EXECUTION COPY
ASSET PURCHASE AGREEMENT
dated as of February 20, 2002
by and between
▇▇▇▇▇ RESIDENTIAL OF PENNSYLVANIA LLC
as Purchaser
and
FORTRESS PENNSYLVANIA, LLC
and
F.P. CONSTRUCTION CORP.
as Sellers
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.
Page
No.
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ARTICLE I SALE OF ASSETS AND CLOSING ....................................... 1
1.01 Assets ............................................................. 1
1.02 Liabilities ........................................................ 4
1.03 Purchase Price; Allocation ......................................... 6
1.04 Deposit Amount ..................................................... 7
1.05 Closing ............................................................ 7
1.06 Further Assurances; Post-Closing Cooperation ....................... 8
1.07 Third-Party Consents ............................................... 8
1.08 Insurance Proceeds ................................................. 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS ....................... 9
2.01 Corporate Existence of Sellers ..................................... 9
2.02 Authority .......................................................... 9
2.03 No Conflicts ....................................................... 10
2.04 Governmental Approvals and Filings ................................. 10
2.05 Financial Statements and Condition ................................. 11
2.06 Taxes .............................................................. 12
2.07 Legal Proceedings .................................................. 12
2.08 Compliance With Laws and Orders .................................... 12
2.09 ERISA .............................................................. 13
2.10 Real Property ...................................................... 13
2.11 Tangible Personal Property ......................................... 14
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2.12 Intellectual Property Rights ....................................... 14
2.13 Contracts .......................................................... 15
2.14 Licenses ........................................................... 16
2.15 Labor Relations .................................................... 16
2.16 Environmental Reports .............................................. 16
2.17 Affiliate Transactions ............................................. 16
2.18 Entire Business .................................................... 17
2.19 Performance Bonds .................................................. 17
2.20 Insurance .......................................................... 17
2.21 Brokers ............................................................ 17
2.22 Homeowner Associations ............................................. 18
2.23 Representations Complete ........................................... 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER .................... 18
3.01 Corporate Existence ................................................ 18
3.02 Authority .......................................................... 18
3.03 No Conflicts ....................................................... 18
3.04 Governmental Approvals and Filings ................................. 19
3.05 Legal Proceedings .................................................. 19
3.06 Brokers ............................................................ 19
ARTICLE IV COVENANTS ....................................................... 19
4.01 Regulatory and Other Approvals ..................................... 19
4.02 Investigation by Purchaser ......................................... 20
4.03 No Solicitations ................................................... 20
4.04 Conduct of Business ................................................ 20
4.05 No Dividend ........................................................ 21
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4.06 Fulfillment of Conditions .......................................... 21
4.07 Payment of Debt .................................................... 21
4.08 Negative Covenant .................................................. 21
4.09 Release of Performance Bonds/Guarantees ............................ 21
4.10 Local Opinions ..................................................... 22
4.11 Homeowner Associations ............................................. 22
4.12 Estoppel Affidavits ................................................ 22
4.13 Fortress Realty .................................................... 22
4.14 Construction ....................................................... 22
ARTICLE V CONDITIONS TO OBLIGATIONS OF PURCHASER ........................... 23
5.01 Representations and Warranties ..................................... 23
5.02 Performance ........................................................ 23
5.03 Officers' Certificates ............................................. 23
5.04 Orders and Laws .................................................... 23
5.05 Regulatory Consents and Approvals .................................. 23
5.06 Deliveries ......................................................... 24
5.07 Third Party Consents ............................................... 24
5.08 Transition Agreement ............................................... 24
5.09 Title Policy ....................................................... 24
5.10 Further Deliveries ................................................. 24
5.11 No Actions or Proceedings .......................................... 24
5.12 No Conflict ........................................................ 25
ARTICLE VI CONDITIONS TO OBLIGATIONS OF SELLERS ............................ 25
6.01 Representations and Warranties ..................................... 25
6.02 Performance ........................................................ 25
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6.03 Officers' Certificates ............................................. 25
6.04 Orders and Laws .................................................... 25
6.05 Regulatory Consents and Approvals .................................. 25
6.06 Deliveries ......................................................... 26
6.07 Third Party Consents ............................................... 26
6.08 Financing .......................................................... 26
ARTICLE VII SURVIVAL; INDEMNITY ............................................ 26
7.01 Survival of Representations, Warranties, Covenants and Agreements .. 26
7.02 Indemnification .................................................... 26
7.03 Method of Asserting Claims ......................................... 28
7.04 Exclusivity ........................................................ 29
ARTICLE VIII ................................................................ 30
8.01 Termination ........................................................ 30
8.02 Effect of Termination .............................................. 30
ARTICLE IX OTHER MATTERS ................................................... 31
9.01 Employee Matters ................................................... 31
9.02 Warranty Matters ................................................... 32
9.03 Title Commitment; Transfer Tax ..................................... 33
9.04 Release of Performance Bonds ....................................... 34
ARTICLE X DEFINITIONS ...................................................... 34
10.01 Definitions ........................................................ 34
ARTICLE XI MISCELLANEOUS ................................................... 41
11.01 Notices ............................................................ 41
11.02 Bulk Sales Act ..................................................... 42
11.03 Entire Agreement ................................................... 42
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11.04 Expenses ........................................................... 43
11.05 Public Announcements; Confidentiality .............................. 43
11.06 Waiver ............................................................. 43
11.07 Amendment .......................................................... 43
11.08 No Third Party Beneficiary ......................................... 43
11.09 No Assignment; Binding Effect ...................................... 43
11.10 Headings ........................................................... 43
11.11 Invalid Provisions ................................................. 43
11.12 Governing Law ...................................................... 44
11.13 Counterparts ....................................................... 44
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B General Assignment and ▇▇▇▇ of Sale
Exhibit C Assumption Agreement
Exhibit D Transition Agreement
Exhibit E Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Exhibit F Opinion of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
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This ASSET PURCHASE AGREEMENT dated as of February 20, 2002 is made
and entered into by and between ▇▇▇▇▇ RESIDENTIAL OF PENNSYLVANIA LLC, Delaware
limited liability company ("Purchaser"), FORTRESS PENNSYLVANIA, LLC, a Delaware
limited liability company ("Fortress PA") and F.P. CONSTRUCTION CORP., a
Delaware corporation ("Construction" and, together with Fortress PA, "Sellers").
Capitalized terms not otherwise defined herein have the meanings set forth in
Section 10.01.
WHEREAS, Sellers are engaged in the residential single-family home
construction and land development business in the Commonwealth of Pennsylvania
and the State of New Jersey (the "Business"); and
WHEREAS, Sellers desire to sell, transfer and assign to Purchaser,
and Purchaser desires to purchase and acquire from Sellers, all of the assets of
Sellers relating to the operation of the Business (other than the Excluded
Assets), and in connection therewith, Purchaser has agreed to assume all of the
liabilities of Sellers relating to the Business (other than the Retained
Liabilities), all on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01 Assets. (a) Assets Transferred. On the terms and subject to the
conditions set forth in this Agreement, Sellers will sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser will acquire from Sellers (free
and clear of all Encumbrances, other than Permitted Encumbrances and as
otherwise expressly provided herein) and purchase and pay for, at the Closing,
all of Sellers' right, title and interest in, to and under the following Assets
and Properties of Sellers used in connection with the Business, except as
otherwise provided in Section 1.01(b), as the same exist on the Closing Date
(collectively, the "Assets"):
(i) Real Property. The real property described in Schedule
1.01(a)(i) (other than any real property listed thereon that is sold prior
the Closing pursuant to any home sales contract) and all real property
purchased by Sellers after the date hereof and prior to the Closing Date
(i) pursuant to any contract listed on Schedule 1.01(a)(vii) or, if not so
listed (ii) with the consent of Purchaser, and all of the rights arising
out of the ownership thereof or appurtenant thereto (the "Real Property"),
together with all single-family homes (including existing display homes)
and other buildings, structures, facilities and fixtures therein and other
improvements thereto (the "Improvements");
(ii) Real Property Leases. The leases and subleases of real property
described in Schedule 1.01(a)(ii) as to which any Seller is the lessee,
together with any options to purchase the underlying property and
leasehold improvements thereon, and in each case all other rights
appurtenant to or related to such leases (the "Real Property Leases");
(iii) Building Materials and Equipment. All inventories of raw
construction materials, work-in-process, finished goods, demonstration
equipment, parts, packaging materials and other accessories related
thereto which are held at, or are in transit from or to, the locations at
which the Business is conducted, in each case, which are used by any
Seller in the conduct of the Business, together with all rights of such
Seller against suppliers of such inventories (the "Building Materials and
Equipment");
(iv) Accounts Receivable. All trade accounts receivable and other
evidences of Indebtedness of and rights to receive payments arising out of
sales occurring in the conduct of the Business, including any rights of
Sellers with respect to any third party collection procedures or any other
Actions or Proceedings which have been commenced in connection therewith
(the "Accounts Receivable"), including those Account Receivables as of
December 31, 2001 which are listed on Schedule 1.01(a)(iv);
(v) Tangible Personal Property. All furniture, appliances and
fixtures (including those in the existing display houses), equipment,
machinery, architectural and engineering plans, specifications, drawings,
surveys, tests, studies, and other tangible personal property (other than
Building Materials and Equipment and Vehicles) used in the conduct of the
Business at the locations at which the Business is conducted or otherwise
used by any Seller in the conduct of the Business, including the items
listed in Schedule 1.01(a)(v) (the "Tangible Personal Property");
(vi) Personal Property Leases. Subject to Section 1.07, the leases
of Tangible Personal Property described in Schedule 1.01(a)(vi), together
with any options to purchase the underlying property (the "Personal
Property Leases");
(vii) Business Contracts. Subject to Section 1.07, all Contracts
listed on Schedule 1.01(a)(vii)1-10 , (other than the Real Property Leases
and Personal Property Leases listed above) to which any Seller is a party
and which are utilized in the conduct of the Business (the "Business
Contracts");
(viii) Prepaid Expenses. All prepaid expenses, claims for refunds
(other than income tax refunds) and rights of offset relating to the
Business (the "Prepaid Expenses"), including those Prepaid Expenses as of
December 31, 2001 which are listed on Schedule 1.01(a)(viii);
(ix) Intangible Personal Property. All Intellectual Property
(including the "▇▇▇▇▇▇▇▇▇" name and logo), owned by Sellers or, to the
extent assignable under the terms thereof, in which Sellers have an
interest, and which in each case are used in the conduct of the Business
and all rights, privileges, claims, causes of action and options relating
or pertaining thereto, including but not limited to the items listed in
Schedule 1.01(a)(ix), but excluding the Retained Intellectual Property
(the "Transferred Intellectual Property");
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(x) Licenses. To the extent their transfer is permitted under
applicable Laws and subject to Section 1.07, all Licenses utilized in the
conduct of the Business which are listed in Schedule 1.01(a)(x) (the
"Business Licenses");
(xi) Vehicles. All motor vehicles owned or leased by any Seller and
used in the conduct of the Business, including but not limited to the
vehicles listed in Schedule 1.01(a)(xi) (the "Vehicles");
(xii) Deposits. All deposits made by any third Person to or for the
benefit of any Seller, or made by any Seller to or for the benefit of any
third Person, under any Real Property Lease, Personal Property Lease, or
Business Contract, including all ▇▇▇▇▇▇▇ money and construction deposit
amounts, together with all, if any, interest accrued thereon (the
"Deposits");
(xiii) Cash. Cash (including checks received prior to the close of
business on the Closing Date, whether or not deposited or cleared prior to
the close of business on the Closing Date), commercial paper, certificates
of deposit and other bank deposits, treasury bills and other cash
equivalents ("Cash");
(xiv) Cash Escrows. The cash escrows listed on Schedule 1.01(a)(xiv)
(the "Cash Escrows");
(xv) Books and Records. All Books and Records used solely in the
conduct of the Business or otherwise relating solely to the Assets, other
than the Excluded Books and Records (the "Business Books and Records");
(xvi) Other Balance Sheet Assets. All other assets of Sellers
reflected on the December Balance Sheet, and all assets subsequently
acquired, except for the Excluded Assets reflected thereon and those
assets disposed of after December 31, 2001 in the ordinary course of
business (the "Other Balance Sheet Assets"); and
(xvii) Other Assets and Properties. All other Assets and Properties
of Sellers used in the conduct of the Business except as otherwise
provided in Section 1.01(b).
(b) Excluded Assets. Notwithstanding anything in this Agreement to
the contrary, the following Assets and Properties of Sellers (the "Excluded
Assets") shall be excluded from and shall not constitute Assets:
(i) Tax Refunds. All refunds or credits, if any, of income taxes
(whether state or Federal) due to Sellers or Fortress;
(ii) Excluded Books and Records. The minute books, stock transfer
books and corporate seal of Sellers and any other Books and Records
relating to the Excluded Assets or the Retained Liabilities (the "Excluded
Books and Records");
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(iii) Trade Name and Logo. All of Sellers' and their Affiliates
right, title and interest in, to and under (A) the name "Fortress" and the
Fortress logo, provided however, through the six-month anniversary of the
Closing Date, Purchaser may continue to use existing supplies of forms,
applications, brochures, signage and advertising of ▇▇▇▇▇▇▇▇▇ which
contain the "Fortress" name and/or logo, so as to permit an orderly
transition to Purchaser's operations, and (B) the Intellectual Property
listed on Schedule 1.01(b)(iii) (the "Retained Intellectual Property");
(iv) Construction Shares. All outstanding shares of Construction
stock, without par value;
(v) Charlestown Oaks Escrow. The cash escrow held with respect to
the Charlestown Oaks Project as set forth on Schedule 1.01(b)(v);
(vi) Assets that become Excluded Assets pursuant to Sections 9.03(a)
and/or 9.03(b); and
(vii) Sellers' rights under this Agreement or any other document
executed in connection with this Agreement.
1.02 Liabilities. (a) Assumed Liabilities. In connection with the
sale, transfer, conveyance, assignment and delivery of the Assets pursuant to
this Agreement, on the terms and subject to the conditions set forth in this
Agreement, except for the Retained Liabilities, Purchaser shall assume and agree
to pay, perform and discharge all liabilities of Sellers arising in connection
with the operation of the Business or relating to the Assets, as the same exist
on the Closing Date, including, but not limited to, the following obligations
(collectively, the "Assumed Liabilities"); provided, that as to liabilities
incurred between December 31, 2001 and the Closing Date, the Assumed Liabilities
shall be limited to those liabilities arising in the normal and ordinary course
of business, consistent with past practice, and those otherwise disclosed to
Purchaser in any Schedule hereto:
(i) Real Property Lease Obligations. All obligations of Sellers
under the Real Property Leases;
(ii) Accounts Payable. All obligations of Sellers with respect to
accounts payable reflected or reserved against in the December Balance
Sheet and those arising in the ordinary course of business since December
31, 2001 (the "Accounts Payable") including, but not limited to, those
Accounts Payable listed on Schedule 1.02(a)(ii);
(iii) Personal Property Lease Obligations. All obligations of
Sellers under the Personal Property Leases;
(iv) Obligations under Contracts and Licenses. All obligations of
Sellers under the Business Contracts and Business Licenses;
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(v) Accrued Expenses. All obligations of Sellers with respect to
accrued expenses reflected or reserved against in the December Balance
Sheet or those incurred in the ordinary course of business since December
31, 2001 (the "Accrued Expenses") including, but not limited to, those
Accrued Expenses listed on Schedule 1.02(a)(v);
(vi) Customer Warranty and Product Liabilities. All customer
warranty and product liability claims and other similar claims as more
specifically set forth in Section 9.02; and
(vii) Health Plan. All obligations under Sellers' health insurance
plan (the "Health Plan").
(b) Retained Liabilities. Sellers shall retain and pay and perform
when due the following liabilities and obligations of Sellers arising or to be
performed prior to the Closing Date (collectively, the "Retained Liabilities"):
(i) Earnout Payments. All amounts owed in excess of the amount of
$417,200 set forth on the December Balance Sheet relating to earnout
payments owed to the prior owners of The ▇▇▇▇▇▇▇▇▇ Organization pursuant
to "Earnout Payments - Annex 1" of the Purchase and Sale Agreement between
Fortress and The ▇▇▇▇▇▇▇▇▇ Organization, dated October 24, 1997;
(ii) Charlestown Oaks. All obligations of Sellers with respect to
the Charlestown Oaks project (the "Charlestown Oaks Project"), other than
customer home warranty obligations for which Purchaser shall be
responsible in accordance with Section 9.02;
(iii) Penn Oaks Litigation. All liabilities arising out of the
pending or threatened claims listed as the first three items on Schedule
2.07, and any other liability arising out of any Action or Proceeding
pending or threatened against Sellers by any resident of any home or other
dwelling located in "Penn Oaks Estates" solely with respect to damage or
loss or liability of any kind caused by the incursion of golf balls from
the enjoining Penn Oaks Golf Club onto the property of such resident;
(iv) Benefit Plans. All liabilities owed or owing to Sellers'
employees or former employees or both under any Plans of Sellers or their
Affiliates (other than the Health Plan), except as otherwise provided in
Section 9.01;
(v) Other Employee Matters. All liabilities under any employment,
severance, retention or termination agreement with any Employee of
Sellers, or liabilities arising out of any employee grievances, except as
otherwise provided in Section 9.01.
(vi) Contracts. Any liability under any Contract not assumed by
Purchaser, including any Liability arising out of or relating to any
Seller's credit facilities or any security interest related thereto;
5
(vii) Related Parties. Any liability of any Seller to any
shareholder or related Person of Sellers, other than as set forth on
Schedule 1.01(a)(vii)9;
(viii) Officers. Any liability to indemnify, reimburse or advance
amounts to any officer, director, employee or agent of Sellers;
(ix) Agreement. Any liability of Sellers under this Agreement or any
other document executed in connection with this Agreement;
(x) Insurance. Any liability of Sellers to the extent that Sellers
have collected insurance funds with respect thereto or have otherwise
received the benefit of any insurance coverage;
(xi) Taxes. Any liability for Taxes arising as a result of Sellers'
operation of the Business or ownership of the Assets prior to Closing; and
(xii) Omissions. Any liability of Sellers based upon Sellers' acts
or omissions occurring after the Closing Date.
Sellers shall discharge in a timely manner or shall make adequate
provision for all of the Retained Liabilities, provided that Sellers shall have
the ability to contest, in good faith, any claim of liability asserted in
respect thereof by any Person other than Purchaser and its Affiliates.
1.03 Purchase Price; Allocation.
(a) Purchase Price. The aggregate purchase price for the Assets is
$11,641,000, payable in immediately available United States funds in the manner
and at the times provided in Sections 1.04 and 1.05 (the "Purchase Price"). The
Purchase Price shall be reduced by the loss opportunity deduction, as set forth
on Schedule 9.03(a), of any Asset that becomes an Excluded Asset pursuant to
Sections 9.03(a) and/or 9.03(b).
(b) Purchaser and Sellers shall allocate the consideration being
paid for the Assets in accordance with Schedule 1.03(b) hereto. After the
Closing, the parties shall make consistent use of the allocation, fair market
value and useful lives specified in Schedule 1.03(b) for all Tax purposes and in
all filings, declarations and reports with the IRS in respect thereof, including
the reports required to be filed under Section 1060 of the Code. Purchaser shall
prepare and deliver IRS Form 8594 to Sellers within forty-five (45) days after
the Closing Date to be filed with the IRS. No party will take a position on any
income, transfer or gains Tax Return, before any Governmental or Regulatory
Authority charged with the collection of any such Tax or in any judicial
proceeding, that is in any manner inconsistent with the terms of any such
allocation without the consent of the other party.
(c) The Parties acknowledge and agree that, except as expressly
provided in this Agreement, and other than as described on Schedule 2.05(d), the
intent of this Agreement is that all income and other accretion of net equity,
if any, including all increases in cash and cash equivalents, if any, from the
Business, Assets and Properties and the operations of the Business
6
after December 31, 2001 shall inure to the benefit of Purchaser without any
reduction by any dividends or other payments or distributions to Sellers and/or
its Affiliates.
1.04 Deposit Amount. Simultaneously with the execution of this
Agreement, Purchaser will pay ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq., as escrow agent (the
"Escrow Agent"), $125,000 in cash, by wire transfer of immediately available
funds, pursuant to the terms of an escrow agreement to being entered into on the
date hereof by Sellers, Purchaser and the Escrow Agent, in the form of Exhibit A
hereto (the "Escrow Agreement"). On February 27, 2002, Purchaser will (subject
to Purchaser's right to terminate this Agreement pursuant to Section 8.01(b))
pay an additional $125,000 in cash by wire transfer of immediately available
funds to the Escrow Agent. Each such payment shall be deemed a deposit against a
portion of the Purchase Price (each, a "Deposit Amount" and collectively, the
"Deposit Amounts"). At the Closing, the Escrow Agent shall deliver the Deposit
Amounts to Sellers, and Sellers shall apply the Deposit Amount towards payment
of the Purchase Price.
1.05 Closing. The Closing will take place at the offices of Blank,
Rome, Comisky, ▇▇▇▇▇▇▇▇ LLP, One ▇▇▇▇▇ Square, Philadelphia, Pennsylvania, or at
such other place as Purchaser and Sellers mutually agree, at 10:00 A.M. local
time, on the Closing Date. At the Closing, Purchaser will pay the Purchase
Price, less the sum of the Deposit Amounts and less any amount escrowed pursuant
to Section 11.02(a), by wire transfer of immediately available funds to the
account of Sellers listed in Section 11.01. Simultaneously, (a) Sellers will
assign and transfer to Purchaser all of their right, title and interest in and
to the Assets (free and clear of all Liens, other than Permitted Liens) by
delivery of (i) a General Assignment and ▇▇▇▇ of Sale substantially in the form
of Exhibit B hereto (the "General Assignment"), duly executed by Sellers, (ii)
an assignment of the Intellectual Property in form and substance reasonably
satisfactory to Purchaser, (iii) special warranty deeds in proper statutory form
for recording and otherwise in form and substance reasonably satisfactory to
Purchaser conveying fee simple title to the Real Property, (iv) an assignment or
assignments of the Real Property Leases, and (v) such other good and sufficient
instruments of conveyance, assignment and transfer duly executed by Sellers, in
form and substance reasonably acceptable to Purchaser's counsel, as shall be
effective to vest in Purchaser title to the Assets (the General Assignment and
the other instruments referred to in clauses (ii), (iii), (iv) and (v) being
collectively referred to herein as the "Assignment Instruments"), (b) Purchaser
will assume from Sellers the due payment, performance and discharge of the
Assumed Liabilities by delivery of (i) an Assumption Agreement substantially in
the form of Exhibit C hereto (the "Assumption Agreement"), duly executed by
Purchaser, and (ii) such other good and sufficient instruments of assumption, in
form and substance reasonably acceptable to Sellers' counsel, as shall be
effective to cause Purchaser to assume the Assumed Liabilities as and to the
extent provided in Section 1.02(a) (the Assumption Agreement and such other
instruments referred to in clause (ii) being collectively referred to herein as
the "Assumption Instruments"), and (c) Sellers, Purchaser and Fortress shall
enter into a transition services agreement, substantially in the form of Exhibit
D hereto, governing the provision by Sellers to Purchaser of management
information and other services for the periods contemplated therein (the
"Transition Agreement"). At the Closing, there shall also be delivered to
Sellers and Purchaser the certificates and other contracts, documents and
instruments required to be delivered under Articles V and VI.
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1.06 Further Assurances; Post-Closing Cooperation. (a) Subject to
the terms and conditions of this Agreement, at any time or from time to time
after the Closing, at Purchaser's request and without further consideration,
Sellers shall execute and deliver to Purchaser such other documents and
instruments of sale, transfer, conveyance, assignment and confirmation, as may
reasonably be requested by Purchaser in order to effectuate this transaction and
to transfer, convey and assign to Purchaser, and to confirm Purchaser's title
to, all of the Assets.
(b) Following the Closing, each party will afford the other party,
its counsel and its accountants, during normal business hours, reasonable access
to the books, records and other data relating to the Business in its possession
with respect to periods prior to the Closing and the right to make copies and
extracts therefrom, to the extent that such access may be reasonably required by
the requesting party in connection with (i) the preparation of tax returns, (ii)
the determination or enforcement of rights and obligations under this Agreement,
(iii) compliance with the requirements of any Governmental or Regulatory
Authority, (iv) any actual or threatened Action or Proceeding, or (v) the
ownership and use of the Assets. Further each party agrees for a period
extending six (6) years after the Closing Date not to destroy or otherwise
dispose of any such books, records and other data unless such party shall first
offer in writing to surrender such books, records and other data to the other
party and such other party shall not agree in writing to take possession thereof
during the ten (10) Business Day period after such offer is made.
(c) If, in order properly to prepare its tax returns, other
documents or reports required to be filed with Governmental or Regulatory
Authorities or its financial statements or to fulfill its obligations hereunder,
it is necessary that a party be furnished with additional information, documents
or records relating to the Business not referred to in paragraph (b) above, and
such information, documents or records are in the possession or control of the
other party, such other party shall use its best efforts to furnish or make
available such information, documents or records (or copies thereof) at the
recipient's request, cost and expense. Any information obtained by such party in
accordance with this paragraph shall be held confidential by such party in
accordance with Section 11.05.
(d) Notwithstanding anything to the contrary contained in this
Section, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in accordance
with this Section shall be subject to applicable rules relating to discovery.
1.07 Third-Party Consents. To the extent that any Real Property
Lease, Personal Property Lease, Business License or Business Contract is not
assignable without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if such assignment
or attempted assignment would constitute a breach thereof or a default
thereunder. Sellers and Purchaser shall use their commercially reasonable
efforts to obtain the consent of such other party to the assignment of any such
Real Property Lease, Personal Property Lease, Business License or Business
Contract to Purchaser in all cases in which such consent is or may be required
for such assignment. If any such consent shall not be obtained, Sellers shall
cooperate with Purchaser in any reasonable arrangement designed to
8
provide for Purchaser the benefits intended to be assigned to Purchaser under
the relevant Real Property Lease, Personal Property Lease, Business License or
Business Contract, including enforcement for the account of Purchaser, the
reasonable costs for which shall be jointly shared by Purchaser and Sellers, of
any and all rights of Sellers against the other party thereto arising out of the
breach or cancellation thereof by such other party or otherwise. If and to the
extent that such arrangement cannot be made, Purchaser shall have no obligations
pursuant to Section 1.02 or otherwise with respect to any such Real Property
Lease, Personal Property Lease, Business Contract or Business License.
1.08 Insurance Proceeds. If any of the Assets are destroyed or
damaged, the insurance proceeds with respect thereto shall be an Asset. At the
Closing, Sellers shall pay or credit to Purchaser any such insurance proceeds
received by it on or prior to the Closing and shall assign to or assert for the
benefit of Purchaser all of its rights against any insurance companies and
others with respect to such damage or destruction. As and to the extent that
there is available insurance under policies maintained by Sellers and its
Affiliates, predecessors and successors in respect of any Assumed Liability,
except for any such insurance proceeds with respect to which the insured is
directly or indirectly self-insured or has agreed to indemnify the insurer,
Sellers shall cause such insurance to be applied toward the payment of such
Assumed Liability. In addition, Fortress shall use reasonable efforts to cause
Purchaser to be named as additional insured under all such policies insofar as
they relate to the Assets or the operations of Sellers prior to the Closing
Date, which policies shall include completed operations coverage and waivers of
transfer of rights of recovery in favor of Purchaser. With respect to any events
occurring on or before the Closing Date that are insured under any insurance
policy, or any other insurance policy covering Sellers, Purchaser shall be
entitled to, and Sellers and Fortress shall cooperate in obtaining for
Purchaser, the benefits thereof; provided that such proceeds shall be credited
against any indemnification obligation which may have arisen pursuant to Section
7.02.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby jointly and severally represent and warrant to
Purchaser as follows:
2.01 Corporate Existence of Sellers. Each Seller is a corporation or
limited liability company validly existing and in good standing as described in
Schedule 2.01, and has full power and authority to conduct the Business as and
to the extent now conducted by it and to own, use and lease the Assets.
2.02 Authority. Each Seller has full corporate power and authority
to execute and deliver this Agreement and the Operative Agreements to which it
is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby, including without
limitation to sell and transfer (pursuant to this Agreement) the Assets. The
execution and delivery by each Seller of this Agreement and the Operative
Agreements to which it is a party, and the performance by such Seller of its
obligations hereunder and thereunder, have been duly and validly authorized by
the Board of Directors and stockholders or members of such Seller, no other
corporate action on the part of such Seller
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being necessary. This Agreement has been duly and validly executed and delivered
by each Seller and constitutes, and upon the execution and delivery by Seller of
the Operative Agreements to which it is a party, such Operative Agreements will
constitute, legal, valid and binding obligations of such Seller enforceable
against such Seller in accordance with its terms.
2.03 No Conflicts. The execution and delivery by each Seller of this
Agreement do not, and the execution and delivery by such Seller of the Operative
Agreements to which it is a party, the performance by such Seller of its
obligations under this Agreement and the Operative Agreements to which it is a
party and the consummation of the transactions contemplated hereby and thereby
will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the operating agreement, certificate of
incorporation or by-laws (or other comparable corporate charter documents), or
any resolution adopted by the Board of Directors, stockholders or members of
such Seller;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices disclosed in Schedule 2.04, conflict with or
result in a violation or breach of any term or provision of, or give any
Governmental Authority the right to exercise any remedy or obtain any relief
under, any material Law or Order applicable to such Seller or any of its Assets
and Properties (other than such conflicts, violations or breaches which could
not in the aggregate reasonably be expected to adversely affect the validity or
enforceability of this Agreement or any of such Operative Agreements or as would
occur solely as a result of the legal or regulatory status of Purchaser or any
of its Affiliates; or
(c) except as disclosed in Schedule 2.03 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 of
such Seller to consummate the transactions contemplated hereby or by any
Operative Agreement 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 such
Seller to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of, or (iv) result
in the creation or imposition of any Lien (other than Permitted Liens) upon such
Seller or any of its Assets or Properties under, any Contract or License to
which such Seller is a party or by which any of its Assets and Properties is
bound.
2.04 Governmental Approvals and Filings. Except as disclosed in
Schedule 2.04, no consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority on the part of any Seller is required in
connection with the execution, delivery and performance of this Agreement or any
of the Operative Agreements or the consummation of the transactions contemplated
hereby or thereby, except (i) where the failure to obtain any such consent,
approval or action, to make any such filing or to give any such notice could not
reasonably be expected to adversely affect the ability of any Seller to
consummate the transactions contemplated by this Agreement or to perform its
obligations hereunder or thereunder or to have a material adverse effect on the
Condition of the Business, and (ii) those as
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would be required solely as a result of the identity or the legal or regulatory
status of Purchaser or any of its Affiliates.
2.05 Financial Statements and Condition. (a) Prior to the execution
of this Agreement, Sellers have delivered to Purchaser a copy of the audited
balance sheet of the Business as of December 31, 2001 (the "December Balance
Sheet"), a copy of which is attached hereto as Schedule 2.05(a).
Except as disclosed in Schedule 2.05(a), the December Balance Sheet was prepared
in accordance with GAAP and fairly presents in all material respects the
financial condition of the Business as of December 31, 2001.
(b) Except for the execution and delivery of this Agreement and the
transactions to take place pursuant hereto on or prior to the Closing Date and
as disclosed in Schedule 2.05(b), since December 31, 2001, the Business has been
operated in all material respects in the ordinary course and there has not been
any material adverse change in the Condition of the Business, and, to the
Knowledge of Sellers, no event has occurred or circumstance exists that would be
likely to result in such a material adverse change.
(c) To the Knowledge of Sellers, as of the date hereof, there are no
outstanding Liabilities of Sellers relating to the Business, except as set forth
on the December Balance Sheet and except for Liabilities incurred in the
ordinary course of business since December 31, 2001 and the Assumed Liabilities.
Schedule 2.05(c) sets forth as of December 31, 2001 the principal amount of
Indebtedness outstanding, including accrued interest payable and the names and
addresses of each borrower, lender and guarantor thereof and a good faith
estimate of such information as of the Closing Date.
(d) Except as set forth on Schedule 2.05(d), since December 31,
2001, no Seller has (i) declared or paid any dividend on or made any other
distribution (whether in cash, equity or property) in respect of any of its
equity interests, (ii) split, combined or reclassified any of its equity
interests, (iii) issued or authorized the issuance of any other securities in
respect of or repurchased or otherwise acquired, any of its equity interests,
(iv) granted any options or membership interests or other rights to acquire
securities of the Sellers in lieu of or in substitution for any of its equity
interests, or (v) made any payment to any Affiliate of any Seller (other than a
Seller) other than payments of compensation and reimbursements of expenses in
the ordinary course of business consistent with past practice.
(e) Attached hereto as Schedule 2.05(e) is an estimated balance
sheet and income statement of the Business, prepared by Sellers in good faith,
as of and for the two month period ending February 28, 2002. Purchaser
acknowledges that (i) Sellers are providing this Schedule for informational
purposes only, (ii) Sellers make no representation or warranty with respect to
such balance sheet and income statement or any of the line items contained
therein, and (iii) Purchaser shall have no claims against Sellers with respect
thereto including, without limitation, any indemnity claim or adjustment to the
Purchase Price.
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2.06 Taxes. Each Seller has filed all tax returns required to be
filed by it with respect to the Business, and all such tax returns are complete
and accurate in all material respects. Each Seller has paid (or its Affiliate
has paid on its behalf) all taxes that are due on such tax returns. Except as
set forth in Schedule 2.06, no deficiencies for any taxes have been proposed,
asserted or assessed against any Seller. No federal, state, local or foreign
audits or other administrative proceedings or court proceedings are presently
pending with regard to any taxes or tax returns of Sellers. As used in this
Agreement, "taxes" shall include all federal, state and local income, sales,
use, and other taxes.
2.07 Legal Proceedings. Except as disclosed in Schedule 2.07:
(a) there are no Actions or Proceedings pending or, to the Knowledge
of Sellers, threatened against, relating to or affecting any Seller with respect
to the Business or any of its Assets and Properties which could reasonably be
expected (i) to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement, or (ii) individually or in the
aggregate with other such Actions or Proceedings, to have a material adverse
effect on the Condition of the Business;
(b) to the Knowledge of Sellers, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve as a
basis for the commencement of any such Action or Proceeding. Sellers have
delivered to Purchaser copies of all pleadings, correspondence and other
documents relating to each Proceeding listed in Schedule 2.07. There are no
Actions or Proceedings listed or required to be listed in Schedule 2.07 that
would reasonably be likely to have a material adverse effect on the Condition of
the Business; and
(c) there are no Orders outstanding against any Seller which,
individually or in the aggregate with other such Others, materially adversely
affect the Condition of the Business; and
2.08 Compliance With Laws and Orders. (a) Except as disclosed in
Schedule 2.08, to the Knowledge of Sellers:
(i) neither Seller is in violation of or default, in any material
respect, under any Law or Order applicable to the Business or
the Assets;
(ii) Sellers have not taken any action which would reasonably be
likely to (A) constitute or result in a violation by any
Seller of or a failure on the part of any Seller to comply
with, in each case in any material respect, any Law or Order
applicable to the Business or any material term or requirement
of any License listed or required to be listed in Schedule
2.08, (B) result in the revocation, withdrawal, suspension,
cancellation or termination of, or any material modification
to, any License listed or required to be listed in Schedule
2.08, or (C) give rise to any obligation on the part of any
Seller to undertake, or to bear all or any portion of the cost
of, any material remedial action of any nature;
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(iii) neither Seller has received any notice in writing or other
written communication from any Governmental or Regulatory
Authority or any other Person regarding (A) any actual or
alleged violation of, or failure to comply with, any material
Law or Order or any term or requirement of any License listed
or required to be listed in Schedule 2.08, (B) any actual or
proposed revocation, withdrawal, suspension, cancellation or
termination of, any License listed or required to be listed in
Schedule 2.08 or (C) any actual or alleged obligation on the
part of any Seller to undertake, or to bear all or any portion
of the cost of, any material remedial action that has not been
fully complied with or corrected;
(iv) all applications required to have been filed for the renewal
of the Licenses listed in Section 2.08 have been duly filed on
a timely basis with the appropriate Governmental or Regulatory
Authority, and all other filings required to have been made
with respect to such Licenses have been duly made on a timely
basis with the appropriate Governmental or Regulatory
Authority.
(b) The Licenses listed in Schedule 2.08 collectively constitute all
of the Licenses necessary to permit Sellers to lawfully conduct and operate the
Business in all material respects in the manner in which Sellers currently
conduct and operate such Business and to permit Sellers to own and use their
Assets and Properties in the manner in which they currently own and use such
Assets and Properties.
2.09 ERISA. No Liens have arisen on any Assets pursuant to Section
302 of ERISA, Section 412 of the Code, or Title IV of ERISA. The Health Plan has
been administered in material compliance with applicable provisions of ERISA and
the Code.
2.10 Real Property. (a) Attached to Schedule 2.10(a) is a computer
printout listing each parcel of Real Property owned by each Seller and used in
connection with the Business as of the date hereof.
(b) Except as disclosed in Schedule 2.10(b), Sellers are in
possession of all Real Property and have not entered into any agreements
relating to such Real Property which would affect title (other than agreements
relating to the sale of homes entered in the ordinary course of business).
(c) Each Seller has a valid and subsisting leasehold estate in and
the right to quiet enjoyment of the real properties subject to the Real Property
Leases to which it is a party described in Schedule 1.01(a)(ii) for the full
term thereof. Each Real Property Lease is a legal, valid and binding agreement,
enforceable in accordance with its terms, of such Seller and, to the Knowledge
of Sellers, of each other Person that is a party thereto, and except as set
forth in Schedule 2.10(c), there is no default by such Seller (and no condition
or event exists which, after notice or lapse of time or both, would constitute a
default by such Seller) thereunder.
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(d) Set forth on Schedule 2.10(d) is the status of lot takedowns for
the projects listed on Schedule 2.10(d) and the dating and performance standards
for such lot takedowns.
(e) To the Knowledge of Sellers, except as disclosed on Schedule
2.10(e) and except as set forth on the Preliminary Title Reports, as of the date
hereof:
(i) the use of the Real Property for the various purposes for
which it is presently being used is in material compliance
with all applicable zoning and other Laws;
(ii) all Improvements are in material compliance with all
applicable Laws, including those pertaining to zoning,
building and the disabled;
(iii) no part of any Improvement encroaches on any real
property not included in the Real Property and there are no
buildings, structures, fixtures or other Improvements
primarily situated on adjoining property which encroach on any
part of the Real Property; and
(iv) all Real Property which has been designated as a
"finished lot" as of the date hereof abuts on and has direct
vehicular access to a public road or has access to a public
road via a permanent, irrevocable, appurtenant easement
benefiting such Real Property, and is supplied with public or
quasi-public utilities and other services appropriate for the
operation of the facilities located thereon.
(f) Except as set forth in Schedule 2.10(f), Sellers have not
received written notification of the institution by a Governmental or Regulatory
Authority of any moratorium applicable to any of the Real Property on the
issuance of building permits for the construction of houses or the purchase of
sewer or water taps which is, or would reasonably be likely to be, materially
adverse to the Condition of the Business.
2.11 Tangible Personal Property. Except as set forth in Schedule
2.11, Sellers are in possession of and have good title to, or have valid
leasehold interests in or valid rights under Contract to use, all the Tangible
Personal Property used in and material to the Condition of the Business. All the
Tangible Personal Property is free and clear of all Liens, other than Permitted
Liens and Liens disclosed in Schedule 2.11, and is in all material respects in
good working order and condition, ordinary wear and tear excepted.
2.12 Intellectual Property Rights. Schedule 1.01(a)(ix) discloses
all Intellectual Property used in and material to the Condition of the Business,
each of which, except as set forth in Schedule 2.12, a Seller either has all
right, title and interest in or a valid and binding rights under Contract to
use. Except as disclosed in Schedule 2.12, (i) to the Knowledge of Sellers,
Sellers are not, nor has any Seller received any notice that it is, in default
(or with the giving of notice or lapse of time or both, would be in default) in
any material respect under any Business Contract to use such Intellectual
Property and (ii) to the Knowledge of Sellers, such Intellectual Property is not
being infringed by any other Person. Sellers have not received notice that
Sellers
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are infringing any Intellectual Property of any other Person in connection with
the conduct of the Business, to the Knowledge of Sellers no claim is pending or
has been made to such effect that has not been resolved and, to the Knowledge of
Sellers, Sellers are not infringing any Intellectual Property of any other
Person the effect of which could reasonably be expected to be materially adverse
to the Condition of the Business.
2.13 Contracts. (a) Schedule 1.01(a)(vii) contains a true and
complete list of each of the following Contracts relating to the Business to
which any Seller is a party as of the date hereof:
(i) all Contracts pursuant to which any Seller is obligated to or
has an option to purchase any developed or undeveloped real property;
(ii) all Contracts relating to the sale of homes, whether or not
under development as of the Closing Date;
(iii) all Contracts with distributors, dealers, suppliers or
manufacturer's representatives with whom any Seller deals in connection
with the Business which in any case involve the payment or potential
payment, pursuant to the terms of any such Contract, by or to any Seller
of more than $100,000 annually;
(iv) all partnership, joint venture, shareholders' or other similar
Contracts with any Person in connection with the Business;
(v) all Contracts (excluding benefit plans) providing for a
commitment of employment or consultation services for any Employee, and
all Contracts with any labor union representing any of the Employees;
(vi) all Contracts with any Person containing any provision or
covenant prohibiting or materially limiting the ability of any Seller to
engage in any business activity or compete with any Person in connection
with the Business or prohibiting or materially limiting the ability of any
Person to compete with any Seller in connection with the Business;
(vii) all Contracts relating to Indebtedness of any Seller in excess
of $100,000;
(viii) all Contracts relating to the future disposition or
acquisition of any Assets material to the Condition of the Business;
(ix) all Contracts between any Seller and Fortress; and
(x) all other Contracts of Sellers not otherwise described in
clauses (i) through (ix) above that involve the payment or potential
payment, pursuant to the terms of any such Contract, by any Seller of more
than $100,000 annually.
15
(b) Each Contract listed in Schedule 1.01(a)(vii) is in full force
and effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of each Seller and, to the Knowledge of Sellers, of
each other party thereto; and except as disclosed in Schedule 2.13(b), neither
any Seller nor, to the Knowledge of Sellers, any other party to such Contract is
in material violation or breach of or default under any such Contract.
2.14 Licenses. Schedule 1.01(a)(x) contains a true and complete list
of all Licenses used in and material to the Condition of the Business. To the
Knowledge of Sellers, each such License is valid and in full force and effect
and neither Seller is in material default under any such License. Neither Seller
has received any notice in writing or other written communication from any
Governmental or Regulatory Authority regarding any actual or alleged violation
of, failure to comply with or proposed revocation, withdrawal, suspension,
cancellation or termination of, any material License.
2.15 Labor Relations. No Employee is presently a member of a
collective bargaining unit and, to the Knowledge of Sellers, there are no
threatened or contemplated attempts to organize for collective bargaining
purposes any of employees of Sellers engaged in the Business. Since January 1,
2001, there has been no work stoppage, strike or other concerted action by the
Employees with respect to the Business.
2.16 Environmental Reports. (a) Prior to the date hereof, Sellers
have delivered to Purchaser true and complete copies of all written
environmental studies, audits, tests, analyses or other reports (the
"Environmental Reports") possessed or initiated by any Seller in relation to any
site or facility now or previously owned, operated or leased by any Seller on
any of the Real Property or concerning compliance by any Seller with
Environmental Laws. Each Environmental Report is listed on Schedule 2.16 hereto.
Sellers shall assist Purchaser in its request to have the Environmental Reports
certified to Purchaser, provided that Purchaser shall be solely responsible for
any costs which may be incurred in connection with the certification process.
(b) Except as set forth on Schedule 2.16 or in the Environmental
Reports, there are no pending or, to the Knowledge of Sellers, threatened
Actions or Proceedings which involve environmental claims against any Seller
relating to the Business.
(c) To the Knowledge of Sellers, except as set forth in the
Environmental Reports, Sellers are not in violation of any Environmental Law
with respect to the Business or the Real Property.
2.17 Affiliate Transactions. Except as disclosed in Schedule 2.17,
(i) no officer, director or Affiliate of Sellers provides or causes to be
provided any assets, services or facilities used in connection with the Business
which are material to the Condition of the Business, and (ii) the Business does
not provide or cause to be provided any assets, services or facilities to any
such officer, director or Affiliate which are material to the Condition of the
Business.
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2.18 Entire Business. The sale of the Assets by Sellers to Purchaser
pursuant to this Agreement will effectively convey to Purchaser the entire
Business (except for the Excluded Assets and subject to Section 1.07) including,
without limitation, all tangible Assets and Properties of Seller reflected in
the December Balance Sheet and Assets and Properties acquired since December 31,
2001 in the conduct of the Business, other than the Excluded Assets and Assets
and Properties disposed of since such date.
2.19 Performance Bonds. Set forth on Schedule 2.19 is (a) a complete
description of all Performance Bonds (the "Performance Bond") entered into
between any Seller and any Governmental or Regulatory Authority as of the date
hereof with respect to: (i) the completion of subdivision improvements,
roadways, storm and sanitary sewers and siltration control; (ii) grading; and
(iii) compliance with soil erosion ordinances and (b) a complete list of all
Deposits, bonds, letters of credit and bank guarantee letters made or posted by
any Seller or Fortress under each Performance Bond and the outstanding balance
of each Deposit, bond, letter of credit and bank guarantee letter as of the date
hereof.
2.20 Insurance. Sellers have provided to Purchaser copies of each
insurance policy listed on Schedule 2.20, which contains a true and complete
list of all material insurance policies currently in effect that insure the
Business and/or the Assets. Each such insurance policy is valid and binding and
in full force and effect, no premiums due thereunder have not been paid and
neither Seller has received any notice of cancellation or termination in respect
of any such policy or is in default thereunder in any material respect. Fortress
shall cause Purchaser to be named as additional insured under all such policies
listed on Schedule 2.20 to the extent that they relate to the operations of the
Sellers prior to the Closing Date or otherwise relate to the Assets or the
Assumed Liabilities, unless prohibited to do so by the carrier under such
policy. With respect to any policy (from October 24, 1997 forward) as to which
Purchaser is not named as an additional insured, Sellers agree that, for so long
as they continue to maintain their corporate existence, they will use
commercially reasonably efforts to maintain such policies and, to the extent the
liability or loss being covered thereunder is an Assumed Liability, enforce such
policies and otherwise use commercially reasonable efforts to recover or obtain
coverage thereunder for the benefit of Purchaser. Sellers further agree that
they will promptly forward to Purchaser any proceeds actually received by them
under any such policy to the extent relating to an Assumed Liability or Retained
Liability. In the event that an Action or Proceeding is commenced against
Purchaser which involves a claim relating to an Assumed Liability that Purchaser
reasonably believes is covered by any policy set forth on Schedule 2.20,
Purchaser shall have the right to implead Sellers into such action; provided,
that Sellers reserve all rights (i) to challenge, on any ground, any defenses
which any party may have to the plaintiff's claim and (ii) to any defenses,
other than any defenses based on Sellers' improper joinder as a third-party
defendant, that Sellers may have with respect to such claim.
2.21 Brokers. Except for UBS Warburg LLC, whose fees, commissions
and expenses are the sole responsibility of Fortress, all negotiations relative
to this Agreement and the transactions contemplated hereby have been carried out
by Fortress and Sellers directly with Purchaser without the intervention of any
Person on behalf of Sellers in such manner as to give rise to any valid claim by
any Person against Purchaser for a finder's fee, brokerage commission or similar
payment.
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2.22 Homeowner Associations. There are no assessments or dues owed
to any Home Owners Association related to any of the Real Property, and all such
dues and assessments will be current as of the Closing Date.
2.23 Representations Complete. No representation or warranty made by
Sellers in this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements herein, in light
of the circumstances in which it was made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
3.01 Corporate Existence. Purchaser is a limited liability company
validly existing and in good standing under the Laws of the State of Delaware.
Purchaser has full corporate power and authority to enter into this Agreement
and the Operative Agreements to which it is a party, to perform its obligations
hereunder and to consummate the transactions contemplated hereby and thereby.
3.02 Authority. The execution and delivery by Purchaser of this
Agreement and the Operative Agreements to which it is a party, and the
performance by Purchaser of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Purchaser, no other
corporate action on the part of Purchaser or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Purchaser and
constitutes, and upon the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, such Operative Agreements will constitute,
legal, valid and binding obligations of Purchaser enforceable against Purchaser
in accordance with its terms.
3.03 No Conflicts. The execution and delivery by Purchaser of this
Agreement do not, and the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, the performance by Purchaser of its
obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby 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 or by-laws
(or other comparable corporate charter document) of Purchaser;
(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Purchaser or any of its Assets and
Properties (other than such conflicts, violations or breaches which could not in
the aggregate reasonably be expected to adversely affect the validity or
enforceability of this Agreement or any such Operative Agreements); or
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(c) except, as could not, individually or in the aggregate,
reasonably be expected to adversely affect the ability of Purchaser to
consummate the transactions contemplated hereby or by any such Operative
Agreements 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 Purchaser to
obtain any material consent, approval or action of, make any filing with or give
any notice to any Person as a result or under the terms of, or (iv) result in
the creation or imposition of any Lien (other than Permitted Liens) upon
Purchaser or any of its Assets or Properties under, any Contract or License to
which Purchaser is a party or by which any of its Assets and Properties is
bound.
3.04 Governmental Approvals and Filings. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of Purchaser is required in connection with the execution, delivery and
performance of this Agreement or the Operative Agreements to which it is a party
or the consummation of the transactions contemplated hereby or thereby, except
where the failure to obtain any such consent, approval or action, to make any
such filing or to give any such notice could not reasonably be expected to
adversely affect the ability of Purchaser to consummate the transactions
contemplated by this Agreement or any of such Operative Agreements or to perform
its obligations hereunder or thereunder.
3.05 Legal Proceedings. There are no Actions or Proceedings pending
or, to the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets and Properties which could reasonably be expected
to result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Agreements.
3.06 Brokers. Except for Banc of America Securities LLC, whose fees,
commissions and expenses are the sole responsibility of Purchaser, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried out by Purchaser directly with Sellers without the
intervention of any Person on behalf of Purchaser in such manner as to give rise
to any valid claim by any Person against Sellers for a finder's fee, brokerage
commission or similar payment.
3.07 Financing. Purchaser has sufficient cash and/or available
credit facilities to pay the Purchase Price, to pay all amounts due and owing to
each of the banks and other Persons listed on Schedule 2.05(c), and to make all
other necessary payments of fees and expenses in connection with the
transactions contemplated by this Agreement and the Operative Agreements to
which it is a party.
ARTICLE IV
COVENANTS
4.01 Regulatory and Other Approvals. From and after the date hereof
and until the Closing Date, Sellers and Purchaser will (i) take all commercially
reasonable steps necessary or desirable to obtain all consents, approvals or
actions of, make all filings with and give all notices to Governmental or
Regulatory Authorities or any other Person to consummate the
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transactions contemplated hereby, (ii) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as such Governmental or Regulatory Authorities or other Persons may reasonably
request in connection therewith, and (iii) provide reasonable cooperation to
each other in connection with the performance of their obligations under this
Section 4.01.
4.02 Investigation by Purchaser. From and after the date hereof and
until the Closing Date, Sellers will, (i) provide Purchaser and its counsel,
accountants and financial advisors (together, "Representatives") with full
access, upon reasonable prior notice and during normal business hours, to the
management of each Seller, and to the Assets and Properties and Books and
Records of each Seller, but only to the extent that such access does not
unreasonably interfere with the business and operations of any Seller, and (ii)
furnish Purchaser and its Representatives with all such information and data
(including without limitation copies of Contracts, and other Books and Records)
concerning the business and operations of each Seller as Purchaser or any of
such other Representatives reasonably may request in connection with such
investigation, except to the extent that furnishing any such information or data
would violate any Law, Order, Contract or License applicable to any Seller or by
which any of their respective Assets and Properties is bound. All requests made
by Purchaser or its Representatives for access pursuant to the preceding
sentence shall be directed only to ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
4.03 No Solicitations. Subject to the duties imposed by applicable
Law, each Seller agrees that it will not take, nor will it permit any Affiliate
of a Seller (or authorize or permit any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf of
such Seller or any such Affiliate) to take, directly or indirectly, any action
to solicit, encourage, receive, negotiate, assist or otherwise facilitate
(including by furnishing confidential information with respect to the Business
or permitting access to the Assets and Properties and Books and Records of such
Seller) any offer or inquiry from any Person concerning the acquisition of the
Business other than Purchaser or its Affiliates; provided, that Fortress shall
not be prohibited from taking any action with respect to a third party who has
proposed a business combination with Fortress and has expressly recognized the
rights of Purchaser hereunder in a written instrument reasonably satisfactory to
Purchaser.
4.04 Conduct of Business. From and after the date hereof and until
the Closing Date, each Seller will conduct business only in the ordinary course
consistent with past practice. Without limiting the generality of the foregoing,
each Seller will use commercially reasonable efforts, to the extent the officers
of such Seller believe such action to be in the best interest of the Business,
to (a) preserve intact the present business organization and reputation of the
Business in all material respects, (b) keep available (subject to dismissals and
retirements in the ordinary course of business) the services of key Employees
and make no material changes in management personnel without prior consultation
with Purchaser, (c) maintain the Assets in good working order and condition,
ordinary wear and tear excepted, (d) maintain the good will of key customers,
suppliers, lenders and other Persons with whom each Seller otherwise has
significant business relationships in connection with the Business, (e) keep in
full force and effect, without amendment, all material rights relating to
Sellers' Business, (f) comply with all Laws and Orders and contractual
obligations applicable to the operations of Sellers' Business, (g) continue in
full
20
force and effect the insurance coverage under the policies of Sellers currently
in place with respect to the Assets or substantially equivalent policies, (h)
cooperate with Purchaser and assist Purchaser in (A) identifying the Licenses
required by Purchaser to operate the Business from and after the Closing Date
and (B) either transferring existing Licenses of Sellers to Purchaser, where
permissible, or obtaining new Licenses for Purchaser, and (i) maintain all Books
and Records of Sellers relating to Sellers' Business.
4.05 No Dividend. Except as set forth on Schedule 2.05(d), Sellers
will not declare, set aside or make payment of any dividend or other
distribution in respect of its equity interests, or take any of the other
actions listed in clauses (i) through (v) of Section 2.05(d).
4.06 Fulfillment of Conditions. Sellers and Purchaser will (i)
execute and deliver at the Closing the Operative Agreements and each
certificate, document and instrument that Sellers and Purchaser are required
hereby to execute and deliver as a condition to the Closing, (ii) take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each other's conditions to the obligations of the other
contained in this Agreement, and (iii) not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
4.07 Payment of Debt. Purchaser shall pay off all amounts due and
owing to each of the banks and other Persons in the amounts listed on Schedule
2.05(c) (as updated by Sellers prior to the Closing Date to reflect the actual
aggregate amount of principal and interest outstanding as of the Closing Date).
4.08 Negative Covenant. Except as otherwise expressly permitted
herein, between the date of this Agreement and the Closing Date, Sellers shall
refrain from: (a) disposing of any Building Materials and Equipment, other than
Building Materials and Equipment used or sold in the ordinary course of business
consistent with past practice, (b) modifying any material Business Contract or
material License, or (c) compromising or settling any Action or Proceeding
relating to the Assets, the Business or the Assumed Liabilities.
4.09 Release of Performance Bonds/Guarantees. (a) From and after the
Closing and for so long as there shall remain outstanding any Performance Bonds
or guarantees with respect to the Business, Purchaser shall use its commercially
reasonable efforts and otherwise cooperate with Sellers in good faith in seeking
to have Sellers released from, and will indemnify and hold Sellers harmless
against payments Sellers are required to make in respect of the guarantees and
Performance Bonds of Sellers set forth in Schedules 2.19 and 4.09.
(b) Upon Closing, Sellers will provide written notice to each bank
and municipality listed on Schedule 1.01(a)(xiv) stating that the Cash Escrows
have been assigned to and are the property of Purchaser, and that such Cash
Escrows shall be delivered to Purchaser upon the release of such escrow.
(c) From and after the Closing, Purchaser shall take all
commercially reasonable steps and proceed diligently in cooperating with Sellers
and Fortress to insure that the cash escrow with respect to the Charlestown Oaks
Project is released to Fortress.
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4.10 Local Opinions. Sellers will use commercially reasonable effort
to obtain the opinions of Sellers' counsel in the Commonwealth of Pennsylvania
and the State of New Jersey with respect to certain zoning matters and licenses
for each of the projects listed on Schedule 5.07 and the transferability of such
licenses.
4.11 Homeowner Associations. Sellers will resign from, and retain no
membership on, any board of a Homeowner Association and will, to the extent
possible, assign any such memberships to Purchaser.
4.12 Estoppel Affidavits. Sellers will use commercially reasonable
effort to obtain an estoppel affidavit from each party to a contract listed in
Part I of Schedule 1.01(a)(vii)(1), certifying that such contract is in full
force and effect, without any defaults and constitutes a legal, valid and
binding agreement enforceable in accordance with its terms against such Seller.
4.13 Fortress Realty. (a) Fortress PA agrees that it will not take
any action which would cause, or otherwise permit Fortress Pennsylvania Realty,
Inc. ("Realty") to, dissolve or otherwise cease its corporate existence until
the later of the date on which (i) Purchaser or any of its Affiliates obtains a
license of Real Estate Broker in the Commonwealth of Pennsylvania (the "Broker's
License") and (ii) Realty distributes the last of the deposit amounts held by it
in escrow pursuant to any home sale contract to which either Seller is a party
(the "Realty Escrow"). Purchaser agrees that it will use good faith efforts to
obtain the Broker's License as promptly as practicable following the Closing
Date, and that it will keep Sellers informed of the actions taken by it with
respect thereto. In addition, if any funds remain in the Realty Escrow on
September 30, 2002, Purchaser will use good faith efforts following such date to
obtain the consent of the home buyers under the relevant home-sale contracts to
the assignment of such escrowed funds to Purchaser or any of its Affiliates.
(b) Fortress PA agrees that, in connection with the settlement of
any home-sale contract, it will transfer to Purchaser from the Realty Escrow all
amounts previously deposited by the home buyer with respect thereto, such
transfer to be made in substantially the same manner and following substantially
the same procedures as are currently in effect.
(c) Fortress PA represents that (i) it is the sole owner of the
outstanding capital stock of Realty and (ii) all amounts held in the Realty
Escrow are held for the benefit of Fortress PA.
4.14 Construction. Construction agrees that, promptly following the
date hereof, it will file with the Commonwealth of Pennsylvania and the State of
New Jersey such certificates and other documentation, and take such other
commercially reasonable actions as may be necessary to become qualified to do
business as a foreign corporation in such jurisdictions. Sellers agree to
indemnify Purchaser and hold it harmless from and against, any penalties, fines
or assessments that may be imposed by any Governmental or Regulatory Authority
of such jurisdictions resulting from Construction's failure to be so qualified
prior to the date hereof.
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ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the Assets and to
assume and pay, perform and discharge the Assumed Liabilities are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Purchaser in its sole
discretion):
5.01 Representations and Warranties. The representations and
warranties made by Sellers in this Agreement, taken as a whole, shall be true
and correct, in all respects material to the validity and enforceability of this
Agreement and the Operative Agreements and to the Condition of the Business, on
and as of the Closing Date as though made on and as of the Closing Date or, in
the case of representations and warranties made as of a specified date earlier
than the Closing Date, on and as of such earlier date.
5.02 Performance. Sellers shall have duly performed and complied
with, in all material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with by Sellers at or
before the Closing.
5.03 Officers' Certificates. Each Seller shall have delivered to
Purchaser a certificate confirming the satisfaction of the conditions set forth
in Sections 5.01 and 5.02. Additionally, each Seller shall have delivered to
Purchaser a certificate, dated the Closing Date and executed and certified by
the Secretary or any Assistant Secretary of such Seller, which shall include,
(i) copies of the certificate of formation, limited liability company agreement,
certificate of incorporation, by-laws or other organizational documents of such
Seller, as applicable, (ii) copies of resolutions of the board of managers or
board of directors, and the sole stockholder of each Seller approving the
execution, delivery, and performance of this Agreement, and (iii) incumbency
certificates setting forth the names, offices, and signatures of all of the
officers or members signing on behalf of each Seller.
5.04 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement, or which
would reasonably be expected to otherwise result in a material diminution of the
benefits of the transactions contemplated by this Agreement to Purchaser, and
there shall not be pending or threatened on the Closing Date any Action or
Proceeding in, before or by any Governmental or Regulatory Authority which could
reasonably be expected to result in the issuance of any such Order or the
enactment, promulgation or deemed applicability to Purchaser or the transactions
contemplated hereby of any such Law.
5.05 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Sellers to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby shall have
been duly obtained, made or given and shall be in
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full force and effect, and all terminations or expirations of waiting periods
imposed by any Governmental or Regulatory Authority necessary for the
consummation of the transactions contemplated by this Agreement shall have
occurred.
5.06 Deliveries. Each Seller shall have executed and delivered to
Purchaser the General Assignment and the other Assignment Instruments.
5.07 Third Party Consents. The consents (or in lieu thereof waivers)
listed in Schedule 5.07 shall have been obtained and shall be in full force and
effect.
5.08 Transition Agreement. Fortress shall have executed and
delivered to Purchaser the Transition Agreement.
5.09 Title Policy. Sellers shall have caused to be issued the Title
Policy to Purchaser as contemplated by Section 9.03(b) with respect to the Real
Property (other than any Real Property that is deemed an Excluded Asset pursuant
to the last sentence of Section 9.03(a)).
5.10 Further Deliveries. Sellers shall have caused the following
documents to be delivered to Purchaser:
(a) an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq., counsel to Fortress PA and
Fortress, dated the Closing Date, substantially in the form of Exhibit E;
(b) an opinion of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, special counsel to
Fortress, dated the Closing Date, substantially in the form of Exhibit F;
(c) an opinion of counsel to Construction, dated the Closing Date, with
respect to the valid existence of Construction, and the power and authority of
Construction to enter into this Agreement and to consummate the transactions
contemplated hereby;
(d) a statement from the holder of each note and mortgage listed on
Schedule 2.05(c) if any, dated the Closing Date, setting forth the principal
amount then outstanding on the indebtedness represented by such note or secured
by such mortgage, the interest rate thereon and a statement to the effect that
Sellers, as obligors under such note or mortgage, are not in default under any
of the provisions thereof; and
(e) Sellers shall have executed and delivered FIRPTA affidavits stating
their respective U.S. taxpayer identification numbers and that none of them is a
"foreign person" within the meaning of Sections 1445 and 7701 of the Code.
5.11 No Actions or Proceedings. There shall not be pending or
threatened on the Closing Date any material Action or Proceeding against
Purchaser (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the transactions contemplated hereby or (b) that would
reasonably be likely to prevent, delay, make illegal, impose limitations or
conditions on or otherwise materially interfere with any of the transactions
contemplated hereby.
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5.12 No Conflict. Neither the consummation nor the performance of
any of the transactions contemplated hereby will (with or without notice or
lapse of time), contravene or conflict with or result in a material violation of
or cause Purchaser to suffer any material adverse consequence under (a) any
applicable Law or Order or (b) any Law or Order that has been published,
introduced or otherwise proposed by or before any Governmental or Regulatory
Authority, excluding bulk sales laws, other than as would occur solely as a
result of the identity or the legal or regulatory status of Purchaser or any of
its Affiliates.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers hereunder to sell the Assets are subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by Sellers in
their sole discretion):
6.01 Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement, taken as a whole, shall be true
and correct in all material respects on and as of the Closing Date as though
made on and as of the Closing Date.
6.02 Performance. Purchaser shall have performed and complied with,
in all material respects, the agreements, covenants and obligations required by
this Agreement to be so performed or complied with by Purchaser at or before the
Closing.
6.03 Officers' Certificates. Purchaser shall have delivered to
Sellers a certificate confirming the satisfaction of the conditions set forth in
Sections 6.01 and 6.02. Additionally, Purchaser shall have delivered to Sellers
a certificate, dated the Closing Date and executed by the sole member of
Purchaser, which shall include, (i) copies of the certificate of formation and
operating agreement or limited liability company agreement of Purchaser, (ii)
copies of resolutions of the sole member of Purchaser approving the execution,
delivery, and performance of this Agreement, and (iii) incumbency certificates
setting forth the names, offices, and signatures of any officer or other person
signing on behalf of Purchaser.
6.04 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.
6.05 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Sellers and Purchaser to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby shall have
been duly obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement shall have occurred.
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6.06 Deliveries. Purchaser shall have executed and delivered to
Sellers the Assumption Agreement and the other Assumption Instruments.
6.07 Third Party Consents. The consents (or in lieu thereof waivers)
listed in Schedule 6.07 shall have been obtained and shall be in full force and
effect.
6.08 Financing. Purchaser shall have paid off amounts of principal
and current interest due and owing to each of the banks and other Persons listed
on Schedule 2.05(c) as updated immediately prior to the Closing. Any amount
other than principal and interest shall be paid by Sellers.
ARTICLE VII
SURVIVAL; INDEMNITY
7.01 Survival of Representations, Warranties, Covenants and
Agreements. (a) The representations, warranties, covenants and agreements of
Sellers and Purchaser contained in this Agreement, any Operative Agreement or
any certificate delivered by Sellers hereunder will survive the Closing until
eighteen months from the Closing Date, except that (i) any covenant or agreement
which by its terms is to be performed in whole or in part after the Closing
Date, until 30 days following the last date on which such covenant or agreement
is to be performed or, if no such date is specified, indefinitely; and (ii) any
representation, warranty, covenant or agreement that would otherwise terminate
will continue to survive if an Indemnity Notice shall have been timely given in
good faith based on facts reasonably expected to establish a valid claim under
Article VII on or prior to such termination date, until the related claim for
indemnification has been satisfied or otherwise resolved as provided in Article
VII.
(b) Notwithstanding anything to the contrary contained in this
Agreement, it is the explicit intent of each party hereto that Sellers are
making no representation or warranty whatsoever, express or implied, including
but not limited to any implied representation or warranty as to condition,
merchantability or suitability as to any of the Assets or other properties of
the Business, except those representations and warranties contained in Article
II. It is understood that, except to the extent otherwise expressly provided
herein, Purchaser takes the Assets "as is" and "where is". In particular,
Sellers make no representation or warranty to Purchaser with respect to any
financial projection or forecast relating to the Business which has been
provided to Purchaser. With respect to any such projection or forecast delivered
by or on behalf of Sellers to Purchaser, Purchaser acknowledges that (i) there
are uncertainties inherent in attempting to make such projections and forecasts,
(ii) it is familiar with such uncertainties, (iii) it is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
such projections and forecasts furnished to it and (iv) it shall have no claim
against Sellers with respect thereto.
7.02 Indemnification. (a) Subject to paragraph (c) of this Section
and the other Sections of this Article VII, Sellers shall indemnify the
Purchaser Indemnified Parties in respect of, and hold each of them harmless from
and against, any and all Losses suffered,
26
incurred or sustained by any of them or to which any of them becomes subject,
resulting from or, arising out of (i) any breach of representation or warranty
or nonfulfillment of or failure to perform any covenant or agreement on the part
of Sellers contained in this Agreement, any Operative Agreement or any
certificate delivered by Sellers hereunder, (ii) any brokerage or finder's fees
or commissions or similar payments based upon any agreement or understanding
made, or alleged to have been made, by any Person with Sellers in connection
with any of the transactions contemplated hereby, (iii) any employee plan
established or maintained by Sellers (other than the Health Plan), (iv) any
failure by Sellers to comply with Section 11.02, or (v) a Retained Liability.
(b) Subject to the other Sections of this Article VII, Purchaser
shall indemnify the Seller Indemnified Parties in respect of, and hold each of
them harmless from and against, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting from
or, arising out of (i) any breach of representation or warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Purchaser contained in this Agreement, (ii) any brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding made,
or alleged to have been made, by any Person with Purchaser in connection with
any of the transactions contemplated hereby and (iii) an Assumed Liability.
(c) Notwithstanding anything to the contrary contained in this
Agreement, except with regard to taxes and except in the event of fraud or
intentional or willful misrepresentation (for which no limit shall exist), no
amounts of indemnity shall be payable as a result of any claim in respect of a
Loss arising under paragraph (a) of Section 7.02:
(i) (A) unless, with respect to any claim or recurring system-wide
claims, such claim or recurring system-wide claims involves Losses in
excess of $10,000;
(B) unless, until and then only to the extent that the
Indemnified Party has suffered, incurred, sustained or become subject to
Losses referred to in such paragraph in excess of $200,000;
(C) if and to the extent that the aggregate amount of payments
to the Purchaser Indemnified Parties in respect of claims made under such
paragraph would exceed $5,000,000; and
(D) unless the Indemnified Party has given the Indemnifying
Party an Indemnity Notice, with respect to such claim, setting forth in
reasonable detail the specific facts and circumstances pertaining thereto,
(x) as soon as practical following the time at which the Indemnified Party
discovered or reasonably should have discovered such claim (except to the
extent the Indemnifying Party is not prejudiced by any delay in the
delivery of such notice) and (y) in any event prior to eighteen months
from the Closing Date;
(ii) to the extent that the Indemnified Party had a reasonable
opportunity, but failed, in good faith to mitigate the Loss, including but
not limited to the failure to use
27
commercially reasonable efforts to recover under a policy of insurance or
under a contractual right of set-off or indemnity; or
(iii) to the extent it arises from or was caused by actions taken or
failed to be taken by Purchaser or any of its Affiliates after the
Closing.
7.03 Method of Asserting Claims. (a) In the event any claim or
demand in respect of which an Indemnified Party might seek indemnity under this
Section 7.03 is asserted against or sought to be collected from such Indemnified
Party by a Person other than a party hereto or any of its Affiliates (a "Third
Party Claim"), then such Indemnified Party shall give written notice
(accompanied by a copy of all papers served, if any) to the Indemnifying Party
of such Third Party Claim, provided that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 7.03, except to the extent that the Indemnifying
Party is actually prejudiced by such failure to give notice. In case any such
action is brought against an Indemnified Party, the Indemnifying Party will have
the right to assume and control the defense of such Third Party Claim by all
appropriate proceedings, which proceedings will be diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the sole
discretion of the Indemnifying Party; provided that the reasonable consent of
the Indemnified Party shall not be required in the case of any settlement that
provides for any relief other than the payment of monetary damages as to which
the Indemnified Party will be indemnified in full. If the Indemnifying Party
timely elects to assume and control the defense of such Third Party Claim, the
Indemnifying Party shall not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense of such Third Party Claim; provided that the Indemnified Party may
participate in such defense at the Indemnified Party's expense. If the
Indemnifying Party elects not to assume the defense of a Third Party Claim, it
will not be obligated to pay the fees and expenses of more than one counsel for
the Indemnified Parties with respect to such claim.
(b) In the event of any claim or demand, including Third Party
Claims, in respect of which an Indemnified Party might seek indemnity under this
Section 7.03, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. The Indemnifying Party will notify the
Indemnified Party within 30 day period following its receipt of such Indemnity
Notice (the "Dispute Period") as to whether the Indemnifying Party disputes its
liability to the Indemnified Party hereunder. If the Indemnifying Party notifies
the Indemnified Party that it does not dispute the claim described in such
Indemnity Notice, or fails to notify the Indemnified Party within the Dispute
Period whether the Indemnifying Party disputes the claim described in such
Indemnity Notice, the Loss specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under this Section
7.03 and the Indemnifying Party shall pay the amount of such Loss, when it has
been finally determined, to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within 60 days following the Indemnified Party's receipt of a written notice
from the Indemnifying Party disputing such claim, such
28
dispute shall be finally settled by arbitration in accordance with paragraph (c)
of this Section 7.03.
(c) Any dispute submitted to arbitration pursuant to this Section
7.03 shall be finally and conclusively settled by the decision of a board of
arbitration consisting of three members (hereinafter sometimes called the "Board
of Arbitration") selected as hereinafter provided. Each of the Indemnified Party
and the Indemnifying Party shall select one member and the third member shall be
selected by mutual agreement of the other members, or if the other members fail
to reach agreement on a third member within 20 days after their selection, such
third member shall thereafter be selected by the American Arbitration
Association upon application made to it for a third member possessing expertise
or experience appropriate to the dispute jointly by the Indemnified Party and
the Indemnifying Party. The Board of Arbitration shall meet in New York, New
York or such other place as a majority of the members of the Board of
Arbitration determines more appropriate, and shall reach and render a decision
in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the Indemnifying Party is
required to pay to the Indemnified Party in respect of a claim filed by the
Indemnified Party. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow such rules and procedures as a majority of
the members of the Board of Arbitration deems necessary or appropriate. It is
the intent of the parties hereto that, barring extraordinary circumstances,
decisions of the Board of Arbitration shall be rendered no more than 30 days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to the Indemnified
Party and the Indemnifying Party. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such 30 calendar day period) shall
be final, binding and conclusive on the Indemnified Party and the Indemnifying
Party and entitled to be enforced to the fullest extent permitted by law and
entered in any court of competent jurisdiction. Each party to any arbitration
shall bear its own expense in relation thereto, including but not limited to
such party's attorneys' fees, if any, and the expenses and fees of the Board of
Arbitration shall be divided between the Indemnifying Party and the Indemnified
Party in the same proportion as the portion of the related claim determined by
the Board of Arbitration to be payable to the Indemnified Party bears to the
portion of such claim determined not to be so payable.
(d) In the event of any claim for indemnity under Section
7.01(a)(i), Purchaser agrees to give Seller and its Representatives reasonable
access to the Books and Records and employees of the Companies and Subsidiaries
in connection with the matters for which indemnification is sought to the extent
Seller reasonably deems necessary in connection with its rights and obligations
under this Article VII.
7.04 Exclusivity. (a) Except as otherwise provided herein, after the
Closing, to the extent permitted by Law, the indemnities set forth in this
Article VII shall be the exclusive remedies of Purchaser and Seller for any
misrepresentation, breach of warranty or nonfulfillment or failure to be
performed of any covenant or agreement contained in this Agreement, and the
parties shall not be entitled to a rescission of this Agreement or to any
further indemnification rights or claims of any nature whatsoever in respect
thereof, all of which the parties hereto hereby waive.
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ARTICLE VIII
8.01 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
Sellers and Purchaser;
(b) at any time on or prior to February 27, 2002, by Purchaser upon
notification to Sellers, in the event that Purchaser is not reasonably satisfied
with the results of its due diligence investigation of the Business;
(c) at any time before the Closing, by Sellers or Purchaser, in the
event that any Order or Law becomes effective enjoining or otherwise prohibiting
or making illegal the consummation of any of the transactions contemplated
hereby, upon notification of the non-terminating party by the terminating party;
or
(d) at any time after March 15, 2002 by Sellers or Purchaser
(including, without limitation, in accordance with Section 9.03) upon
notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party.
8.02 Effect of Termination. (a) If this Agreement is validly
terminated pursuant to Section 8.01, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of Sellers or
Purchaser (or any of their respective officers, directors, employees, agents or
other representatives or affiliates), except as provided in paragraph (b) below
and the next succeeding sentence, and except that the provisions with respect to
expenses in Section 11.04 and confidentiality in Section 11.05 will continue to
apply following any such termination. Notwithstanding any other provision in
this Agreement to the contrary, upon termination of this Agreement pursuant to
Section 8.01, Sellers and Purchaser will remain liable to the other for any
willful breach of Section 4.06 by either Sellers or Purchaser existing at the
time of such termination, and Sellers or Purchaser may seek such remedies,
including damages and fees of attorneys, against the other with respect to any
such breach as are provided in this Agreement or as are otherwise available at
Law or in equity.
(b) If this Agreement is validly terminated by Purchaser pursuant to
Section 8.01(b) or Section 9.03, Sellers shall be entitled to retain the initial
$125,000 Deposit Amount. If this Agreement is validly terminated by Sellers or
Purchaser pursuant to Section 8.01(d) and at the time of such termination,
Purchaser is in breach of this Agreement, Sellers shall be entitled to retain
the full $250,000 Deposit Amount; provided that, if Purchaser is not then in
breach of this Agreement, Sellers shall promptly cause the Escrow Agent to
refund the full $250,000 Deposit Amount to Purchaser. If this Agreement is
validly terminated by either party for any other reason, Sellers shall promptly
cause the Escrow Agent to refund the full $250,000 Deposit Amount to Purchaser.
The parties acknowledge that any Deposit Amount retained by Sellers shall be
retained as a termination fee to reimburse Sellers for, among other things,
their costs and expenses incurred in the transaction contemplated hereby.
30
ARTICLE IX
OTHER MATTERS
9.01 Employee Matters. (a) The parties hereto intend that there
shall be continuity of employment with respect to all of the employees of the
Business. Purchaser shall offer employment, commencing on the Closing Date, to
all employees listed on Schedule 9.01(a), including those on vacation, leave of
absence, disability or layoff, who were employed by the Business immediately
prior to Closing (the "Offered Employees"), on the same terms (including salary,
fringe benefits, job responsibility and location as described on Schedule
9.01(a)) as those provided to such employees by the Sellers immediately prior to
Closing. Those persons who accept Purchaser's offer of employment and commence
working with Purchaser on the Closing Date shall hereafter be referred to as
"Transferred Employees." Prior to, or in connection with, the Closing, Purchaser
shall take no action to cause the Sellers or the Business to terminate the
employment of any employee of the Business, and neither any Seller nor the
Business shall be under any obligation to terminate any employee of the Business
prior to or on the Closing Date. Purchaser shall be liable for any amounts to
which any employee of the Business becomes entitled under any benefit or
severance policy, plan, agreement, arrangement or program which exists or
arises, or may be deemed to exist or arise, under any applicable law or
otherwise, as a result of, or in connection with, the sale of the Business
hereunder. Purchaser shall (i) assume any and all liabilities and obligations of
Sellers and its affiliates under any employment agreements (the "Employment
Agreements") between Sellers or any of their affiliates and any of the Offered
Employees, except those liabilities and obligations arising out of any defaults
by Sellers under such Employment Agreements and (ii) indemnify Sellers for any
and all liabilities and obligations relating to the Employment Agreements,
except those liabilities and obligations arising out of any defaults by Sellers
under such Employment Agreements. Each Transferred Employees shall continue to
participate in all of the benefit plans, programs and policies under the Health
Plan.
(b) Immediate Participation in Purchaser's 401(k) Plan Fortress
shall, with respect to the Transferred Employees who are participants in The
Fortress Group, Inc. 401(k) Profit Sharing Plan (the "Fortress 401(k) Plan"),
contribute and allocate to the accounts of such participants all employer
contributions (including matching contributions with respect to all employee
contributions and salary deferrals) for the portion of the current plan year
ending on the Closing Date that would otherwise have been made to the Fortress
401(k) Plan for the current 2002 plan year but for the transactions contemplated
hereby, without regard to any year of service or last day of year active
participant requirements. Fortress shall cause the accounts of all participants
in the Fortress 401(k) Plan to be fully vested as of the Closing Date. As of the
Closing, Purchaser (i) shall cause all full time Transferred Employees to be
eligible to commence participation in The ▇▇▇▇▇ Companies 401(k) Plan (the
"Purchaser's 401(k) Plan"), and (ii) shall provide each Transferred Employee
with the option to transfer such Transferred Employee's account balance to the
Purchaser's 401(k) Plan.
(c) Welfare Plans -- Claims Incurred; Pre-Existing Conditions;
COBRA. The Sellers shall retain responsibility for and continue to pay all life
insurance, disability and other welfare plan expenses and benefits (other than
under the Health Plan) for each Transferred
31
Employee with respect to claims incurred by such Transferred Employees or their
covered dependents prior to the Closing Date, subject to the terms of Sellers'
welfare plans. Expenses and benefits with respect to claims incurred by
Transferred Employees or their covered dependents on or after the Closing Date
shall be the responsibility of Purchaser. For purposes of this paragraph, a
claim is deemed incurred when the services that are the subject of the claim are
performed; in the case of life insurance, when the death occurs, and, in the
case of long-term disability benefits, when the disability occurs. With respect
to any welfare benefit plans (as defined in section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended) maintained by Purchaser for
the benefit of Transferred Employees on and after the Closing Date, Purchaser
shall (i) cause there to be waived any pre-existing condition limitations and
(ii) give effect, in determining any deductible and maximum out-of-pocket
limitations, to claims incurred and amounts paid by, and amounts reimbursed to,
such employees with respect to similar plans maintained by the Sellers (and its
affiliates) for their benefit immediately prior to the Closing Date. Purchaser
shall assume, be responsible for, and indemnify Sellers for, any and all
obligations to provide continuation coverage under the Consolidated Omnibus
Reconciliation Act of 1985 ("COBRA") for any Offered Employees which (i) arises
on or after the Closing Date or (ii) arises, or may be deemed to exist or arise,
as a result of, or in connection with, the sale of the Business hereunder.
(d) Recognition of Company Service. Purchaser shall cause the
Transferred Employees who become employees of Purchaser or its Affiliates to
receive credit for all of their service prior to the Closing Date, as
applicable, under all programs, and policies sponsored by Purchaser for the
benefit of employees generally. Except as otherwise herein provided, such prior
service shall be credited for both eligibility and vesting purposes, and for
purposes of any benefit schedule based on service (e.g. for vacation pay, sick
days and personal days).
(e) Employment Agreements. Sellers hereby acknowledge that Purchaser
has entered into discussions and negotiations with the following individuals
regarding their proposed employment with Purchaser following the Closing Date:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. If this Agreement is terminated and
the transactions contemplated hereby are abandoned, Purchaser will refrain from,
either alone or in conjunction with any other Person, or directly or indirectly
through its present or future Affiliates, employing, engaging or seeking to
employ or engage the individuals listed in the first sentence of this paragraph.
Any employment agreement entered into between any such individual and Purchaser
prior to the Closing Date shall contain an express provision providing for the
termination of such employment agreement in the event of the termination of this
Agreement.
9.02 Warranty Matters. (a) Except as provided in the second sentence
of paragraph (b) below, Purchaser shall be responsible for all customer warranty
obligations with respect to construction work performed on homes (whether closed
prior to, on, or after the Closing Date) and product liabilities and other
similar claims arising out of events occurring prior to, on, or after the
Closing Date.
(b) At the Closing, Sellers will deliver to Purchaser a list, which
shall be attached to Schedule 9.02(b), of each home under which the Sellers
maintain a standard one-year customer warranty policy. In the event that, at any
time prior to the first anniversary of the
32
Closing Date, a customer warranty claim under the standard one-year customer
warranty policy is asserted with respect to any home not disclosed on Schedule
9.02(b), Sellers shall indemnify Purchaser for such claim.
9.03 Title Commitment; Transfer Tax. (a) Sellers have delivered to
Purchaser, or shall deliver or cause to be delivered to Purchaser within 15
Business Days from the date hereof, or as soon as reasonably possible
thereafter, all preliminary title reports, land surveys, subdivision plats and
other title materials (collectively, the "Preliminary Title Reports") covering
each parcel of Real Property owned by Sellers and described on Schedules
1.01(a)(i) and 1.01(a)(vii)(1) hereof, including at a minimum a commitment for
an owner's policy of title insurance, covering each such parcel of Real Property
(collectively, the "Title Commitments") issued by Chicago Title Insurance
Company or an agent thereof (the "Title Company"), together with complete and
legible copies of all written covenants, restrictions, easements and other
matters that are listed as exceptions thereon. Purchaser or Sellers may obtain
updates of the Title Commitments prepared by the Title Company up to and
including the Closing Date (each, a "Title Update"). If any such Title Update is
obtained, the Title Company shall furnish copies of each such update to both
Purchaser and Sellers, together with complete and legible copies of all written
covenants, restrictions, easements, encumbrances and other matters that are
listed as exceptions thereon. All title matters reflected in a Title Commitment
or a Title Update that are not reasonably objected to by Purchaser within 5
Business Days of Purchaser's receipt of such Title Commitment or Title Update,
as the case may be, to Purchaser shall be deemed approved by Purchaser and shall
be deemed Permitted Encumbrances. If Purchaser does so reasonably and timely
object to any such matter appearing on a Title Commitment or a Title Update,
Sellers shall in good faith use commercially reasonable efforts to cause such
matter to be resolved or insured over with the reasonable consent of Purchaser
prior to the Closing Date or, if such matter cannot be resolved by the Closing
Date, Purchaser shall have the right (i) to exclude the applicable parcel from
the Real Property and such parcel shall be treated as an Excluded Asset, or (ii)
if such parcel of Real Property is listed on Schedule 9.03(a), to terminate this
Agreement on or after March 15, 2002 in accordance with Section 8.01(d) if such
matter has not been resolved or insured over prior thereto.
(b) At the Closing, Purchaser shall be entitled to receive an
owner's policy of title with all customary endorsements reasonably requested by
Purchaser issued by the Title Company (for each parcel, the "Title Policy"),
with all Schedule B requirements to effectiveness satisfied, free and clear of
all Encumbrances (except for the Permitted Encumbrances), showing fee simple
title of the Real Property vested in Purchaser, together with copies of all
recorded documents evidencing title exceptions raised in Schedule B of the Title
Policy. Such Title Policy shall be obtained at Purchaser's cost. Sellers will
execute any and all documents reasonably necessary to enable the Title Company
to eliminate mechanic's liens as an exclusion from each Title Policy for each
parcel of Real Property. In the event that Sellers are unable to or fail to
deliver a Title Policy in accordance with the first sentence of this paragraph
(b), Purchaser shall have the right (i) to exclude the applicable parcel from
the Real Property and such parcel shall be treated as an Excluded Asset, or (ii)
if such parcel of Real Property is listed on Schedule 9.03(a), to terminate this
Agreement on or after March 15, 2002 in accordance with Section 8.01(d) if such
Title Policy has not been delivered prior hereto.
33
(c) In the event that Purchaser elects to exclude any parcel of Real
Property listed on Schedule 9.03(a) pursuant to paragraph (a) or (b) above, then
notwithstanding the satisfaction in full of each condition to Closing contained
in Article VI, Sellers shall have the option, in lieu of proceeding with the
Closing, of terminating this Agreement on or after March 15, 2002.
(d) All taxes, conveyances, deed stamps and recording charges due in
connection with the conveyance, assignment, or transfer of the Assets in (i) the
Commonwealth of Pennsylvania shall be borne equally by Sellers and Purchaser and
(ii) the State of New Jersey shall be borne by Sellers. The conveyance tax
referenced in this paragraph (d) shall be allocated to each project listed in
Schedule 9.03(a) based upon (i) Sellers' book value of such project as of
December 31, 2001 with respect to each parcel of real property located in the
State of New Jersey and (ii) an assessment of each parcel of real property, such
assessment to be mutually agreed to by Sellers and Purchaser, with respect to
real property located in the Commonwealth of Pennsylvania.
9.04 Release of Performance Bonds. By June 30, 2002, Purchaser shall
arrange with the appropriate Governmental or Regulatory Authority in the
Commonwealth of Pennsylvania and the State of New Jersey for the exchange of all
outstanding Performance Bonds as set forth on Schedule 2.19 for a performance
bond or other appropriate security of Purchaser to effect the release of
Fortress from all outstanding obligations associated with the Performance Bonds.
ARTICLE X
DEFINITIONS
10.01 Definitions. (a) Defined Terms. As used in this Agreement, the
following defined terms have the meanings indicated below:
"Accounts Payable" has the meaning ascribed to it in Section
1.02(a)(ii).
"Accounts Receivable" has the meaning ascribed to it in Section
1.01(a)(iv).
"Accrued Expenses" has the meaning ascribed to it in Section
1.02(a)(v).
"Actions or Proceedings" means any action, litigation, suit,
proceeding, arbitration or Governmental or Regulatory Authority investigation
(in each case whether civil, criminal, administrative or judicial).
"Affiliate" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control of a
Person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such Person whether by Contract or otherwise and,
in any event and without limitation of the previous sentence, any Person owning
ten percent (10%) or more of the voting securities of another Person shall be
deemed to control that Person.
34
"Agreement" means this Asset Purchase Agreement and the Schedules,
as the same shall be amended from time to time.
"Assets" has the meaning ascribed to it in Section 1.01(a).
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person.
"Assignment Instruments" has the meaning ascribed to it in Section
1.05.
"Assumed Liabilities" has the meaning ascribed to it in Section
1.02(a).
"Assumption Agreement" has the meaning ascribed to it in Section
1.05.
"Assumption Instruments" has the meaning ascribed to it in Section
1.05.
"Board of Arbitration" has the meaning ascribed to it in Section
7.03(c).
"Books and Records" of any Person means all files, documents,
instruments, papers, books and records relating to the business, operations,
condition of (financial or other), results of operations and Assets and
Properties of such Person, including without limitation financial statements,
budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers, Contracts,
Licenses, customer lists, operating data and plans and environmental studies and
plans.
"Building Materials and Equipment" has the meaning ascribed to it in
Section 1.01(a)(iii).
"Business" has the meaning ascribed to it in the forepart of this
Agreement.
"Business Books and Records" has the meaning ascribed to it in
Section 1.01(a)(xv).
"Business Contracts" has the meaning ascribed to it in Section
1.01(a)(vii).
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the States of New Jersey, Pennsylvania, Virginia or New
York are authorized or obligated to close.
"Business Licenses" has the meaning ascribed to it in Section
1.01(a)(x).
"Cash" has the meaning ascribed to it in Section 1.01(a)(xiii).
35
"Cash Escrows" has the meaning ascribed to it in Section
1.01(a)(xiv).
"Charlestown Oaks Project" has the meaning ascribed to it in Section
1.02(b)(ii).
"Closing" means the closing of the transactions contemplated by
Section 1.05.
"Closing Date" means (i) February 28, 2002, or (ii) if any of the
conditions to Closing listed in Article V or VI have not been satisfied or
waived, then the second Business Day following the day on which the last of such
conditions is obtained or waived.
"COBRA" has the meaning ascribed to it in Section 9.02(c).
"Condition of the Business" means the business, financial condition,
results of operations and Assets and Properties of the Business.
"Confidentiality Agreement" has the meaning ascribed to it in
Section 11.05(b).
"Construction" has the meaning ascribed to it in the forepart of
this Agreement.
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract.
"December Balance Sheet" has the meaning ascribed to it in Section
2.05(a).
"Departments" has the meaning ascribed to it in Section 11.02.
"Deposits" has the meaning ascribed to it in Section 1.01(a)(xii).
"Deposit Amount" and "Deposit Amounts" have the meanings ascribed to
them in Section 1.04.
"Dispute Period" has the meaning ascribed to it in Section 7.03(b).
"Employee" means each employee, officer or consultant of any Seller
engaged primarily in the conduct of the Business.
"Employment Agreements" has the meaning ascribed to it in Section
9.01(a).
"Encumbrance" means any restriction, lease, easement, right-of-way
or similar item encumbering real estate.
"Environmental Law" means any Law or Order relating to the
regulation or protection of the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes into the environment, or
otherwise relating to the manufacture, use, treatment, storage, disposal, or
36
transport of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes.
"Environmental Reports" has the meaning ascribed to it in Section
2.16.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"Excluded Assets" has the meaning ascribed to it in Section 1.01(b).
"Excluded Books and Records" has the meaning ascribed to it in
Section 1.01(b)(ii).
"Financial Statements" has the meaning ascribed to it in Section
2.05.
"Fortress" has the meaning ascribed to it in Section 1.01(a)(xii).
"Fortress 401(k) Plan" has the meaning ascribed to it in Section
9.01(b).
"GAAP" means generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
"General Assignment" has the meaning ascribed to it in Section 1.05.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision.
"Health Plan" has the meaning ascribed to it in Section
1.02(a)(viii).
"Improvements" has the meaning ascribed to it in Section 1.01(a)(i).
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under
any provision of Section 7.02.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Section 7.02.
"Indemnity Notice" means written notification pursuant to Section
7.02 of a claim for indemnity thereunder by an Indemnified Party, specifying the
nature of and basis for such
37
claim, together with the amount or, if not then reasonably determinable, the
estimated amount, determined in good faith, of the Loss arising from such claim.
"Intellectual Property" means all patents, trademarks, trade names,
service marks, service names, inventions, copyrights, internet domain names and
addresses, building plans, building systems and procedures and CAD plans.
"Knowledge of Sellers" means the actual knowledge of any of the
following individuals: ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ Schoubacher.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States or any state,
county, city or other political subdivision or of any Governmental or Regulatory
Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise).
"Licenses" means all licenses, permits, zoning approvals,
subdivision approvals and all other land use approvals for the Real Property,
certificates of authority, authorizations, approvals and registrations,
franchises granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Loss" means any and all damages, fines, penalties, deficiencies,
losses and expenses (including without limitation interest, court costs,
reasonable fees of attorneys, accountants and other experts or other reasonable
expenses of litigation or other proceedings or of any claim, default or
assessment).
"Offered Employees" has the meaning ascribed to it in Section
9.01(a).
"Operative Agreements" means, collectively, the General Assignment
and the other Assignment Instruments, the Assumption Agreement and the other
Assumption Instruments.
"Order" means any writ, judgment, decree, injunction, stop order,
cease or desist order or similar order of any Governmental or Regulatory
Authority (in each such case whether preliminary or final).
"Other Balance Sheet Assets" has the meaning ascribed to it in
Section 1.01(a)(xvi).
"Performance Bonds" has the meaning ascribed to it in Section 2.19.
38
"Permitted Encumbrances" means: (i) the Real Property Leases; (ii)
Encumbrances waived in writing by Purchaser; and (iii) Encumbrances (which are
not Liens) appearing in Schedule B [Section 2] of the Title Policies delivered
to Purchaser pursuant to this Agreement. For purposes of clarification, standard
exceptions shall be deemed Permitted Encumbrances.
"Permitted Lien" means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent and (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens could not reasonably be expected to materially
adversely affect any single project.
"Person" means any natural person, corporation, limited liability
company, general partnership, limited partnership, proprietorship, other
business organization, trust, union, association or Governmental or Regulatory
Authority.
"Personal Property Leases" has the meaning ascribed to it in Section
1.01(a)(vi).
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, leave of absence, layoff, vacation,
day or dependent care, legal services, cafeteria, life, health, accident,
disability, workmen's compensation or other insurance, severance, separation,
unemployment or other employee benefit plan, practice, policy or arrangement of
any kind, including, but not limited to, any "employee benefit plan" within the
meaning of Section 3(3) of ERISA.
"Preliminary Title Reports" has the meaning ascribed to it in
Section 9.03(a).
"Prepaid Expenses" has the meaning ascribed to it in Section
1.01(a)(viii).
"Purchase Price" has the meaning ascribed to it in Section 1.03(a).
"Purchaser" has the meaning ascribed to it in the forepart of this
Agreement.
"Purchaser Indemnified Parties" means Purchaser and its officers,
directors, employees, agents and Affiliates.
"Purchaser's 401(k) Plan" has the meaning ascribed to it in Section
9.02(b).
"Real Property" has the meaning ascribed to it in Section
1.01(a)(i).
"Real Property Leases" has the meaning ascribed to it in Section
1.01(a)(ii).
"Representatives" has the meaning ascribed to it in Section 4.02.
39
"Retained Intellectual Property" has the meaning ascribed to it in
Section 1.01(b)(iii).
"Retained Liabilities" has the meaning ascribed to it in Section
1.02(b).
"Sellers" has the meaning ascribed to it in the forepart of this
Agreement.
"Seller Indemnified Parties" means Sellers and their respective
officers, directors, employees, agents and Affiliates.
"Schedules" mean the schedules delivered to Purchaser by Sellers
herewith and dated as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein by Sellers pursuant to this Agreement.
"Severance Obligations" has the meaning ascribed to it in Section
9.01(a).
"Tangible Personal Property" has the meaning ascribed to it in
Section 1.01(a)(v).
"taxes" has the meaning ascribed to it in Section 2.06.
"Third Party Claim" has the meaning ascribed to it in Section
7.03(a).
"Title Company" has the meaning ascribed to it in Section 9.03(a).
"Title Policy" has the meaning ascribed to it in Section 9.03(b).
"Title Update" has the meaning ascribed to it in Section 9.03(a).
"Transferred Employees" has the meaning ascribed to it in Section
9.01(a).
"Transferred Intellectual Property" has the meaning ascribed to it
in Section 1.01(a)(ix).
"Transition Agreement" has the meaning ascribed to it in Section
1.05.
"Vehicles" has the meaning ascribed to it in Section 1.01(a)(xi).
(b) Construction of Certain Terms and Phrases. Unless the context of
this Agreement otherwise requires, the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement and the phrase "ordinary course
of business" refers to the business of Seller in connection with the Business.
Whenever this Agreement refers to a number of days, such number shall refer to
calendar days unless Business Days are specified. All accounting terms used
herein and not expressly defined herein shall have the meanings given to them
under GAAP. Any representation or warranty contained herein as to the
enforceability of a Contract shall be subject to the effect of any bankruptcy,
insolvency, reorganization, moratorium or other
40
similar law affecting the enforcement of creditors' rights generally and to
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at Law).
ARTICLE XI
MISCELLANEOUS
11.01 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
▇▇▇▇▇ Companies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & Samor, P.C.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to any Seller, to:
The Fortress Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
with copies to:
Lazard Freres Real Estate Investors L.L.C.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Chairman of Fortress' Planning Committee
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Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
11.02 Bulk Sales Act. (a) Sellers shall give all notices to the
Pennsylvania Department of Revenue and Pennsylvania Department of Labor and
Industry (the "Departments") that are required pursuant to applicable
Pennsylvania bulk sales laws at least ten (10) days prior to the Closing Date
and shall deliver to Purchaser all clearance certificates received from the
Departments. Sellers shall indemnify, defend and hold harmless Purchaser from
and against any and all cost, claim, loss, liability or expense (including
reasonable attorneys' and other professional fees) arising out of the failure of
Sellers to comply with the preceding sentence. Sellers agree that, at the
Closing, Purchaser shall be entitled to deposit in escrow with Purchaser's title
insurance company, as security for such indemnification, a portion of the
Purchase Price in an amount equal to the average of the amount of taxes
determined by Sellers' independent certified public accountant, on the one hand,
and Purchaser's independent certified public accountant, on the other (such
determination to be made on or prior to February 27, 2002), to be due or to
become due by Sellers to the Commonwealth of Pennsylvania as of the Closing Date
or as a result of the transaction contemplated hereby. The provisions of this
Section survive Closing.
(b) The parties agree to submit the appropriate notification to the
State of New Jersey, Department of Treasury, Division of Taxation with regard to
this bulk sale. Purchaser shall submit such notification and Sellers agree to
cooperate with Purchaser in completing and filing such notice. Such notice to be
provided at least ten (10) days prior to Closing. Sellers shall be responsible
for any and all taxes imposed by the State of New Jersey in accordance with such
sale.
11.03 Entire Agreement. This Agreement and the Operative Agreements
supersede all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof, including without limitation that
certain Confidentiality Agreement, and contains the sole and entire agreement
between the parties hereto with respect to the subject matter hereof and
thereof.
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11.04 Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
each party will pay its own costs and expenses incurred in connection with the
negotiation, execution and closing of this Agreement and the transactions
contemplated hereby.
11.05 Public Announcements; Confidentiality. (a) Sellers and
Purchaser will also obtain the other party's prior approval of any press release
to be issued immediately following the Closing announcing the consummation of
the transactions contemplated by this Agreement, which approval shall not be
unreasonably withheld or delayed.
(b) Purchaser hereby confirms the continued effectiveness of the
confidentiality agreement signed by Purchaser and UBS Warburg LLC on behalf of
Fortress, effective as of September 5, 2001(the "Confidentiality Agreement")
11.06 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
11.07 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
11.08 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Section 7.02.
11.09 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) that Purchaser may assign any or all of its rights, interests and
obligations hereunder to a wholly-owned subsidiary, provided that any such
subsidiary agrees in writing to be bound by all of the terms, conditions and
provisions contained herein, but no such assignment referred to in clause (b)
shall relieve Purchaser of its obligations hereunder. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
11.10 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.11 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby,
43
(a) such provision will be fully severable, (b) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof and (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom.
11.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
11.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party as of the date first
above written.
By Purchaser:
▇▇▇▇▇ RESIDENTIAL OF PENNSYLVANIA LLC
By: ▇▇▇▇▇ RESIDENTIAL LIMITED
PARTNERSHIP
By: ▇▇▇▇▇ COMPANIES, INC.
Its Managing General Partner
By:
-------------------------------------
Name:
Title:
By Sellers:
FORTRESS PENNSYLVANIA, LLC
By:
-------------------------------------
Name:
Title:
F.P. CONSTRUCTION CORP.
By:
-------------------------------------
Name:
Title:
The Fortress Group, Inc., the owner of all of the outstanding membership
interests of Fortress PA and an indirect owner of all of the capital stock of
Construction, irrevocably and unconditionally guarantees, as and for its own
obligation, the due and punctual performance of all obligations of Sellers
whatsoever arising under the Agreement in accordance with its terms and
condition, including any duty of Sellers to satisfy damages or liabilities (the
"Guaranty"). If Sellers default in performance of their obligations under the
Agreement, Fortress shall pay to Purchaser all damages, costs, and expenses that
Purchaser is entitled to recover from Sellers by reason of such default. This
Guaranty shall continue in force until all obligations of Sellers under the
Agreement have been satisfied or until Sellers' liability to Purchaser under the
Agreement has been completely discharged, whichever first occurs. Fortress shall
not be discharged from liability hereunder so long as any claim by Purchaser
against Sellers under this Agreement remains outstanding. This Guaranty shall be
governed by and construed in accordance with the Laws of the State of New York
applicable to a contract executed and performed in such State, without giving
effect to the conflicts of laws principles thereof.
THE FORTRESS GROUP, INC.
By:
-----------------------------
Name:
Title: