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PURCHASE AGREEMENT
AMONG
ORLEANS HOMEBUILDERS, INC.,
REALEN HOMES, L.P.
REALEN GENERAL PARTNER, LLC
DB HOMES VENTURE, L.P.,
XXXXXX ENTERPRISES, INC.,
XXXXXX SUB., INC.
BPG REAL ESTATE INVESTORS-B, X.X.
XXXXXXX PROPERTY GROUP, LTD.
AND BERWIND PROPERTY GROUP, INC.
DATED AS OF JULY 28, 2004
TABLE OF CONTENTS
PAGE
SECTION 1. ACQUISITION OF INTERESTS...............................................................................1
1.1 Sale and Purchase of Interests..................................................................1
1.2 Tax Treatment...................................................................................1
1.3 Waiver..........................................................................................2
SECTION 2. PURCHASE PRICE AND PAYMENT.............................................................................2
2.1 Purchase Price..................................................................................2
2.2 Payment.........................................................................................2
2.3 Allocation of the Purchase Price................................................................2
SECTION 3. ASSETS AND LIABILITIES OF THE PARTNERSHIP..............................................................2
3.1 Assets and Liabilities to be Acquired...........................................................2
3.2 Assets and Liabilities Not Acquired.............................................................3
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING SELLERS AND UPSTREAM PARTIES..................................4
4.1 Organization and Good Standing..................................................................4
4.2 Power and Authorization.........................................................................4
4.3 No Conflicts....................................................................................4
4.4 Ownership of the Interests......................................................................5
4.5 Brokers.........................................................................................5
4.6 Indebtedness....................................................................................5
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING THE PARTNERSHIP AND THE SUBSIDIARIES..........................6
5.1 Organization and Good Standing..................................................................6
5.2 Power and Authorization.........................................................................6
5.3 No Conflicts....................................................................................7
5.4 Capitalization..................................................................................8
5.5 Investments and Subsidiaries....................................................................8
5.6 Compliance with Laws............................................................................8
5.7 Litigation......................................................................................8
5.8 Financial Statements............................................................................9
5.9 Inventory.......................................................................................9
5.10 Warranties.....................................................................................10
5.11 Real Property..................................................................................10
5.12 Personal Property..............................................................................13
5.13 List of Properties, Contracts, etc.............................................................13
5.14 Contracts......................................................................................14
5.15 Insurance......................................................................................15
5.16 Previously Constructed Homes...................................................................15
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5.17 Suppliers......................................................................................15
5.18 Taxes..........................................................................................16
5.19 Employee Benefits..............................................................................17
5.20 Labor Matters..................................................................................19
5.21 Officers and Employees.........................................................................20
5.22 Affiliate Agreements...........................................................................20
5.23 Environmental Matters. Except as disclosed in Schedule 5.23:..................................20
5.24 Absence of Certain Changes and Events..........................................................23
5.25 Books and Records..............................................................................24
5.26 Brokers........................................................................................25
5.27 Accounts Receivable............................................................................25
5.28 Title Insurance Agency.........................................................................25
5.29 Additional Capital Contributions...............................................................25
5.30 Internal Controls..............................................................................25
5.31 Disclosure.....................................................................................25
5.32 Net Worth......................................................................................26
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................26
6.1 Organization and Good Standing.................................................................26
6.2 Power and Authorization........................................................................26
6.3 No Conflicts...................................................................................26
6.4 Brokers........................................................................................27
6.5 Investment Purpose.............................................................................27
SECTION 7. OBLIGATIONS OF THE PARTIES............................................................................27
7.1 Conduct of Business Pending Closing............................................................27
7.2 Negative Covenants.............................................................................28
7.3 Access to Information; Confidentiality.........................................................28
7.4 Efforts........................................................................................30
7.5 Consents.......................................................................................30
7.6 Financial Information..........................................................................30
7.7 Noncompetition, Trade Secrets, etc.............................................................30
7.8 Employee Matters...............................................................................33
7.9 SAP Residential Land...........................................................................33
7.10 Office Lease...................................................................................33
7.11 Public Announcement............................................................................33
SECTION 8. CERTAIN CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS...................................................33
8.1 Representations and Warranties.................................................................34
8.2 Performance of Covenants.......................................................................34
8.3 Approvals......................................................................................34
8.4 Legal Matters..................................................................................34
8.5 Intentionally omitted..........................................................................34
8.6 Resignation of Directors and Officers..........................................................34
8.7 Opinion of Counsel.............................................................................34
8.8 No Material Adverse Change.....................................................................34
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8.9 Indebtedness...................................................................................34
8.10 Tax Affidavits.................................................................................35
8.11 Estoppel Letters...............................................................................35
SECTION 9. CERTAIN CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS..................................................35
9.1 Representations and Warranties.................................................................35
9.2 Performance of Covenants.......................................................................35
9.3 Approvals......................................................................................35
9.4 Legal Matters..................................................................................35
9.5 Opinion of Counsel.............................................................................35
9.6 Tri-Party Agreements, Bonds and Letters of Credit..............................................36
SECTION 10. CLOSING..............................................................................................36
10.1 Time and Place of Closing......................................................................36
10.2 Deliveries at the Closing......................................................................36
10.3 [Intentionally omitted]........................................................................38
10.4 [Intentionally omitted]........................................................................38
10.5 Remittance of Payments.........................................................................38
SECTION 11. INDEMNIFICATION......................................................................................38
11.1 Indemnification by Sellers and the Upstream Parties............................................38
11.2 Indemnification by Buyer.......................................................................40
11.3 Third Party Claims.............................................................................40
11.4 Other Matters..................................................................................41
11.5 Tax Treatment of Indemnity Payments............................................................41
11.6 Interest.......................................................................................41
11.7 Right of Set-Off; Application of Warranty Holdback.............................................41
11.8 Certain Liability Matters......................................................................42
11.9 Survival Periods...............................................................................42
11.10 Limitation.....................................................................................43
SECTION 12. DEFINITIONS..........................................................................................43
SECTION 13. MISCELLANEOUS........................................................................................46
13.1 Further Assurances.............................................................................47
13.2 Costs and Expenses.............................................................................47
13.3 Notices........................................................................................47
13.4 Assignment and Benefit.........................................................................48
13.5 Brokers........................................................................................48
13.6 Amendment, Modification and Waiver.............................................................49
13.7 Governing Law, Venue and Attorneys' Fees and Costs.............................................49
13.8 Section Headings and Defined Terms.............................................................50
13.9 Severability...................................................................................50
13.10 Counterparts...................................................................................50
13.11 Entire Agreement...............................................................................50
13.12 Concerning the Upstream Parties................................................................50
13.13 Knowledge of Partnership.......................................................................50
Exhibit 2.2 - Form of Promissory Note
Exhibit 7.7(b) - Land Proposed to be Acquired by Partnership
Exhibit 7.9 - Right of First Offer
Exhibit 11 - List of Active Communities
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is entered into as of July
28, 2004 by and among Orleans Homebuilders, Inc., a Delaware corporation
("Buyer"), Realen Homes, L.P., a Pennsylvania limited partnership (the
"Partnership"), Realen General Partner, LLC, a Pennsylvania limited liability
company ("Realen GP"), DB Homes Venture, L.P., a Pennsylvania limited
partnership ("DB Homes"), XxXxxx Enterprises, Inc., a Pennsylvania corporation
("XxXxxx"), XxXxxx Sub., Inc. a Pennsylvania corporation ("XxXxxx Sub"), Bergen
Homes, Inc., a Pennsylvania corporation ("Bergen"), BPG Real Estate Investors-B,
L.P., a Pennsylvania limited partnership ("BPG Investors"), Berwind Property
Group, Ltd., a Pennsylvania limited partnership ("BPG LP"), and Berwind Property
Group, Inc., a Pennsylvania corporation ("Berwind").
A. Realen GP and DB Homes (collectively, the "Sellers") own all of the
issued and outstanding partnership interests of the Partnership.
B. DB Homes owns all of the issued and outstanding membership interest
in Realen GP. XxXxxx and XxXxxx Sub (collectively, the "XxXxxx Parties"), Bergen
and BPG Investors collectively own all of the issued and outstanding partnership
interests in DB Homes. Berwind and BPG LP are affiliates of BPG Investors;
Bergen, BPG Investors, BPG LP and Berwind are hereinafter referred to as the
"Berwind Parties." The XxXxxx Parties and the Berwind Parties are hereinafter
referred to as the "Upstream Parties."
C. The Sellers desire to sell, and Buyer desires to purchase, all of
the issued and outstanding partnership interests of the Partnership at the price
and upon the terms and conditions hereinafter set forth.
D. Certain capitalized terms used herein are defined in Section 12 of
this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. ACQUISITION OF INTERESTS
1.1 Sale and Purchase of Interests. Subject to the terms and
conditions of this Agreement, at the Closing (as herein defined), each Seller
shall sell, transfer and deliver to Buyer all of the general and limited
partnership interests of the Partnership set forth beside its name on Schedule
1.1 hereto, in the aggregate constituting all of the outstanding general and
limited partnership interests of the Partnership (collectively, the
"Interests"), and Buyer shall purchase the Interests for the consideration set
forth in Section 2.
1.2 Tax Treatment. The Partnership and Realen GP are disregarded
entities for Federal income tax purposes. Accordingly, the parties will treat
the transaction provided for herein as DB Homes having sold, and the Buyer
having purchased from DB Homes all of the Partnership assets other than those
referred to in Section 3.2.
1.3 Waiver. The Partnership and the Sellers hereby waive any
rights restricting transfer of the Interests under the Limited Partnership
Agreement dated November 14, 2000 and any other agreement, and hereby agree to
the transfer of the Interests to Buyer as set forth in this Agreement.
SECTION 2. PURCHASE PRICE AND PAYMENT
2.1 Purchase Price. The aggregate purchase price for the Interests
shall be Fifty Nine Million, Eight Hundred Forty Eight Thousand, Two Hundred
Eighty One Dollars ($59,848,281) (the "Purchase Price").
2.2 Payment. The Purchase Price shall be paid on the Closing
Date (as defined herein) or on the next business day as follows: (i) Fifty Three
Million, Three Hundred Forty Eight Thousand, Two Hundred Eighty One Dollars
($53,348,281) shall be delivered by Buyer to the Sellers by wire transfer of
immediately available funds pursuant to instructions previously given by the
Sellers to Buyer for that purpose; (ii) an aggregate of Five Million Dollars
($5,000,000) shall be paid by the issuance of a promissory note from Buyer in
favor of DB Homes in the form attached hereto as Exhibit 2.2 (the "Purchase
Money Financing"); and (iii) at Closing, Buyer shall retain One Million Five
Hundred Thousand Dollars ($1,500,000) of the Purchase Price (the "Warranty
Holdback") to be applied towards the administration of any warranty claims made
against the Partnership in accordance with this Agreement. The promissory note
evidencing the Purchase Money Financing shall bear interest at the rate of 3%
per year, and the entire principal balance and all accrued interest on such
notes shall be payable on the maturity date, which shall be the earlier of the
second anniversary of the Closing Date or the date on which there shall occur a
Change of Control of Buyer.
2.3 Allocation of the Purchase Price. An allocation of the
Purchase Price is attached hereto as Schedule 2.3. The parties hereto shall make
consistent use of the allocation for all Tax (as defined in Section 5.18)
purposes and in all filings, declarations and reports filed with the Internal
Revenue Service ("IRS") in respect thereof.
SECTION 3. ASSETS AND LIABILITIES OF THE PARTNERSHIP
3.1 Assets and Liabilities to be Acquired. The assets and
liabilities of the Partnership and the Subsidiaries, all of which are being
indirectly acquired by Buyer in connection with the purchase of the Interests
pursuant to this Agreement, shall include, without limitation, the following,
unless excluded under Section 3.2:
(a) all of the Partnership's land parcels (the Partnership and
the Upstream Parties represent that no land parcels or any homes or any other
Real Property are owned by any Subsidiary) under contract or negotiation (the
"Land Pipeline"), subject to the terms and conditions of such contracts or
negotiations, including without limitation such Land Pipelines set forth on
Schedule 3.1(a) hereto;
(b) all of the Partnership's owned land parcels, including
without limitation those set forth on Schedule 3.1(b) hereto;
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(c) all of the Partnership's homes under construction but not
sold, including without limitation those set forth on Schedule 3.1(c) hereto;
(d) all of the Partnership's homes sold but not yet delivered,
including without limitation those set forth on Schedule 3.1(d) hereto;
(e) all of the Partnership's sales offers and reservations,
including without limitation those set forth on Schedule 3.1(e) hereto;
(f) all of the Partnership's model homes and furnishings,
including without limitation those set forth on Schedule 3.1(f) hereto;
(g) all of the Partnership's and Subsidiaries' trade names,
including without limitation those set forth on Schedule 3.1(g) hereto;
(h) all of the Partnership's subsidiary entities, including
without limitation those set forth on Schedule 5.1A hereto;
(i) all of the Partnership's and Subsidiaries' architectural
plans and other intangible assets, including without limitation those set forth
on Schedule 3.1(i) hereto; and
(j) all of the Partnership's and Subsidiaries' Material
Contracts, including without limitation those set forth on Schedule 5.13, except
to the extent consent to the transactions contemplated hereby is required under
such contracts and not obtained and Buyer elects to complete the Closing despite
that fact.
3.2 Assets and Liabilities Not Acquired. Notwithstanding anything
to the contrary set forth in Section 3.1 or otherwise in this Agreement:
(a) [Intentionally omitted];
(b) all of the outstanding membership interests in Realen
Settlement Services, LLC, a Pennsylvania limited liability company that conducts
the business of the Partnership's title insurance agency, shall be conveyed from
the Partnership to DB Homes at Closing;
(c) Sellers shall retain any and all obligations and
liabilities with respect to the Bellinghamshire Community; and
(d) Sellers shall retain any and all ongoing obligations and
liabilities to dedicate and release all maintenance and/or performance
guarantees in favor of public authorities with respect to Oak Terrace/Tallamore,
Horsham Township, Xxxxxxxxxx County, Pennsylvania.
In connection with subsections (c) and (d), Buyer will permit the
Sellers and the Upstream Parties to have access to the records of the
Partnership and cooperation by the personnel of the Partnership and the Buyer,
as reasonably necessary to permit them to deal with the obligations and
liabilities referred to in those subsections.
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SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING SELLERS AND
UPSTREAM PARTIES
Sellers make the following representations and warranties to Buyer as
of the date of this Agreement and as of the Closing Date, it being understood
that (a) representations and warranties concerning the Sellers are made jointly
and severally by the Sellers and the Upstream Parties; (b) representations and
warranties concerning the XxXxxx Parties are made jointly and severally by the
XxXxxx Parties, but not by the Sellers or the Berwind Parties, and (c)
representations and warranties concerning the Berwind Parties are made jointly
and severally by the Berwind Parties, but not by the Sellers or the XxXxxx
Parties.
4.1 Organization and Good Standing. Each Seller is, and each
Upstream Party is, duly organized, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania and has all necessary power and
authority to carry on its business as presently conducted, to own and lease the
assets which it owns and leases and to perform all its obligations under each
agreement and instrument by which it is bound.
4.2 Power and Authorization. Each Seller has, and each Upstream
Party has full legal right, power and authority to enter into and perform its
obligations under this Agreement and under the other agreements and documents
(the "Seller Transaction Documents") required to be delivered by it prior to or
at the Closing. The execution, delivery and performance by each applicable
Seller and each Upstream Party, as the case may be, of this Agreement and the
Seller Transaction Documents has been duly authorized by all necessary action by
each applicable Seller and Upstream Party, as the case may be. This Agreement
has been duly and validly executed and delivered by each Seller and each
Upstream Party and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as limited by
applicable bankruptcy, reorganization, insolvency, or similar laws affecting
creditors' rights generally. When executed and delivered as contemplated herein,
each of the Seller Transaction Documents shall constitute the legal, valid and
binding obligation of each Seller or Upstream Party that is a party thereto,
enforceable against it in accordance with its terms, except as limited by
applicable bankruptcy, reorganization, insolvency, or similar laws affecting
creditors' rights generally.
4.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement
and the Seller Transaction Documents do not and will not (with or without the
passage of time or the giving of notice):
(i) violate or conflict with the certificate of limited
partnership or articles of incorporation, partnership agreement, operating
agreement or bylaws (or other organizational documents), as applicable, of the
Sellers or the Upstream Parties;
(ii) violate or conflict with any law (including, without
limitation, principles of common law), statute, regulation, permit, license,
certificate, judgment, order, award or other decision or requirement of any
arbitrator, court, government or governmental agency or instrumentality
(domestic or foreign) (collectively, "Laws"), binding upon any Seller or the
Upstream Party; or
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(iii) result in, require or permit the creation or
imposition of any restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance of any nature upon or with
respect to the Interests.
(b) There are no judicial, administrative or other
governmental actions, proceedings or investigations pending or, to the knowledge
of any Seller or Upstream Party, threatened, that question any of the
transactions contemplated by, or the validity of, this Agreement or any of the
other agreements or instruments contemplated hereby or which, if adversely
determined, could reasonably be expected to have a material adverse effect upon
the ability of any Seller or Upstream Party to enter into or perform its
obligations under this Agreement or any such other agreements or instruments. No
Seller or Upstream Party has received any request from any governmental agency
or instrumentality for information with respect to the transactions contemplated
hereby.
4.4 Ownership of the Interests. Each Seller owns the Interests
ascribed to it on Schedule 1.1, beneficially and of record, free and clear of
any restriction, mortgage, deed of trust, pledge, lien, security interest or
other charge, claim or encumbrance of any kind, and there has been no event or
action taken (or failure to take action) by or against any Seller or Upstream
Party which might result in the creation of any restriction, mortgage, deed of
trust, pledge, lien, security interest or other charge, claim or encumbrance of
any kind on any Interests. There are no partnership or other agreements
affecting the right of any Seller to convey the Interests to Buyer or any other
right of such Seller with respect to the Interests and each Seller has the
absolute right, authority, power and capacity to sell, assign and transfer the
Interests ascribed to it on Schedule 1.1 to Buyer free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance. Upon assignment to Buyer of the Interests at the
Closing, Buyer will acquire good, valid and marketable title to the Interests,
free and clear of any restriction, mortgage, deed of trust, pledge, lien,
security interest or other charge, claim or encumbrance not created by Buyer.
There are no rights or interests, or any options, warrants or other rights to
acquire such rights or interests, which constitute any equity or voting
interests relating to the Partnership.
4.5 Brokers. No person acting on behalf of any Seller or any
affiliate of a Seller or under the authority of any of the foregoing is or will
be entitled to any brokers' or finders' fee or any other commission or similar
fee, directly or indirectly, from any of such parties in connection with any of
the transactions contemplated by this Agreement, except for Xxxx Xxxxx, JMP
Securities LLC, or any affiliate thereof (collectively, "JMP"), which fees or
commissions shall be paid in accordance with Section 13.5.
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4.6 Indebtedness. Except for the loan in the original principal
amount of Six Million Five Hundred Thousand Dollars ($6,500,000) now owed to RNP
Associates, L.P. (a limited partnership whose general partners and limited
partners are identified on Schedule 4.6 hereto) by the Partnership, which loan
has a current outstanding balance of $4,062,500 (the "RNP Loan"), there are no
notes, advances or other unpaid indebtedness or obligations, whether written or
oral, of the Partnership or any Subsidiary (defined in Section 5.1) in favor of
any Seller, any Upstream Party or a Related Party (as defined in Section 5.22)
of any Seller or Upstream Party. A true and correct copy of the promissory note
evidencing the RNP Loan is attached hereto as Schedule 4.6. The Sellers shall
cause the Partnership and RNP Associates, L.P. to modify such Note, effective as
of the Closing, as follows: Section 6(b) shall be revised to provide for
delivery of a compliance certificate, rather than the financial statements
referred to therein, and Sections 8(iii) and 8(vii) shall be revised to provide
that these Sections shall be inapplicable to any transaction resulting in a
transfer of all or substantially all of the assets of Maker to Buyer or any of
its affiliates; provided, however, the provisions of Section 8(vii) will
continue to be applicable if a dissolution, liquidation or termination of Maker
occurs without the Buyer or one of its affiliates (whichever is the transferee
of assets of the Partnership transferred as a result of such dissolution,
liquidation or termination) assuming the obligations of the Maker under such
Promissory Note.
SECTION 5. REPRESENTATIONS AND WARRANTIES REGARDING THE PARTNERSHIP AND
THE SUBSIDIARIES
Sellers and the Upstream Parties jointly and severally represent and
warrant to Buyer as of the date of this Agreement and as of the Closing Date as
follows:
5.1 Organization and Good Standing. The Partnership is a limited
partnership duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania and each corporation, partnership, limited
liability company or other legal entity in which the Partnership owns any of the
outstanding equity interests (a "Subsidiary") is validly existing under such
laws as may be applicable from time to time, and is in good standing. The
Partnership and each Subsidiary has all necessary power and authority to carry
on its business as presently conducted, to own and lease the assets which it
owns and leases and to perform all its obligations under each agreement and
instrument by which it is bound. Schedule 5.1A lists the name and jurisdiction
of organization of each Subsidiary, the type of entity it is, the percentage of
the equity interests owned by the Partnership in each Subsidiary and, with
respect to any Subsidiary which is not wholly owned by the Partnership, the
names of the other equity owners, and the percentage of the equity interest
owned by such other owners. All of the equity interests owned by the Partnership
in each Subsidiary are owned by the Partnership free and clear of all liens,
claims and encumbrances. Except as shown on Schedule 5.1A, there are no
shareholder, partnership, operating agreements or any other agreements relating
to any Subsidiary between the Partnership or any affiliate thereof, and any of
the other equity owners of any Subsidiary. Except as set forth on Schedule 5.1,
neither the Partnership nor any Subsidiary is required to be qualified to do
business as a foreign limited partnership in any jurisdiction other than
Pennsylvania. No Subsidiary, other than Realen Settlement Services, LLC and
Realen Mortgage Company, LLC, has any material assets, liabilities or
operations.
5.2 Power and Authorization. The Partnership has full legal right,
power and authority to enter into and perform its obligations under this
Agreement and under the other agreements and documents (the "Partnership
Transaction Documents") required to be delivered by it prior to or at the
Closing. The execution, delivery and performance by the Partnership of this
Agreement and the Partnership Transaction Documents have been duly authorized by
all necessary action by the Partnership. This Agreement has been duly and
validly executed and delivered by the Partnership and constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, except as limited by applicable bankruptcy, reorganization, insolvency,
or similar laws affecting creditors' rights generally. When executed and
delivered as contemplated herein, each of the Partnership Transaction Documents
shall constitute the legal, valid and binding obligation of the Partnership,
enforceable against it in accordance with its terms, except as limited by
applicable bankruptcy, reorganization, insolvency, or similar laws affecting
creditors' rights generally.
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5.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement
and the Partnership Transaction Documents do not and will not (with or without
the passage of time or the giving of notice):
(i) violate or conflict with the certificate of limited
partnership or the partnership agreement (or other organizational documents) of
the Partnership or any Subsidiary or any Law binding upon the Partnership or any
Subsidiary;
(ii) assuming that all consents described in Schedule 8.3
are obtained, violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under any agreement or other
obligation to which the Partnership or any Subsidiary is a party or by which it
or its assets are bound, or give to others any rights (including rights of
termination, foreclosure, cancellation or acceleration), in or with respect to
the Partnership, any of the Subsidiaries or any of their respective assets; or
(iii) result in, require or permit the creation or
imposition of any restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance upon or with respect to the
Interests, the Partnership, any Subsidiaries or any of their assets.
(b) Except as described in Schedule 8.3, no approval of, or
registration, notification, filing and/or declaration with, or consent from, any
court, government or governmental agency or instrumentality, creditor, lessor or
other person required to be given or made by the Partnership or any Subsidiary
in connection with the execution, delivery and performance of this Agreement and
the other agreements and instruments contemplated herein. Upon consummation of
the transactions contemplated by this Agreement, the Partnership and each
Subsidiary will be entitled to continue to use all of the assets and properties
now used by it immediately prior to such consummation.
(c) There are no judicial, administrative or other
governmental actions, proceedings or investigations pending or, to the knowledge
of the Sellers, threatened, that question any of the transactions contemplated
by, or the validity of, this Agreement or any of the other agreements or
instruments contemplated hereby or which, if adversely determined, could
reasonably be expected to have a material adverse effect upon the Sellers'
ability to enter into or perform its obligations under this Agreement or any of
the other agreements or instruments contemplated hereby. Neither the Partnership
nor any Seller has received any request from any governmental agency or
instrumentality for information with respect to the transactions contemplated
hereby.
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5.4 Capitalization. The authorized, issued and outstanding
Interests or other securities or equity interests of the Partnership and each
Subsidiary are fully and accurately set forth in Schedule 5.4 attached hereto.
No person has any preemptive or other similar rights with respect to any such
equity interests or other securities and there are no offers, options, warrants,
rights, agreements or commitments of any kind (contingent or otherwise) relating
to the issuance, conversion, registration, voting, sale or transfer of any
equity interests or other securities of the Partnership or any Subsidiary
(including, without limitation, the Interests) or obligating the Partnership or
any Subsidiary or any other person to purchase or redeem any such equity
interests or other securities. The Interests constitute all of the issued and
outstanding partnership interests of the Partnership, such Interests and all
equity interests in the Subsidiaries and by the Partnership have been duly
authorized and are validly issued and outstanding, fully paid and
non-assessable, and such issuance was not in violation of applicable securities
laws.
5.5 Investments and Subsidiaries. Except as disclosed in Schedule
5.5, the business of the Partnership and each Subsidiary is and has been
conducted solely by and through the Partnership or such Subsidiary and no other
person, and, except for the Partnership's equity interests in the Subsidiaries,
neither the Partnership nor any Subsidiary directly or indirectly owns, controls
or has any investment or other interest in any corporation, partnership, joint
venture, business trust or other entity, and neither the Partnership nor any
Subsidiary has agreed, contingently or otherwise, to share any profits, losses,
costs or liabilities, or (except in the ordinary course of business, including
performance and maintenance bonds) to indemnify any person or entity or to
guaranty the obligations of any person or entity.
5.6 Compliance with Laws.
(a) The Partnership and each Subsidiary is in compliance in
all material respects with all Laws applicable to the Partnership and each
Subsidiary, and neither the Partnership nor any Subsidiary has received any
written notice from a governmental authority of an alleged, actual or potential
violation of or failure to comply with any Law. The Partnership and each
Subsidiary has complied with all material provisions of applicable building and
zoning codes and any and all other applicable laws and regulations for all homes
constructed by the Partnership or any Subsidiary.
(b) All federal, foreign, state, local and other governmental
consents, licenses, permits, franchises, grants and authorizations
(collectively, "Authorizations") required for the operation of the business of
the Partnership and each Subsidiary as currently conducted are in full force and
effect, and to the knowledge of the Partnership, it has not received any written
notice of any claim or charge that the Partnership or any Subsidiary is in
violation of or in default under any such Authorization. No proceeding is
pending or, to the knowledge of the Partnership or any Subsidiary, threatened by
any person to revoke or deny the renewal of any Authorization of the Partnership
or any Subsidiary.
5.7 Litigation. Except as disclosed in Schedule 5.7, there are no
pending actions, suits, proceedings (arbitration or otherwise) or investigations
to which the Partnership or any Subsidiary, or its directors, officers or
partners in their capacities as such, is a party before or by any court or
governmental agency or instrumentality, or before an arbitrator of any kind; to
the knowledge of the Partnership or any Subsidiary, no such action, suit,
proceeding or investigation is presently threatened; and there are no judgments,
penalties or awards against the Partnership or any Subsidiary.
-8-
5.8 Financial Statements.
(a) Schedule 5.8 attached hereto includes: (i) the
consolidated balance sheet of the Partnership and its Subsidiaries as of
December 31, 2003 (including the notes thereto, the "Balance Sheet"), and the
related consolidated statements of income and partners' equity for the fiscal
year then ended, together with the audit report thereon from
PriceWaterhouseCoopers LLP, independent accountants (the "Audited Financial
Statements"), including all notes thereto, and (ii) the interim consolidated
balance sheet of the Partnership and the Subsidiaries as of April 30, 2004 and
for the four (4) month period then ended (including the notes thereto, the
"Interim Balance Sheet") and the related statements of income and partners'
equity for such period (such related statements for such four-month period and
the Interim Balance Sheet are referred to collectively as the "Interim Financial
Statements"). Such financial statements and notes fairly present the
consolidated financial condition and results of operations of the Partnership
and the Subsidiaries as at the respective dates thereof and for the periods
therein referred to, all in accordance with accounting principles generally
accepted in the United States ("GAAP") consistently applied, subject, in the
case of the Interim Financial Statements, to normal year-end adjustments.
(b) The Interim Balance Sheet reflects all liabilities of the
Partnership and the Subsidiaries, whether absolute, accrued or contingent, as of
the date thereof required to be reflected or disclosed in a balance sheet (or
the notes thereto) prepared in accordance with GAAP. Neither Partnership nor any
of the Subsidiaries has any liabilities that are not reflected in the Interim
Balance Sheet (or the notes thereto) of the type which would be required to be
disclosed in the financial statements of the Partnership and the Subsidiaries
under GAAP other than current liabilities incurred since the date thereof in the
ordinary course of business, consistent with past practice.
5.9 Inventory.
(a) All inventory of the Partnership and the Subsidiaries is
valued on the Partnership's and Subsidiaries' consolidated books and records at
the cost thereof, and is usable or saleable in the ordinary course of business
consistent with past practice. A true and complete listing of all inventory of
the Partnership and the Subsidiaries as of a recent date has been delivered to
Buyer.
(b) There are no present design, construction, manufacturing
or other defects with respect to homes currently in inventory, including,
without limitation, defects presently existing as a result of soil conditions.
For this purpose, "homes currently in inventory" means homes as to which
construction commenced prior to the Closing Date, but as to which the settlement
for the sale thereof by the Partnership or any of the Subsidiaries shall not
have occurred as of such date. In no event shall the Sellers have any liability
with respect to design, construction, manufacturing or other defects of any
homes attributable to any acts or omissions of the Buyer or any employee, agent
or contractor of Buyer after the Closing Date. No homes have been sold by the
Partnership or any of the Subsidiaries under an understanding that such homes
would be returnable. Sellers will deliver at the Closing a schedule identifying
the "homes currently in inventory" as of the Closing Date and the state of
construction thereof.
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5.10 Warranties. Except for the standard warranty, a copy of which
is attached hereto as Schedule 5.10, (a) neither the Partnership nor any of the
Subsidiaries has made any express warranties to third parties with respect to
any homes manufactured, constructed or sold by the Partnership or any of the
Subsidiaries; and (b) there are no express warranties outstanding with respect
to any such homes or services. Neither Partnership nor any of the Subsidiaries
has modified or expanded its warranty obligations beyond those set forth in the
standard warranty. Notwithstanding the foregoing, the Partnership has on
occasion provided extended warranties to some purchasers; the amount required to
be expended to honor the extended portion of such warranties will not exceed
$50,000 in the aggregate.
5.11 Real Property.
(a) Except as disclosed in Schedule 5.11(a), the Owned Real
Property (as defined below), and the Land Contract Real Property (as defined
below) and the Option Real Property (as defined below) (collectively, the "Real
Property"): (i) have (or do as a matter of right) all necessary access to and
from public highways, streets, and roads, and no pending or threatened
proceeding that would reasonably be expected to limit or result in the
termination of such access; (ii) are (or may as a matter of right be) connected
to and serviced by public electric, public gas, public sewage, septic tanks,
permitted xxxxx, public storm drains, public telephone and public water
facilities, which facilities are operational and in compliance, in all material
respects, with all applicable Laws; and (iii) meet the conditions for the
issuance of a building permit for the construction and sale of residential
dwellings as proposed by the Partnership to and from public highways, streets
and roads. The Real Property constitutes all of the Real Property that the
Partnership owns or has a right to acquire. The status of the actual or proposed
development of the Real Property is set forth on Schedule 5.11(a). No Subsidiary
owns any Real Property.
(b) Schedule 5.11(b) attached hereto lists all of the real
property that the Partnership owns, and the Partnership is the sole owner of,
good, valid, marketable and insurable (at standard rates) fee simple title, to
all such real property, including, without limitation, all buildings,
structures, fixtures and improvements thereon (the "Owned Real Property"), in
each case free and clear of any restriction, mortgage, deed of trust, pledge,
lien, security interest, or other lien or encumbrance, except as set forth in
title insurance policies issued to the Partnership and made available to Buyer
(which policies are listed on Schedule 5.11(b)), and except for Permitted
Encumbrances created or permitted by the Partnership since its acquisition and
set forth on Schedule 5.11(b), or as disclosed in title reports and surveys made
available to Buyer and listed on Schedule 5.11(b). "Permitted Encumbrances"
means (i) liens for current state and local property taxes or assessments not
yet due or delinquent or which are being contested in good faith; (ii)
mechanics', carriers', workers', repairers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations as to which
there is no default on the part of the Partnership or any of the Subsidiaries;
(iii) exceptions shown on the surveys or other title records made available to
Buyer on or before the date hereof and which do not materially affect the
Partnership's or the Subsidiaries' proposed use of such Real Property; (iv)
mortgages on the landlord's interest in property leased to the Partnership or
any of the Subsidiaries; (v) liens and encumbrances reflected in the Balance
Sheet (or notes thereto or the Interim Balance Sheet); (vii) such other Liens,
imperfections in title, charges, rights of way, land use ordinances and zoning
plans which do not materially interfere with Partnership's or the Subsidiaries'
proposed use of such Real Property; and (viii) easements, restrictions,
covenants and declarations necessary to effect the development of such property,
none of which has an adverse effect on such property or the Partnership.
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(c) Schedule 5.11(c) attached hereto describes each lease
pursuant to which the Partnership or any of the Subsidiaries is the lessee with
respect to any real property (the "Leased Real Property"). The Partnership or
one of the Subsidiaries has all right, title and interest in all material
leasehold estates and other material rights purported to be granted to them by
the agreements, arrangements, contracts, commitments and leases listed and set
forth in Schedule 5.11(c).
(d) Schedule 5.11(d) attached hereto lists all written and
oral agreements, arrangements, contracts and commitments to which the
Partnership or any of the Subsidiaries is a party pursuant to which the
Partnership or any Subsidiary is obligated to purchase any developed or
undeveloped real property, whether or not subject to conditions precedent (the
"Land Contract Real Property") or possesses an option or other rights to acquire
any developed or undeveloped real property, whether or not subject to conditions
precedent (the "Option Real Property").
(e) Except as disclosed in Schedule 5.11(e), with respect to
any agreements, arrangements, contracts, covenants, conditions, deeds of trust,
rights-of-way, easements, mortgages, restrictions, surveys, title insurance
policies, and other documents granting the Partnership or any of its
Subsidiaries title to or an interest in or a right or an option to acquire real
property, no breach or event has occurred that, with or without the giving of
notice or the passage of time, would constitute a breach or event of default, by
the Partnership or any of its Subsidiaries, or any other party thereto.
(f) No Owned Real Property, Land Contract Real Property nor
Option Real Property is the subject of any condemnation, eminent domain, or
similar proceedings and no condemnation, eminent domain, or similar proceeding
is threatened with respect to the Real Property.
(g) Except as disclosed in Schedule 5.11(g), the buildings and
other improvements on the Owned Real Property, the Land Contract Real Property
and the Option Real Property, do not violate (i) any applicable Law, including
without limitation, any building, set-back, or zoning Law, or (ii) any
restrictive covenant affecting any such real property and conform in all
material respects to the appropriate governmental authority's subdivision
standards, except to the extent that any violation of, or nonconformance with an
applicable Law would not inhibit the Partnership's or any Subsidiary's ability
to construct and sell residential homes.
(h) There are no parties in possession of any portion of the
Owned Real Property, the Land Contract Real Property or the Option Real
Property, as lessees, tenants at sufferance, or to the Partnership's knowledge,
trespassers.
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(i) Except as set forth in Schedule 5.11(i), and except for
such items arising in the ordinary course, consistent with past practice
(provided that such items do not have a material adverse effect on the
Partnership or its business, assets, operations or condition, financial or
otherwise), there are no unpaid charges, debts, liabilities, claims or
obligations arising from the construction, occupancy, ownership, use, or
operation of the Owned Real Property, the Land Contract Real Property or the
Option Real Property. Except as set forth in Schedule 5.11(i), no Owned Real
Property, no Land Contract Real Property and no Option Real Property is subject
to any condition or obligation to any governmental entity or other person
requiring the Partnership or any transferee thereof to donate land, money or
other property or to make on-site or off-site public improvements.
(j) Except in the ordinary course of business: (i) neither the
Partnership nor or any of the Subsidiaries has any obligation to pay any
developer related charges or any charges or assessments for public improvements
made to Owned Real Property, the Land Contract Real Property or the Option Real
Property, including without limitation, any charges or assessments for
construction of sewer lines, water lines, storm drainage systems, electric
lines, natural gas lines, roads and curbs, and (ii) neither the Partnership nor
any of the Subsidiaries has any obligation to pay any developer related charges
or any charges or assessments for public improvements made to previously sold
homes, including without limitation, any charges or assessments for construction
of sewer lines, water lines, storm drainage systems, electric lines, natural gas
lines, roads and curbs.
(k) Except as disclosed in Schedule 5.11(k), there is no
moratorium applicable to any of the Owned Real Property, the Land Contract Real
Property or the Option Real Property on (i) the issuances of building permits
for the construction of houses or certificates of occupancy therefor, or (ii)
the purchase of sewer or water taps.
(l) Except as disclosed in Schedule 5.11(l), the Owned Real
Property, and, to the knowledge of the Partnership and the Subsidiaries, the
Land Contract Real Property and the Option Real Property (i) are not located
within a "critical," "preservation," "conservation" or similarly designated area
or habitat for endangered or threatened species or wetlands recognized by
environmental laws and (ii) the buildable area of the property does not contain
wetlands.
(m) Except as disclosed in Schedule 5.11(m), to the knowledge
of the Partnership and the Subsidiaries, none of the Owned Real Property or the
Sold Real Property, the Land Contract Real Property and the Option Real Property
is reclaimed xxxxx or swampland or has been used as a grave site, land fill or
for any industrial purpose whatsoever.
(n) Schedule 9.6 lists all of the tri-party agreements,
construction, maintenance, surety and other bonds which have been posted by the
Partnership or any of its Subsidiaries and the amount thereof. If and to the
extent the amount reasonably and necessarily required to be expended by the
Partnership after the Closing Date to complete the work at the Non-Active
Communities necessary to obtain a release of such agreements and bonds (or any
replacement arrangements obtained by the Buyer pursuant to Section 9.6) exceeds
$435,000 in the aggregate, such excess amount shall be deemed to be Damages for
which the Sellers and the Upstream Parties are responsible pursuant to the
indemnification provisions of Section 11.1, subject to the limitations set forth
in Section 11, and will first be applied to any remaining amounts in the
Warranty Holdback. In determining whether an expenditure is reasonable and
necessary within the meaning of the preceding sentence, Buyer will be held to
the same standard as if it were dealing with obligations for which it was not
entitled to indemnification or insurance. If it is anticipated that if such
expenditure will be more than $100,000 in the aggregate for any one community,
Buyer intends to consult with DB Homes with respect thereto, but in no event
shall any failure to so consult negate or impair any of the obligations of
Sellers or any of the rights of Buyer under this paragraph or any other
provision of this Agreement.
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5.12 Personal Property. The Partnership and the Subsidiaries own
all of the personal property reflected in the Interim Balance Sheet as owned by
them and all personal property acquired after December 31, 2003, except personal
property which has been sold or disposed of in the ordinary course of business
since such date, free and clear of any mortgage, deed of trust, pledge, lien,
security interest or other charge, claim or encumbrance.
5.13 List of Properties, Contracts, etc. Schedule 5.13 attached
hereto lists or describes the following:
(a) Each material Authorization;
(b) Each (i) material fictitious business name, tradename,
registered and unregistered trademark, service xxxx, patents, copyrights and
related application (together with the names Realen Homes, the "Intellectual
Property"), and (ii) material license and permit issued or granted by any person
relating to any of the foregoing; in each case owned, leased, used or held by,
granted to or licensed by the Partnership or any of the Subsidiaries as either
licensor or licensee, together with all other interests therein granted by the
Partnership or any of the Subsidiaries to any other person, all agreements with
respect to any of the foregoing to which the Partnership or any of the
Subsidiaries is a party and any lien, encumbrance, adverse claim, opposition or
claim of infringement with respect to any of the foregoing;
(c) Each outstanding loan or advance (excluding certain
advances to employees for ordinary and necessary business expenses made in the
ordinary course of business) by the Partnership or any of the Subsidiaries to
any person (including any Seller or Upstream Party and any officer, director or
employee of the Partnership or any of the Subsidiaries);
(d) Each contract, agreement, lease, purchase order or other
commitment involving the performance of services or delivery of goods or
materials by or to the Partnership or any of the Subsidiaries (excluding
contracts for the sale of homes, land acquisition and option contracts listed in
Schedule 5.11(d), and construction and development contracts entered into in the
ordinary course of business, but including listing agreements) involving
payments of more than $50,000 over its remaining term and which is not
terminable by the Partnership or any of the Subsidiaries on 90 days' notice,
without premium or penalty (each, a "Material Contract");
(e) Each capital project currently undertaken or which has
been approved by the Partnership or any of the Subsidiaries (in each case
outside the ordinary course of business) involving an estimated expenditure of
more than $50,000 and all agreements, contracts, purchase orders or commitments
with respect thereto;
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(f) Each contract, agreement, lease or commitment, to which
the Partnership or any of the Subsidiaries is a party or is otherwise bound
providing for payments (contingent or otherwise) to or by any person or entity
based on sales, purchases or profits;
(g) Each form of contract, agreement, lease or commitment
currently used by the Partnership or any of the Subsidiaries as a standard form
in the ordinary course of business;
(h) Each policy and binder of insurance (including without
limitation, property, casualty, liability, life, health, accident, workers'
compensation and disability insurance and bonding arrangements) owned by, or
maintained for the benefit of, or respecting which any premiums are paid
directly or indirectly by the Partnership or any of the Subsidiaries;
(i) Each outstanding power-of-attorney or similar power
granted by the Partnership or any of the Subsidiaries for any purpose whatsoever
(other than in connection with financing, bonding and similar arrangements);
(j) Each evidence of indebtedness, note, advance, guaranty or
letter of credit entered into, issued or to be issued by the Partnership or any
of the Subsidiaries, and all loan and other agreements relating thereto;
(k) Each evidence of indebtedness, note, advance, guaranty or
letter of credit entered into, issued or to be issued to the Partnership or any
of the Subsidiaries, and all loan and other agreements relating thereto;
(l) Each deed of trust, pledge, lien, security interest or
other charge, claim and encumbrance of any nature relating to the Owned Real
Property or material personal property of the Partnership or any of the
Subsidiaries; and
(m) Each bank or other financial institution in which the
Partnership or any of the Subsidiaries has a deposit account, line of credit or
safe deposit box, the relevant account or other identifying number, and the
names of all persons authorized to act or deal in connection therewith.
Sellers have caused the Partnership and the Subsidiaries to make
available to Buyer true and complete copies of each agreement or other document
required to be disclosed on Schedule 5.13.
5.14 Contracts. Each Material Contract to which the Partnership or
any of the Subsidiaries is a party was made in the ordinary course of business,
is in full force and effect and is valid, binding and enforceable against the
parties thereto in accordance with its terms. Neither, the Partnership nor any
Subsidiary has received any written notice of cancellation of, or any written
notice of a material dispute under, any Material Contract. To the Partnership's
each applicable Subsidiary's knowledge, no other party is in default in any
material respect under any Material Contract, and there has not occurred any
event which (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute such a default. The Partnership
and each applicable Subsidiary has performed in all material respects all
obligations required to be performed by it under each such contract, agreement
and commitment, and no condition exists or event has occurred which with notice
or lapse of time would constitute a material default or a basis for delay or
non-performance by the Partnership or each applicable Subsidiary.
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5.15 Insurance.
(a) The insurance policies listed on Schedule 5.13 are valid
and enforceable policies, no claims have been made against any of such insurance
policies other than in the ordinary course of business, and, except as disclosed
in Schedule 5.13 such insurance policies will not be affected by, terminate or
lapse by reason of the transactions contemplated by this Agreement.
(b) Neither the Partnership nor any of the Subsidiaries has
received any written notice of cancellation or modification of any policy or
binder of insurance identified in Schedule 5.13.
5.16 Previously Constructed Homes.
(a) All of the homes previously Constructed by the Partnership
and any of the Subsidiaries were of a quality salable in the ordinary course of
business, consistent with the practices and standards of the home building
industry and in substantial compliance with all Laws, including without
limitation, any building, setback, subdivision or zoning Law, consistent with
the practices followed in homebuilding industry in the markets in which the
Partnership and any of the Subsidiaries operate. As used in this Agreement
"Constructed" means homes for which construction has been completed and a
certificate of occupancy has been issued.
(b) Schedule 5.16 attached hereto lists all repairs made after
sale of Constructed homes by or on behalf of the Partnership and any of the
Subsidiaries during the 36 month period ended April 30, 2004, which involved a
material recurring problem (the same problem occurring in more than five (5)
homes).
(c) There are no design, construction, manufacturing or other
defects with respect to homes previously Constructed by the Partnership or any
of the Subsidiaries, which homes are sold on or before the Closing Date as to
which the Warranty Reserve (to the extent applicable) is insufficient.
5.17 Suppliers. Schedule 5.17 attached hereto lists the names of
the ten suppliers from whom the Partnership and each of the Subsidiaries made
the most purchases during fiscal 2002 and fiscal 2003 and the aggregate
expenditures attributable to each in each such year. No supplier that accounted
for more than $50,000 of the purchases of the Partnership or each of the
Subsidiaries during the twelve month period ended April 30, 2004, has terminated
or materially reduced, or has given notice that it intends to terminate or
materially reduce, the amount of business done with the Partnership or any
applicable Subsidiary.
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5.18 Taxes.
(a) All federal, state, local and foreign Returns (as defined
herein) relating to Taxes (as defined herein), or extensions relating thereto,
required to be filed on or before the Closing Date by or with respect to the
Partnership and each of the Subsidiaries have been or will be timely filed and
are or will be true, correct and complete. For purposes of this Agreement,
"Return" and/or "Returns" shall mean all reports, estimates, information
statements and returns of any nature, including amended versions of any of the
foregoing, relating to or required to be filed in connection with any Taxes
pursuant to the statutes or regulations of any federal, state, local or foreign
government taxing authority. "Tax" or "Taxes" shall mean all federal, state
(which includes for this purpose the District of Columbia), local and foreign
(which includes for this purpose possessions, territories and protectorates of
the United States of America) income, profits, capital, franchise, sales, use,
payroll, premium, occupancy, real or personal property, ad valorem, severance,
excise, withholding, customs, unemployment, transfer and other taxes, or other
kind of tax, assessment, levy, imputation or other governmental change in the
nature of a tax (no matter how denominated), including interest, additions to
tax and penalties.
(b) All Taxes imposed upon the Partnership and each of the
Subsidiaries due with respect to taxable periods ending on or prior to Closing
Date have been fully and timely paid to the appropriate governmental authority
or properly deposited as required by law, or, in the case of Taxes not yet due,
fully provided for on the books of account of the Partnership and the
Subsidiaries and where appropriate in the Interim Balance Sheet, and any later
financial statement provided by Sellers to Buyer; and there are no levies,
liens, or other encumbrances relating to Taxes existing, threatened or pending
with respect to any asset of the Partnership or any of the Subsidiaries.
(c) No claim of deficiency has been asserted or threatened by
the IRS or any other taxing authority (or is currently pending), no taxing
authority has begun or threatened to begin any audit or investigation of any
Returns filed by the Partnership or any of the Subsidiaries referred to above,
or requested information with regard thereto or any other Taxes that may be owed
by the Partnership or any of the Subsidiaries or with respect to Returns filed
by the Partnership and any of the Subsidiaries and no waivers of statutes of
limitations have been given with respect to any Returns previously filed by the
Partnership and any of the Subsidiaries. In the event any of the Partnership,
the Subsidiaries or the Sellers become aware of any such asserted or threatened
deficiency or assessment, or any investigation or audit, after the date hereof,
it or they will immediately notify Buyer and will diligently defend any such
action.
(d) Buyer has been furnished complete copies of all Returns
filed by the Partnership and any of the Subsidiaries for all periods beginning
on or after July 1, 1999. No deficiencies have been asserted in writing against
the Partnership or the Subsidiaries or partners in the Partnership or any of the
Subsidiaries or, with respect to deficiencies as to which the Partnership or any
of the Subsidiaries or partners in the Partnership or any of the Subsidiaries
received written notice, are currently under examination by the IRS or by other
taxing authorities with respect to all federal, state, local and foreign income,
franchise and sales and use tax Returns of or with respect to the Partnership or
any of the Subsidiaries. All deficiencies asserted or assessments made as a
result of such examinations have been fully paid, and there are no other unpaid
deficiencies asserted or assessments made by any taxing authority against the
Partnership or any of the Subsidiaries. Whenever reference is made in this
section to a partner in the Partnership or any of the Subsidiaries, the
reference is only with respect to the activities or assets of the Partnership
and such applicable Subsidiaries.
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(e) Neither the Partnership nor any of the Subsidiaries is
required to file a foreign Return and neither the Partnership nor any of the
Subsidiaries nor any of the Partners or owners in the Partnership nor any of the
Subsidiaries (or partners therein) is a foreign person for purposes of Section
1445 or any other sections of the Code.
(f) Realen GP and DB Homes are the sole partners in
Partnership. DB Homes is the sole member in Realen GP. Neither Realen GP nor the
Partnership has ever elected to be treated as a corporation or an association
taxable as a corporation for federal income tax purposes, or been so treated.
Accordingly, for federal income tax purposes the Sellers have properly treated
Partnership as a disregarded entity and DB Homes as owning all assets described
in Section 3.
5.19 Employee Benefits.
(a) Schedule 5.19 attached hereto contains a complete and
correct list of all Employee Benefit Plans (as defined below). The Partnership
and each of the Subsidiaries has made available to Buyer, with respect to each
such Employee Benefit Plan, true, complete and correct copies of the following
(to the extent applicable): all governing plan documents, handbooks, manuals,
collective bargaining agreements and similar documents governing employment
policies, practices and procedures; the most recent summary plan descriptions
and any subsequent summaries of material modifications for each Employee Benefit
Plan subject to Title I of ERISA; Forms series 5500 as filed with the IRS or the
U.S. Department of Labor ("DOL") for the three most recent plan years; the most
recent report of the enrolled actuary for all defined benefit plans, funded
welfare plans or other plans requiring actuarial valuation; all trust agreements
with respect to any Employee Benefit Plans; plan contracts with service
providers or with insurers providing benefits for participants or beneficiaries
under any Employee Benefit Plan or liability insurance for fiduciaries and other
parties in interest or bonding; most recent annual audit and accounting of plan
assets for all funded plans; and the most recent IRS determination letter for
each Employee Benefit Plan that is intended to be qualified under Code section
401(a). As used herein, "ERISA Affiliate" shall refer to any trade or business,
whether or not incorporated, under common control with the Partnership or any of
the Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the
Code. "Employee Benefit Plan" shall refer to any employee benefit plans,
arrangements, commitments and payroll practices, including, but not limited to,
plan and arrangements that are treated employee benefit plans as that term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), and including, without limitation, sick leave, vacation
pay, severance pay, salary continuation for disability, consulting or other
compensation arrangements, retirement, deferred compensation, bonus, incentive
compensation, stock purchase, stock option, health including hospitalization,
medical and dental, life insurance and scholarship programs maintained for the
benefit of any present or former employees of the Partnership or any of the
Subsidiaries or any ERISA Affiliate or to which the Partnership or any of the
Subsidiaries or any ERISA Affiliate has contributed or is or was within the last
three years obligated to make payments.
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(b) With respect to each Employee Benefit Plan required to be
listed on Schedule 5.19: (i) each Employee Benefit Plan has been administered in
substantial compliance with its terms, and is in compliance in all material
respects with the applicable provisions of ERISA, the Code and all other
applicable Laws (including, without limitation, funding, filing, termination,
reporting and disclosure and continuation coverage obligations pursuant to Title
V of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA")); (ii) the Partnership and each of the Subsidiaries has made or
provided for all contributions required under the terms of such Plans; (iii) no
Employee Benefit Plan that is an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA has been the subject of a
"reportable event" (as defined in Section 4043 of ERISA) and there have been no
"prohibited transactions" (as set forth in Section 4975 of the Code or in Part 4
of Subtitle B of Title I of ERISA) with respect to any Employee Benefit Plan;
(iv) there are and during the past three years there have been no inquiries,
proceedings, claims or suits pending or threatened by any governmental agency or
authority or by any participant or beneficiary (other than claims for benefits
made in the ordinary course) against any of the Employee Benefit Plans, the
assets of any of the trusts under such Plans or the Plan sponsor or the Plan
administrator, or against any fiduciary of any of such Employee Benefit Plans;
(v) the actuarial present value of accumulated benefits (both vested and
unvested) of each of the Employee Benefit Plans which are defined benefit plans,
are fully funded in accordance with the actuarial assumptions used by the
Pension Benefit Guaranty Corporation ("PBGC") to determine the level of funding
required in the event of the termination of such Plan; (vi) each Employee
Benefit Plan which is intended to be "qualified" within the meaning of Section
401(a) of the Code is and has from its inception been so qualified, and any
trust created pursuant to any such Employee Benefit Plan is exempt from federal
income tax under Section 401(a) of the Code and the IRS has issued each such
Plan a favorable determination letter which is currently applicable; and (vii)
neither the Partnership nor any of the Subsidiaries nor any ERISA Affiliate is
aware of any circumstance or event which would jeopardize the tax-qualified
status of any such Employee Benefit Plan or the tax-exempt status of any related
trust, or which would cause the imposition of any liability, penalty or tax
under ERISA or the Code with respect to any Employee Benefit Plan.
(c) Neither the Partnership or any of the Subsidiaries nor any
ERISA Affiliate maintains or has ever maintained or been obligated to contribute
to a "Multiemployer Plan" (as such term is defined by Section 4001(a)(3) of
ERISA).
(d) With respect to each Employee Benefit Plan maintained by
the Partnership or any Subsidiary or any ERISA Affiliate: (i) no unsatisfied
liabilities to participants, the IRS, the DOL, the PBGC or to any other person
or entity have been incurred as a result of the termination of any Employee
Benefit Plan; (ii) no Employee Benefit Plan, which is subject to the minimum
funding requirements of Part 3 of subtitle B of Title I of ERISA or subject to
Section 412 of the Code, has incurred any "accumulated funding deficiency"
within the meaning of Section 302 of ERISA or Section 412 of the Code and there
has been no waived funding deficiency within the meaning of Section 303 of ERISA
or Section 412 of the Code; (iii) there has been no event with respect to an
Employee Benefit Plan which would require disclosure under Sections 4062(c),
4063(a) or 4041(e) of ERISA.
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(e) All reports and information required to be filed with the
DOL, IRS and PBGC with respect to each Employee Benefit Plan have been filed and
all annual reports (including Form 5500 series) of such Plans were certified
without qualification by each Plan's accountants and actuaries.
(f) Any bonding required under ERISA with respect to any
Employee Benefit Plan has been obtained and is in full force and effect and no
funds held by or under the control of the Partnership are plan assets.
(g) Neither the Partnership nor any Subsidiary nor any ERISA
Affiliate maintains any retiree life and/or retiree health insurance plans which
provide for continuing benefits or coverage for any employee or any beneficiary
of an employee after such employee's termination of employment (other than such
continuation of health coverage for a retiree as may be required to be provided
pursuant to COBRA).
(h) Except as disclosed in Schedule 5.19(h) or Schedule 5.21,
the consummation of the transactions contemplated by this Agreement will not,
alone or together with any other event, (i) entitle any person to severance pay
or any other similar payment, (ii) accelerate the time of payment or vesting, or
increase the amount of compensation due to any such employee, or (iii) result in
any liability under Title IV of ERISA or otherwise.
5.20 Labor Matters.
(a) (i) No application or petition for certification of a
collective bargaining agent is pending and none of the employees of the
Partnership or any of the Subsidiaries are, or since July 1, 1999, have been,
represented by any union or other bargaining representative; (ii) since July 1,
1999, to the Partnership's knowledge, no union has attempted to organize any
group of the Partnership's employees and no group of the Partnership's or any of
the Subsidiaries' employees has sought to organize themselves into a union or
similar organization for the purpose of collective bargaining; (iii) since July
1, 1999, there has not been and there is not currently pending any labor
arbitration or proceeding in respect of the grievance of any employee, any
application, charge or complaint filed by any employee or union with the
National Labor Relations Board or any comparable state or local agency, any
strike, slowdown, picketing or work stoppage by any employees at any facility of
the Partnership or any of the Subsidiaries, any lockout of any such employees;
(iv) no agreement restricts the Partnership or any of the Subsidiaries from
relocating, closing or terminating any of its operations or facilities or any
portion thereof; and (v) no such agreement, action, proceeding or occurrence has
been threatened in writing by any person. Notwithstanding the foregoing, one
employee of Radnor Carpentry, Inc. is represented by a labor union.
(b) Neither the Partnership nor any Subsidiary has been cited
for violations of the Occupational Safety and Health Act of 1970, 29 U.S.C. sec.
651 et seq. ("OSHA"), any regulation promulgated pursuant to OSHA or any other
Law establishing standards of workplace safety, or paid any fines or penalties
with respect to any such citation.
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(c) Schedule 5.20(c) attached hereto contains true and correct
copies of each OSHA record keeping injury/illness report, loss and summary
completed and maintained by the Partnership and each Subsidiary at its work
establishments for the past three (3) years.
5.21 Officers and Employees. Schedule 5.21 attached hereto sets
forth the following information for each officer and employee of the Partnership
and each Subsidiary and each consultant and independent contractor regularly
retained, in each case whose aggregate compensation for the fiscal year ended
December 31, 2003 exceeded $50,000 or whose current aggregate annual rate of
compensation exceeds such amount (including each such person on leave or layoff
status): employer; employee name and job title; current annual rate of
compensation (identifying bonuses separately) and any change in compensation
since the date of the Balance Sheet; accrued vacation pay and any automobile
leased or owned by the Partnership or each Subsidiary primarily for use by any
of the foregoing persons. None of the Partnership's or any Subsidiary's
employees or officers is a party to, or is otherwise bound by, any agreement or
arrangement with any person or entity other than the Partnership or each
Subsidiary which limits or adversely affects the performance of his duties, the
ability of the Partnership or any Subsidiary to conduct their businesses, or his
freedom to engage in any of the businesses conducted by the Partnership or any
Subsidiary. Schedule 5.21 lists each employment, severance or change of control
agreement to which the Partnership or any Subsidiary is a party or is otherwise
bound.
5.22 Affiliate Agreements. Except as set forth on Schedule 5.22
attached hereto, there are no, and since July 1, 1999 there have not been any,
agreements or transactions between the Partnership or any Subsidiary on the one
hand and any Seller or Upstream Party or any present or former director,
shareholder, partner, officer or employee of the Partnership or any Subsidiary
or any Seller or Upstream Party or any member of such person's immediate family
(a "Related Party") providing for the furnishing of services (other than as an
employee) by, rental of any assets from or to, or otherwise requiring payments
to any Related Party. Except as set forth on Schedule 5.22 attached hereto, no
such Related Party has, or since July 1, 1999 has had, any interest in any
material property (real or personal, tangible or intangible) sold to, purchased
by or otherwise used in or pertaining to the business of the Partnership or any
Subsidiary, or any direct or indirect interest in any person or entity which has
had business dealings or a financial interest in any transaction with the
Partnership or any Subsidiary or which is in competition with any business of
the Partnership or any Subsidiary. Except as set forth on Schedule 5.22 attached
hereto, all agreements between the Partnership or any Subsidiary and all Related
Parties are terminable by the Partnership or Subsidiary upon 30 days' notice or
less, without payment of penalty or premium of any kind.
5.23 Environmental Matters. Except as disclosed in Schedule 5.23:
(a) The businesses and operations of the Partnership and the
Subsidiaries are and always have been operated in compliance in all respects
with all applicable Environmental Laws (as defined below); provided that, with
respect to periods prior to the acquisition or lease, or after the disposition,
of any Real Property by the Partnership or any Subsidiary, the foregoing
representation and warranty is given only to the knowledge of any of the
Sellers.
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(b) There are no conditions on, about, beneath or arising from
any currently Owned Real Property ("Current Real Property"), which are
reasonably expected, under any applicable Environmental Laws, (A) to give rise
to any liability or the imposition of any statutory lien, or (B) to require any
"Response," "Removal" or "Remedial Action" (as those terms are defined below);
(c) At the time of disposition thereof, there were no
conditions on, about, beneath or arising from any real property which was, but
is no longer, owned, used or leased to or by the Partnership or any Subsidiary,
including without limitation real property that includes homes which were
previously constructed and/or sold by the Partnership or any Subsidiary ("Former
Real Property") which resulted from action taken by the Partnership, any
Subsidiary or, to the knowledge of any Seller or Upstream Party, any other party
during the Partnership's period of ownership, use or lease and are reasonably
expected, under any applicable Environmental Laws, (A) to give rise to any
liability or the imposition of any statutory lien, or (B) to require any
"Response," "Removal" or "Remedial Action" (as defined below) pursuant to
applicable Environmental Law;
(d) Neither the Partnership nor any Subsidiary has received
any notification of a "Release" or threat of a "Release of a "Hazardous
Substance" (as defined below) with respect to any Current Real Property or
Former Real Property); provided that, with respect to periods prior to the
acquisition or lease, or after the disposition, of any Real Property by the
Partnership or any Subsidiary, the foregoing representation and warranty is
given only to the knowledge of any of the Sellers;
(e) No Hazardous Substances have been generated, processed,
treated, stored, released, discharged or disposed of by the Partnership or any
Subsidiary or, to the Partnership's knowledge, any third party on, about or
beneath any Current Real Property except in compliance with applicable
Environmental Laws; and to the knowledge of any of the Sellers, no Hazardous
Substances are present on, about or beneath any Current Real Property at levels
exceeding any applicable remediation standard established to any Environmental
Law.
(f) During the Partnership's or any Subsidiary's ownership,
use or lease of the Former Real Property, no Hazardous Substances were
generated, processed, treated, released, discharged or disposed of by the
Partnership or Subsidiary or to the Partnership's or Subsidiary's knowledge, any
third party on, about or beneath any Former Real Property except in compliance
with applicable Environmental Laws;
(g) There are, and to the knowledge of any of the Sellers,
have been no above or underground storage tanks, asbestos containing materials,
lead-based paint, at levels which can reasonably be expected to cause adverse
effects to persons or property, or transformers containing or contaminated with
PCB's on, about or beneath the Current Real Property.
(h) There has not been:
(i) any claim, demand, investigation, enforcement action,
Response, Removal, Remedial Action, statutory lien or other governmental or
regulatory action instituted or threatened in writing or to the knowledge of any
Seller or Upstream Party, threatened in any manner, against the Partnership or
any Subsidiary or the Current, or Former Real Property pursuant to any of the
Environmental Laws;
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(ii) any written or, to the knowledge of any Seller or
Upstream Party, any other claim, demand, notice or suit, made or threatened by
any person against the Partnership or any Subsidiary, the Current Real Property
or the Former Real Property claiming (1) damage, loss or injury resulting from,
or claimed to result from, any Hazardous Substance on, about, beneath or arising
from the Current or Former Real Property or (2) any alleged violation of the
Environmental Laws by the Partnership or any Subsidiary; or
(iii) any written or, to the knowledge of any Seller or
any Upstream Party, any other communication to or from any governmental or
regulatory agency arising out of or in connection with Hazardous Substances on,
about, beneath, arising from or generated at the Current Real Property or Former
Real Property, including without limitation, any notice of violation, citation,
complaint, order, directive, request for information or response thereto, notice
letter, demand letter or compliance schedule which is likely to involve any
liability or expenditure by the Partnership or any Subsidiary.
(i) None of the Current Real Property contains, and none of
the Former Real Property contained at the time it was sold by the Partnership, a
level of radon above action levels of the United States Environmental Protection
Agency; provided that, with respect to periods prior to the acquisition or
lease, or after the disposition, of any Real Property by the Partnership or any
Subsidiary, the foregoing representation and warranty is given only to the
knowledge of any Seller or Upstream Party.
(j) Neither the Partnership nor any Subsidiary has arranged
for transportation or disposal of any Hazardous Substances at any site listed or
formally proposed for listing on the National Priority List promulgated pursuant
to "CERCLA" (as defined below) or to any site listed on any other federal or
state list of sites requiring or recommended for investigation or clean-up. None
of the Current Real Property or Former Real Property is listed on the National
Priorities List or any other federal or state list of sites requiring or
recommended for investigation or clean up.
(k) [Intentionally omitted.]
(l) To the knowledge of any Seller or Upstream Party, none of
the Current Real Property, or any portion thereof, has been used to dispose or
treat wastes or for any industrial purpose whatsoever. None of the Current Real
Property, or any portion thereof, is currently being used or, to the knowledge
of any Seller or Upstream Party, has been used to dispose or treat wastes or for
any industrial purpose whatsoever.
(m) To the knowledge of any Seller or Upstream Party, neither
the Current Real Property, nor the Former Real Property, contains or contained
the presence of mold, fungus or other microbial matter (hereafter "Mold") at
levels, in amounts or in a manner, that could reasonably be expected to cause
adverse effects to persons or property or a liability to the Partnership. To the
knowledge of any Seller or Upstream Party, there are no and have been no claims,
suits, demands or notices made, filed or threatened against the Partnership or
any Subsidiary with respect to Mold.
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(n) As used in this Agreement:
(i) the term "Environmental Laws" means all applicable
federal, state and local Laws relating to pollution or contamination of the
environment, including but not limited to CERCLA and XXXX (as defined in clause
(ii) below), or otherwise relating to emissions, discharges, releases or
threatened releases of Hazardous Substances or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
(ii) the terms "Release," "Response," "Removal" and
"Remedial Action" shall have the meanings ascribed to them in Sections
101(23)-101(25) of the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act ("XXXX"), 42 U.S.C. ss.ss.9601(23)-9601(25).
(iii) The term "Hazardous Substances" or "Hazardous
Substance" shall mean any substance regulated under any of the Environmental
Laws including, without limitation, any substance which is: (A) petroleum,
asbestos or asbestos-containing material, or polychlorinated biphenyls; (B)
defined, designated or listed as a "Hazardous Substance" pursuant to Sections
307 and 311 of the Clean Water Act, 33 U.S.C. ss. 1317, 1321, Section 101(14) of
CERCLA, 42 U.S.C. ss. 9601; (C) listed in the United States Department of
Transportation Hazardous Material Tables, 49 C.F.R. ss. 172.101; (D) defined,
designated or listed as a "Hazardous Waste" under Section 1004(5) of the
Resource and Conservation and Recovery Act, 42 U.S.C. 6903(5).
5.24 Absence of Certain Changes and Events.
(a) Except as set forth on Schedule 5.24 attached hereto,
since January 1, 2004, the Partnership and each Subsidiary has conducted its
business only in the usual and ordinary course consistent with past practice and
there has not been any:
(i) declaration or payment of any dividend or other
distribution or payment in respect of the Interests of the Partnership or any
Subsidiary;
(ii) payment by the Partnership or any Subsidiary of any
bonus or increase of any compensation payable to any officer or, except in the
ordinary course of business consistent with past practice, employee or entry
into (or amendment of) any employment, severance or similar agreement with any
officer or employee;
(iii) adoption of or change in any Employee Benefit Plan
or labor policy;
(iv) damage, destruction or loss to any material asset or
property of the Partnership or any Subsidiary, whether or not covered by
insurance;
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(v) except in the ordinary course of business, entry into
any agreement involving payments in excess of $50,000;
(vi) sale (other than sales of inventory in the ordinary
course of business), assignment, conveyance, lease, or other disposition of any
material asset or property of the Partnership or any Subsidiary or mortgage,
pledge or imposition of any lien, on any material asset or property of the
Partnership or any Subsidiary;
(vii) discharge or satisfaction of any lien, claim or
encumbrance, other than in the ordinary course of business consistent with past
practice;
(viii) write-down or write-off of the value of any asset
except for write-downs and write-offs in the ordinary course of business
consistent with past practice and at a rate no greater than that during the
twelve months ended December 31, 2003, or any cancellation or waiver of any
other claim or right with a value in the aggregate in excess of $10,000;
(ix) material change in the business or operations of the
Partnership or any Subsidiary or in the manner of conducting the same or entry
by the Partnership or any Subsidiary into any material transaction, other than
in the ordinary course of business consistent with past practice;
(x) change in the accounting methods, principles or
practices followed by the Partnership or any Subsidiary, except as required by
GAAP, or any change in any of the assumptions underlying, or methods of
calculating, any bad debt, contingency or other reserve; or
(xi) agreement, whether or not in writing, to do any of
the foregoing by the Partnership or any Subsidiary.
(b) Since the date of the Balance Sheet, there has not been
any material adverse change in the business, operations, properties, assets, or
condition (financial or otherwise) of the Partnership or any Subsidiary.
5.25 Books and Records.
(a) The copies of the certificate of formation of the
Partnership and such comparable documents of each Subsidiary, as certified by
the Secretary of State of its jurisdiction of incorporation, and of its bylaws
(or of their other comparable organizational documents), as certified by its
secretary, which have been made available to Buyer are true, complete and
correct and are in full force and effect as of the date hereof.
(b) The partnership interest records of the Partnership and
each Subsidiary fairly and accurately reflect the record ownership of all of its
outstanding partnership interest. Complete and accurate copies, as of the date
hereof, of all minute books and organizational records of the Partnership and
each Subsidiary have been made available to Buyer.
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5.26 Brokers. No person acting on behalf of the Partnership or any
Subsidiary, any Related Party or any of their affiliates or under the authority
of any of the foregoing is or will be entitled to any brokers' or finders' fee
or any other commission or similar fee, directly or indirectly, from any of such
parties in connection with any of the transactions contemplated by this
Agreement, except for JMP, which fees or commissions shall be paid in accordance
with Section 13.5.
5.27 Accounts Receivable. Each of the accounts receivable of the
Partnership or any Subsidiary reflected on the Balance Sheet or arising
thereafter constituted at the Balance Sheet date or as of the date they arose,
respectively, a valid claim in the full amount thereof against the debtor
charged therewith on the books of the Partnership or Subsidiary and was acquired
in the ordinary course of the Partnership's or Subsidiary's business. No account
debtor has any valid set-off, deduction or defense with respect thereto and no
account debtor has asserted any such set-off, deduction or defense. No reserve
for doubtful accounts is required to be reflected on the Balance Sheet in
accordance with GAAP applied on a basis consistent with prior periods or is
believed by the Partnership, any Subsidiary, the Sellers and the Upstream
Parties to be required for the purpose as of the date hereof with respect to the
accounts receivable as of the date of the Balance Sheet, or is believed by them
to be required for a balance sheet of the Partnership or any Subsidiary prepared
in accordance with GAAP on a basis consistent with past periods as of the
Closing Date.
5.28 Title Insurance Agency. On or before the Closing Date,
Sellers shall have caused DB Homes to acquire all of the membership interests in
Realen Settlement Services, LLC for no consideration, and neither the
Partnership nor any Subsidiary will be liable for any of its obligations.
5.29 Additional Capital Contributions. Neither the Partnership nor
any Subsidiary has any obligation to make any additional capital contributions,
loans, advances or any other liability, whether fixed, contingent or otherwise,
to any entity.
5.30 Internal Controls. The Partnership and each of its
Subsidiaries maintains accurate books and records reflecting its assets and
liabilities and maintains proper and adequate internal accounting controls which
provide assurance that (i) transactions are executed with the authorization of
the management of the Partnership or such Subsidiary; (ii) transactions are
recorded as necessary to permit preparation of the consolidated financial
statements of the Partnership and to maintain accountability for the
Partnership's and Subsidiaries' consolidated assets; (iii) access to the
Partnership's and any Subsidiary's assets is permitted only in accordance with
the authorization of the Partnership's and such Subsidiary's management; (iv)
the reporting of the Partnership's and any Subsidiary's assets are compared with
existing assets at regular intervals; and (v) accounts, notes and other
receivables and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a timely basis.
5.31 Disclosure. All documents and other papers delivered by or on
behalf of the Partnership and the Subsidiaries or Sellers in connection with the
transactions contemplated by this Agreement are accurate and complete in all
material respects and are authentic. None of the representations and warranties
of the Sellers made in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
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5.32 Net Worth. The net worth of the Partnership (computed in
accordance with GAAP) as of June 30, 2004 was no less than $35,000,000.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as of the date of this
Agreement and of the Closing Date as follows:
6.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all necessary corporate power and authority to carry on its
business as presently conducted, to own and lease the assets which it owns and
leases and to perform all of its obligations under each agreement and instrument
by which it is bound.
6.2 Power and Authorization. Buyer has full legal right, power and
authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Buyer Transaction Documents")
required to be delivered by it prior to or at the Closing. The execution,
delivery and performance by Buyer of this Agreement and the Buyer Transaction
Documents have been duly authorized by all necessary corporate action. This
Agreement has been duly and validly executed and delivered by Buyer and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, except as limited by applicable bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally. When executed and delivered as contemplated herein, each of the Buyer
Transaction Documents shall constitute the legal, valid and binding obligation
of Buyer, enforceable against it in accordance with its terms, except as limited
by applicable bankruptcy, reorganization, insolvency, or similar laws affecting
creditors rights generally.
6.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement
and the Buyer Transaction Documents do not and will not (with or without the
passage of time or the giving of notice):
(i) violate or conflict with Buyer's certificate of
incorporation or bylaws or any Law binding upon Buyer; or
(ii) violate or conflict with, result in a breach of, or
constitute a default or otherwise cause any loss of benefit under any material
agreement or other material obligation to which Buyer is a party.
(b) Each consent or approval of, or registration,
notification, filing and/or declaration with, any court, government or
governmental agency or instrumentality, creditor, lessor or other person
required to be given or made by Buyer in connection with the execution, delivery
and performance of this Agreement and the other agreements and instruments
contemplated herein is described on Schedule 6.3(b).
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(c) There are no judicial, administrative or other
governmental actions, proceedings or investigations pending or, to the knowledge
of Buyer, threatened, that question any of the transactions contemplated by, or
the validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, could reasonably be
expected to have a material adverse effect upon the ability of Buyer to enter
into or perform its obligations under this Agreement or any of the other
agreements or instruments contemplated hereby. Buyer has not received any
request from any governmental agency or instrumentality for information with
respect to the transactions contemplated hereby.
6.4 Brokers. No person acting on behalf of Buyer or any of its
affiliates or under the authority of any of the foregoing is or will be entitled
to any brokers' or finders' fee or any other commission or similar fee, directly
or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement.
6.5 Investment Purpose. Buyer is an "accredited investor," as such
term is defined in Regulation D of the Securities Act of 1933, as amended, and
will acquire the Interests for its own account and not with a view to a sale or
distribution thereof in violation of any securities laws. Buyer has the present
intention of holding the Interests for investment purposes.
SECTION 7. OBLIGATIONS OF THE PARTIES
7.1 Conduct of Business Pending Closing. Except as contemplated
herein, between the date hereof and the Closing, without the prior written
consent of Buyer, Sellers and the Upstream Parties will cause the Partnership
and each Subsidiary to:
(a) maintain its legal existence, pay and discharge all debts,
liabilities and obligations as they become due, operate in the ordinary course
in a manner, including marketing and sales activities, consistent with past
practice, and the provisions of this Agreement and in compliance with all
material respects with all applicable Laws;
(b) maintain its facilities and assets in the same state of
repair, order and condition as they were on the date hereof, reasonable wear and
tear excepted;
(c) maintain its books and records in accordance with past
practice, and maintain in full force and effect all Authorizations and all
insurance policies and binders;
(d) use reasonable efforts to preserve intact its present
business organization and maintain their relations and goodwill with the
suppliers, customers, employees and others having a business relationship with
it any of them;
(e) promptly advise Buyer of the written threat or
commencement against the Partnership, any Subsidiary or any Seller of any
action, suit, proceeding, arbitration or investigation known to any Seller by,
against or affecting the Partnership, any Subsidiary or any of their respective
operations or assets, or which challenges the validity of this Agreement or any
action taken or to be taken in connection with this Agreement or the ability of
the Partnership, any Subsidiary or any Seller to consummate the transactions
contemplated herein or therein; and
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(f) promptly advise Buyer in the event it actually knows that
any representation or warranty of the Partnership, any Subsidiary or the Sellers
or the Upstream Parties set forth in this Agreement is untrue in a material
respect.
7.2 Negative Covenants. Except as expressly provided herein,
between the date hereof and the Closing, without the prior written consent of
Buyer, Sellers shall not cause or permit the Partnership or any Subsidiary to:
(a) make any change in any of their authorized or issued
equity interests; grant any option or warrant or other right to purchase any of
their equity interests or other securities; issue or make any commitment to
issue any security by the Partnership or any Subsidiary, including any security
convertible into ownership interests; grant any registration rights; or
purchase, redeem, retire or make any other acquisition of any equity interests
or other securities of the Partnership or any Subsidiary; or, except as
contemplated by Section 5.28, declare or pay any dividend or other distribution
or payment in respect of ownership interests of the Partnership or any
Subsidiary;
(b) amend the certificate of limited partnership or
partnership agreement (or equivalent governing documents) of the Partnership or
any Subsidiary;
(c) fail to pay or discharge when due any liability or
obligation of the Partnership or any Subsidiary;
(d) enter into any agreement, commitment or transaction other
than in the ordinary course of business, consistent with past practice;
(e) enter into any contract, agreement, commitment or
arrangement with any party, other than contracts for the sale of merchandise or
services and contracts for the purchase of materials, services and supplies in
the ordinary and usual course of its business, and not waive any rights under,
amend, modify or terminate any such contract, agreement, commitment or
arrangement;
(f) make any capital expenditure in excess of $100,000 as to
any individual obligation or expenditure or any series of related expenditures
or obligations, other than expenditures required under contracts in effect on
the date hereof;
(g) increase the current compensation or rate of compensation
payable to any employee of the Partnership or any Subsidiary or modify any
payments or fringe benefits payable to such employees; or
(h) enter into any contract, agreement, commitment or
arrangement with any Seller, Upstream Party or Related Party thereof or any
officer, director or employee of the Partnership or any Subsidiary.
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7.3 Access to Information; Confidentiality.
(a) Prior to the earlier of Closing or termination pursuant to
Section 10, the Partnership and each Subsidiary shall, and each Seller, and
Upstream Party (insofar as each is able) shall cause the Partnership and each
Subsidiary to, upon reasonable prior notice and during ordinary business hours,
give Buyer and its authorized representatives reasonable access to all of its
personnel, books, records, plants, offices and other facilities and properties,
and permit Buyer to make such inspections thereof as Buyer may reasonably
request, and cause its officers and advisors to furnish Buyer with such
financial, operating and other information regarding the business of the
Partnership and the Subsidiaries, agreements, commitments, liabilities,
personnel and properties as Buyer may reasonably request.
(b) Buyer agrees at all times, (i) to keep confidential all
information provided to it, (ii) not to use the confidential information on its
own behalf, except in connection with the transactions contemplated hereby, or
on behalf of any other person, firm or entity, and (iii) not to disclose the
confidential information to any third party (other than to Buyer's lenders,
employees, agents, advisors, counsel, accountants and other consultants in
connection with the transactions contemplated hereby) without the advance
written authorization of the Partnership and each Subsidiary; provided that
Buyer shall have no such obligations with respect to confidential information
that (A) was lawfully obtained by it not subject to restrictions of
confidentiality; (B) is a matter of public knowledge; (C) has been or is
hereafter publicly disclosed other than by or through Buyer or by a third party
in violation of its obligation to the Partnership and each Subsidiary or (D) is
required to be disclosed by Buyer pursuant to a subpoena or order issued by a
court of competent jurisdiction, regulatory or administrative body that has
power to compel the disclosure of information, or pursuant to any other law,
rule or regulation. In the event this Agreement is terminated, Buyer will
promptly return to the Partnership and all Subsidiaries all documents, and other
materials furnished to Buyer or any of its representatives and all copies
thereof, and will promptly and completely destroy all work papers made or
prepared by Buyer or any of its representatives relating to the transactions
contemplated hereby, whether obtained before or after the execution of this
Agreement. In the event of a breach or threatened breach by Buyer of the
provisions of this Section 7.3, the Partnership and any Subsidiary shall be
entitled to an injunction restraining Buyer from disclosing, in whole or in
part, the confidential information.
(c) Sellers and the Upstream Parties agree at all times, (i)
to keep confidential all information provided by or on behalf of Buyer to them,
(ii) not to use the confidential information on their own behalf, except in
connection with the transactions contemplated hereby, or on behalf of any other
person, firm or entity, and (iii) not to disclose the confidential information
to any third party (other than to the Partnership's, the Subsidiaries', the
Sellers' and the Upstream Parties' lenders, counsel, accountants and other
consultants in connection with the transactions contemplated hereby) without the
advance written authorization of the Partnership and each Subsidiary; provided
that Sellers shall have no such obligations with respect to confidential
information that (A) was lawfully obtained by it not subject to restrictions of
confidentiality; (B) is a matter of public knowledge; (C) has been or is
hereafter publicly disclosed other than by or through Sellers or the Upstream
Parties or by a third party in violation of its obligation to Buyer; or (D) is
required to be disclosed by Partnership, any Subsidiary, the Sellers or the
Upstream Parties pursuant to a subpoena or order issued by a court of competent
jurisdiction, regulatory or administrative body that has power to compel the
disclosure of information, or pursuant to any other law, rule or regulation. In
the event this Agreement is terminated, the Partnership, the Subsidiaries, the
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Sellers and the Upstream Parties will promptly return to Buyer all documents and
other materials furnished to them or any of their representatives and all copies
thereof, and will promptly and completely destroy all work papers made or
prepared by them or any of their representatives relating to the transactions
contemplated hereby, whether obtained before or after the execution of this
Agreement. In the event of a breach or threatened breach by the Sellers or the
Upstream Parties of the provisions of this Section 7.3, the Buyer shall be
entitled to an injunction restraining Sellers and the Upstream Partners from
disclosing, in whole or in part, the confidential information.
7.4 Efforts. Prior to the earlier of Closing or termination
pursuant to Section 10, each party hereto shall use commercially reasonable
efforts to cause to occur the transactions contemplated hereby and by the
Transaction Documents, and to cause all conditions to the performance of the
parties hereto that are within its control to be satisfied. No party shall take
any action to cause any such covenant, agreement, transaction or condition not
to occur, be satisfied or be performed, as the case may be.
7.5 Consents. Prior to the Closing, the Partnership, the
Subsidiaries, each Seller and each Upstream Party shall, and each Seller and
each Upstream Party (insofar as each is able) shall cause the Partnership or
each Subsidiary to use commercially reasonable efforts to obtain (and cooperate
with the other parties hereto in obtaining) all consents, permits,
Authorizations, approvals of, and exemptions by, any regulatory authority or
third party necessary for the consummation of the transactions contemplated by
this Agreement and the Seller Transaction Documents or the Partnership
Transaction Documents.
7.6 Financial Information. Until the earlier of Closing or
termination pursuant to Section 10, the Partnership and Sellers shall provide
Buyer, within 20 days after the end of each month, with an unaudited
consolidated balance sheet and income statement of the Partnership and
Subsidiaries as of and for the month then ended, prepared on the same basis as
the interim financial statements referred to in Section 5.8, and certified as
such by the chief financial officers of the Partnership and Subsidiaries.
7.7 Noncompetition, Trade Secrets, etc.
(a) The Sellers, the Upstream Parties and Xxxxxxx XxXxxx,
Xxxxxxx XxXxxx, Xxxxx XxXxxx and Xxxxxx XxXxxx (such four individuals being
collectively referred to herein as the "XxXxxx Individuals") hereby agree, from
and after the Closing Date hereunder, as follows:
(i) Until the date which is thirty (30) months after the
Closing Date, as such period may be extended as hereinafter set forth (the
"Restricted Period"), (A) Sellers, the Upstream Parties, the XxXxxx Individuals
and/or any entity controlling, controlled by or under common control with any of
them (collectively, the "Seller Affiliates") shall not directly or indirectly
engage in (as a principal, shareholder, partner, director, officer, agent,
employee, consultant or otherwise) or be financially interested in any business
operating within Chicago, Illinois or any other place within a 50 mile radius of
Chicago, Illinois (the "Restricted Area"), which is engaged in the construction
or marketing of any homes or the acquisition or development of any property for
any such purpose (not including the construction, marketing, acquisition or
development of housing held for lease or rental); provided, however, nothing
contained in this Section 7.7 shall prevent Sellers or the Seller Affiliates
from holding for investment no more than five percent (5%) of any class of
equity securities of a company whose securities are publicly traded on a
national securities exchange or in a national market system; (B) neither
Sellers, the Upstream Parties, the XxXxxx Individuals, nor any Seller Affiliate
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shall directly or indirectly induce or attempt to influence any employee,
customer, independent contractor or supplier of the Partnership or any
Subsidiary to terminate employment or any other relationship with the
Partnership or any Subsidiary; and (C) Sellers, the XxXxxx Individuals and the
Upstream Parties shall not directly or indirectly induce or attempt to induce
any person who was as of May 1, 2004 an employee of the Partnership or any
Subsidiary to establish an employment relationship with any other person or
entity. The Sellers and the XxXxxx Individuals shall not, directly or
indirectly, (i) compete with Buyer for a period of twelve (12) months after the
Closing Date with respect to any land listed on the Partnership's proposed land
acquisition schedule attached hereto as Exhibit 7.7(b), or (ii) acquire, or make
any offer to acquire, any such land.
(ii) The Sellers, the XxXxxx Individuals and the Upstream
Parties shall not use for their personal benefit, or disclose, communicate or
divulge to, or use for the direct or indirect benefit of any person, firm,
association or company other than the Partnership or any Subsidiary, any
Confidential Information. For purposes of the preceding sentence, "Confidential
Information" means any information regarding the Partnership's and any
Subsidiary's business methods, business policies, procedures, techniques,
research or development projects or results; historical or projected financial
information, budgets, trade secrets or other knowledge or processes of or
developed by the Partnership or any Subsidiary; any names and addresses of
customers or clients or any data on or relating to past, present or prospective
Partnership customers or clients; or any other confidential information relating
to or dealing with the business, operations or activities of the Partnership or
any of the Subsidiaries, excepting in each case (A) information otherwise
lawfully known generally by, or readily accessible to, the trade or the general
public, (B) information known to any Seller, XxXxxx Individual or Upstream Party
from any source other than the Partnership or any of the Subsidiaries, or (C) as
required to be disclosed by law or final order of a court of competent
jurisdiction or governmental authority. At no time shall the Sellers, directly
or indirectly, remove or cause to be removed from the premises of the
Partnership or any of the Subsidiaries any memorandum, note, list, record, file,
document or other paper, equipment or any like item relating to its business
(including copies, extracts and summaries thereof). The foregoing provisions of
this Section 7.7(a)(ii) shall apply during and after Closing pursuant to Section
10.1 of this Agreement and shall be in addition to (and not a limitation of) any
legally applicable protections of the Partnership's and any Subsidiaries'
interests in confidential information, trade secrets and the like. The foregoing
shall not preclude the Sellers, the XxXxxx Individuals and the Upstream Parties
from otherwise engaging in competitive activities with Buyer following the
termination of the Restricted Period. From and after the Closing, unless
expressly consented to in writing by Buyer, Sellers, the XxXxxx Individuals and
the Upstream Parties shall not, and, insofar as each is able, shall use
commercially reasonable efforts to cause all Seller Affiliates not to, directly
or indirectly, use or disclose to any third person, any Confidential Information
relating to Buyer, the Partnership or any Subsidiary.
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(iii) The Sellers, the XxXxxx Individuals and the Upstream
Parties acknowledge that the restrictions contained in this Section 7.7, in view
of the nature of the business in which the Partnership and each of the
Subsidiaries is engaged and the purchase to be made by Buyer at Closing
hereunder, are reasonable and necessary in order to protect the legitimate
interests of the Partnership and each of the Subsidiaries, that their
enforcement will not impose a hardship on the Sellers, the XxXxxx Individuals or
the Upstream Parties or significantly impair their ability to earn a livelihood,
and that any violation thereof would result in irreparable injuries to the
Partnership and each of the Subsidiaries. The Sellers, the XxXxxx Individuals
and the Upstream Parties therefore acknowledge that, in the event of any
violation of any of these restrictions, the Partnership and each of the
Subsidiaries shall be entitled to obtain from any court of competent
jurisdiction preliminary and permanent injunctive relief as well as damages,
including the Partnership's and all Subsidiaries' legal and other costs of
enforcing Sellers', the XxXxxx Individuals' and the Upstream Parties' compliance
with these restrictions, and an equitable accounting of all earnings, profits
and other benefits arising from such violation, which rights shall be cumulative
and in addition to any other rights or remedies to which the Partnership or any
Subsidiary may be entitled. From and after the Closing, unless expressly
consented to in writing by Sellers, Buyer shall not, and, insofar as it is able,
shall use commercially reasonable efforts to cause all of its affiliates not to,
directly or indirectly, use or disclose to any third person, any trade secret,
financial data, customer list, pricing or marketing policies or plans or other
proprietary or confidential information relating to the Sellers, the XxXxxx
Individuals or the Upstream Parties.
(iv) If the Restricted Period or the Restricted Area
specified in Section 7.7(a) above should be adjudged unreasonable in any
proceeding, then the period of time shall be reduced by such amount or the area
shall be reduced by the elimination of such portion or both such reductions
shall be made so that such restrictions may be enforced for such time and in
such area as is adjudged to be reasonable. If either Seller, any XxXxxx
Individual or any Upstream Party violates any of the restrictions contained in
this Section 7.7(a), the Restricted Period shall be extended by a period equal
to the length of time from the commencement of any such violation until such
time as such violation shall be cured. The Partnership and each Subsidiary shall
have the right and remedy to require each Seller, XxXxxx Individual and each
Upstream Party to account for and pay over to the Partnership and each
Subsidiary all compensation, profits, monies, accruals, increments or other
benefits derived or received by such Seller, such XxXxxx Individual or such
Upstream Party as the result of any transactions constituting a breach of this
Section 7.7, and each Seller, XxXxxx Individual and Upstream Party shall account
for and pay over such amounts to the Partnership and each Subsidiary upon the
Partnership's or any Subsidiary's request therefor. The Sellers, the XxXxxx
Individuals and the Upstream Parties hereby expressly consent to the
jurisdiction of any court within the Restricted Area to enforce the provisions
of this Section 7.7, and agree to accept service of process by mail relating to
any such proceeding. The Partnership and any Subsidiary may supply a copy of
Section 7.7 of this Agreement to any person to whom the Sellers, the XxXxxx
Individuals or the Upstream Parties have supplied information if the Partnership
or any Subsidiary determines in good faith that there is a reasonable likelihood
that such Seller, the XxXxxx Individuals or Upstream Party has violated or will
violate this Section 7.7.
(b) Notwithstanding anything to the contrary in this Section
7.7, Sellers, the Upstream Entities and the XxXxxx Individuals may hire any
employee of the Partnership or any Subsidiary who is a Terminated Employee in
accordance with Section 7.8 herein.
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7.8 Employee Matters. Effective as of and contingent upon the
Closing, Buyer shall consider the retention of employment of such employees of
the Partnership and each of the Subsidiaries (the "Partnership Employees") as
Buyer shall determine, in its sole and absolute discretion. Buyer and the
Sellers acknowledge and agree that (i) Buyer may interview and discuss
employment terms and issues and conduct its normal hiring procedures with any of
the Partnership Employees, and (ii) the Sellers (but not the Partnership or any
of the Subsidiaries) shall be solely responsible for, and shall pay, any and all
severance payments or other related obligations, including without limitation
existing stay bonuses, arising out of the transactions contemplated by this
Agreement, if any, to the employees of the Partnership and each of the
Subsidiaries who are terminated and to the Partnership Employees that Buyer
determines to retain as employees of the Partnership or any of the Subsidiaries.
The Sellers may direct, by written notice given by Sellers to Buyer at least
five (5) days prior to Closing, that any payments for which the Sellers are
responsible pursuant to clause (ii) above be made by the Partnership or any of
the Subsidiaries and, in such instance, any such payments shall be deducted from
the portion of the Purchase Price payable at Closing. Nothing in this Agreement
shall be construed as a commitment or obligation of Buyer to retain, or
otherwise continue the employment of, any of the Partnership Employees.
Notwithstanding clause (ii) above, the Partnership shall be solely responsible
for (and there shall be no adjustment of the Purchase Price in respect of)
payments required to be made by the Partnership under the provisions of
Amendment No. 2, dated the date hereof, to the Employment Agreement between the
Partnership and Xxxx Previ and the letter agreement dated the date hereof
between the Partnership and Xxxxxx Augugliario.
7.9 SAP Residential Land. As of the Closing, Berwind shall cause
Campus Investors Residential 1A, L.P., and Campus Investors Residential 1B, L.P.
to grant to the Partnership and each of the Subsidiaries a right of first offer
in the form attached hereto as Exhibit 7.9 (the "Right of First Offer") with
respect to the residential portion of the SAP Property in Newtown Square, Pa.
7.10 Office Lease. Upon notice to be given by Buyer, at its
option, to DB Homes no later than September 1, 2004, cause the landlord for the
Partnership's office space, located at 0000 Xxxxx Xxxx Xx., Xxxxxxx,
Xxxxxxxxxxxx to deliver to the Partnership and/or Buyer an agreement in form and
substance satisfactory to Buyer and its counsel extending the term of the lease
for such office space, at no cost or expense to Buyer or the Partnership for
obtaining such extension, on a month to month (at Buyer's option) basis until
December 31, 2004 or such earlier date as Buyer shall elect on the same terms
(including rent) as are now applicable to such lease.
7.11 Public Announcement. The parties will consult with each other
about the timing and content of any public announcement of this Agreement and
the transactions contemplated hereby. No party will, except as required by
applicable law, rule or regulation, or the NASDAQ rules or regulations, make any
announcement of this Agreement of the transactions contemplated hereby to which
any other party hereto shall reasonably object.
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SECTION 8. CERTAIN CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of Buyer to consummate the acquisition of the Interests
is subject to the fulfillment by or at the Closing of each of the following
conditions:
8.1 Representations and Warranties. Each Seller's and each
Upstream Party's representations and warranties contained in this Agreement
shall be deemed to have been made again at and as of the Closing and shall at
such time then be true and correct in all material respects, except for
representations and warranties qualified by materiality, which shall be true and
correct in all respects.
8.2 Performance of Covenants. The Partnership, each Seller and
each Upstream Party shall have performed or complied in all respects with all of
the covenants and agreements in this Agreement to be performed or complied with
by them prior to or at the Closing.
8.3 Approvals. The consents or approvals set forth in Schedule 8.3
attached hereto shall have been obtained and no such consent or approval: (a)
shall have been conditioned upon the modification, cancellation or termination
of any material lease, commitment, agreement, easement, right or Authorization
of the Partnership; or (b) shall impose on the Buyer or the Partnership any
material condition, provision or requirement not presently imposed upon Sellers
or the Partnership. Notwithstanding the foregoing, the consent of Xxxxx Fargo
Bank and the other lenders under the Third Amended and Restated Credit Agreement
dated July 30, 2003, among, inter alia, Xxxxx Fargo Bank, N.A. and the
Partnership (the "Xxxxx Fargo Loan Agreement") is not a condition to Buyer's
obligation to complete the Closing; if that consent is not obtained, Buyer may
extend the Closing Date as provided in Section 10.1.
8.4 Legal Matters. The Closing shall not violate any order or
decree of any court or governmental body of competent jurisdiction and no suit,
action, proceeding or investigation, shall be pending or threatened which
questions the validity or legality of this Agreement or the transactions
contemplated hereby.
8.5 Intentionally omitted.
8.6 Resignation of Directors and Officers. Buyer shall have
received resignations from all of the officers of the Partnership, if any, as it
shall have requested in writing no less than five days before the Closing Date.
8.7 Opinion of Counsel. Buyer shall have received opinions from
Drinker Xxxxxx & Xxxxx LLP, as counsel for Sellers, the Upstream Parties and the
Partnership, dated as of the Closing Date, in form and substance reasonably
satisfactory to Buyer, with respect to the transactions contemplated by this
Agreement.
8.8 No Material Adverse Change. The shall have been no material
adverse change in the business, assets, financial condition or prospects of the
Partnership.
8.9 Indebtedness. Sellers, Realen Settlement Services, LLC and the
Upstream Parties shall have delivered to the Partnership releases for any
indebtedness, obligation or claim for which each Seller or a Related Party of
such Seller, may be entitled, except for the RNP Loan which shall be paid by the
Partnership in accordance with its terms and conditions, except that the RNP
Loan shall become immediately due and payable upon a Change of Control of the
Partnership or a Change of Control of the Buyer. Each Seller, each Upstream
Party and each of their Related Parties shall have paid to the Partnership all
amounts due under any obligations, loans or similar instruments evidencing
indebtedness of such persons to the Partnership.
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8.10 Tax Affidavits. Because the Partnership is a disregarded
entity for federal tax purposes, and all of the real estate owned by the
Partnership is properly treated by the Partnership and DB Homes as owned by DB
Homes for federal tax purposes, DB Homes will, at closing, deliver to Buyer such
affidavits or statements as Buyer may reasonably request in order to evidence
that Buyer has no obligation to withhold taxes under Section 1445 of the Code
from the amounts paid to Sellers hereunder.
8.11 Estoppel Letters. The Sellers shall deliver to Buyer the
estoppel letters from each person or entity or related group of persons or
entities to which the Partnership has indebtedness aggregating in excess of
$500,000 (other than Xxxxx Fargo Bank and the other lenders) under the Xxxxx
Fargo Loan Agreement, in form and substance reasonably satisfactory to Buyer.
SECTION 9. CERTAIN CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
The obligation of Sellers and the Upstream Parties to consummate the
sale of the Interests is subject to the fulfillment by or at the Closing of each
of the following conditions:
9.1 Representations and Warranties. Buyer's representations and
warranties contained in this Agreement shall be deemed to have been made again
at and as at the Closing and shall then be true and correct in all material
respects, except for representations and warranties qualified by materiality,
which shall be true and correct in all respects.
9.2 Performance of Covenants. Buyer shall have performed or
complied in all material respects with all of the covenants and agreements in
this Agreement to be performed or complied with by it prior to or at the
Closing, except for agreements, covenants and conditions qualified by
materiality, which shall be conformed and complied with in all respects.
9.3 Approvals. The consents or approvals set forth in Schedule 8.3
shall have been obtained.
9.4 Legal Matters. The Closing shall not violate any order or
decree of any court or governmental body of competent jurisdiction and no suit,
action, investigation, or legal or administrative proceeding shall be pending
which questions the validity or legality of this Agreement or the transactions
contemplated hereby.
9.5 Opinion of Counsel. Sellers and the Upstream Parties shall
have received an opinion of Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP, counsel for
Buyer, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Sellers, with respect to the transactions contemplated by
this Agreement.
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9.6 Tri-Party Agreements, Bonds and Letters of Credit. Buyer shall
replace or obtain the release of Sellers from any liability with respect to the
tri-party agreements, bonds and letters of credit pertaining to the Partnership
set forth on Schedule 9.6 or, if such release is not obtained, Buyer agrees to
indemnify Sellers with respect to such liability.
SECTION 10. CLOSING
10.1 Time and Place of Closing. The closing of the purchase and
sale of the Interests (the "Closing") pursuant to this Agreement shall take
place at the offices of Wolf, Block, Xxxxxx and Xxxxx-Xxxxx, 0000 Xxxx Xxxxxx,
00xx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 concurrently with the execution of
this Agreement (the "Closing Date").
10.2 Deliveries at the Closing. At the Closing, in addition to the
other actions contemplated elsewhere herein:
(a) Each Seller and Upstream Party, as appropriate, shall
deliver, or shall cause to be delivered, to Buyer the following:
(i) an assignment of partnership interests in form and
substance reasonably satisfactory to Sellers and Buyer (the "Assignment of
Interests") assigning all of the Interests owned by the Sellers to Buyer;
(ii) a certificate, dated the Closing Date and signed by
each Seller and each Upstream Party, to the effect set forth in Sections 8.1,
8.2 and 8.3;
(iii) the signed resignations of the general partner and
all officers, if any, of the Partnership, dated and effective as of the Closing
Date;
(iv) general releases in favor of the Partnership executed
by each Seller and by each officer, if any, of the Partnership in form and
substance satisfactory to counsel for Buyer, releasing the Partnership from all
liability to such persons or entities, except with respect to the Seller's Loan;
(v) [Intentionally omitted];
(vi) [Intentionally omitted];
(vii) [Intentionally omitted];
(viii) the Right of First Offer in the form attached
hereto as Exhibit 7.9;
(ix) an agreement with JMP Securities LLC relating to the
payments of its fee in connection with this transaction;
(x) an agreement with certain of its Affiliates
terminating certain agreements between the Affiliates and the Partnership;
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(xi) agreements from Xxxxx Xxxxxx, Xxxx Previ and Xxxxxx
Augugliario agreeing not to make any claims against the Partnership or Buyer for
any severance payments and other related obligations, including, without
limitation, any stay bonuses, except as set forth in such agreements; and
(xii) such other documents and instruments as Buyer may be
reasonably request to effectuate or evidence the transactions contemplated by
this Agreement.
(b) Sellers, insofar as each is able, shall cause the
Partnership to deliver to Buyer the following:
(i) a certificate, dated the Closing Date and signed by
the Sellers, to the effect set forth in Sections 8.1 and 8.2;
(ii) copies of the Partnership's certificate of limited
partnership and partnership agreement, or the corresponding charter documents,
and all amendments thereof to date, certified as of a recent date by the
Secretary of State or corresponding certifying authority of the Partnership's
respective jurisdiction of organization and by the Secretary of the General
Partner of the Partnership;
(iii) certificates of good standing of a recent date for
the Partnership, certified by the Secretaries of State or corresponding
certifying authorities of each such entity's respective jurisdiction of
organization and of each state in which such entities are qualified to do
business;
(iv) copies of the resolutions of the board of directors
or corresponding governing body of the Partnership's General Partner and the
Partnership itself authorizing the execution, delivery and performance of this
Agreement and the other agreements and instruments referred to herein, certified
as of the Closing Date by the Secretary of the General Partner of the
Partnership;
(v) the original seals, minute books and Interest transfer
and record books of the Partnership as they exist on the Closing Date and such
of their files, books and records as Buyer may request;
(vi) the releases more fully described in Section 8.9; and
(vii) such other documents and instruments as Buyer may
reasonably request to effectuate or evidence the transactions contemplated by
this Agreement.
(c) Buyer shall deliver, or shall cause to be delivered, to
Sellers and the Upstream Parties, as appropriate, the items set forth below:
(i) that portion of the Purchase Price referred to in
Section 2.2(i);
(ii) [Intentionally omitted];
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(iii) a certificate of Buyer, signed by the Vice Chairman
of Buyer, to the effect set forth in Sections 9.1 and 9.2;
(iv) a copy of Buyer's certificate of incorporation and
bylaws and all amendments thereof to date, certified as of a recent date by the
Secretary of State of Delaware and by the Secretary or an Assistant Secretary of
Buyer, and accompanied by a certificate of good standing as of a recent date for
Buyer, certified by the Secretary of State of Delaware;
(v) a copy of the resolutions of the board of directors of
Buyer authorizing the execution, delivery and performance by Buyer of this
Agreement and the other agreements and instruments referred to herein, certified
as of the Closing by the Secretary or an Assistant Secretary of Buyer;
(vi) [Intentionally omitted];
(vii) the promissory note more fully described in Section
2.2 which constitutes the Purchase Money Financing;
(viii) the Right of First Offer in the form attached
hereto as Exhibit 7.9; and
(ix) such other documents and instruments as Sellers may
reasonably request to effectuate or evidence the transactions contemplated by
this Agreement.
10.3 [Intentionally omitted].
10.4 [Intentionally omitted].
10.5 Remittance of Payments. From and after the Closing, Sellers
and the Upstream Parties shall immediately remit to the Partnership, in the form
received, any payments which they or any affiliate may receive (such as payments
of accounts receivable) which properly belong to the Partnership.
SECTION 11. INDEMNIFICATION
11.1 Indemnification by Sellers and the Upstream Parties. In the
event the Closing hereunder is consummated, Sellers and the Upstream Parties
jointly and severally (except as provided below) hereby indemnify and agree to
hold Buyer, the Partnership and their respective partners, officers, directors
and shareholders harmless against and in respect of any and all losses, costs,
expenses, claims, damages, obligations and liabilities, including, without
limitation, interest, penalties and reasonable attorneys fees and disbursements
("Damages"), including, but not limited to, Damages relating to Taxes, which
Buyer or any such person may suffer, incur or become subject to arising out of,
based upon or otherwise in respect of (i) any breach of any covenant,
representation or warranty made by any Seller in or pursuant to this Agreement
and (ii) the matters referred to below in this Section 11.1. Such
indemnification shall include, without limitation, matters relating to (i) the
ownership or operation of the Bellinghamshire Community as more fully described
in Section 3.2(c), including, without limitation those matters specifically set
forth on Schedule 11.1; (ii) the ownership or operation of the Realen Settlement
Services, LLC as more fully described in Section 3.2(b); (iii) the dedication
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and release of Buyer and the Partnership of any and all maintenance and/or
performance guarantees with respect to Oak Terrace, as more fully described in
Section 3.2(d); (iv) the severance payments and other related obligations,
including without limitation existing stay bonuses, due to the Terminated
Employees and the Partnership Employees arising out of the transactions
contemplated by this Agreement, as more fully described in Section 7.8; (v) Home
Warranty Claims, to the extent the aggregate amount of Home Warranty Claims is
in excess of $1,015,000; and (vi) any excess amounts referred to in Section
5.11(n) hereof; (vii) Improvement Warranty Claims; (viii) the costs and expenses
of achieving the dedication of the Flowers Mill community to Middletown
Township, Bucks County, Pennsylvania, and obtaining the consent of the
homeowners association in connection therewith, to the extent such costs and
expenses exceed $300,000 in the aggregate; and (ix) the matters referred to in
Schedule 5.7 as "Hirobumi & Takkako Araki", "Xxxxxx Xxxxxxxx, Xxxxx Xxxx, etc.",
and "Xxxxxxx Xxxxx and Xxxxxx Xxxxx vs. South Coventry Township and Realen
Homes" and any other matters directly or indirectly arising from or relating
thereto, including, without limitation, any class action claims concerning
matters similar to those relating to the three matters specifically identified;
provided, however, that no claim may be made for indemnification under this
clause (ix) (A) to the extent of amounts actually received by the Partnership
with respect thereto from the Partnership's insurers or (B) with respect to the
first $250,000 in the aggregate relating to the Araki and Cheetham matters,
collectively, and with respect to the first $50,000 relating to the Xxxxx matter
(in each case in excess of the insurance recoveries referred to above). "Home
Warranty Claims" shall mean (i) any warranty claims made by the purchasers of
any homes sold by the Partnership or any affiliates thereof and delivered prior
to Closing and any "punch list" items with respect to such homes, and (ii) the
actual costs to Buyer of its management of Home Warranty Claims. Improvement
Warranty Claims shall mean (i) any costs related to Non-Active Communities,
including without limitation, any costs necessary to discharge maintenance or
performance obligations to the extent that those costs exceed $435,000 in the
aggregate, being the total of all accrued costs to complete for site
improvements for Non-Active Communities and (ii) any costs related to Active
Communities incurred for the repair of subsurface improvements including without
limitation piping, culverts, subbase and utilities plus any costs associated
with the repair of storm water basins to reach retention capacity to the extent
that those costs exceed the $25,000 per community deductible and the amount
accrued as costs to complete for such subsurface item in the specific community
site improvement budget, as such accrual is shown on the Partnership's books and
records as of the end of the calendar month immediately preceding Closing (or if
the Closing is as of the end of the calendar month the immediately preceding
calendar month) and which are not recovered otherwise from any sub-contractor
warranties. Notwithstanding the foregoing, damages with respect to the storm
water basins shall apply to issues arising from improper construction of the
basins in accordance with approved plans but will not cover normal maintenance
items such as removal of silt.
Notwithstanding the joint and several nature of the Sellers' and
the Upstream Parties' indemnification obligation, the first sentence of Section
4 shall determine the separate indemnification obligations of the XxXxxx Parties
and the Berwind Parties for the matters described in that sentence.
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The Buyer shall make available its staff and the resources of its
warranty department to manage Home Warranty Claims. Buyer shall deliver monthly
reports to Sellers with regard to the status and expenses incurred with respect
to any warranty claim in reasonable detail. Sellers shall be consulted with
respect to any claims above $25,000.
No representation or warranty contained herein shall be deemed to
have been waived, affected or impaired by any investigation made by, or the
knowledge of, Buyer.
11.2 Indemnification by Buyer. In the event Closing hereunder is
consummated, Buyer shall indemnify and hold Sellers and the Upstream Parties
harmless against and in respect of any and all Damages which Sellers may suffer,
incur or become subject to arising out of, based upon or otherwise in respect
of: (a) any breach of any representation or warranty of Buyer made in or
pursuant to this Agreement; (b) any breach of any covenant made by Buyer in this
Agreement; or (c) the inability of Buyer to replace or release of Sellers with
respect to the tri-party agreements, bonds and letters of credit pertaining to
the Partnership set forth on Schedule 9.6. No claim for indemnification or other
remedy available to the Sellers or the Upstream Parties pursuant to this
Agreement may be exercised against Buyer unless all of the Sellers and all of
the Upstream Parties join in, or have given consent to seek, such claim.
11.3 Third Party Claims.
(a) Each party seeking indemnification pursuant to this
Section 11 or as otherwise provided in this Agreement (the "Indemnified Party")
shall promptly notify the party from which it is seeking indemnification (the "
Indemnifying Party") of the assertion in writing by any third party of any claim
(each an "Indemnity Payment") with respect to which the indemnification set
forth in this Section relates (which shall also constitute the notice required
by Section 11.4). The failure of the Indemnified Party to give such notice shall
reduce and limit the Indemnified Party's rights under this Section 11.3(a) only
to the extent failure to give prompt notice prejudices the Indemnifying Party's
ability to defend such third party claim or to mitigate the Damages arising
therefrom. The Indemnifying Party shall have the right, upon notice to the
Indemnified Party within ten business days after the receipt of notice from the
Indemnified Party, to undertake the defense of such claim with counsel
satisfactory to the Indemnified Party or, with the consent, which shall not
unreasonably be withheld or delayed, of the Indemnified Party, to settle or
compromise such claim. The Indemnified Party shall have the right, with the
consent, which shall not be unreasonably withheld or delayed, of the
Indemnifying Party, to settle or compromise such claim. The failure of the
Indemnifying Party to give such notice and to so undertake and diligently
prosecute the defense of or to settle or compromise such a claim shall
constitute a waiver of the Indemnifying Party's rights under this Section
11.3(a) and shall preclude the Indemnifying Party from disputing the manner in
which the Indemnified Party may conduct the defense of such claim or the
reasonableness of any amount paid by the Indemnified Party in satisfaction of
such claim. Any claim which Buyer believes is covered by the Partnership's then
existing title insurance shall also be made by the Partnership against the
issuer thereof, and any Damages relating thereto shall be reduced by any amount
actually collected from such issuer on account thereof by the Partnership.
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(b) The election by the Indemnifying Party, pursuant to
Section 11.3(a), to undertake the defense of a third-party claim shall not
preclude the party against which such claim has been made also from
participating or continuing to participate in such defense, so long as such
party bears its own legal fees and expenses for so doing.
11.4 Other Matters.
(a) The Sellers and Buyer shall make available to the other,
as reasonably requested, all information, records or documents in their
possession relating to Tax liabilities of the Partnership for all taxable
periods of the Partnership ending on, prior to or including the Closing Date and
shall preserve all such information, records and documents until the expiration
of any applicable Tax statute of limitations or extensions thereof; provided,
however, that if a proceeding has been instituted for which the information,
records or documents is required prior the expiration of the applicable statue
of limitations, such information, records or documents shall be retained until
there is a final determination with respect to such proceeding.
(b) Buyer shall promptly notify Sellers in writing upon
receipt by Buyer or the Partnership of notice of any Tax audits of or proposed
assessments against the Partnership for taxable periods of the Partnership
ending on or prior to the Closing Date; provided, however, that the failure of
Buyer to give Sellers prompt notice as required herein shall not relieve Sellers
of any of his obligations under this Section 11.4, except to the extent that
Sellers are actually and materially prejudiced thereby. To the extent Buyer or
the Partnership may, in the judgment of Buyer, be adversely affected by the
occurrence of any such Tax audit or administrative or court proceeding (after
taking into account its rights to indemnity under this Section 11), Buyer shall
represent the Partnership's interests in any such Tax audit or administrative or
court proceeding and shall employ counsel of its choice. Sellers agree that they
will cooperate fully with Buyer and its counsel in the defense against or
compromise of any claim in any such audit or proceeding.
(c) The parties hereto agree to furnish or cause to be
furnished to each other, at their own expense, such information, access to books
and records, and assistance, including making employees available during regular
business hours on a mutually convenient basis, as may reasonably be necessary
for the preparation and filing of any Tax Return contemplated by this Section
11.4.
11.5 Tax Treatment of Indemnity Payments. The Sellers, the
Upstream Parties and Buyer agree to treat any indemnity payment made pursuant to
this Section 11 as an adjustment to the Purchase Price for federal, state, local
and foreign income tax purposes.
11.6 Interest. In the event any party fails to make full payment
with respect to an Indemnity Payment within 30 days after a request for such
Indemnity Payment is made by an Indemnified Party, such unpaid Indemnity Payment
shall bear interest until paid at a rate of 10% per annum or, if less, the
highest rate permitted by applicable law.
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11.7 Right of Set-Off; Application of Warranty Holdback.
(a) In the event that Buyer determines in good faith that it
is entitled to Damages or reimbursement pursuant to this Section 11, Buyer,
Buyer's affiliates and the Partnership shall have a right of set-off against the
payments from Buyer due to Sellers with respect to the Purchase Money Financing
with respect to the amount of such Damages (the "Set-Off Amount"), subject to
the following provisions of this Section. Any Set-Off Amount shall decrease the
payments due under the Purchase Money Financing, beginning on the next occurring
payment date (the "Set-Off Date"). Upon a final determination of the actual
amount of indemnification (the "Actual Amount") thereon, if the Set-Off Amount
is in excess of the Actual Amount (upon determination thereof), such excess
shall be paid to Sellers with payment of such amounts to be due within ten (10)
business days of the date on which the Actual Amount is determined. The Buyer's
right of set-off set forth in this Section 11.7 shall be in addition to any and
all other rights and remedies available to Buyer in connection with any Damages
or reimbursement pursuant to this Section 11, but Buyer shall have no set-off
right against the RNP Loan.
(b) Any Home Warranty Claims and/or improvement warranty
claims, shall first, prior to the exercise of any right of set-off referred to
in Section 11.7(a), be applied by Buyer against the Warranty Holdback. To the
extent that any liquidated or unliquidated Damages for which the Buyer has made
claims as of the date which is 30 months after the Closing is less than the
aggregate remaining amount of the Warranty Holdback as of such date, Buyer shall
promptly pay the excess amount to DB Homes for disbursement to the Sellers and
the Upstream Parties. With respect to any amounts applied by Buyer against the
Warranty Holdback for repairs, such amounts shall be only with respect to costs
for actual labor and materials, plus overhead for employment related
expenditures, provided that such overhead shall not exceed 20% of the actual
costs of such labor and materials. With respect to any amounts to be applied by
Buyer against the Warranty Holdback for payments in settlement of claims by
homebuyers, no individual settlement in excess of $10,000 shall be made by Buyer
without approval of DB Homes, which approval will not be unreasonably withheld
or delayed.
11.8 Certain Liability Matters. Notwithstanding the foregoing, no
party will have any liability (for indemnification or otherwise) with respect to
a breach of a representation and warranty (but not including any other breach
requiring indemnification pursuant to Section 11) until the total of Damages
with respect to such matters exceeds $600,000 in the aggregate (it being agreed
and acknowledged by the parties that for the purpose of determining whether the
foregoing $600,000 threshold has been exceeded in the aggregate, the
representations and warranties of the Sellers and the Upstream Parties contained
herein shall not be deemed qualified by any references herein to materiality
generally, and the $600,000 Damages amount shall be determined in the aggregate
with respect to the Sellers and the Upstream Parties on a combined basis), and
then only for the amount by which such Damages resulting from such breach of
such representations and warranties exceeds $600,000 in the aggregate.
11.9 Survival Periods. The following representations and
warranties shall have the following respective survival periods: (i) the date
which is thirty (30) months from the Closing Date - any representations and
warranties that are not specified in any of the succeeding clauses; (ii) the
date on which the applicable statute of limitations expires - any representation
and warranty related to (x) a breach of any representations or warranties of a
party to this Agreement that were made with an intent to mislead or defraud or
with a reckless disregard of the accuracy thereof; or (y) the representations
and warranties set forth in Sections 4.1, 4.2, 4.3(a)(i), 4.4, 4.6, 5.1, 5.2,
5.3(a)(i), 5.4, 5.12, 5.18, 5.23, 6.1 and 6.2. If more than one of such survival
periods applies to a particular claim, the latest of such survival period shall
be the controlling survival period for such claim. No party shall have any
obligation to indemnify any other party pursuant to this Section 11 for a claim
for Damages resulting from a breach of a particular representation and warranty
if the notice of such breach is not submitted to the other party within the
applicable survival period as set forth above.
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11.10 Limitation.
(a) Absent fraud, in no event shall the cumulative
indemnification obligation of the Sellers on the one hand and the Buyer on the
other, with respect to a breach of a representation or warranty contained in
this Agreement exceed $6,500,000 (the "Cap"), other than with respect to a
breach of any of the representations and warranties set forth in Sections 4.1,
4.2, 4.3(a)(i), 4.4, 4.6, 5.1, 5.2, 5.3(a)(i), 5.4, 5.12, 5.18, 5.23, 6.1 and
6.2, as to which such limit shall not apply.
(b) Notwithstanding anything herein to the contrary, for the
purposes of this Section 11, in determining the amount of any Damages, any
materiality qualifier contained in any such representation or warranty will be
disregarded.
(c) Notwithstanding anything herein to the contrary, if Buyer
is entitled to be indemnified by the Sellers or the Upstream Parties pursuant to
Section 11 in connection with Damages and more than one clause in Section 11 is
applicable, Buyer shall have right, in its sole discretion, to determine which
of the applicable clauses in Section 11 with respect to which it is seeking
indemnification for such Damages, provided that in no event shall Buyer be
entitled to multiple recoveries for the same Damages.
SECTION 12. DEFINITIONS
"Active Communities" shall mean those communities set forth on Exhibit
11 hereto.
"Actual Amount" shall have the meaning set forth in Section 11.7.
"Assignment of Interests" shall have the meaning set forth in Section
10.2(a)(i).
"Authorizations" shall have the meaning set forth in Section 5.6(b).
"Balance Sheet" shall have the meaning set forth in Section 5.8(a).
"Buyer Transaction Documents" shall have the meaning set forth in
Section 6.2.
"Cap" shall have the meaning set forth in Section 11.9(a).
"CERCLA" shall have the meaning set forth in Section 5.23(m)(ii).
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"Change of Control of Buyer" shall mean the occurrence of one or more
events after which (a) Xxxxxxx X. Orleans, members of his family, personal
representatives and/or heirs (collectively, the "Orleans Interests") own, in the
aggregate, less than 30% (measured by voting power and not by number of Shares)
of the outstanding voting stock of Orleans Homebuilders, Inc. or any successor
thereto, or (b) any "person" (within the meaning of section 13(d)(3) of the
Securities Exchange Act of 1934) other than the Orleans Interests becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and 13d-5 of the
Securities and Exchange Commission, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercised immediately or only after the passage
of time, upon the happening of an event, or otherwise) of more of the voting
stock of Orleans Homebuilders, Inc. or any successor thereto (measured by voting
power and not by number of shares) than is owned collectively by the Orleans
Interests. For this purpose, "voting stock" means stock entitled to vote
generally in the election of directors.
"Change of Control of Partnership" means the occurrence of one or more
events after which Buyer does not directly or indirectly, itself and/or through
one or more entities, own a majority of the outstanding voting equity interests
of Partnership or any successor thereto.
"Closing" shall have the meaning set forth in Section 10.1.
"Closing Date" shall have the meaning set forth in Section 10.1.
"COBRA" shall have the meaning set forth in Section 5.19(b).
"Code" shall have the meaning set forth in Section 5.18(e).
"Confidential Information" shall have the meaning set forth in Section
7.7(a)(ii).
"Constructed" shall have the meaning set forth in Section 5.16(a).
"Continuation Notice" shall have the meaning set forth in Section
10.3(c).
"Covered Receivables" shall have the meaning set forth in Section 10.5.
"Current Real Property" shall have the meaning set forth in Section
5.23(b).
"Damages" shall have the meaning set forth in Section 11.1.
"DOL" shall have the meaning set forth in Section 5.19(a).
"Employee Benefit Plans" shall have the meaning set forth in Section
5.19(a).
"Environmental Laws" shall have the meaning set forth in Section
5.23(m)(i).
"ERISA" shall have the meaning set forth in Section 5.19(a).
"ERISA Affiliate" shall have the meaning set forth in Section 5.19(a).
"Former Real Property" shall have the meaning set forth in Section
5.23(c).
"GAAP" shall have the meaning set forth in Section 5.8(a).
"Hazardous Substances" shall have the meaning set forth in Section
5.23(m)(iii).
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"Home Warranty Claims" shall have the meaning set forth in Section 11.1
"Improvement Warranty Claims" shall have the meaning set forth in
Section 11.1.
"Indemnified Party" shall have the meaning set forth in Section
11.3(a).
"Indemnifying Party" shall have the meaning set forth in Section
11.3(a).
"Indemnity Payment" shall have the meaning set forth in Section
11.3(a).
"Intellectual Property" shall have the meaning set forth in Section
5.13(c).
"Interests" shall have the meaning set forth in Section 1.1.
"Interim Balance Sheet" shall have the meaning set forth in Section
5.8(a).
"IRS" shall have the meaning set forth in Section 2.3.
"JMP" shall have the meaning set forth in Section 4.5.
"Land Contract Real Property" shall have the meaning set forth in
Section 5.11(d).
"Land Pipeline" shall have the meaning set forth in Section 3.1(a).
"Laws" shall have the meaning set forth in Section 4.3(a)(ii).
"Leased Real Property" shall have the meaning set forth in Section
5.11(c).
"Material Contract" shall have the meaning set forth in Section
5.13(e).
"Multiemployer Plan" shall have the meaning set forth in Section
5.19(c).
"Non-Active Communities" shall mean all communities of the Partnership
or any Subsidiary not listed on Exhibit 11 hereto.
"OSHA" shall have the meaning set forth in Section 5.20(b).
"Option Real Property" shall have the meaning set forth in Section
5.11(d).
"Owned Real Property" shall have the meaning set forth in Section
5.11(b).
"Partnership Employees" shall have the meaning set forth in Section
7.8.
"Partnership Transaction Documents" shall have the meaning set forth in
Section 5.2.
"PBGC" shall have the meaning set forth in Section 5.19(b).
"Permitted Encumbrances" shall have the meaning set forth in Section
5.11(b).
"Purchase Money Financing" shall have the meaning set forth in Section
2.2.
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"Purchase Price" shall have the meaning set forth in Section 2.1.
"PWC" shall have the meaning set forth in Section 11.4(d)(2).
"Real Property" shall have the meaning set forth in Section 5.11(a).
"Related Party" shall have the meaning set forth in Section 5.22.
"Release" shall have the meaning set forth in Section 5.23(m)(ii).
"Remedial Action" shall have the meaning set forth in Section
5.23(m)(ii).
"Removal" shall have the meaning set forth in Section 5.23(m)(ii).
"Response" shall have the meaning set forth in Section 5.23(m)(ii).
"Restricted Area" shall have the meaning set forth in Section
7.7(a)(i).
"Restricted Period" shall have the meaning set forth in Section
7.7(a)(i).
"Return" shall have the meaning set forth in Section 5.18(a).
"Right of First Offer" shall have the meaning set forth in Section 7.9.
"RNP Loan" shall have the meaning set forth in Section 4.6.
"XXXX" shall have the meaning set forth in Section 5.23(b)(ii).
"Seller Affiliates" shall have the meaning set forth in Section
7.7(a)(i).
"Seller Transaction Documents" shall have the meaning set forth in
Section 4.2.
"Set-Off Amount" shall have the meaning set forth in Section 11.7.
"Set-Off Date" shall have the meaning set forth in Section 11.7.
"Statement" shall have the meaning set forth in Section 11.4(d)(ii).
"Subsidiary" shall have the meaning set forth in Section 5.1.
"Taxes" shall have the meaning set forth in Section 5.18(a).
"Terminated Employees" shall have the meaning set forth in Section 7.8.
"Warranty Holdback" shall have the meaning set forth in Section 2.2.
"Xxxxx Fargo Loan Agreement" shall have the meaning set forth in
Section 8.3.
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SECTION 13. MISCELLANEOUS
13.1 Further Assurances. Each party hereto shall use best efforts
to comply with all requirements imposed hereby on such party and to cause the
transactions contemplated hereby to be consummated as contemplated hereby and
shall, from time to time and without further consideration, either before or
after the Closing, execute such further instruments and take such other actions
as any other party hereto shall reasonably request in order to fulfill its
obligations under this Agreement and to effectuate the purposes of this
Agreement and to provide for the orderly and efficient transition of the
ownership of the Partnership to Buyer. Sellers shall, for five years after the
Closing, retain their various books and records relating to the Partnership and
shall, upon prior notice, provide Buyer and its authorized representatives
reasonable access thereto. Each party shall promptly notify the other parties of
any event or circumstance known to such party that could prevent or delay the
consummation of the transactions contemplated hereby or which would indicate a
breach or non-compliance with any of the terms, conditions, representations,
warranties or agreements of any of the parties to this Agreement.
13.2 Costs and Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection herewith. Buyer
will bear the cost of all title searches, title insurance policies, and
nonimputation endorsements it may wish to obtain. Any and all transfer, sales,
use, documentary and similar taxes and recording and filing fees incurred in
connection with the transactions contemplated herein shall be borne one-half by
Buyer and one-half by Sellers (and not by the Partnership). Sellers believe
reasonably and in good faith, on the basis of the Partnership's records, that
the location of the Partnership's property and the sources of its revenues are
such that no Pennsylvania realty transfer tax will be payable as a result of the
sale if the Interest pursuant to this Agreement. If, despite the Sellers'
belief, such taxes are established to be payable, they will be borne half by
Buyer and half by Sellers, as provided in the preceding sentence. The parties
hereto agree to work together to minimize the costs arising out of the
transactions contemplated by this Agreement.
13.3 Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth below or if sent by
documented overnight delivery service or registered or certified mail, postage
prepaid, return receipt requested, or by telecopy, receipt acknowledged,
addressed as set forth below or to such other person or persons and/or at such
other address or addresses as shall be furnished in writing by any party hereto
to the others. Any such notice or communication shall be deemed to have been
given as of the date received, in the case of personal delivery, or on the date
shown on the receipt or confirmation therefor in all other cases.
To Buyer: Orleans Homebuilders, Inc.
0000 Xxxxxx Xxxx, Xxxxx #000
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxx
with a copy to: Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
0000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
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To any Seller or any Upstream Party:
c/x XxXxxx Enterprises, Inc.
XxXxxx Homes Corporate Center
000 Xxxxxx Xxxx Xxxxxxxxx
Xxxxxxx XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. XxXxxx
and
c/o Berwind Property Group, Inc.
0000 Xxxxxx Xxxxxx Xxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxx
13.4 Assignment and Benefit.
(a) Buyer may assign this Agreement in whole to any subsidiary
or to any person which becomes a successor in interest (by purchase of assets or
stock, or by merger or otherwise) to Buyer, but no such assignment shall
discharge Buyer from any of its obligations hereunder. Neither the Partnership,
any Seller nor any Upstream Party shall assign this Agreement or any rights
hereunder, or delegate any obligations hereunder, without prior written consent
of Buyer, except that any Seller may direct that its portion of the purchase
price be paid to any other person and may assign to such person its right to
receive the same; provided that any such assignment shall be subject to all
offset rights of Buyer pursuant to this Agreement. Subject to the foregoing,
this Agreement and the rights and obligations set forth herein shall inure to
the benefit of, and be binding upon, the parties hereto, and each of their
respective successors, heirs and assigns.
(b) This Agreement shall not be construed as giving any
person, other than the parties hereto and their permitted successors, heirs and
assigns, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any of the provisions herein contained, this Agreement and all
provisions and conditions hereof being intended to be, and being, for the sole
and exclusive benefit of such parties, and permitted successors, heirs and
assigns and for the benefit of no other person or entity.
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13.5 Brokers. Except as set forth in the following sentence,
Sellers and the Upstream Parties, jointly and severally, hereby indemnify and
hold Buyer and the Partnership harmless from and against any claim for brokerage
commission of finder's fee based on any retention or alleged retention of a
broker or finder by the Sellers, the Upstream Parties or the Partnership.
Notwithstanding the foregoing, Buyer shall be responsible for payment of a
portion of any brokerage or finders commission or fee due to JMP in an amount
not to exceed the lesser of (i) 25% of any such commissions or fees due to JMP
arising out of the transactions contemplated by this Agreement, and (ii) Two
Hundred Fifty Thousand Dollars ($250,000); the exact allocation of the fee is
set forth in a letter agreement with JMP dated as of even date herewith among
JMP, the Sellers and Buyer.
13.6 Amendment, Modification and Waiver. The parties may amend or
modify this Agreement in any respect, and Buyer, on the one hand, and each of
the Sellers and the Upstream Parties, on the other hand, may: (a) extend the
time for the performance of any of the obligations of the other, (b) waive any
inaccuracies in representations and warranties by the other, (c) waive
compliance by the other with any of the obligations contained in this Agreement,
or (d) waive the fulfillment of any condition precedent to the performance under
this Agreement of the waiving party. Any such amendment, modification, extension
or waiver shall be in writing. The waiver by a party of any breach of any
provision of this Agreement shall not constitute or operate as a waiver of any
other breach of such provision or of any other provision hereof, nor shall any
failure to enforce any provision hereof operate as a waiver of such provision or
of any other provision hereof.
13.7 Governing Law, Venue and Attorneys' Fees and Costs. This
Agreement is made pursuant to, and shall be construed and enforced in accordance
with, the laws of the Commonwealth of Pennsylvania (and United States federal
law, to the extent applicable), irrespective of the principal place of business,
residence or domicile of the parties hereto, and without giving effect to
otherwise applicable principles of conflicts of law.
EACH SELLER, BUYER AND UPSTREAM PARTY HEREBY AGREES THAT ANY ACTION OR
PROCEEDING ARISING IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREUNDER PERMITTED TO BE BROUGHT IN COURT BY THE TERMS OF THIS
AGREEMENT SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE
COMMONWEALTH OF PENNSYLVANIA, IN PHILADELPHIA COUNTY OR IN THE UNITED STATES
DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. SELLERS, BUYER AND
TITLE UPSTREAM PARTIES EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF
SUCH COURTS FOR THE PURPOSE OF ANY SUCH ACTION OR PROCEEDING AND IRREVOCABLY
AGREE TO BE BOUND BY ANY JUDGMENT RENDERED BY SUCH COURTS IN CONNECTION WITH
SUCH ACTION OR PROCEEDING. EACH SELLER, BUYER AND UPSTREAM PARTY HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION SUCH
SELLER, BUYER AND UPSTREAM PARTY MAY HAVE, NOW OR HEREAFTER, TO THE VENUE OF ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
In connection with any legal proceedings arising out of this Agreement,
the prevailing party in such proceeding shall be entitled to receive from the
non-prevailing party reimbursement for costs and expenses incurred (including
reasonable attorneys' fees), including in connection with any appellate
proceedings.
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13.8 Section Headings and Defined Terms. The section headings
contained herein are for reference purposes only and shall not in any way affect
the meaning and interpretation of this Agreement. The terms defined herein and
in any agreement executed in connection herewith include the plural as well as
the singular and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herewith and
therewith.
13.9 Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
13.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
13.11 Entire Agreement. This Agreement, together with the
agreements, Schedules, schedules and certificates referred to herein or
delivered pursuant hereto, constitute the entire agreement between the parties
hereto with respect to the purchase and sale of the Shares and supersede all
prior agreements and understandings. Without limiting the scope of the
foregoing, the parties specifically acknowledge and agree that all partnership
agreements, subscription agreements and any similar agreements regarding the
Interests that any Seller or Upstream Party entered into at any time prior to
the Closing hereunder are hereby terminated and superseded in all respects, and
the applicable Sellers and Upstream Parties hereby waive any and all rights
arising under such agreements with respect to the transactions contemplated by
this Agreement. The submission of a draft of this Agreement or portions or
summaries thereof does not constitute an offer to purchase or sell the
Interests, it being understood and agreed that neither Buyer nor Sellers shall
be legally obligated with respect to such a purchase or sale or to any other
terms or conditions set forth in such draft or portion or summary unless and
until this Agreement has been duly executed and delivered by all parties.
13.12 Concerning the Upstream Parties. The Berwind Parties and the
XxXxxx Parties agree among themselves that any liability they may owe to the
Buyer hereunder on a joint and several basis will be borne equally by the
Berwind Parties, on the one hand, and the XxXxxx Parties, on the other hand.
This Section 13.12 does not limit the nature of each of the Upstream Parties to
the Buyer as to matters stated herein to be their joint and several obligations.
13.13 Knowledge of Partnership. The references in the Agreement to
the knowledge of the Partnership shall be deemed to include the knowledge of any
Subsidiary.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the first date written above.
Buyer: ORLEANS HOMEBUILDERS, INC.
By: Xxxxxxxx X. Xxxxxxx
----------------------------------
Xxxxxxxx X. Xxxxxxx
Vice Chairman
Partnership: REALEN HOMES, L.P.
By: Realen General Partner LLC, the Partnership's
General Partner
By: Xxxxxxx X. XxXxxx
----------------------------------
Xxxxxxx X. XxXxxx
President
Sellers: REALEN GENERAL PARTNER, LLC
By: Xxxxxxx X. XxXxxx
----------------------------------
Xxxxxxx X. XxXxxx
President
DB HOMES VENTURE, L.P.
By: XxXxxx Sub, Inc.
----------------------------------
General Partner
By: Xxxxxxx X. XxXxxx
----------------------------------
Xxxxxxx X. XxXxxx, President
By: Bergen Homes, Inc.
----------------------------------
General Partner
By: Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx, Chairman
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Upstream Entities:
XxXXXX SUB, INC.
General Partner
By: Xxxxxxx X. XxXxxx
----------------------------------
Xxxxxxx X. XxXxxx, President
BERGEN HOMES, INC.
By: Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx, Chairman
BPG REAL ESTATE INVESTORS-B, L.P.
By: Bergen, Inc., General Partner
By: Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx, Chairman of the Board
BERWIND PROPERTY GROUP, LTD.
By: Berwind Property Group, Inc., General Partner
By: Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx
Executive Vice President
BERWIND PROPERTY GROUP, INC.
By: Xxxxx Xxxxxx
----------------------------------
Name: Xxxxx Xxxxxx
Title: Executive Vice President
XXXXXX ENTERPRISES, INC.
By: Xxxxxxx X. XxXxxx
----------------------------------
Name: Xxxxxxx X. XxXxxx
Title: Vice President
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The undersigned hereby join in this Agreement solely for the purposes of
agreeing to the provisions of Section 7.7 of this Agreement.
Xxxxxxx X. XxXxxx
-------------------------------------
Xxxxxxx X. XxXxxx
Xxxxxxx XxXxxx
-------------------------------------
Xxxxxxx XxXxxx
Xxxxx XxXxxx
-------------------------------------
Xxxxx XxXxxx
Xxxxxx XxXxxx
-------------------------------------
Xxxxxx XxXxxx
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LIST OF SCHEDULES
-----------------
Schedule 1.1-General and limited partnership interests owned by each Seller
Schedule 2.3 - Allocation of Purchase Price
Schedule 3.1(a) - Land parcels under contract or negotiation
Schedule 3.1(b) - Owned land parcels Schedule 3.1(c) - Homes under construction
but not sold
Schedule 3.1(d) - Homes sold but not yet delivered
Schedule 3.1(e) - Sales offers and reservations
Schedule 3.1(f) - Model homes
Schedule 3.1(g) - Trade names
Schedule 3.1(h) - Partnership's subsidiaries
Schedule 3.1(i) - Architectural plans and other intangible assets
Schedule 4.6 - Partners of RNP Associates, L.P. and copy of RNP promissory note
Schedule 5.1 - Foreign Qualifications
Schedule 5.1A - Name and Jurisdiction of each Subsidiary and list of partnership
and other agreements among equity owners, Partnership and/or Affiliates
Schedule 5.4 - Capitalization
Schedule 5.5 - Control of Partnership and Subsidiary Business
Schedule 5.7 - Litigation
Schedule 5.8 - Financial Statements
Schedule 5.10 - Standard Warranty
Schedule 5.11(a) - Certain information relating to Real Property
Schedule 5.11(b) - List of Real Property and encumbrances
Schedule 5.11(c) - Leased Real Property
Schedule 5.11(d) - Land Contract Real Property
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Schedule 5.11(e) - Certain Defaults
Schedule 5.11(g) - Non-compliant Real Property
Schedule 5.11(i) - Unpaid Charges, Debts, Liabilities or Obligations or
Conditions or Obligations concerning Real Property
Schedule 5.11(k) - Moratoria
Schedule 5.11(l) - Property in protected areas
Schedule 5.11(m) - Reclaimed Real Property
Schedule 5.13 - List of Intellectual Property, certain loans and contracts, etc.
Schedule 5.16 - List of repairs after sale
Schedule 5.17 - Names of top ten Suppliers
Schedule 5.19 - Employee Benefits Schedule 5.19(h) - Payments resulting from
Purchase
Schedule 5.20(c) - OSHA Reports
Schedule 5.21- Directors, Officers and Employees; List of Employment Agreements
and severance and change of control arrangements
Schedule 5.22- Affiliate Agreements and Transactions
Schedule 5.23 - Environmental Matters
Schedule 5.24- Certain Changes and Events Since 1/1/04
Schedule 6.3(b) - Consents and Approvals to be obtained by Buyer
Schedule 8.3-Consents and Approvals to be obtained before Closing
Schedule 9.6 - Bonds and Letters of Credit from which Sellers to be released
Schedule 11.1 - Certain Bellinghamshire Indemnification Matters
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LIST OF EXHIBITS
----------------
Exhibit 2.2 - Form of Purchase Money Promissory Note
Exhibit 7.7(b) - Land proposed to be acquired by Partnership
Exhibit 7.9 - Form of Right of First Offer
Exhibit 11 - List of Active Communities
