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PURCHASE AGREEMENT
AMONG
X. XXXXXXXXXXX XXXXXXX
XXXXXXXXXXX HOMES, LLC
FORTRESS HOLDING-VIRGINIA, INC.
AND
THE FORTRESS GROUP, INC.
DATED: APRIL 5, 2001
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of this 5th day of
April, 2001, among J. Xxxxxxxxxxx Xxxxxxx, an individual residing in Las Vegas,
Nevada (the "Purchaser"), Fortress Holding-Virginia, Inc., a Delaware
corporation (the "Seller"); Xxxxxxxxxxx Homes, LLC, a Nevada limited liability
company ("Xxxxxxxxxxx Homes" or the "Acquired Company"); and The Fortress Group,
Inc., a Delaware corporation ("Fortress").
WHEREAS, the Acquired Company is engaged in the business of constructing
and selling residential single-family homes in the State of Nevada (the
"Business"),
WHEREAS, Seller owns all of the outstanding membership interests in the
Acquired Company (the "Interests"),
WHEREAS, Seller desires to sell, transfer, and assign to Purchaser, and
Purchaser desires to purchase and acquire all of the Interests for the
consideration and on the terms set forth in this Agreement,
NOW, THEREFORE, in consideration of the mutual covenants of the parties
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
SALE OF INTERESTS
1.1 INTERESTS. Upon the terms and subject to the conditions set forth
herein and in reliance on the respective representations and warranties of the
parties, the Seller will sell and transfer all of the Interests to Purchaser,
and Purchaser will purchase the Interests from the Seller on the Closing Date
and at the time and place of Closing referred to below, for the consideration
and in accordance with the provisions of Section 2.1 hereof.
1.2 CONSENTS. Promptly after the date hereof and except as otherwise
provided herein, Seller and the Acquired Company shall use reasonable efforts to
obtain all approvals, consents, notices, and waivers required to transfer the
Interests to the Purchaser (collectively, the "Consents"), in form and substance
reasonably satisfactory to the Purchaser. Seller shall promptly notify Purchaser
following the receipt of any Consent. Schedule 4.4 hereto describes each
Consent.
1.3 TRANSFER TO THE PURCHASER SUBSIDIARY. At the election of the
Purchaser, at Closing the Seller shall transfer the Interests to such newly
formed entity as Purchaser shall designate in writing to Seller before the
Closing date ("Purchaser Entity"). In such case the agreements, covenants,
indemnifications, and representations and warranties of the Seller set forth
herein shall also be for the benefit of the Purchaser Entity. If Purchaser
elects to have title transferred at Closing to Purchaser Entity, Purchaser and
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Purchaser Entity shall be subject to and bound by the duties, covenants,
indemnifications, liabilities, representations, and warranties of Purchaser set
forth herein. Moreover, the Purchaser Entity shall be deemed to have made all of
the representations and warranties set forth in Article V as of the Closing
Date.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Interests and the terms of payment will be as follows:
(a) $1.00 Cash. At Closing Purchaser shall pay to Seller $1.00
cash.
(b) Promissory Note. At Closing Purchaser and Xxxxxxxx Xxxxxxx
shall deliver to Seller a promissory note signed by each of them,
substantially in the form and to the effect of the promissory note
attached hereto as Exhibit A and made a part hereof (the "Promissory
Note").
ARTICLE III
CLOSING
3.1 TIME AND PLACE OF CLOSING. The purchase and sale provided for in
this Agreement will take place at the offices of Thorndal, Armstrong, Delk,
Xxxxxxxxxx & Xxxxxxxx, 0000 X. Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxx 00000, or at
such other place as the parties may agree upon, at 10:00 a.m. (local time) on
August 31, 2001 (the "Closing", sometimes referred to as the "Closing Date") or
such sooner date as the parties may agree in writing.
3.2 DELIVERIES. At Closing, the Seller, Acquired Company and Purchaser
will respectively deliver the closing documents as set forth in the Deliveries
Check List attached as Exhibit B hereto and hereby incorporated by reference
(the "Deliveries Check List").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIRED COMPANY
AND PURCHASER
The Acquired Company and Seller each jointly and severally represent and
warrant to Purchaser as follows:
4.1 CORPORATE POWER AND AUTHORITY; EFFECT OF AGREEMENT. Seller is a
corporation validly existing and in good standing under the laws of the State of
Delaware. The Acquired Company is a limited liability company validly existing
and in good standing under the laws of the State of Nevada. Seller and the
Acquired Company have full corporate power and authority to execute and deliver
this Agreement and to perform their obligations hereunder and to consummate the
transactions contemplated hereby.
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The execution and delivery of this Agreement by the Acquired Company and Seller
and performance by them of their obligations under this Agreement and the
consummation by them of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of each, in accordance with
applicable law and the respective Certificate of Incorporation and By-laws and
Certificate of Formation and operating agreements of the entities. This
Agreement has been duly and validly executed and delivered by the Acquired
Company and Seller and constitutes the valid and binding obligations of each,
enforceable in accordance with their respective terms, except to the extent that
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws of general applicability relating to or
affecting creditors' rights generally, or the application of equitable
principles.
4.2 CAPITALIZATION. The entire capital interests of the Acquired Company
is listed on Schedule 4.2 and is held only by Seller. No legend or other
reference to any purported encumbrance appears upon any certificate representing
the Interests of the Acquired Company. All of the outstanding interests of the
Acquired Company have been duly authorized and validly issued and are fully paid
and nonassessable. There are no voting agreements, voting trusts or other
agreements (including cumulative voting rights), commitments or understandings
with respect to any of the Interests.
4.3 CERTIFICATE OF FORMATION, OPERATING AGREEMENT, OFFICERS. True and
complete copies of the Certificate of Formation, and all amendments thereof to
date, and the operating agreement, as amended, have been delivered to Purchaser.
Schedule 4.3 is a true and complete list of all of the officers and managers of
the Acquired Company.
4.4 NO CONFLICT. Except for the Consents described on Schedule 4.4
hereto, the execution, delivery or performance of this Agreement, the execution
and delivery by Seller of Closing documents, and the consummation of the
transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of
any of the terms, conditions, or provisions of the Certificate of
Incorporation and By-laws of Seller or the Certificate of
Organization or the Operating Agreement of the Acquired Company;
(b) conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to Acquired
Company (other than such conflicts, violations or breaches (i)
which could not in the aggregate be reasonably expected to
adversely affect the validly or enforceability of this Agreement
or to have a material adverse effect on the Condition of the
Business or (ii) as would occur solely as a result of the
identity or the legal or regulatory status of Purchaser;
(c) except as disclosed in Schedule 4.4 hereto or as could
not, individually or in the aggregate, reasonably be expected to
be materially adverse to the Condition of the Business or to
adversely affect the ability
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of Seller to consummate the transactions contemplated hereby or
to perform its obligations hereunder or thereunder, (i) conflict
with or result in a violation or breach of, (ii) constitute
(with or without notice or lapse of time or both) a default
under, (iii) require the Acquired Company, Seller, or Fortress
to obtain any consent or approval of any Person under the terms
of, (iv) result in or give to any Person any right of
termination, cancellation, or modification under, or (v) result
in the creation or imposition of an Lien upon Seller, the
Acquired Company, or its assets under, any Contract or License
to which the Acquired Company or Seller is a party or by which
any of the assets of the Acquired Company are bound.
Under a heading "Consents", Schedules 4.4 describes each Consent.
It is hereby stipulated by Purchaser that the imposition of an assumption fee or
legal fees as a condition of providing a Consent shall not be a breach of the
representations provided in this Agreement.
4.5 BALANCE SHEET. Attached as Schedule 4.5 hereto is the unaudited
balance sheet of the Acquired Company as of February 28, 2001.
4.6 LEGAL ACTIONS. Except as disclosed in Schedule 4.6 hereto, there are
no actions, suits, proceedings, or claims pending or, to the knowledge of Seller
and the Acquired Company, threatened, before or by any court, arbitrator,
regulatory authority or government agency against or affecting the Acquired
Company or Seller that (i) seek to enjoin or prevent the consummation of the
transaction contemplated by this Agreement or (ii) could reasonably be expected
to have a material adverse effect on the Condition of the Business.
4.7 COMPLIANCE WITH LAWS AND ORDERS. The Acquired Company is not in
violation of or in default under any Law or Order applicable to the Business the
effect of which, individually or in the aggregate with other such violations and
defaults, could reasonably be expected to materially adverse to the Condition of
the Business.
4.8 REAL PROPERTY. Attached to Schedule 4.8 is a computer printout
listing, as of February 28, 2001, each parcel of real property owned by the
Acquired Company which is individually or in the aggregate with other owned or
leased parcels material to the Condition of the Business.
4.9 CONTRACTS. Schedule 4.9 hereto contains a true and correct list of
(i) all employment Contracts to which the Acquired Company is a party and (ii)
all Contracts relating to Indebtedness of the Acquired Company in excess of
$200,000.
4.10 BROKERS. All negotiations relative to the Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any other person on behalf of Seller or the Acquired Company in such manner
as to give rise to any claim by any other person for a finder's fee, brokerage
commission or similar payment.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 EXECUTION, DELIVERY AND ENFORCEABILITY OF AGREEMENT; VIOLATION. This
Agreement has been duly executed and delivered by Purchaser and at the Closing
any other documents required hereunder to be executed and delivered by or on
behalf of Purchaser will have been duly executed and delivered. This Agreement
constitutes the legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditors' rights generally and
the application of equitable principles. Any other agreements required hereto to
be executed and delivered by the Purchaser at Closing will constitute the legal,
valid and binding agreements of the Purchaser executing the same, enforceable
against Purchaser in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditors' rights generally and
the application of equitable principles.
5.2 RESIDENCE AND DOMICILE; BANKRUPTCY. The Purchaser is a resident of,
and domiciled in, the state of Nevada. No bankruptcy, insolvency, or
receivership proceedings have been instituted or are pending against Purchaser,
and Purchaser is able to satisfy his respective liabilities as they become due.
5.3 NO CONFLICTS. The execution and delivery by Purchaser of this
Agreement do not , and the execution and delivery by Purchaser of Closing
documents, the performance by Purchaser of its obligations under this Agreement
and the Closing documents and the consummation of the transactions contemplated
hereby and thereby will not:
(a) conflict with or result in a violation or breach of any term
or provision of any Law or Order applicable to Purchaser (other than
such conflicts, violations or breaches which could not in the aggregate
be reasonably expected to adversely affect the validly or enforceability
of this Agreement or the Closing documents to be delivered by
Purchaser).
(b) except as could not, individually or in the aggregate,
reasonably be expected to adversely effect the ability of Purchaser to
consummate the transactions contemplated hereby or by the Closing
documents to be delivered by Purchaser or to perform its obligations
hereunder or at Closing, (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or
both) a default under, (iii) require Purchaser to obtain any consent or
approval of any Person under the terms of, or (iv) result in or give to
any Person any right of termination, cancellation, or modification
under, any Contract or License to which Purchaser is a party.
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5.4 LEGAL ACTIONS. There are no actions, suits, proceedings or claims
pending before or by any court, arbitrator, regulatory authority or government
agency against or affecting Purchaser that seeks to enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
5.5 BROKERS. All negotiations relative to the Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any other person on behalf of Purchaser in such manner as to give rise to any
claim by any other person for a finder's fee, brokerage commission or similar
payment.
ARTICLE VI
COVENANTS PRIOR TO CLOSING
6.1 COOPERATION. Seller, the Acquired Company, and Purchaser shall
cooperate fully with each other in furnishing any information or performing any
action requested by the other party which is reasonably necessary to the timely
and successful consummation of the transactions contemplated by this Agreement.
6.2 BUSINESS CONDUCT. From the date hereof through the date of Closing,
Seller, Fortress, and the Acquired Company covenant and agree that --
(a) the Business will be conducted only in the ordinary course
consistent with past practice.
(b) the Acquired Company will not distribute any cash to Seller
or Fortress if after giving effect to the cash distribution the Debt
Ratio would exceed 96.2%.
6.3 SALE OF FORTRESS. Fortress covenants and agrees that in the event it
enters into negotiations (i) to sell all or substantially all of its assets or
all of its outstanding common stock or (ii) to merge with another company in a
transaction that would close on or before the Closing Date, an agreement to
honor the terms and conditions of this Agreement will be a condition of the
transaction.
6.4 LIST OF EMPLOYEES. Within sixty days from the date hereof Purchaser
shall deliver to Fortress a tentative, confidential list of those current
employees of the Acquired Company that Purchaser will not retain following the
Closing Date.
6.5 DETERMINATION OF PERCENTAGE OF CONSTRUCTION COMPLETED; SCHEDULE.
(a) On the second business day prior to the Closing Date, an
employee of the Acquired Company shall (i) visit each of the Projects in
order to make a good faith evaluation, with respect to each unit under
construction at such Project, of the Percentage of Construction
Completed and (ii) deliver a written certificate to Purchaser and Seller
setting forth his or her determination of the Percentage of Construction
Completed with respect to each such unit. Such determination shall be
deemed final for the purpose of calculating all amounts hereunder or
under the
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Promissory Note, unless objected to by Seller or Purchaser prior to
Closing. In the event of such an objection, Seller and Purchaser shall
in good faith negotiate in order to reach agreement on the Percentage of
Construction Completed for each unit under dispute.
(b) The agreed upon list of the Percentage of Construction
Completed shall be used by the parties to develop and attach as a
post-execution schedule a Schedule 6.5 that contains the following
information with respect to each unit included in the calculation of the
Principal Amount of the Promissory Note, organized by Project: (i) lot
number, (ii) Percentage of Construction Completed on the lot, (iii) the
applicable component of the Accrued Management Fee represented by the
lot in question, and (iv) the applicable component of the Profit
Participation represented by the lot in question. The format of Schedule
6.5 shall conform substantially to attached Schedule 6.5.
ARTICLE VII
CONDITIONS PRECEDENT TO THE CLOSING
7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser under this Agreement to consummate the transactions contemplated
hereby will be subject to the satisfaction, at or prior to the Closing, of all
of the following conditions, any one or more of which may be waived at the
option of Purchaser:
(a) Performance of this Agreement. All agreements, covenants, and
obligations required by the terms of this Agreement to be performed and
complied with by Seller, the Acquired Company, and Fortress on or before
the Closing Date shall have been so performed or complied with in all
material respects.
(b) Accuracy of Representations and Warranties. The
representations and warranties of Seller and the Acquired Company
contained in Article IV of this Agreement shall be true and correct in
all material respects on and as of the Closing Date as though made at
and as of such date, except to the extent that they expressly refer to
an earlier or specific time, in which case they shall be true and
correct in all material respects as of such time, and Seller shall have
delivered to Purchaser a certificate to that effect, signed on behalf of
Seller and the Acquired Company by a duly authorized officer of Seller
and the Acquired Company, as the case may be.
(c) No Legal Obstruction. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining, or otherwise
prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement.
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(d) Financing. Prior to ninety days from the date hereof --
(i) Bank United (the "Existing Lenders") shall have
consented in writing to the sale and purchase without a material
change in the terms or conditions of its respective credit
facility with the Acquired Company in place on the date of this
Agreement; or
(ii) to the extent one or more of the Existing Lenders
demands a material change in the terms or conditions of its
credit facility as a condition to its consent, Purchaser has
either -
(A) secured a commitment from the Lender for the
amount of the existing credit facility in question on
revised terms and conditions reasonably acceptable to
Purchaser,
(B) secured a commitment from one or more other
lenders to replace the facility in question under terms
and conditions reasonably acceptable to Purchaser.
Purchaser covenants to make reasonable efforts to secure the
financing.
(e) Material Adverse Change. Since February 28, 2001 no material
adverse change in the Condition of the Business shall have occurred,
other than those occurring as a result of general economic or financial
conditions or other developments which are not unique to the Business
but also affect other persons who participate or are engaged in lines of
business similar to the Business.
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of
the Seller under this Agreement to consummate the transactions contemplated
hereby will be subject to the satisfaction, at or prior to the Closing, of all
the following conditions, any one or more of which may be waived at the option
of the Seller:
(a) Performance of this Agreement. All agreements, covenants, and
obligations required by the terms of this Agreement to be performed and
complied with by Purchaser on or before the Closing Date shall have been
so performed or complied with in all material respects.
(b) Accuracy of Representations and Warranties. The
representations and warranties of Purchaser contained in Article V of
this Agreement shall be true and correct in all material respects on and
as of the Closing Date as though made at and as of such date, except to
the extent that they expressly refer to an earlier or specific time, in
which case they shall be true and correct in all material respects as of
such time, and Purchaser shall have delivered to Seller a certificate to
that effect, signed on by Purchaser.
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(c) No Legal Obstruction. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining, or otherwise
prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement.
(d) Opinion of Financial Advisor. Fortress shall have received
within forty-five days from the date hereof a written opinion of an
investment banking firm which is satisfactory in form and substance to
the Board of Directors of Fortress (the "Board"), in its sole
discretion, to the effect that, as of the date hereof, the Purchase
Price consideration to be received by the Seller in the transaction is
fair to Seller and Fortress from a financial point of view (the
"Fairness Opinion"), and Fortress shall have delivered such opinion to
Bank of New York, Successor Trustee to IBJ Xxxxxxxxx Bank & Trust
Company, the Trustee under the Indenture, dated May 21, 1996, between
Fortress and the Trustee.
ARTICLE VIII
OTHER AGREEMENTS
8.1 EXTENSION OF CONSULTING AGREEMENTS. Purchaser and the Acquired
Company are parties to four consulting agreements (the "Consulting Agreements",
described in Exhibit C attached hereto and made a part hereof) in connection
with four residential real estate developments known as Southern Highlands I,
Southern Highlands II, Bellacere, and LLV 724 (the "Projects") managed by the
Acquired Company pursuant to certain operating agreements identified in Exhibit
D attached hereto and made a part hereof. Pursuant to written notice provided to
the Acquired Company by the Purchaser the Consulting Agreements will terminate
on April 30, 2001 unless extended by written action of the parties.
(a) By this Agreement the Consulting Agreements between J.
Xxxxxxxxxxx Xxxxxxx and Xxxxxxxxxxx Homes, LLC, successor to Xxxxxxxxxxx
Homes, Custom Home Division, Inc., are hereby extended until the Closing
Date.
(b) In the event this Agreement is terminated under Section
12.14(a)(iii), (iv) or (v) the Consulting Agreements are hereby deemed
to be extended for a period of sixty days from the date of the
termination.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLER. Subject to the limitations set forth in
Section 9.6(b), below, from and after the Closing, Seller and Fortress jointly
and severally agree to indemnify, defend, and save the Acquired Company, and its
officers, directors, employees, and agents, and Purchaser and Xxxxxxxx Xxxxxxx
(each, a "Purchaser Indemnified Party"), at all times from and after this
Agreement through the Expiration Date harmless from and against, and to promptly
pay to a Purchaser Indemnified Party or
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reimburse a Purchaser Indemnified Party for, any and all liabilities (whether
contingent, fixed or unfixed, liquidated or unliquidated, or otherwise),
obligations, deficiencies, demands, claims, suits, actions, or causes of action,
assessments, losses, costs, expenses, filing fees, interest, fines, penalties,
actual or punitive damages or costs or expenses of any and all investigations,
proceedings (including appeals, arbitration and mediation), judgments,
settlements and compromises (including reasonable fees and expenses of
attorneys, accountants and other experts) (individually and collectively, the
"Losses") sustained or incurred by any Purchaser Indemnified Party relating to,
resulting from, arising out of, or otherwise by virtue of --
(a) a Construction Claim; or
(b) action by the Acquired Company, the Seller, or Fortress to
terminate an employee of the Acquired Company between the date hereof
and on or before the Closing Date.
9.2 INDEMNIFICATION BY PURCHASER. From and after the Closing, Purchaser
and any assignee agree to indemnify, defend, and save Seller, Fortress, and
their officers, directors, employees and agents, (a "Seller Indemnified Party")
at all times from and after this Agreement through the Expiration Date harmless
from and against, and to promptly pay to a Seller Indemnified Party or reimburse
a Seller Indemnified Party for, any and all Losses sustained or incurred by a
Seller Indemnified Party relating to, resulting from, arising out of, or
otherwise by virtue of the termination of employment of an employee of the
Acquired Company after the Closing Date.
9.3 INDEMNIFICATION PROCEDURE. In the event that subsequent to the
Closing any person or entity entitled to indemnification under this Agreement
(an "Indemnified Party") receives notice of the assertion of any claim or of the
commencement of any action or proceeding by an entity who is not a party to this
Agreement or an affiliate of such a party (including, but not limited to any
domestic or foreign court, government, or Governmental Authority or
instrumentality, federal state or local) (a "Claim") against such Indemnified
Party, against which a party to this Agreement is required to provide
indemnification under this Agreement (an "Indemnifying Party"), the Indemnified
Party shall give written notice together with a statement of any available
information regarding such claim to the Indemnifying Party within thirty (30)
days after learning of such claim (or within such shorter time as may be
necessary to give the Indemnifying Party a reasonable opportunity to respond to
such claim). The Indemnifying Party shall have the right, upon written notice to
the Indemnified Party (the "Defense Notice") within thirty (30) days after
receipt from the Indemnified Party of notice of such claim, which notice by the
Indemnifying Party shall specify the counsel it will appoint to defend such
claim ("Defense Counsel"), to conduct at its expense the defense against such
claim in its own name, or if necessary in the name of the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to approve
the Defense Counsel, which approval shall not be unreasonably withheld, and in
the event the Indemnifying Party shall propose an alternate Defense Counsel,
which shall be subject again to the Indemnified Party's approval.
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(a) In the event that the Indemnifying Party shall fail to give
such notice, it shall be deemed to have elected not to conduct the
defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith and to
compromise and settle the claim without prior consent of the
Indemnifying Party and the Indemnifying Party will be liable for all
costs, expense, settlement amounts or other Losses paid or incurred in
connection therewith.
(b) In the event that the Indemnifying Party does elect to
conduct the defense of the subject claim, the Indemnified Party will
cooperate with and make available to the Indemnifying Party such
assistance and materials as may be reasonably requested by it, all at
the expense of the Indemnifying Party, and the Indemnified Party shall
have the right at its expense to participate in the defense assisted by
counsel of its own choosing, provided that the Indemnified Party shall
have the right to compromise and settle the claim only with the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. If a firm decision is made to settle a
Claim, which offer the Indemnifying Party is permitted to settle under
this Section 9.3 and the Indemnifying Party desires to accept and agree
to such offer, the Indemnifying Party will give written notice to the
Indemnified Party to that effect. If the Indemnified Party fails to
consent to such firm offer within 30 calendar days after its receipt of
such notice, the Indemnified Party may continue to contest or defend
such Claim and, in such event, the maximum liability of the Indemnifying
Party as to such Claim will not exceed the amount of such settlement
offer, plus costs and expenses paid or incurred by the Indemnified Party
through the end of such 30 day period.
(c) Any judgment entered or settlement agreed upon in the manner
provided herein shall be binding upon the Indemnifying Party, and shall
conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
9.4 FAILURE TO GIVE TIMELY NOTICE. A failure by an Indemnified Party to
give timely, complete or accurate notice as provided in Sections 9.3 will not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise directly and materially damaged as a result
of such failure to give timely notice.
9.5 REDUCTION OF LOSS. To the extent any Loss of an Indemnified Party is
reduced by receipt of payment (i) under insurance policies which are not subject
to retroactive adjustment or other reimbursement to the insurer in respect of
such payment, or (ii) from third parties not affiliated with the Indemnified
Party, such payments (net of the expenses of the recovery thereof and in the
case of a Loss under Section 9.1(a) net of the Condo Threshold) (such net
payment being referred to herein as a "Reimbursement")
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shall be credited against such Loss; provided, however, (x) the pendency of such
payments shall not delay or reduce the obligation of the Indemnifying Party to
make payment to the Indemnified Party in respect of such Loss, and (y) the
Indemnified Party shall have no obligation, hereunder or otherwise, to pursue
payment under or from any insurer or third party in respect of such loss. If any
Reimbursement is obtained subsequent to payment by an Indemnifying Party in
respect of a Loss, such Reimbursement shall be promptly paid over to the
Indemnifying Party.
9.6 LIMITATION OF INDEMNIFICATION. Notwithstanding anything in this
Agreement to the contrary:
(a) Limitation of Years. A party's duty to indemnify under this
Article IX shall coincide with the relevant statute of limitations under
Nevada law controlling the claim in question, the final date under the
relevant statute of limitations being the Expiration Date under this
Article IX.
(b) Threshold. The duty of Seller and Fortress to indemnify under
Section 9.1(a) shall not arise until the Losses sustained or incurred by
an Indemnified Party exceed the Condo Threshold and then only for the
amount by which such Losses exceed the Condo Threshold.
9.7 SUBROGATION. The Indemnifying Party shall be subrogated to the
Indemnified Party's rights of recovery to the extent of any Loss satisfied by
the Indemnifying Party. The Indemnified Party shall execute and deliver such
instruments and papers as are necessary to assign such rights and assist in the
exercise thereof, including access to books and records of the Acquired Company.
ARTICLE XI
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
referred to in this Article 11:
"Accrued Management Fees" - with respect to the Acquired Company's management of
the Projects under the Operating Agreements identified in Exhibit D, the
receivables due from joint ventures as recorded on the books of the Acquired
Company, less (i) deferred income from joint ventures, (ii) consulting fees due
to J. Xxxxxxxxxxx Xxxxxxx under the Consulting Agreements, and (iii) that
portion of the receivables due from joint ventures that is attributable to the
warranty reserve for the unit in question or one (1%) percent of the Contract
Price for which only a Purchase Agreement exists, as the case may be.
"Acquired Company" - as defined on page 2.
"Board" - as defined in Section 7.2(e).
"Business" - as defined on page 2.
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"Closing" and "Closing Date - as defined in Section 3.1.
"Condition of the Business" - the business, financial condition, or results of
operations of the Business.
"Condo Threshold" - with respect to the Acquired Company, the portion of
warranty reserve as recorded on its books as of the Closing Date attributable to
condominium units at the Terraces, plus $50,0001.
"Consents" - as defined in Sections 1.2.
"Contract Price" - with respect to a unit that is part of one of the Projects,
the sales price for the unit stated in the Purchase Agreement multiplied by the
Percentage of Construction Completed as of the Closing Date.
"Construction Claim" - warranty obligations and construction defects in respect
of construction work on or at condominium units of the Terraces only completed
by the Acquired Company and delivered to one of its customers prior to the
Closing Date.
"Consulting Agreements" - as defined in Section 8.1.
"Contract" - any material agreement, lease, evidence of Indebtedness, or other
material contract.
"Debt Ratio" - with respect to the balance sheet of the Acquired Company, the
quotient, expressed as a ratio rounded to the nearest 1/10 percent, derived by
dividing total interest bearing debt by Net Total Inventory.
"Deliveries Check List" - Exhibit B.
"Existing Lender" - as defined in Section 7.1(e).
"Expiration Date" - as defined in Section 9.6(a).
"Fortress" - The Fortress Group, Inc., a Delaware corporation.
"Indebtedness" - with respect to any person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, and (iii) in the nature of guarantees of the obligations described
in clauses (i) and (ii), above of any other Person.
"Indemnified Party" - as defined in Section 9.3.
--------
(1) This number shall be calculated as of the Closing date to the satisfaction
of the parties and made a part of the deliveries at closing.
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"Indemnifying Party" - as defined in Section 9.3.
"Laws" - all laws, statutes, rules, regulations and ordinances of the United
States or any domestic state, county, city, or other political subdivision or of
any governmental or regulatory authority.
"License" - any license, permit, certificate of authority, authorization,
approval and registration granted or issued by any governmental or regulatory
authority.
"Liens" - any mortgage, pledge, security interest, lease, lien, charge or other
encumbrance or any kind, or any Contract to give any of the foregoing.
"Losses" - as defined in Section 9.1.
"Net Total Inventory" - with respect to the balance sheet of the Acquired
Company, total inventory, less capped interest, capped overhead, and the
theoretical inventory adjustments.
"Note Adjustment" - with respect to the Promissory Note (Exhibit A), an
adjustment to the Principal Amount determined by comparing the Adjusted Debt
Ratio to 96.2%, as follows:
(1) Note Decrease. If the Adjusted Debt Ratio is greater than 96.2%, the
principal amount of the Promissory Note shall be reduced by the product
of a times b where "a" is Net Total Inventory as of the Closing Date and
"b" is the difference between the Adjusted Debt Ratio and 96.2%.
(2) Note Increase. If the Adjusted Debt Ratio is less than 96.2%, the
principal amount of the Promissory Note shall be increased by the
product of a times c where "a" is Net Total Inventory as of the Closing
Date and "c" is the difference between 96.2% and the Adjusted Debt
Ratio.
"Order" - any writ, judgment, decree, injunction or similar order of any
governmental authority.
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"Percentage of Construction Completed" - with respect to a unit under
construction that is part of one of the Projects, the percentage of construction
completed shall be calculated according to the following schedule:
Stage of Construction Deemed percentage of Completion
--------------------- -------------------------------
Staking Completed 25%
Framing Completed and ready
to request or receive framing inspection 50%
Drywall Completed, taped, and
textured 75%
Unit Completed and ready for
inspection by building inspector 100%
"Person" - any individual, corporation (including non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, or other entity, or governmental body.
"Profit Participation" - with respect to a Consulting Agreement, the sum of d,
e, and f where-
"d" equals 1.50% of the Sales Revenue (as defined in the Southern
Highlands I Operating Agreement) or Contract Price, as the case may be,
of units that are part of Southern Highlands I or II,
"e" equals 1.66% of the Sales Revenue (as defined in the Bellacere
Operating Agreement) or Contract Price, as the case may be, of units
that are part of Bellacere, and
"f" equals 1.5% of the Sales Revenue (as defined in the L.L.V. 724
Operating Agreement) or Contract Price, as the case may be, of units
that are part of L.L.V. 724, LLC.
In calculating the respective component of Profit Participation, Sales Revenue
will be used for those units that have been sold and delivered prior to or on
the Closing Date, and Contract Price will be used for those units for which a
Purchase Agreement has been executed prior to the Closing Date but the unit has
not been closed as of the Closing Date.
"Projects" - as defined in Section 8.1.
"Purchase Agreement" - with respect to a unit that is part of one of the
Projects, a binding written agreement for the sale of the unit.
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"Purchaser" - as defined on page 2.
"Purchase Price" - as defined in Section 2.1.
"Purchaser Indemnified Party" - as defined in Section 9.1.
"Seller" - as defined on page 2.
"Seller Indemnified Party" - as defined in Section 9.2.
"Terraces" - a condominium development located in Xxxxx County, Nevada known and
identified on a plat as "Terraces I & II in the Hills at Xxxxxxxxx", as recorded
in the Records of Xxxxx County, Nevada.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES, CONSENTS, ETC. Any notices, consents or other
communication required to be sent or given hereunder by any of the parties shall
in every case be in writing and shall be deemed properly served if (i) delivered
personally, (ii) sent by registered or certified mail, in all such cases with
first class postage prepaid, return receipt requested, or (iii) delivered by a
recognized overnight courier service, to the parties at the addresses as set
forth below or at such other addresses as may be furnished in writing.
(a) If to Seller:
The Fortress Group, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxx, President
Copy to:
Milbank Tweed Hadley & XxXxxx, LLP
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx, Esquire
Facsimile No. (000) 000-0000
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(b) If to Purchaser:
J. Xxxxxxxxxxx Xxxxxxx
0000 Xxxxxxxxxx
Xxxxxxxxx, XX 00000
Copy to:
Thorndal, Armstrong, Delk, Xxxxxxxxxx & Xxxxxxxx
0000 X. Xxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxx Xxxxx, Esquire
Date of service of such notice shall be (x) the date such notice is personally
delivered, (y) three (3) days after the date of mailing if sent by certified or
registered mail, or (z) one (1) day after date of delivery to the overnight
courier if sent by overnight courier.
12.2 SEVERABILITY. The unenforceability or invalidity of any provision
of this Agreement shall not affect the enforceability or validity of any other
provision.
12.3 DOCUMENTS. Each party will execute all documents and take such
other actions as the other party may reasonably request in order to consummate
the transactions provided for herein and to accomplish the purposes of this
Agreement.
12.4 COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed by facsimile signature, provided an original instrument shall be
delivered to each party no later than three business days after the execution of
the Agreement.
12.5 EXPENSES. Except as otherwise specifically provided herein, each of
the parties shall pay all costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in closing an carrying out the
transactions contemplated by this Agreement.
12.6 COOPERATION BY THE PARTIES. The parties to this Agreement will use
their reasonable efforts, and will cooperate with each other of them, to secure
all necessary consents, approvals, authorizations, exemptions and waivers from
third parties as shall be required in order to enable each of them to effect the
transactions contemplated hereby, and will otherwise use their best efforts to
cause the consummation of such transactions in accordance with the terms and
conditions hereof.
12.7 FURTHER ASSURANCES. At any time or from time to time up to one year
after the Closing, each of the parties hereto shall, at the request of the other
of the parties
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hereto and at such other parties' expense, execute and deliver any further
instruments or documents and take all such further actions as are reasonably
requested of it in order to consummate and make effective the sale of the Assets
pursuant to this Agreement.
12.8 GOVERNING LAW. This Agreement shall be construed and governed in
accordance with the laws of the State of Nevada applicable to a contract
executed in such State, without giving effect to conflicts and choice of law
principles.
12.9 HEADINGS. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
12.10 ASSIGNMENT. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but will not be assignable or delegable by any party without the prior
written consent of the other parties.
12.11 ENTIRE AGREEMENT. This Agreement and all the Schedules and
Exhibits attached to the Agreement (which shall be deemed incorporated in the
Agreement and made a part hereof) set forth the entire understanding of the
parties and supersedes all prior or contemporaneous agreements or negotiations
(whether in writing or oral) and may be modified only by instruments signed by
both of the parties hereto. Oral modifications are absolutely prohibited.
12.12 THIRD PARTIES. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person or entity, other than
the parties to this Agreement, any rights or remedies under or by reason of this
Agreement.
12.13 INTERPRETATIVE MATTERS. Unless the context otherwise requires, (i)
all references to Articles, Sections, Schedules or Exhibits are to those
contained in or attached to this Agreement, (ii) each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in accordance
with GAAP, and (iii) words in the singular or plural include the singular and
plural and pronouns stated in either the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter.
12.14 TERMINATION. Upon notice to the other parties hereto, the
Purchaser or the Seller may terminate this Agreement prior to the Closing under
the circumstances set forth below:
(a) Prior to Closing. This Agreement may be terminated at any time prior
to Closing:
(i) at any time prior to the Closing by the mutual written
consent of Purchaser and the Seller;
(ii) at any time prior to the Closing by either the Seller or
Purchaser in writing, without liability to the terminating party on
account of such termination
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(provided the terminating party is not otherwise in default or in breach
of this Agreement), if Purchaser or the Seller, respectively, shall (i)
fail to perform in any material respect its agreements contained herein
required to be performed prior to the Closing, or (ii) materially breach
any of its representations, warranties or covenants contained herein;
and
(iii) By Seller at any point up to May 20, 2001 by giving notice
to Purchaser that it elects to terminate its obligations under the
Fairness Opinion Condition, Section 7.2(d) hereof.
(iv) By Purchaser at any point up to July 5, 2001 by giving
notice to Seller that it elects to terminate its obligations under the
Financing Condition, Section 7.1(d) hereof.
(v) By Seller on or after June 4, 2001 hereof if by that date
Purchaser has not received from a financial institution a letter of
interest indicating a willingness to finance this transaction, subject
to formal approval by the credit committee of the financial institution.
(b) Effect of Termination. In the event of termination of this Agreement
pursuant to Subsections 12.14(a)(i),(iii), (iv), or (v) then all obligations of
the parties hereunder shall terminate and each party will be relieved on any and
all claims from the other party growing out of this Agreement and each party
will bear its own expenses and respective fees and costs.
12.15 SURVIVAL. The representations and warranties contained in Section
4.1 and 4.2 will survive until the expiration of the applicable statute of
limitations. All other representations and warranties contained in this
Agreement will not survive the Closing, and there shall be no liability in
respect thereof.
12.16 PUBLIC ANNOUNCEMENT. Any public announcement or similar publicity
with respect to this Agreement will be issued, if at all, at such time and in
such manner as Fortress determines; provided, however, Fortress will provide an
advance copy of the public announcement to Purchaser and reasonably consider
Purchaser's proposed additions or changes to the announcement. Except as is
reasonably necessary to consummate this transaction or consented to by Fortress
in advance or required by law, prior to Closing Purchaser shall keep this
Agreement confidential.. Seller and Purchaser will consult with each other
concerning the means by which the employees, customers, suppliers and other
interested parties of the Acquired Company will be informed of the transaction.
12.17 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising a right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of the right,
power, or privilege, and no single
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or partial exercise of a right, power, or privilege will preclude any other or
further exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in it can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given.
12.18 JOINTLY NEGOTIATED. The provisions of this Agreement have been
jointly negotiated by all of the parties to the Agreement, and as such, it is
agreed that no provision shall be more strictly construed against a party
regardless of which party drafted the provision.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
----------------------
J. Xxxxxxxxxxx Xxxxxxx
The Fortress Group, Inc. Fortress Holding-Virginia, Inc.
By: By:
--------------------- ---------------------
Xxxxxx Xxxxxx, Xxxxx Xxxxxxxx,
President President
[ATTEST] [ATTEST]
-------------------------- ---------------------------
Xxxxxxx Xxxxx Xxxxxxx Xxxxx
Assistant Secretary Assistant Secretary
Xxxxxxxxxxx Homes, LLC.
By:
---------------------
Xxxxx Xxxxxxxx,
President, Fortress Holding- Virginia, Inc.
Its sole Member
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AMENDMENT
THIS AMENDMENT is made this __ day of April, 2001.
WHEREAS, on April 5, 2001 J. Xxxxxxxxxxx Xxxxxxx, an individual residing
in Las Vegas, Nevada (the "Purchaser"), Fortress Holding-Virginia, Inc., a
Delaware corporation (the "Seller"); Xxxxxxxxxxx Homes, LLC, a Nevada limited
liability company ("Xxxxxxxxxxx Homes" or the "Acquired Company"); and The
Fortress Group, Inc., a Delaware corporation ("Fortress") entered into a certain
Purchase Agreement (the "Agreement"), incorporated herein by reference,
WHEREAS, the parties to the Agreement wish to amend with respect to
certain dates,
NOW, THEREFORE, in consideration of the bargaining of the parties and
other valuable consideration, the receipt of which is hereby acknowledged, IT IS
AGREED AS FOLLOWS:
1. Section 7.1(d) of the Agreement is amended to substitute "one
hundred, five days" in place of "ninety days" where that phrase appears.
2. Section 7.2(d) of the Agreement is amended to substitute "sixty days"
in place of "forty-five days" where that phrase appears.
3. Subsection 12.14(a)(iii) is amended to read as follows:
"(iii) By Seller at any point up to June 4, 2001 by giving notice
to Purchaser that it elects to terminate its obligations under the
Fairness Opinion Condition, Section 7.2(d) hereof."
4. Subsection 12.14(a)(iv) is amended to read as follows:
"(iv) By Purchaser at any point up to July 20, 2001 by giving
notice to Seller that it elects to terminate its obligations under the
Financing Condition, Section 7.1(d) hereof."
5. Subsection 12.14(a)(v) is amended to read as follows:
"(v) By Seller on or after June 19, 2001 hereof if by that date
Purchaser has not received from a financial institution a letter of
interest indicating a willingness to finance this transaction, subject
to formal approval by the credit committee of the financial
institution."
This Amendment may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Amendment may also
be executed by facsimile signature,
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provided an original instrument shall be delivered to each party no later than
five business days after the execution of the Agreement.
IN WITNESS WHEREOF the parties have executed this Amendment on the day
and year first above written.
----------------------
J. Xxxxxxxxxxx Xxxxxxx
The Fortress Group, Inc. Fortress Holding-Virginia, Inc.
By: By:
-------------------- ----------------------
Xxxxxx Xxxxxx, Xxxxx Xxxxxxxx,
President President
[ATTEST] [ATTEST]
---------------------- ------------------
Xxxxxxx Xxxxx Xxxxxxx Xxxxx
Assistant Secretary Assistant Secretary
Xxxxxxxxxxx Homes, LLC.
By:
--------------------
Xxxxx Xxxxxxxx,
President, Fortress Holding- Virginia, Inc.
Its sole Member
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SECOND AMENDMENT
THIS SECOND AMENDMENT is made this __ day of July, 2001.
WHEREAS, on April 5, 2001 J. Xxxxxxxxxxx Xxxxxxx, an individual residing
in Las Vegas, Nevada (the "Purchaser"), Fortress Holding-Virginia, Inc., a
Delaware corporation (the "Seller"); Xxxxxxxxxxx Homes, LLC, a Nevada limited
liability company ("Xxxxxxxxxxx Homes" or the "Acquired Company"); and The
Fortress Group, Inc., a Delaware corporation ("Fortress") entered into a certain
Purchase Agreement (the "Agreement"), incorporated herein by reference,
WHEREAS, the Agreement was amended an Amendment dated May 20, 2001
(incorporated herein by reference),
WHEREAS, the parties to the Agreement, as amended, wish to further amend
it with respect to certain terms of Exhibit A attached to the Agreement, the
Promissory Note,
NOW, THEREFORE, in consideration of the bargaining of the parties and
other valuable consideration, the receipt of which is hereby acknowledged, IT IS
AGREED AS FOLLOWS:
1. The Agreement, as amended, is further amended by amending the
Promissory Note attached as Exhibit A as follows:
(a) A new section 2.2 is added as follows:
"2.2 BORROWERS' RIGHT TO EXTEND THE DUE DATES OF INSTALLMENT
PAYMENTS. Borrowers shall have the right, at their sole election and
within their discretion, to extend the due dates referred to in Section
2.1(a) through (d) inclusive set forth hereinabove to the dates
indicated hereinbelow. The right to extend shall be exercised by
Borrowers in writing by providing notice in accordance with Section 12.1
of the Purchase Agreement at any time up to and including the original
due date set forth in Section 2.1(a) through (d), above. The original
installment payment dates may be extended as follows:
(a) From March 31, 2002 to January 1, 2003;
(b) From June 30, 2002 to March 31, 2003;
(c) From September 30, 2002 to June 30, 2003;
(d) From December 31, 2002 to September 30, 2003."
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(b) Current Section 2.2 is renumbered as Section 2.3 and is
amended to read as follows:
"2.3 INTEREST.
(a) Subject to the exception provided in Section 2.3(b),
below, this Promissory Note will not accrue interest unless and
until there is an Event of Default by the Borrowers under Section
3.1(a)(i). If such Event of Default occurs, the Borrowers agree
to pay interest on any amount owing under this Promissory Note,
for the period including the date due, but excluding the date
such amount is paid in full, at a rate equal to 12% per annum.
(b) Notwithstanding the provisions of Section 2.3(a),
above, in the event Borrowers elect to extend the due date of an
installment payment under Section 2.2, above, the installment
payment due on the extended payment date shall include interest
from the original due date at a rate equal to twelve (12%)
percent per annum until paid."
(b) Section 3.1(a) is amended to read as follows:
"(a) The Borrowers fail to pay -
(i) any Installment Payment due in accordance with
the original payment schedule as provided in Section 2.1,
unless extended pursuant to Section 2.2, above; or
(ii) any Installment Payment or interest due on an
extended payment date pursuant to Section 2.2, above;"
2. In consideration of foregoing amendments, Borrowers represent that
during the term of the Promissory Note they will provide to Lender a copy of the
quarterly financial statements of the Acquired Company within forty-five days of
the end of each quarter, commencing the quarter ending December 31, 2001.
3. This Amendment may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Amendment may also
be executed by facsimile signature, provided an original instrument shall be
delivered to each party no later than five business days after the execution of
the Agreement.
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IN WITNESS WHEREOF the parties have executed this Second Amendment on
the day and year first above written.
----------------------
J. Xxxxxxxxxxx Xxxxxxx
The Fortress Group, Inc. Fortress Holding-Virginia, Inc.
By: By:
----------------------- -----------------------
Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxxx,
Vice President President
[ATTEST] [ATTEST]
---------------------- ------------------
Xxxxxxx Xxxxx Xxxxxxx Xxxxx
Assistant Secretary Assistant Secretary
Xxxxxxxxxxx Homes, LLC.
By:
---------------------
Xxxxx Xxxxxxxx,
President, Fortress Holding- Virginia, Inc.
Its sole Member
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