been met with respect to the Developed Real Property and each
lot contained therein ("Lot" or "Lots"):
(a) Final subdivision plats have been approved by all
applicable governmental authorities and recorded in the official
records of the County, municipality or applicable governmental
authority;
47
(b) Letters have been issued by the appropriate governmental
authority which evidence that such authority has released at least 90%
of the funds escrowed for installation of streets, water lines,
sanitary sewer, and storm sewers for the Lots;
(c) The appropriate governmental authority has certified that
operable water and sewer taps are available to each of the Lots; and
(d) The appropriate governmental authority has certified that
building permits are obtainable for the construction of single-family
houses on the Lots.
"Tax" - as defined in Section 4.7(a).
"Tax Determination"- as defined in Section 2.2(a).
"Tax Return" - as defined in Section 4.7(a).
"Territory" - as defined in Section 8.1(a).
"Third Party Claim" - as defined in Section 9.3.
"Title IV Plans" as defined in Section 4.16.
"Trade Marks" - as defined in Section 4.12.
"Undeveloped Real Property" - as defined in Section 4.11.
"VEBA" - as defined in Section 4.16.
"Voting Trust Agreements" - as defined on page 2.
"Welfare Plan" - as defined in Section 4.16.
"Xxxxxxxxx Construction" - as defined on page 2.
48
ARTICLE XI
MISCELLANEOUS
11.1 Notices, Consents, Etc. Any notices, consents or other communication
required to be sent or given hereunder by any of the parties shall in every case
be in writing and shall be deemed properly served if (i) delivered personally,
(ii) sent by registered or certified mail, in all such cases with first class
postage prepaid, return receipt requested, or (iii) delivered by a recognized
overnight courier service, to the parties at the addresses as set forth below or
at such other addresses as may be furnished in writing.
(a) If to Sellers:
Xxxxxxxxx Construction, Incorporated
000X Xxx Xxxxxx Xxxx Xxxxx
Xx. Xxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxxxx, Xx.
Xxxxxx and Xxxxxxx Xxxxxxxxx
#0 Xxxxx Xxxxxxxx Xxxxx
Xx. Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxxxxx, Xx.
000 Xxxxxxxxxx
Xx. Xxxxxxx, XX 00000
Xxxxx X. Xxxxxxxxx
0000 Xxxxxxxx Xxxxx
Xx. Xxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxxx
000 Xxxxxxxxxx Xxxxx
Xx. Xxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxxx
000 Xxxxxx Xxxx Xxxx
Xx. Xxxxxxx, XX 00000
(b) If to Purchaser:
THE FORTRESS GROUP, INC.
0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Xx.
Date of service of such notice shall be (x) the date such notice is personally
delivered, (y) three (3) days after the date of mailing if sent by certified or
registered mail, or (z) one (1) day after date of delivery to the overnight
courier if sent by overnight courier.
49
11.2 Severability. The unenforceability or invalidity of any provision of
this Agreement shall not affect the enforceability or validity of any other
provision.
11.3 Documents. Each party will execute all documents and take such other
actions as the other party may reasonably request in order to consummate the
transactions provided for herein and to accomplish the purposes of this
Agreement.
11.4 Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11.5 Expenses. Except as otherwise specifically provided herein, each of
the parties shall pay all costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in closing an carrying out the
transactions contemplated by this Agreement. Sellers shall not pay or obligate
Purchaser to pay any of such costs and expenses from the Assets.
11.6 Cooperation by the Parties. In addition to the covenants of Sellers
contained in Article VI herein, the parties to this Agreement will use their
reasonable efforts, and will cooperate with each other of them, to secure all
necessary consents, approvals, authorizations, exemptions and waivers from third
parties as shall be required in order to enable each of them to effect the
transactions contemplated hereby, and will otherwise use their best efforts to
cause the consummation of such transactions in accordance with the terms and
conditions hereof.
11.7 Further Assurances. At any time or from time to time up to one year
after the Closing, each of the parties hereto shall, at the request of the other
of the parties hereto and at such other parties' expense, execute and deliver
any further instruments or documents and take all such further actions are
reasonably requested of it in order to consummate and make effective the sale of
the Assets pursuant to this Agreement.
11.8 Governing Law. This Agreement shall be construed and governs in
accordance with the laws of the State of Missouri, without giving effect to
conflicts and choice of law principles.
11.9 Headings. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
11.10 Assignment. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but will not be assignable or delegable by any party without the prior
written consent of the other parties; provided, however, that nothing in the
Agreement is intended to limit Purchaser's ability to assign its rights or
delegate its responsibilities, liabilities and obligations under this Agreement
to any person at any time whether prior to or following the Closing without
consent, but no such assignment shall relieve Fortress of any of its
obligations, duties or liabilities hereunder.
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11.11 Entire Agreement. This Agreement and all the Schedules and Exhibits
attached to the Agreement (which shall be deemed incorporated in the Agreement
and made a part hereof) set forth the entire understanding of the parties and
supersedes all prior or contemporaneous agreements or negotiations (whether in
writing or oral). and may be modified only by instruments signed by both of the
parties hereto. Oral modifications are absolutely prohibited.
11.12 Third Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person or entity, other than
the parties to this Agreement, any rights or remedies under or by reason of this
Agreement.
11.13 Interpretative Matters. Unless the context otherwise requires, (i)
all references to Articles, Sections, Schedules or Exhibits in this Agreement,
(ii) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with GAAP, and (iii) words in the singular
or plural include the singular and plural and pronouns stated in either the
masculine, feminine or neuter gender shall include the masculine, feminine and
neuter.
11.14 Termination. Upon notice to the other parties hereto, the Purchaser
or the Sellers may terminate this Agreement prior to the Closing under the
circumstances set forth below:
(a) Outside Closing Date. The Purchaser or the Sellers may terminate this
Agreement if the Closing has not occurred on or before March 6, 1998.
(b) Failure to deliver Xxxxxxx Money Deposits. This Agreement will
automatically terminate at 12:001 a.m., January 6, 1998 if Purchaser fails to
deliver the Xxxxxxx Money Deposit in a timely fashion as provided in Section
2.1(a)(i)(A), and it will also automatically terminate at 5:01 p.m. Central
Standard Time, February 27, 1998 if Purchaser fails to deliver the 2d Xxxxxxx
Money Deposit in a timely fashion as provided in Section 2.1(a)(i)(B).
(c) Prior to Closing. This Agreement may be terminated at any time prior to
Closing:
(i) at any time prior to the Closing by the mutual
written consent of Purchaser and the Sellers;
(ii) at any time prior to the Closing by either the Sellers or
Purchaser in writing, without liability to the terminating party on
account of such termination (provided the terminating party is not
otherwise in default or in breach of this Agreement), if Purchaser or
the Sellers, respectively, shall (i) fail to perform in any material
respect its agreements contained herein required to be performed prior
to the Closing, or (ii) materially breach any of its representations,
warranties or covenants contained herein; and
(b) Effect of Termination. In the event of termination of this Agreement
pursuant to Subsections 11.14(a), (b) or (c)(i), then all obligations of the
parties hereunder shall terminate and each party will be relieved on any and all
claims from the other party growing out of this Agreement except the
confidentiality provisions contained in Section 8.3(d), and each party will bear
its own expenses and respective fees and costs.
11.15 Public Announcement. Any public announcement or similar publicity
with respect to this Agreement will be issued, if at all, at such time and in
such manner as Fortress determines; provided, however, Fortress will provide an
advance copy of the public announcement to Sellers and reasonably consider
Sellers' proposed additions or changes to the announcement. Unless reasonably
necessary to consummate this transaction or consented to by Fortress in advance
or required by law, prior to Closing Sellers shall, and shall cause it
directors, officers, employees, agents, and advisors to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person. Sellers and Fortress will consult with each other concerning the means
by which the employees, customers, suppliers and other interested parties of the
Acquired Companies will be informed of the transaction and Fortress will have
the right to be present at any such communication. In any pubic announcement for
distribution in the greater St. Louis, Missouri area, no reference will be made
to the price paid, and if in other public announcements the price paid is
included, it shall include the debt on the books of the Acquired Companies,
reflecting the enterprise value, not just the cash paid.
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11.16 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising a right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of the right, power, or
privilege, and no single or partial exercise of a right, power, or privilege
will preclude any other or further exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in it can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given.
11.17 Jointly Negotiated. The provisions of this Agreement have been
jointly negotiated by all of the parties to the Agreement, and as such, it is
agreed that no provision shall be more strictly construed against a party
regardless of which party drafted the provision.
11.18 Brokers. Each party represents and warrants that it employed no
broker or agent in connection with this transaction except for Xxxxxxx X. Xxxx &
Associates, LLC ("Xxxx"), and except as modified by this Agreement agrees to
indemnify the other parties hereto against all loss, cost, damages or expenses
arising out of claims for fees or commissions of brokers employed or alleged to
have been employed by such indemnifying party. Notwithstanding to the contrary
implied by Sections 9.1(c), any commission payable to Xxxx covering the
adjustment to the Purchase Price for the Section 338 Tax Increase, described in
Section 2.2, above, shall be borne by Purchaser and not the Sellers.
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IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Purchase Agreement on February 27, 1998.
The Fortress Group, Inc.
By: ________________________________
Xxxxx X. Xxxxxxx, Xx., President
[ATTEST]
By: ___________________________________
Xxxxx Xxxxxxxx, Assistant Secretary
Xxxxxxxxx Construction, Incorporated RRKTG Lumber, Inc.
By: ______________________________ By: _________________
Xxxxxx X. Xxxxxxxxx, Xx.
Xxxxx and Xxxxx Title Company
_____________________________
By: _________________________ _____________________
Xxxxxx X. Xxxxxxxxx, Xx. Xxxxxxx X. Xxxxxxxxx
_____________________________ ______________________
Xxxxxxx X. Xxxxxxxxx Xxxxxx X. Xxxxxxxxx, Xx.
_____________________________ ________________________
Xxxxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxxxxx
_________________________________
Xxxxxx X. Xxxxxxxxx, Xx., Trustee
Of Voting Trust Agreements between
XX Xxxxxxxxx Construction, Incorporated and RKG
And Xxxxxxx X. Xxxxxxxxx, Xxxxxxx X. Xxxxxxxxx,
Xxxxxx X. Xxxxxxxxx, Xx., Xxxxxxx Xxxxxxxxx and
Xxxxx X. Xxxxxxxxx
