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EXHIBIT 2.1
MASTER TRANSACTION AGREEMENT
BY AND AMONG
MERITAGE CORPORATION,
▇▇▇▇▇▇▇-MTH BUILDERS, INC.,
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC.,
HC BUILDERS, INC.
AND
▇▇▇▇▇▇▇ COMMUNITIES, L.L.C.
Dated May 7, 2001
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MASTER TRANSACTION AGREEMENT
ARTICLE I....................................................................................... 5
1.1 Definitions........................................................................ 5
ARTICLE II...................................................................................... 12
2.1 Closing............................................................................ 12
2.2 Assets to be Purchased............................................................. 12
2.3 Assets Not Being Transferred....................................................... 12
2.4 Liabilities........................................................................ 13
2.5 Purchase Price; Earn-Out; Adjustment; Deposit...................................... 14
2.6 Allocation of Purchase Price....................................................... 18
2.7 Risk of Loss....................................................................... 18
ARTICLE III..................................................................................... 18
3.1 Organization and Qualification..................................................... 18
3.2 Authority Relative to this Agreement............................................... 18
3.3 Legal Capacity and Authority....................................................... 19
3.4 No Conflicts....................................................................... 19
3.5 WARN Act........................................................................... 19
ARTICLE IV...................................................................................... 20
4.1 Organization and Qualification..................................................... 20
4.2 Authority Relative to this Agreement............................................... 20
4.3 Legal Capacity and Authority of Sellers............................................ 20
4.4 No Conflicts....................................................................... 20
4.5 No Consents........................................................................ 20
4.6 Intentionally Omitted.............................................................. 20
4.7 Ownership Interests................................................................ 21
4.8 Financial Statements............................................................... 21
4.9 Absence of Undisclosed Liabilities................................................. 21
4.10 No Material Adverse Changes....................................................... 21
4.11 Absence of Certain Developments................................................... 21
4.12 Permitted Liens; Good Title to and Condition of Acquired Assets................... 23
4.13 Legal Descriptions of Real Property.............................................. 23
4.14 Real Property..................................................................... 23
4.15 Acquired Contracts................................................................ 26
4.16 Warranties........................................................................ 28
4.17 Environmental Matters............................................................. 28
4.18 Tax Matters....................................................................... 29
4.19 Restrictions on Business Activities............................................... 31
4.20 Intellectual Property............................................................. 31
4.21 Litigation........................................................................ 31
4.22 Employees......................................................................... 31
4.23 Employee Benefit Plans............................................................ 32
4.24 Insurance......................................................................... 33
4.25 Affiliate Transactions............................................................ 33
4.26 Compliance with Laws.............................................................. 33
4.27 Permits........................................................................... 34
4.28 Membership Records; Minute Books.................................................. 34
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4.29 Disclosure........................................................................ 34
ARTICLE V....................................................................................... 35
5.1 Conduct of Business Pending the Closing............................................ 35
5.2 Business Relationships............................................................. 36
5.3 Notification of Certain Matters.................................................... 36
ARTICLE VI...................................................................................... 37
6.1 Employment......................................................................... 37
6.2 Break-up Fee....................................................................... 37
6.3 No Negotiations.................................................................... 37
6.4 Public Announcements............................................................... 37
6.5 Confidentiality.................................................................... 38
6.6 Further Assurances................................................................. 38
6.7 Right to Enter and Inspect......................................................... 39
6.8 Intentionally Omitted.............................................................. 39
6.9 Intentionally Omitted.............................................................. 39
6.10 Intentionally Omitted............................................................. 39
6.11 Tax on Prior Sales................................................................ 39
6.12 Transfer of Permits............................................................... 39
6.13 Performance Bonds................................................................. 39
6.14 Tash Note......................................................................... 39
6.15 Mission Royale.................................................................... 39
ARTICLE VII..................................................................................... 40
7.1 Conditions to Obligation of Sellers................................................ 40
7.2 Conditions to Obligation of Parent and Buyers...................................... 40
ARTICLE VIII.................................................................................... 43
8.1 Sellers' Obligations............................................................... 43
8.2 Parent's or Buyers' Obligations.................................................... 44
8.3 Transfer Fees, Title Costs, and Closing Costs and Other Fees; Prorations........... 45
ARTICLE IX...................................................................................... 46
9.1 Survival of Representations and Warranties......................................... 46
9.2 Nature of Statements............................................................... 46
9.3 Arbitration........................................................................ 46
ARTICLE X....................................................................................... 47
10.1 Termination....................................................................... 47
10.2 Effect of Termination............................................................. 47
10.3 Specific Performance.............................................................. 47
ARTICLE XI...................................................................................... 47
11.1 Notices........................................................................... 47
11.2 Counterparts...................................................................... 48
11.3 Governing Law..................................................................... 48
11.4 Assignment........................................................................ 48
11.5 Gender and Number................................................................. 49
11.6 Schedules and Exhibits............................................................ 49
11.7 Waiver of Provisions.............................................................. 49
11.8 Costs............................................................................. 49
11.9 Amendment......................................................................... 49
11.10 Severability..................................................................... 49
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11.11 Binding Effect................................................................... 49
11.12 Construction..................................................................... 50
11.13 Time Periods..................................................................... 50
11.14 Headings......................................................................... 50
11.15 Commission....................................................................... 50
11.16 Entire Agreement................................................................. 50
EXHIBIT A - MANAGEMENT AGREEMENT
EXHIBIT B - [INTENTIONALLY OMITTED]
EXHIBIT C - ▇▇▇▇ ▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT
EXHIBIT D - AMERICAN WEST NON-COMPETE AGREEMENT
EXHIBIT E - ▇▇▇▇▇▇▇ OFFICERS NON-COMPETE AGREEMENT
EXHIBIT F - INDEMNIFICATION AGREEMENT
EXHIBIT G - WARRANTY DEED
EXHIBIT H - ▇▇▇▇ OF SALE
EXHIBIT I - DISPUTE RESOLUTION
EXHIBIT J - ASSET AGREEMENT
EXHIBIT K - REAL PROPERTY AGREEMENT
EXHIBIT L - ASSUMPTION AGREEMENT
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MASTER TRANSACTION AGREEMENT
This MASTER TRANSACTION AGREEMENT (the "AGREEMENT") is made as of May
7, 2001, by and among MERITAGE CORPORATION, a Maryland corporation ("MERITAGE or
PARENT"); ▇▇▇▇▇▇▇-MTH BUILDERS, INC., an Arizona corporation ("BUILDER BUYER");
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC., an Arizona corporation ("SALES BUYER," and
collectively with Builder Buyer, "BUYERS"); HC BUILDERS, INC., an Arizona
corporation ("HC BUILDERS" or "SELLER"), and ▇▇▇▇▇▇▇ COMMUNITIES, L.L.C., an
Arizona limited liability company ("HC SALES" or "SELLER," and collectively with
HC Builders, "SELLERS").
RECITALS
1. American West Homes, Incorporated, a Nevada corporation ("AMERICAN
WEST"), owns 55% and ▇▇▇▇ ▇▇▇▇▇▇▇, an individual, owns 45% of Exeter Holding
Company, L.L.C., an Arizona limited liability company ("Exeter"). Exeter owns HC
Builders and a 99% interest in HC Sales, with the remaining 1% owned by ▇▇▇▇
▇▇▇▇▇▇▇, an individual. Collectively, American West and ▇▇▇▇ ▇▇▇▇▇▇▇ own and
operate the ▇▇▇▇▇▇▇ Communities homebuilding and sales business (the "▇▇▇▇▇▇▇
COMMUNITIES BUSINESS").
2. The parties have entered into that Agreement of Purchase and Sale of
Assets in the form attached as EXHIBIT J hereto ("ASSET AGREEMENT"), that
Agreement of Purchase and Sale of Real Property in the form attached as EXHIBIT
K hereto ("REAL PROPERTY AGREEMENT"), and that Indemnification Agreement in the
form attached as EXHIBIT F hereto (the "INDEMNIFICATION AGREEMENT").
3. Although not a condition to Closing, Parent and Buyers anticipate
financing the acquisition of the assets of the ▇▇▇▇▇▇▇ Communities Business
using the proceeds of a new bridge financing or the sale of notes pursuant to
Rule 144A under the Securities Act of 1933 (the "FINANCING").
4. Pursuant to this Agreement, the Asset Agreement, and the Real
Property Agreement, Buyers will acquire all or substantially all of the assets
of the ▇▇▇▇▇▇▇ Communities Business.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in reliance upon the representations and
warranties contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following terms shall have the meanings set forth
below where used in this Agreement and identified with initial capital letters.
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"ABOVEGROUND STORAGE TANK" shall have the meaning ascribed to such term
in Sections 6901, et seq., as amended, of RCRA, or any applicable state or local
statute, law, ordinance, code, rule, regulation, order ruling, or decree
governing Aboveground Storage Tanks.
"ACCOUNTING ARBITRATOR" shall have the meaning set forth in Section
2.5.
"ACQUIRED ASSETS" shall have the meaning set forth in Section 2.2.
"ACQUIRED CONTRACTS" shall have the meaning set forth in Section 1.2 of
the Real Property Agreement and the Asset Agreement.
"ADDITIONAL REAL PROPERTY" shall have the meaning set forth in Section
4.1 of the Real Property Agreement.
"ADJUSTED BALANCE SHEET" shall mean a balance sheet for the ▇▇▇▇▇▇▇
Communities Business prepared by Parent after the Closing in accordance with
Adjusted GAAP and Section 2.5 hereof.
"ADJUSTED BOOK VALUE" shall mean total equity of the ▇▇▇▇▇▇▇
Communities Business as reflected on the Closing Balance Sheet, which is to be
prepared in accordance with Adjusted GAAP, consistent with the March 31, 2001
balance sheet, attached as SCHEDULE 2.5A(3).
"ADJUSTED GAAP" shall have the meaning set forth in Section 2.5.
"AMERICAN WEST NON-COMPETE AGREEMENT" shall have the meaning set forth
in Section 7.2.
"APPLICABLE LAWS" shall mean all federal, state, regional, local, or
other governmental or quasi-governmental statutes, laws, rules, regulations,
codes, ordinances, orders, plans, injunctions, decrees, rulings, or judicial or
administrative interpretations thereof, including without limitation
Environmental Laws, which are or may be applicable to Sellers, to Buyers, to the
▇▇▇▇▇▇▇ Communities Business, or the Acquired Assets or the use, development,
condition or otherwise related to any of the Acquired Assets.
"APPROVED TITLE EXCEPTIONS" shall have the meaning set forth in Section
5.2 of the Real Property Agreement.
"ASSETS" shall have the meaning set forth in Section 1.2 of the Asset
Agreement.
"ASSET AGREEMENT" shall have the meaning set forth in the recitals.
"ASSUMED CONSTRUCTION CLAIMS" shall have the meaning set forth in
Section 2.4.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.4.
"ASSUMPTION AGREEMENT" shall have the meaning set forth in Section 8.1.
"BONDS" shall have the meaning set forth in Section 4.24.
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"BREAK-UP FEE" shall have the meaning set forth in Section 6.2.
"BUYERS" shall mean ▇▇▇▇▇▇▇-MTH Builders, Inc. and ▇▇▇▇▇▇▇-MTH
Communities, Inc., both wholly-owned subsidiaries of Parent. "Buyer," as used in
the Real Property Agreement shall refer only to ▇▇▇▇▇▇▇-MTH Builders, Inc.
"BUYER REVIEW" shall have the meaning set forth in Section 2.5.
"CLOSING" shall have the meaning set forth in Section 2.1.
"CLOSING DATE" shall have the meaning set forth in Section 2.1.
"CLOSING BALANCE SHEET" shall mean an estimated closing balance sheet,
as of the end of the month immediately preceding the Closing Date, for the
▇▇▇▇▇▇▇ Communities Business, prepared in accordance with Adjusted GAAP to be
delivered to Parent and Buyers at least five (5) business days prior to the
Closing.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONSTRUCTION CLAIMS" shall mean all claims, including, without
limitation, claims for breach of contract, claims for breach of express or
implied warranty, construction defect claims, claims for lost profits,
consequential damages, and incidental damages (but not punitive damages) with
respect to Assumed Construction Claims, and all losses, costs and expenses
relating to any work which has been done, or any corrective work that is to be
done, on a completed Housing Unit or on streets, gradings, landscaping and
homeowners' association improvements and all other similar subdivision work.
"CONTRACT ASSIGNMENTS" shall have the meaning set forth in Section 8.1.
"DEED" shall have the meaning set forth in Section 8.1.
"DISCHARGE" shall mean any manner of spilling, leaking, dumping,
discharging, releasing, or emitting, as any of such terms may further be defined
in any Environmental Law, into any medium including, without limitation, ground
water, surface water, soil, or air.
"DISPUTE" shall have the meaning set forth in EXHIBIT I.
"DISPUTE NOTICE" shall have the meaning set forth in EXHIBIT I.
"EARN-OUT ACCOUNTING ARBITRATOR" shall have the meaning set forth in
Section 2.5.
"EARN-OUT PAYMENTS" shall have the meaning set forth in Section 2.5.
"EARN-OUT PERIOD" shall mean for the first Earn-Out Period, the period
commencing on the first day of the month in which the Closing occurs and ending
on December 31, 2001; for the second Earn-Out Period, the period commencing on
January 1, 2002 and ending on December 31, 2002; for the third Earn-Out Period,
the period commencing on January 1, 2003 and ending on December 31, 2003; and
for the final Earn-Out Period, the period commencing on January 1,
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2004 and ending on the last day of the month immediately preceding the month in
which Closing occurred.
"ENVIRONMENTAL LAW" or "ENVIRONMENTAL LAWS" shall mean all federal,
state, regional, local, or other governmental or quasi-governmental statutes,
laws, Applicable Laws, rules, regulations, codes, ordinances, orders, plans,
injunctions, decrees, rulings, or judicial or administrative interpretations
thereof, as amended from time to time, which govern or relate to pollution,
protection of the environment, protection of endangered or threatened species of
flora or fauna, public health and safety, air emissions, water discharges,
hazardous or toxic substances, solid or hazardous waste, or occupational health
and safety, as any of these terms are or may be defined in such statutes, laws,
rules, regulations, codes, ordinances, orders, plans, injunctions, decrees,
rulings, or judicial or administrative interpretations thereof, including,
without limitation: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendment and Reauthorization
Act of 1986, 42 U.S.C. Section 9601, et seq. (collectively "CERCLA"); the Solid
Waste Disposal Act, as amended by the Resource Conversation and Recovery Act of
1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
Sections 6901, et seq. (collectively "RCRA"); the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Sections 1801, et seq.; the Clean
Water Act, as amended, 33 U.S.C. Section 1311, et seq.; the Clean Air Act, as
amended, 42 U.S.C. Section 7401-7642; the Toxic Substances Control Act, as
amended, 15 U.S.C. Sections 2601, et seq.; the Federal Insecticide, Fungicide,
and Rodenticide Act as amended, 7 U.S.C. Section 136-136y ("FIFRA"); the
Emergency Planning and Community Right-to-Know Act of 1986 as amended, 42 U.S.C.
Sections 11001, et seq. (Title III of ▇▇▇▇) ("EPCRA"); and the Occupational
Safety and Health Act of 1970, as amended, 29 U.S.C. Sections 651, et seq.
("OSHA").
"ERISA" shall mean Title IV of the Employee Retirement Income Security
Act of 1974, as amended.
"ESCROW" shall have the meaning set forth in Section 5.1 of the Real
Property Agreement.
"ESCROW AGENT" shall have the meaning set forth in Section 5.1 of the
Real Property Agreement.
"EVALUATION INFORMATION" shall have the meaning set forth in Section
6.5.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.3.
"EXCLUDED LIABILITIES" shall have the meaning set forth in Section 2.4.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 4.8.
"FINANCING" shall have the meaning set forth in the recitals to this
Agreement.
"GAAP" shall mean generally accepted accounting principles,
consistently applied with past practice.
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"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or pertaining
to government, including, without limitation, any government authority, agency,
department, board, commission, or instrumentality of the United States, any
State of the United States, or any political subdivision thereof, and any
tribunal or arbitrator(s) of competent jurisdiction, and any self-regulatory
organizations.
"▇▇▇▇▇▇▇ COMMUNITIES BUSINESS" shall mean the homebuilding and home
sales operations of ▇▇▇▇▇▇▇ Communities, operated by Exeter, HC Builders and HC
Sales.
"▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT" shall have the meaning set forth in
Section 6.1.
"▇▇▇▇▇▇▇ OFFICERS" shall mean ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇ collectively.
"▇▇▇▇▇▇▇ OFFICERS NON-COMPETE AGREEMENTS" shall have the meaning set
forth in Section 7.2.
"HANDLE" shall mean any manner of generating, accumulating, storing,
treating, disposing of, transporting, transferring, labeling, handling,
manufacturing, or using, as any of such terms may further be defined in any
Environmental Law, of any Hazardous Substances or Waste.
"HAZARDOUS SUBSTANCES" shall be construed broadly to include any toxic
or hazardous substance, material, or waste, and any other contaminant,
pollutant, or constituent thereof, whether liquid, solid, semi-solid, sludge,
and/or gaseous, including without limitation, chemicals, compounds, by-products,
pesticides, asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires or may require
investigation or remediation under any Environmental Laws or which are or become
regulated, listed, or controlled by, under, or pursuant to any Environmental
Laws, including, without limitation, RCRA, CERCLA, the Hazardous Materials
Transportation Act, the Toxic Substances Control Act, the Clean Air Act, the
Clean Water Act, FIFRA, EPCRA, and OSHA, or any similar state statute, or any
future amendments to, or regulations implementing such statutes, laws,
ordinances, codes, rules, regulations, orders, rulings, or decrees, or which has
been or shall be determined or interpreted at any time by any Governmental
Authority to be a hazardous or toxic substance regulated under any other
statute, law, regulation, order, code, rule, order, or decree.
"HOUSING UNIT" shall mean a residential dwelling constructed or to be
constructed on a lot, together with the associated lot.
"HSR ACT" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
"INDEMNIFICATION AGREEMENT" shall have the meaning set forth in the
recitals.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section 1.2
of the Real Property Agreement and the Asset Agreement.
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"LAND USE ENTITLEMENTS" shall have the meaning set forth in Section
4.27.
"LEASE ASSIGNMENTS" shall have the meaning set forth in Section 8.1.
"LICENSE" shall mean the license set forth in Section 8.1
"NOTICES" shall have the meaning set forth in Section 4.17.
"OPENING DATE" shall have the meaning set forth in Section 5.1 of the
Real Property Agreement.
"PARENT" shall mean Meritage Corporation.
"PERMITS" shall have the meaning set forth in Section 4.27.
"PERMITTED LIENS" shall have the meaning set forth in Section 4.12.
"PERMITTED MATERIALS" shall mean (a) reasonable amounts of gasoline,
and oil or other vehicle lubricants stored in the vehicles and equipment used on
the Real Property, (b) reasonable amounts of fertilizers, herbicides and/or
pesticides, and ordinary, everyday painting and cleaning supplies, used only in
the ordinary course of completing and maintaining the buildings, landscaping and
improvements on the Real Property, and (c) standard building components and
materials which are properly and lawfully installed in or incorporated into the
improvements and may lawfully remain therein in accordance with Applicable Laws,
taking into account the nature, purpose and intended use and occupancy thereof;
provided that in all cases all such components, materials, substances and other
items referred to in clauses (a) through (c), above, are stored, transported,
used, installed, incorporated and disposed of, in accordance with all Applicable
Laws.
"PERSON" shall mean any natural person, corporation, general or limited
partnership, limited liability company, trust, sole proprietorship, or other
entity, organization or association of any kind.
"PRE-TAX NET INCOME" shall mean the net income of the Buyers before
income taxes determined in accordance with GAAP and as reported on Buyers'
financial statements after giving effect to the Capital Charge and the Services
Fee under the Management Agreement.
"PROCEEDINGS" shall mean claims, suits, actions, arbitrations, dispute
resolution proceedings, judgments, penalties, fines or administrative or
judicial investigations or proceedings.
"PROPERTY LEASES" shall have the meaning set forth in Section 4.15.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.5.
"REAL PROPERTY" shall have the meaning set forth in Section 1.2 of the
Real Property Agreement.
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"REAL PROPERTY ASSETS" shall have the meaning set forth in Section 1.2
of the Real Property Agreement.
"REAL PROPERTY AGREEMENT" shall have the meaning set forth in the
recitals.
"REPORT" shall have the meaning set forth in Section 5.2 of the Real
Property Agreement.
"RESERVES" shall mean the reserves for both Assumed Construction Claims
and Unassumed Construction Claims.
"SEC" shall mean the Securities and Exchange Commission.
"SELLERS" shall mean HC Builders and HC Sales collectively.
"SUPPLEMENTAL TITLE REVIEW PERIOD" shall have the meaning set forth in
Section 5.2 of the Real Property Agreement.
"SURVEY" shall have the meaning set forth in Section 5.2 of the Real
Property Agreement.
"TAXES" shall mean any and all federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, payroll, employment, recapture,
disability, real property, personal property, sales, use, transfer,
registration, value-added, alternative or add-on minimum, estimated, any other
taxes, assessments, or government charges of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURNS" shall mean any return, declaration, report, claim to
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TITLE COMPANY" shall have the meaning set forth in Section 5.1 of the
real Property Agreement.
"TITLE POLICY" shall have the meaning set forth in Section 5.2 of the
real Property Agreement.
"TITLE REPORT SUPPLEMENT" shall have the meaning set forth in Section
5.2 of the Real Property Agreement.
"UNASSUMED CONSTRUCTION CLAIMS" shall have the meaning set forth in
Section 2.4.
"UNDERGROUND STORAGE TANK" shall have the meaning ascribed to such term
in Section 6901 et seq., as amended, of RCRA, or any applicable state or local
statute, law, ordinance, code, rule, regulation, order ruling, or decree
governing Underground Storage Tanks.
"WASTE" shall be construed broadly to include any abandoned or disposed
agricultural wastes, biomedical wastes, biological wastes, bulky wastes,
construction and demolition debris,
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garbage, household wastes, industrial solid wastes, liquid wastes, recyclable
materials, sludge, solid wastes, special wastes, used oils, white goods, and
yard trash as those terms are defined under any applicable Environmental Laws.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Closing. The closing of the purchase and sale of the Acquired
Assets (the "CLOSING") shall take place at 10:00 A.M. local time on the 1st day
of June, 2001 at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., One Arizona Center, ▇▇▇
▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or such other time and place prior to or on July
2, 2001 and after May 23, 2001 as the Buyers may establish by written notice to
Sellers no less than 3 business days prior to an anticipated Closing; provided
that if Parent and Buyers provide notice to Sellers of an anticipated Closing to
take place on after May 31, 2001, such Closing will not occur until on or after
June 15, 2001. The day on which the Closing actually occurs is herein sometimes
referred to as the "CLOSING DATE."
2.2 Assets to be Purchased. Upon the terms and subject to the
conditions set forth herein, and in reliance on the respective representations
and warranties of the parties contained herein and in the Asset Agreement and
the Real Property Agreement, at the Closing, Sellers agree to sell, convey,
grant, assign, and transfer to Buyers and Buyers agree to purchase and acquire
from Sellers all of the Real Property Assets, the Assets and any other assets,
properties, or rights of every nature, kind, description, tangible and
intangible, whether real, personal or mixed, whether accrued, contingent or
otherwise and whether now existing or hereinafter acquired (other than the
Excluded Assets) relating in any way to or used or held for use in connection
with the ▇▇▇▇▇▇▇ Communities Business (the "ACQUIRED ASSETS").
2.3 Assets Not Being Transferred. Sellers shall retain and Buyers shall
not purchase the following ("EXCLUDED ASSETS"):
A. All of Sellers' right, title and interest under or related
to this Agreement, the Real Property Agreement or the Asset Agreement,
including, without limitation, the consideration delivered pursuant to
this Agreement.
B. Minute books, stock transfer ledgers and membership ledgers
of the Sellers.
C. The right to all refunds, buyins or deposits relating to
utilities and infrastructure improvements, including, without
limitation, deposits relating to the Trailwood project.
D. The right to receive deposits or assets pledged by American
West or any of Sellers (and not reflected as assets on the Closing
Balance Sheet) relating to performance bonds.
E. The stock of HC Builders and membership interests in HC
Sales.
F. Any deferred tax assets.
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2.4 Liabilities.
A. Assumed Liabilities; Loan Payments. Upon the terms and
subject to the terms of this Agreement, at the Closing, Buyers shall
assume from and after the Closing Date, and perform and pay when due,
only the following liabilities and no others (the "ASSUMED
LIABILITIES"):
(1) The obligations under the Acquired Contracts
arising on or after the Closing Date;
(2) Any Construction Claim that arises out of or is
related to (i) any Housing Units in any subdivision acquired
hereunder as to which less than 50% of the Housing Units have
been closed as of the Closing; and (ii) those Housing Units
closed after the Closing with respect to subdivisions acquired
hereunder as to which 50% or more of the Housing Units have
been closed as of the Closing (the "ASSUMED CONSTRUCTION
CLAIMS"); in each case other than Construction Claims pending
or threatened in writing by a lawyer, the office of the
Attorney General of the state of Arizona or the Registrar of
Contractors on or prior to the Closing. Such subdivisions are
set forth on SCHEDULE 2.4(A)(2).
(3) All liabilities or obligations reflected on the
Closing Balance Sheet.
In addition, at Closing, Buyers shall pay off all (i)
loans due to Exeter outstanding as of the Closing (which
Sellers advise Parent and Buyers includes certain officer
loans that Exeter intends to pay off at Closing), and (ii)
"equity" loans and real estate loans due to American West
outstanding as of the Closing, each as set forth on SCHEDULE
2.4 and reflected in the March 31, 2001 balance sheet set
forth on Schedule 2.5A(3), together with all accrued interest
thereon; provided, that immediately prior to Closing, Sellers
shall apply all available cash to reduce the amounts of such
loans.
B. Excluded Liabilities. Notwithstanding any other provision
of this Agreement, and except for the Assumed Liabilities specified in
this Section 2.4, Buyers shall not assume, acquire, or be responsible
for any liabilities, obligations or expenses, whether fixed or
contingent, known or unknown, matured or unmatured, executory or
non-executory, to the extent such liability or obligations arise out of
occurrences on or prior to the Closing Date, even if they do not become
known until after such date, relating to or consisting of
(collectively, the "EXCLUDED LIABILITIES"):
(1) Liabilities and obligations not reflected on the
Closing Balance Sheet;
(2) All liabilities, obligations and expenses
(including Taxes) of Sellers under this Agreement or with
respect to or arising out of the consummation of the
transactions contemplated by this Agreement;
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(3) (a) Any liabilities, obligations or expenses for
Taxes (except for property taxes for property of Sellers which
has not closed prior to the Closing Date); (b) any liabilities
or obligations or expenses of the Sellers related to pending
or threatened litigation against Sellers, ▇▇▇▇▇▇▇ Communities
Business or the Acquired Assets; (c) any liabilities,
obligations, or expenses arising from or relating to or
consisting of any lien, encumbrance or claim affecting the
title to the Acquired Assets, other than Permitted Liens; (d)
any liabilities, obligations, or expenses under any contracts
arising or relating to the period prior to the Closing Date;
(e) any liabilities, obligations or expenses relating to any
environmental matter or condition; and (f) any liability or
obligation to or in respect of any employees or former
employees of Sellers, including without limitation (i) any
employment agreement, whether or not written, between Sellers
and any person, (ii) under any employee plan at any time
maintained, contributed to or required to be contributed to by
or with respect to Sellers or under which Sellers may incur
liability, or any contributions, benefits or liabilities
therefor, or any liability with respect to Sellers' withdrawal
or partial withdrawal from or termination of any employee
plan, or (iii) with respect to any claim of an unfair labor
practice, or any claim under any state unemployment
compensation or worker's compensation law or regulation or
under any federal or state employment discrimination law or
regulation;
(4) Any Construction Claim that is not an Assumed
Construction Claim ("UNASSUMED CONSTRUCTION CLAIMS").
(5) any obligations related to ▇▇▇▇ ▇▇▇▇▇▇▇'▇
long-term monetary commitment to Arizona State University or
its affiliates.
(6) any deferred tax liabilities.
Anything contained in this Agreement to the contrary
notwithstanding, Buyers shall not assume the Excluded Liabilities,
which Excluded Liabilities shall at and after the Closing remain the
exclusive responsibility of Sellers. Sellers shall discharge all
Excluded Liabilities in accordance with their terms (subject to
Sellers' right to contest obligations believed in good faith not to be
then due) and Applicable Law.
2.5 Purchase Price; Earn-Out; Adjustment; Deposit.
A. Purchase Price. At Closing, for the Acquired Assets, in
addition to assuming the Assumed Liabilities, Parent will cause Buyers
to pay in immediately available funds, the sums set forth in this
Section 2.5A; SUBJECT, HOWEVER, to adjustment as set forth herein (the
"PURCHASE PRICE"). Sellers have directed Parent and Buyers to pay the
Purchase Price for the Acquired Assets directly to American West and
▇▇▇▇ ▇▇▇▇▇▇▇, the sole members of the parent organization of Sellers,
as follows:
(1) At Closing, Buyers will pay to American West an
amount equal to (i) the product of American West's interest,
as provided to Parent, multiplied by the Adjusted Book Value
plus (ii) $11,000,000.
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(2) At Closing, Buyers will pay to ▇▇▇▇ ▇▇▇▇▇▇▇ an
amount equal to (i) the product of ▇▇▇▇ ▇▇▇▇▇▇▇'▇ interest, as
provided to Parent, multiplied by the Adjusted Book Value plus
(ii) $3,600,000.
American West and ▇▇▇▇ ▇▇▇▇▇▇▇ will furnish Parent
with a jointly executed written notice no later than 3
business days prior to Closing identifying their respective
interest under Section 2.5A.
(3) SCHEDULE 2.5A(3) sets forth a balance sheet of
the ▇▇▇▇▇▇▇ Communities Business as of March 31, 2001 prepared
in accordance with Adjusted GAAP, which reflects the Adjusted
Book Value as of such date.
(4) In addition to the foregoing, ▇▇▇▇ ▇▇▇▇▇▇▇ shall
receive from Parent deferred payments, to the extent earned,
of 20% of the Pre-Tax Net Income of Buyers as determined in
accordance with GAAP (the "EARN-OUT PAYMENTS"), subject to the
provisions set forth below:
(a) There shall be four Earn-Out Payments,
one for each of the four consecutive Earn-Out Periods
following the Closing Date;
(b) Buyers shall pay to ▇▇▇▇ ▇▇▇▇▇▇▇ ninety
percent (90%) of each estimated Earn-Out Payment for
the previous (i.e., just ended) Earn-Out Period in
cash on or before the 30th day following the end of
the last relevant Earn-Out Period. Thereafter, within
ninety (90) days after completion of each Earn-Out
Period, Buyer shall deliver to ▇▇▇▇ ▇▇▇▇▇▇▇ a
calculation notice of the Pre-Tax Net Income for such
Earn-Out Period and the remaining amount, if any, of
any Earn-Out Payment due, together with a check in
the amount of the balance due;
(c) During the Earn-Out Periods, unless
otherwise agreed to by ▇▇▇▇ ▇▇▇▇▇▇▇, Parent and
Buyers agree to (i) supply adequate capital to
provide the ▇▇▇▇▇▇▇ Communities Business the
opportunity to generate the Pre-Tax Net Income
necessary to achieve the Earn-Out Payments in
accordance with budgets approved by the ▇▇▇▇▇▇▇
Communities Business, (ii) maintain separate books
and records for the ▇▇▇▇▇▇▇ Communities Business;
(iii) maintain the ▇▇▇▇▇▇▇ Communities Business as
separate entities and not combine, merge or
consolidate them (except together or with Parent or
another subsidiary of Parent; provided that with
respect to any such combination, merger or
consolidation, Parent will continue to maintain
separate books and records for the ▇▇▇▇▇▇▇
Communities Business) or liquidate them or, except in
the ordinary course of business, sell or otherwise
dispose of their assets (except to the Parent or
another subsidiary of Parent; provided that with
respect to any such sale, transfer or disposition,
Parent will continue to maintain separate books and
records for the ▇▇▇▇▇▇▇ Communities Business);
provided that for purposes of this paragraph it shall
be understood that the term "▇▇▇▇▇▇▇ Communities
Business" shall mean the ▇▇▇▇▇▇▇ Communities
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Business as it is now conducted and as it is
reasonably anticipated to be conducted over the next
three years.
(d) If ▇▇▇▇ ▇▇▇▇▇▇▇ disputes the calculation
of the Earn-Out Payment and the Buyers and ▇▇▇▇
▇▇▇▇▇▇▇ are unable to resolve that dispute, the
parties will arbitrate the dispute in the manner
provided in EXHIBIT I, except that the arbitrator
(the "EARN-OUT ACCOUNTING ARBITRATOR") will be
entitled to rely conclusively upon any accounting
firm of national repute (other than the firms
currently serving as auditors for Buyers or ▇▇▇▇
▇▇▇▇▇▇▇) as may be mutually agreed upon by Buyers and
▇▇▇▇ ▇▇▇▇▇▇▇. The arbitration award shall be final
and binding on all parties, and judgment on the
arbitration award may be enforced in any court having
jurisdiction over the subject matter of the
controversy. If the Earn-Out Payment as determined by
the Earn-Out Accounting Arbitrator is within 5% of
the amount calculated by Buyers, ▇▇▇▇ ▇▇▇▇▇▇▇ will
pay all of the cost of the parties' accounting and
other professionals and will bear the fees and
expenses of the Earn-Out Accounting Arbitrator.
Conversely, if the Earn-Out Payment as determined by
the Earn-Out Accounting Arbitrator is less than the
amount calculated by Buyers by more than 5%, Buyers
will pay all of the cost of the parties' accounting
and other professionals and will bear the fees and
expenses of the Earn-Out Accounting Arbitrator;
(e) The Earn-Out Payments (to the extent of
(i) $1,350,000 for the first 12 months after Closing,
(ii) $675,000 for the period beginning at the end of
the 12th month after Closing and ending at the end of
the 24th month after Closing, and (iii) $0
thereafter; subject, however, to any amount that
Parent or Buyers are entitled to retain under the
provisions of the Indemnification Agreement, or that
is disputed and subject to the dispute-resolution
provisions of EXHIBIT I) may be setoff or reduced to
satisfy indemnification claims of the Parent or
Buyers that may arise under the Indemnification
Agreement, as provided therein; and
(f) The provisions of the Management
Agreement, attached as EXHIBIT A to this Agreement,
will apply to the Earn-Out Payments.
B. [Intentionally Omitted].
C. Adjustment. For the purpose of making an initial
determination of Adjusted Book Value, Sellers shall deliver to Parent,
at least five (5) days prior to the Closing, a Closing Balance Sheet,
prepared in accordance with Adjusted GAAP consistent with SCHEDULE
2.5A(3). For purposes of this Agreement and the transactions
contemplated hereby, the term "ADJUSTED GAAP" will mean GAAP except for
the following adjustments: (a) interest on loans due to Exeter (which
Sellers advise Parent and Buyers includes certain officer loans that
Exeter intends to pay off at Closing) shall be expensed rather than
capitalized and (b) Excluded Assets and Excluded Liabilities will be
excluded; PROVIDED, HOWEVER, that reserves relating to Unassumed
Construction Claims will be included to reflect that Buyers will
perform warranty repairs as provided
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in Section 2.5E. Within 45 days after the Closing, Parent will conduct
a review of the Closing Balance Sheet (the "BUYER REVIEW") to verify
the Adjusted Book Value, and, accordingly, the Purchase Price. In
connection with the Buyer Review, Parent will promptly advise Sellers
of any required adjustments to the Closing Balance Sheet, together with
the Adjusted Balance Sheet reflecting the financial position of the
▇▇▇▇▇▇▇ Communities Business as of the Closing Date. The Adjusted
Balance Sheet will become final and binding on the parties unless
within 15 business days following delivery thereof to Sellers, Sellers
notify Parent in writing that Sellers object thereto. If Sellers object
to the Adjusted Balance Sheet, and after good faith consultation with
respect to the objection, the parties are unable to reach an agreement
within 15 days, then the parties shall resolve the dispute in the
manner provided in EXHIBIT I; PROVIDED, HOWEVER, that the arbitrator
shall be an accounting firm of national repute (other than the firms
currently serving as auditor for Parent or Sellers) as may be mutually
agreed upon by Parent and Sellers (the "ACCOUNTING ARBITRATOR"). The
determination of the Accounting Arbitrator shall be final and binding
on all parties, and judgment on the arbitration award may be enforced
in any court having jurisdiction over the subject matter of the
controversy. Buyers and Sellers shall each pay the cost of their own
accounting and other professionals and shall bear equally the fees and
expenses of the Accounting Arbitrator. In the event that the Adjusted
Book Value, as determined pursuant to the Buyer Review, is different
from the Adjusted Book Value reflected on the Closing Balance Sheet,
the Purchase Price will be adjusted on a dollar for dollar basis and
payments made promptly by and to the appropriate parties in immediately
available funds.
D. Deposit. Within 2 business days of the date hereof, Buyers
will deposit into an escrow account established with First American
Title Insurance Co. the sum of $500,000, which shall be applied to the
Purchase Price in the event the transaction closes. If the transaction
does not close on June 1, 2001, the amount deposited into the escrow
account will be immediately disbursed by Escrow Agent to Sellers (55%
to American West and 45% to ▇▇▇▇ ▇▇▇▇▇▇▇), unless the failure to close
results from (1) any failure of the conditions set forth in Subsections
▇-▇, Q and R of Section 7.2 herein, (2) any material breach by any
Seller of any covenant, agreement, representation or warranty contained
herein, or (3) Buyers' termination of this Agreement under Section 5.2
of the Real Property Agreement. In such event, except as set forth in
Section 10.3, the Deposit shall be the sole rights and remedies of
Sellers, or any affiliate or owner, direct or indirect, thereof. In all
other events, including specifically Sellers failure to satisfy the
conditions in Subsections M, O, P, S or T of Section 7.2, the deposit
will be returned to Parent.
E. Warranty and Reserve Administration. Parent and Buyers have
undertaken the responsibility to administer all construction claims and
acquired all of the Reserves included on the Closing Balance Sheet.
Parent and Buyers will administer and discharge all Assumed and
Unassumed Construction Claims in accordance with the procedures now
used by Sellers. Buyers will administer and discharge all Assumed and
Unassumed Construction Claims under the supervision and control of ▇▇▇▇
▇▇▇▇▇▇▇ (provided he is then employed by Parent or Buyers). However,
Parent and Buyers are only obligated to administer and discharge
Unassumed Construction Claims (but not to defend litigation in respect
thereof) to the extent that the costs of those claims are less
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than the Reserves attributable to those claims. In the event that the
costs attributable to any Unassumed Construction Claims exceed the
Reserves attributable to those claims, Sellers will reimburse Parent or
Buyers for the difference as an Excluded Liability under the
Indemnification Agreement. On the second anniversary of the Closing,
Parent or Buyers will deliver to Sellers any amount of Reserves that
remain except with respect to any Construction Claims that have been
asserted and remain unresolved as of that date.
2.6 Allocation of Purchase Price. The Purchase Price and the Assumed
Liabilities shall be allocated among the Acquired Assets in accordance with
Section 197 and 1060 of the Code and the regulations thereunder. Such allocation
shall be reported consistently by Buyers and Sellers on Internal Revenue Service
Form 8594, Asset Acquisition Statement, which will be filed with Buyers' and
Sellers' Federal income tax returns for the tax year that includes the Closing
Date; PROVIDED that the parties acknowledge that Buyers are paying for HC
Builders' assets the Adjusted Book Value attributable to HC Builders, with the
balance of the purchase price being attributable to the assets of HC Sales. No
party makes any representation or warranty as to the tax treatment of this
transaction to any other party. SCHEDULE 2.6 sets forth an estimated allocation
as of March 31, 2001. A final allocation will be prepared at or as soon as
practicable after the Closing, consistent with SCHEDULE 2.6, and after giving
effect to the actual Purchase Price and Adjusted Balance Sheet
2.7 Risk of Loss. All risk of loss with respect to the Acquired Assets
on or before the Closing Date shall remain the sole risk of Sellers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYERS
As of the date hereof and as of the Closing Date, Parent and Buyers
hereby represent and warrant to Sellers, the following:
3.1 Organization and Qualification. Each of Parent and Buyers is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of incorporation and has the requisite corporate power
and authority to own and operate its properties and to carry on its business as
now conducted in every jurisdiction where the failure to do so would have a
material adverse effect on its business, properties, or ability to conduct the
business currently conducted by it.
3.2 Authority Relative to this Agreement. Each has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Parent
and Buyers and the consummation by Parent and Buyers of the transactions
contemplated hereby have been duly authorized by each, and no other corporate
proceedings on the part of Parent and Buyers are necessary to authorize this
Agreement and such transactions. This Agreement has been duly executed and
delivered by each and constitutes a valid and binding obligation of each,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization, or other similar laws
relating to the enforcement of creditors' rights generally and by general
principles of equity.
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3.3 Legal Capacity and Authority.
A. Each possesses the legal capacity to execute and deliver each
document to which it is a party, to perform its obligations thereunder, and to
consummate the transactions contemplated thereby.
B. Except as provided in SCHEDULE 3.3, neither Parent nor Buyers is
subject to or obligated under, any provision or any agreement, arrangement or
understanding or any law, regulation, order, judgment or decree, which would be
breached or violated or in respect of which a right to termination or
acceleration would arise, or pursuant to which any encumbrance on any of their
assets would be created by the execution, delivery, and performance of this
Agreement and the consummation by either of the transactions contemplated
hereby; and
C. Except as provided in SCHEDULE 3.3, no authorization, consent, or
approval to, or filing with, any public body, court, or authority is necessary
on the part of Parent or Buyers for the consummation by Parent or Buyers of the
transactions contemplated by this Agreement. With respect to each document to
which Parent and Buyers are parties, at the Closing, each will duly execute and
deliver such documents which will be a valid, legal and binding obligation of
Parent and Buyers enforceable against each in accordance with its terms, as the
case may be.
3.4 No Conflicts. Neither Parent nor Buyers are subject to, or
obligated under, any provision of:
A. its respective organizational documents or bylaws;
B. any material agreement, arrangement, or understanding (other than
its lending arrangements),
C. any material license, franchise, or permit, or
D. any law, regulation, order, judgment, or decree, which would be
breached or violated, or in respect of which a right of termination or
acceleration would arise, or pursuant to which any encumbrance on any of its or
any of its subsidiaries' material assets would be created, by its execution,
delivery, and performance of this Agreement and the consummation by it of the
transactions contemplated hereby.
3.5 WARN Act. Each of Parent and Buyers is aware that Sellers presently
employ approximately 140 people and therefore are subject to the Worker
Adjustment and Retraining Notification Act ("WARN ACT"). Neither Parent or
Buyers shall initiate layoffs, closures or cutbacks that affect 50 or more
employees after Closing without fully complying with the notice and other
procedures of the WARN Act. Nothing herein shall be deemed to limit or reduce
the provisions of Section 2.4B(3)(f) above.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SELLERS
For Purposes of this Article IV, the term "Knowledge of Sellers" means
that no facts or information have come to the attention of ▇▇▇▇ ▇▇▇▇▇▇▇ or the
▇▇▇▇▇▇▇ Officers after reasonable inquiry that would make them aware of any
inaccuracy of the representations or warranties of Sellers set forth in this
Agreement. As of the date hereof and as of the Closing Date, Sellers hereby
represent, warrant, and agree as follows, to and for the benefit of Parent and
Buyers:
4.1 Organization and Qualification. Sellers are each duly organized,
validly existing, and in good standing under the laws of Arizona and have the
requisite power and authority to own and operate their properties and to carry
on their business as now conducted.
4.2 Authority Relative to this Agreement. Sellers have the requisite
power and authority to enter into this Agreement and to carry out their
obligations hereunder. The execution and delivery of this Agreement by Sellers
and the consummation by Sellers of the transactions contemplated hereby have
been duly authorized, and no other corporate proceedings on the part of Sellers
is necessary to authorize this Agreement and such transactions. This Agreement
has been duly executed and delivered by Sellers and constitutes a valid and
binding obligation of Sellers enforceable in accordance with its terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
4.3 Legal Capacity and Authority of Seller, Partners, and Shareholders.
Sellers possess the legal capacity to execute and deliver each document to which
they are a party, to perform their obligations thereunder, and to consummate the
transactions contemplated thereby. With respect to each document to which
Sellers are a party, at the Closing, Sellers will duly execute and deliver such
documents, which will be a valid, legal and binding obligation of Sellers
enforceable against Sellers in accordance with its terms, as the case may be.
4.4 No Conflicts. Except as set forth in SCHEDULE 4.4, Sellers are not
subject to nor obligated under (i) any provision of its articles of
incorporation or bylaws; (ii) any agreement, arrangement, or understanding;
(iii) any license, franchise, or permit; or (iv) any law, regulation, order,
judgment, or decree, which would be breached or violated, or in respect of which
a right of termination or acceleration would arise, or pursuant to which any
encumbrance on any of its assets would be created, by its execution, delivery,
and performance of this Agreement and the consummation by it of the transactions
contemplated hereby.
4.5 No Consents. Except as set forth in SCHEDULE 4.5, no authorization,
consent, or approval of, or filing with, any public body, court, or authority or
pursuant to any Acquired Contract is necessary on the part of Sellers for the
consummation by Sellers of the transactions contemplated by this Agreement.
4.6 [Intentionally Omitted].
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4.7 Ownership Interests. Except as disclosed in SCHEDULE 4.7, Sellers
do not own any stock, partnership interest, joint venture interest, or any other
security issued by or equity interest in any other corporation, organization,
association, or entity whose business is real estate related.
4.8 Financial Statements. Sellers have provided: (a) the audited
financial statements of the ▇▇▇▇▇▇▇ Communities Business for and as of the
fiscal year ended December 31, 2000; and (b) the unaudited financial statements
of the ▇▇▇▇▇▇▇ Communities Business for and as of the period ended March 31,
2001 (the "FINANCIAL STATEMENTS"). The Financial Statements have been prepared
in accordance with GAAP and Regulation S-X throughout the periods involved and
fairly present the financial position of the ▇▇▇▇▇▇▇ Communities Business as of
the dates thereof and the results of its operations and cash flows for the
periods then ended. The Financial Statements are attached hereto as SCHEDULE
4.8.
4.9 Absence of Undisclosed Liabilities.
A. To Seller's Knowledge, there are no obligations or
liabilities relating to or affecting the ▇▇▇▇▇▇▇ Communities Business
or the Acquired Assets (whether accrued, absolute, contingent,
liquidated, unliquidated, or otherwise, whether due or to become due
and regardless of when asserted), except (i) liabilities reflected in
the Financial Statements or disclosed in the notes thereto, (ii)
liabilities which have arisen in the ordinary course of business after
the date of the Financial Statements, (iii) liabilities specifically
disclosed in SCHEDULE 4.9, and (iv) Excluded Liabilities.
B. As of the Closing, in accordance with Section 2.5C, Sellers
will have delivered the Closing Balance Sheet prepared in accordance
with Adjusted GAAP. To Seller's Knowledge, there will be no obligations
or liabilities relating to or affecting the ▇▇▇▇▇▇▇ Communities
Business or the Acquired Assets (whether accrued, absolute, contingent,
liquidated, unliquidated, or otherwise, whether due or to become due
and regardless of when asserted), except (i) liabilities reflected in
the Closing Balance Sheet, (ii) liabilities which have arisen in the
ordinary course of business after the date of the Closing Balance
Sheet, (iii) liabilities specifically disclosed in SCHEDULE 4.9, and
(iv) Excluded Liabilities.
4.10 No Material Adverse Changes. Except as set forth in SCHEDULE 4.10,
since the date of the Financial Statements, there has not been any material
adverse change in the assets, financial condition, or operating results,
customer, employee, or supplier relations, business condition or prospects, or
financing arrangements related to ▇▇▇▇▇▇▇ Communities Business or the Acquired
Assets.
4.11 Absence of Certain Developments. Except as set forth in SCHEDULE
4.11 or except as contemplated in and consistent with the terms of this
Agreement, the Asset Agreement or the Real Property Agreement, since the date of
the Financial Statements, Sellers have not, in respect of the ▇▇▇▇▇▇▇
Communities Business:
A. Changed its accounting methods or practices (including any
change in depreciation or amortization policies or rates) or revalued
any of its assets;
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B. Declared or paid any dividend or distributions;
C. Borrowed any amount under existing lines of credit, or
otherwise incurred or become subject to any indebtedness, except in the
ordinary course of business and in a manner and in amounts that are in
keeping with historical practice;
D. Discharged or satisfied any lien (other than property taxes
and assessments, business and personal property taxes, mechanic's liens
and similar items discharged in the ordinary course of business
consistent with past practices) or encumbrance;
E. Except as is reasonably necessary for the ordinary
operation of the ▇▇▇▇▇▇▇ Communities Business and in a manner and in
amounts that are in keeping with historical practice, mortgaged,
pledged, or subjected to any lien, charge, or other encumbrance, any of
its assets with a fair market value in excess of $25,000, except liens
for current property taxes not yet due and payable;
F. Sold, assigned, or transferred (including, without
limitation, transfers to any employees, shareholders, or affiliates)
any assets or canceled any debts or claims, except in the ordinary
course of business and consistent with past practices;
G. Sold, assigned, or transferred any patents, trademarks,
trade names, copyrights, trade secrets, or other intangible assets,
except in the ordinary course of business and consistent with past
practices, or disclosed any proprietary or confidential information to
any person other than Parent or Buyers;
H. Suffered any extraordinary loss or waived any material
right or claim, including any write-off or compromise of any contract
or other account receivable;
I. Taken any other action or entered into any other
transaction other than in the ordinary course of business and in
accordance with past custom and practice, or entered into any
transaction with an employee, shareholder, member or officer of Sellers
or any other entity associated with the ▇▇▇▇▇▇▇ Communities Business;
J. Suffered any theft, damage, destruction, or loss of or to
any property or properties owned or used by it, whether or not covered
by insurance;
K. Increased the annualized level of compensation of or
granted any extraordinary bonuses, benefits, or other forms of direct
or indirect compensation to any employee, officer, director, or
consultant that aggregate in excess of $25,000, or increased,
terminated, or amended or otherwise modified any plans for the benefit
of employees, except in the ordinary course of business and consistent
with historical adjustments to such compensation and benefits;
L. Except as is reasonably necessary for the ordinary
operation of the ▇▇▇▇▇▇▇ Communities Business and in a manner and in
amounts that are in keeping with
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historical practice, made any capital expenditures or commitments for
property, plant and equipment that aggregate in excess of $25,000;
M. Engaged or agreed to engage in any extraordinary
transactions or distributions, or except as is reasonably necessary for
the ordinary operation of the ▇▇▇▇▇▇▇ Communities Business and in
keeping with historical practice, entered into any contract, written or
oral, that involves consideration or performance by it of a value
exceeding $25,000 or a term exceeding one year;
N. Made any loans or advances to, or guarantees for the
benefit of, any persons; or
O. Made charitable contributions or pledges which in the
aggregate exceed $10,000.
4.12 Permitted Liens; Good Title to and Condition of Acquired Assets.
Sellers' title to the Acquired Assets is free and clear of all liens and
encumbrances other than those listed on SCHEDULE 4.12 (collectively, the
"PERMITTED LIENS"). All of the Acquired Assets are in good condition and repair,
ordinary wear and tear excepted, and are usable in the ordinary course of
business. The Acquired Assets represent all of the assets of the ▇▇▇▇▇▇▇
Communities Business and all of the assets necessary or required by Buyers to
continue to operate the ▇▇▇▇▇▇▇ Communities Business as conducted prior to the
Closing including any assets of Exeter. Sellers own, or lease under valid
leases, all property, machinery, equipment, and other tangible and intangible
assets necessary for the conduct of the ▇▇▇▇▇▇▇ Communities Business. Except for
the names "▇▇▇▇▇▇▇ Homes" and "▇▇▇▇▇▇▇ Communities," which are the subject of an
exclusive license as provided in Section 1.2E of the Asset Agreement, and as
provided in the License described in Section 8.1, none of the assets
attributable to, or necessary to the operation of, the ▇▇▇▇▇▇▇ Communities
Business, as conducted immediately prior to the Closing, are held or owned by an
entity other than Sellers. There are no members, shareholders or affiliates of
Sellers that directly own any assets, licenses, permits or other authorizations
relating to the Acquired Assets or the ▇▇▇▇▇▇▇ Communities Business.
4.13 Legal Descriptions of Real Property. SCHEDULE 4.13 sets forth a
Report for each parcel of Real Property as of the date thereof, excepting any
sales of homes or lots which close on or after the date thereof in the ordinary
course of the ▇▇▇▇▇▇▇ Communities Business.
4.14 Real Property. Except as set forth on SCHEDULE 4.14:
A. With respect to any agreements, arrangements, contracts,
leases, licenses, covenants, conditions, deeds, deeds of trust,
rights-of-way, easements, mortgages, restrictions, surveys, title
insurance policies, and other documents granting to Sellers title to or
an interest in or otherwise affecting the Real Property, no breach or
event of default exists, and no condition or event has occurred that
with the giving of notice, the lapse of time, or both would constitute
a breach or event of default, by Sellers or any other person.
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B. The Real Property has all necessary access to and from
public highways, streets, and roads and no pending or threatened
proceeding or other fact or condition exists that could limit or result
in the termination of such access.
C. Electric, gas (if applicable), sewage, telephone, and water
utility facilities are available for connection and service to homes
constructed or being constructed on the Real Property, which facilities
are, to the knowledge of Sellers, in compliance in all respects, with
all Applicable Laws, subject to such installation and connection
charges with respect thereto which in the ordinary course of business
are payable upon issuance of certificates of occupancy which have not
yet been procured.
D. No condemnation, eminent domain, or similar proceeding
exists, is pending or, to Seller's Knowledge, is threatened with
respect to, or that could affect, any of the Real Property.
E. Any buildings and improvements on the Real Property to the
extent installed or constructed by Sellers are in substantial
compliance with all Applicable Laws and do not violate, in any respect,
(i) any set-back, (ii) zoning law, ordinance, regulation, or statute,
or other governmental restriction in the nature thereof, or (iii) any
restrictive covenant affecting any such Real Property.
F. There are no parties in possession of any portion of the
Real Property as lessees, tenants at sufferance, or trespassers.
G. Except as incurred in the ordinary course of business after
the date of the Financial Statements, there are no unpaid charges,
debts, liabilities, claims, or obligations arising from the
construction, occupancy, ownership, use, or operation of the Real
Property. No Real Property is subject to any condition or obligation to
any governmental entity or other person requiring the owner or any
transferee thereof to donate land, money or other property or to make
off-site public improvements.
H. Except as set forth on SCHEDULE 4.8 or 4.13, no
developer-related fees, charges or assessments for public improvements
or otherwise made against the Real Property or any lots included
therein are due and unpaid, including without limitation those for
construction of sewer lines, water lines, storm drainage systems,
electric lines, natural gas lines, streets (including perimeter
streets), roads and curbs other than as may be required in the ordinary
course of completing such project from its current (incomplete) status
or as may be contemplated in the conditions of approval and contained
in the Land Use Entitlements for such projects.
I. There is no moratorium applicable to any of the Real
Property on (1) the issuance of building permits for the construction
of houses, or certificates of occupancy therefor, or (2) the purchase
of sewer or water taps.
J. To the Knowledge of Sellers, each of the lots included in
the Real Property is stable and otherwise suitable for the construction
of a residential structure
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suitable to the soil conditions thereon, as set forth in the soil
report related to each such subdivision.
K. Except as set forth in the Reports, Surveys or plats, the
Real Property does not contain "wetlands," as defined, or subject to
regulation by, the Army Corps of Engineers or the Environmental
Protection Agency, or, to the knowledge of Seller, a level of radon
above action levels of the U.S. Environmental Protection Agency and are
not located within a "critical", "preservation", "conservation,"
"habitat conservation area," or similar type of area subject to
regulation under any Environmental Laws. No portion of the Real
Property is situated within a "noise cone" such that the Federal
Housing Administration will not approve mortgages due to the noise
level classification of such real property.
L. To the Knowledge of Sellers, the Real Property has not been
used as a gravesite, landfill, or waste disposal area.
M. No Proceeding is pending or, to the Knowledge of Sellers,
threatened which involves any of the Real Property, or against Sellers
with respect to any of the Real Property; all of the developed Real
Property and the lots included therein are in substantial compliance
with all Applicable laws, including without limitation, zoning and
subdivision laws and ordinances and the Real Property is zoned to
permit single family home construction; none of the development-site
preparation and construction work performed on the Real Property has
concentrated or diverted surface water or percolating water improperly
onto or from the Real Property or caused or resulted in a release of
any Hazardous Substance in violation of any Environmental Law.
▇. ▇▇▇▇▇▇▇ have not granted to any person any contract or
other right to the use of any portion of the Real Property or to the
furnishing or use of any facility or amenity on or relating to the Real
Property.
O. Neither Seller is a "foreign person" within the meaning of
Sections 1445 and 7701 of the Code.
P. Subject to Reserves, to the extent installed or constructed
by Sellers or their agents or affiliates, all of the Housing Units,
improvements and buildings on the Real Property were constructed in a
good and workmanlike manner, substantially comply with Applicable Laws,
are structurally sound, are in good and proper working condition and
repair, normal wear and tear, normal maintenance and normal warranty
and customer services matters excepted, and are useful for their
intended purposes.
Q. To the Knowledge of Sellers, any improvements and buildings
included within the Real Property are located within the boundary lines
of the Real Property and do not encroach upon the land of any adjacent
owner; no improvements of any third Person encroach upon the Real
Property; and no Person has any unrecorded right, title or interest in
the real property constituting the Real Property, whether by right of
adverse possession, prescriptive easement or otherwise.
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R. The recorded easements, rights-of-way, covenants, and other
title exceptions and survey matters do not adversely affect the current
beneficial use of the Real Property. The Real Property is being
developed and used in compliance with all covenants, easements, and
restrictions affecting the Real Property, and all obligations of
Sellers on the Real Property with regard to such covenants, easements,
and restrictions have been and are being performed in a proper and
timely manner.
S. Except as set forth on SCHEDULE 4.17, to the Knowledge of
Sellers:
(1) All property adjacent to the Real Property is
free from Hazardous Substances (other than Permitted
Materials), and is not in violation of any Environmental Law.
(2) No environmental lien in favor of any
governmental entity has attached to any of the Real Property.
T. To the Knowledge of Sellers, there are no historical or
archeological materials or artifacts of any kind or any Indian ruins of
any kind located on the Real Property.
U. To the Knowledge of Sellers, no part of the Real Property
is "critical habitat" as defined in the Federal Endangered Species Act,
16 U.S.C.Sections 1531 et seq., as amended, or in regulations
promulgated thereunder, nor are any "endangered species" or "threatened
species" located on the Real Property, as defined therein, or under any
similar state or local Environmental Law.
V. The Real Property is not within a flood plain, flood way or
flood control district as reflected in the currently adopted 100 year
flood plain of the Federal Emergency Management Agency.
▇. ▇▇▇▇▇▇▇ do not have any liability for any Taxes, or any
interest or penalty in respect thereof, of any nature that may be
assessed against Parent or Buyers or that are or may become a lien
against the Real Property, other than the lien for current real
property taxes, special taxes and assessments paid with taxes not yet
delinquent.
X. All work performed on or about the Real Property or to any
improvements located thereon within six (6) months prior to the date of
this Agreement has been paid for or will be reflected in the Closing
Balance Sheet.
4.15 Acquired Contracts.
A. SCHEDULE 1.2 of the Real Property Agreement lists as of the
date hereof all of the Acquired Contracts. The provisions of this
Section 4.15 shall apply to all Acquired Contracts entered into
following the date of this Agreement.
B. Each of the Acquired Contracts is valid, binding, and in
full force and effect on Sellers and, to the Knowledge of Sellers, is
valid, binding, and in full force and effect on third parties to the
Acquired Contracts. Except as set forth on the relevant
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Schedules to this Agreement, if applicable, no Acquired Contract has
been amended or supplemented in any way and Sellers have not and no
party thereto has, assigned any of its rights or delegated any of its
duties thereunder. True and complete copies of the Acquired Contracts
have been delivered to Parent.
C. Except as set forth on SCHEDULE 4.15, no breach or default
exists under any Acquired Contract and, to the Knowledge of Sellers, no
event has occurred with respect thereto that with the lapse of time or
action or inaction by Sellers or any other party thereto, would result
in a breach thereof or a default thereunder.
D. Except as specifically disclosed in SCHEDULE 4.15, (1)
since the date of the Financial Statements, no supplier or materialman
has indicated that it will stop or decrease the rate of business done
with either Seller, except for changes in the ordinary course of the
▇▇▇▇▇▇▇ Communities Business; (2) Sellers have performed in all
respects the obligations which were or are now required to be performed
by each in connection with the Acquired Contracts and Sellers have not
been advised of or received any claim of default under any Acquired
Contract; (3) Sellers have no present expectation or intention of not
fully performing any obligation pursuant to any Acquired Contract; and
(4) there has been no material breach and, to the Knowledge of Sellers,
there is no anticipated material breach by any other party to any
Acquired Contract.
E. Upon the assignment of each Acquired Contract to Buyers
pursuant hereto, and subject to any consent requirements contained
therein, all rights of Sellers with respect to each Acquired Contract
will inure to Buyers and each Acquired Contract will be enforceable by
Buyers in the same manner as such Acquired Contract is enforceable by
Sellers.
F. The assignment to Buyers of all of Sellers' right, title,
and interest in, to and under each Acquired Contract pursuant hereto
will be free and clear of any lien except for Permitted Liens.
G. Except as set forth in the Acquired Contracts, as of the
Closing Date, Sellers will not owe any amount (whether absolute,
contingent, or otherwise) with respect to any Acquired Contract, other
than amounts incurred in the ordinary course of business consistent
with past practices and this Agreement, which amounts will be properly
recorded in the Closing Balance Sheet.
H. Except as disclosed therein, no Acquired Contract (1)
except with respect to Acquired Contracts relating to Real Property
requires Sellers to make purchases or pay for services in excess of the
requirements of its business, or (2) guarantees any obligation of
another person or provides any type of indemnification whatsoever.
I. Sellers have paid all rental and other payments due under
each personal property lease and real property lease (collectively, the
"PROPERTY LEASES") under which any Seller is the lessee in accordance
with its terms. With respect to each such Property Lease, Sellers have
been in peaceable possession of the buildings, equipment, machinery,
Real Property, vehicles, or other tangible property covered thereby
since the commencement of the original term of such Property Lease. No
indulgence,
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postponement, or waiver of Sellers' obligations under any such Property
Lease has been granted by the lessor. Subject to the terms of the
Property Leases, Sellers possess full right and power to occupy or
possess, as the case may be, all of the buildings, equipment,
machinery, real property, vehicles, and other tangible property covered
by such Property Leases.
J. With respect to any written or oral agreement, arrangement,
commitment, contract, or lease that either Seller entered into, after
the date hereof, such agreement, arrangement, commitment, contract, or
lease will satisfy all the representations and warranties set forth in
this Section 4.15.
4.16 Warranties. Except as set forth on SCHEDULE 4.16, Sellers have not
given or made any other express warranties to third parties with respect to any
property or products sold or services performed by Sellers and there are no
facts or the occurrence of any event forming the basis of any present claim
against Sellers for liabilities due to any express or implied warranty. SCHEDULE
4.16 includes forms of Sellers' residential sales contracts containing
applicable guaranty, warranty, and indemnity provisions.
4.17 Environmental Matters.
A. To the Knowledge of Sellers, Sellers have at all times
been in compliance with all Environmental Laws governing their
business, operations, properties, and assets, including, without
limitation: (1) all requirements relating to the Discharge and Handling
of Hazardous Substances; (2) all requirements relating to notice,
record keeping, and reporting; (3) all requirements relating to
obtaining and maintaining Permits for the ownership of its properties
and assets and the operation of its business, including Permits
relating to the Handling and Discharge of Hazardous Substances; or (4)
all applicable writs, orders, judgments, injunctions, governmental
communications, decrees, informational requests, or demands issued
pursuant to, or arising under, any Environmental Laws.
B. Except as set forth on SCHEDULE 4.17, there are no and, to
the Knowledge of Sellers, there is no basis for any orders, warning
letters, notices of violation (collectively "NOTICES") or Proceedings
pending or threatened against or involving Sellers, the ▇▇▇▇▇▇▇
Communities Business or the Acquired Assets issued by any Governmental
Authority or third party with respect to any Environmental Laws or
Permits issued to Sellers thereunder in connection with, related to, or
arising out of the ownership by Sellers of their properties or assets
or the operation of their business which have not been resolved to the
satisfaction of the issuing Governmental Authority or third party in a
manner that would not impose any obligation, burden, or continuing
liability on Buyer in the event that the transactions contemplated by
this Agreement are consummated, or which could have a material adverse
effect on the ▇▇▇▇▇▇▇ Communities Business, the Acquired Assets or
Sellers' financial condition, or results of operations including,
without limitation: (i) Notices or Proceedings related to Sellers being
potentially responsible parties for a federal or state environmental
cleanup site or for corrective action under any applicable
Environmental Laws; (ii) Notices or Proceedings in connection with any
federal or state environmental cleanup site, or in connection with any
of the real property or premises where Sellers have transported,
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transferred, or disposed of Hazardous Substances; (iii) Notices or
Proceedings relating to Sellers being responsible to undertake any
response or remedial actions or clean-up actions of any kind; or (iv)
Notices or Proceedings related to Sellers being liable under any
Environmental Laws for personal injury, property damage, natural
resource damage, or clean up obligations.
C. Except for the Permitted Materials and except as set forth
on SCHEDULE 4.17, Sellers have not Handled or Discharged, nor allowed
or arranged for any third party to Handle or Discharge, Hazardous
Substances to, at, or upon: (1) any location other than a site lawfully
permitted to receive such Hazardous Substances; (2) any of the Real
Property; or (3) any site which: (a) pursuant to CERCLA or any similar
state law has been placed on the National Priorities List or its state
equivalent; or (b) with respect to which the Environmental Protection
Agency or the relevant state agency or other governmental authority has
notified Sellers that such governmental authority has proposed or is
proposing to place on the National Priorities List or its state
equivalent. There has not occurred, nor is there presently occurring, a
Discharge, or threatened Discharge, of any Hazardous Substance on,
into, or beneath the surface of, or adjacent to, any of the Real
Property in an amount or otherwise requiring a Notice or report to be
made to a Governmental Authority or in violation of any applicable
Environmental Laws.
D. SCHEDULE 4.17 identifies the operations and activities, and
locations thereof, if any, which have been conducted and are being
conducted by Sellers on any of the Real Property which have involved
the Handling or Discharge of Hazardous Substances, other than Permitted
Materials.
E. Except as set forth on SCHEDULE 4.17, Sellers do not use,
and have never used, any Aboveground Storage Tanks or Underground
Storage Tanks, and there are not now nor, to the Knowledge of Sellers,
have there ever been any Underground Storage Tanks beneath any of the
Real Property that are required to be registered and/or upgraded under
applicable Environmental Laws.
F. SCHEDULE 4.17 identifies (i) all environmental audits,
assessments, or occupational health studies undertaken by Sellers or
their agents or, to the Knowledge of Sellers, undertaken by any
governmental authority or any third party, relating to or affecting
Sellers or any of the Real Property; (ii) the results of any ground,
water, soil, air, or asbestos monitoring undertaken by Sellers or their
agents or, and to the extent available or made known to Sellers,
undertaken by any governmental authority or any third party, relating
to or affecting Sellers or any of the Real Property which indicate the
presence of Hazardous Substances at levels requiring a notice or report
to be made to a governmental authority or in violation of any
applicable Environmental Laws; (iii) all material written
communications between Sellers and any governmental authority arising
under or related to Environmental Laws; and (iv) all outstanding
citations issued under OSHA, or similar state or local statutes, laws,
ordinances, codes, rules, regulations, orders, rulings, or decrees,
relating to or affecting either Seller or any of the Real Property.
4.18 Tax Matters
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A. Except for current filings which are the subject of
extensions under applicable procedures and which are identified in
SCHEDULE 4.18, Sellers have filed all Tax Returns that Sellers were
required to file prior to the date hereof. All such Tax Returns were
correct and complete in all respects. Except as set forth in SCHEDULE
4.18, all Taxes owed by Sellers (whether or not shown on any Tax
Return) with respect to Tax Returns the due date of which preceded the
date hereof have been paid. Except as set forth in SCHEDULE 4.18, all
other Taxes due and payable by Sellers with respect to periods ending
on or as of the date of the Closing (whether or not a Tax Return is due
on such date) have been paid or are accrued on the applicable Financial
Statements or will be accrued on the books and records of Sellers as of
the Closing and made available to Parent and Buyers.
B. Except as set forth on SCHEDULE 4.18, with respect to each
taxable period for Sellers ending prior to the date hereof or prior to
the date of the Closing, (1) except for taxable periods which are open
either such taxable period has been audited by the relevant taxing
authority or the time for assessing or collecting Taxes with respect to
each such taxable period has closed and each taxable period is not
subject to review by an relevant taxing authority; (2) no deficiency or
proposed adjustment which has not been settled or otherwise resolved
for any amount of Taxes has been asserted or assessed by any taxing
authority against Sellers; (3) Sellers have not consented to extend the
time in which any Taxes may be assessed or collected by any taxing
authority; (4) Sellers have not requested or been granted an extension
of the time for filing any Tax Return to a date later than the Closing;
(5) there is no action, suit, taxing authority proceeding, or audit or
claim for refund now in progress, pending or threatened against or with
respect to Sellers regarding Taxes; (6) Sellers have not made an
election or filed a consent under Section 341(f) of the Code (or any
corresponding provision of state, local or foreign law); (7) there are
no liens on the assets of Sellers relating or attributable to Taxes
(other than liens for sales and payroll Taxes not yet due and payable
and liens for non-delinquent current real property taxes, special
taxes, and assessments paid with real property taxes), and Sellers have
no knowledge of any reasonable basis for the assertion of any claim
relating or attributable to Taxes which, if adversely determined, would
result in any such lien (other than those noted in the preceding
parenthetical) on the assets of Sellers; (8) to Sellers' knowledge,
Sellers will not be required (a) as a result of a change in method of
accounting for a taxable period ending on or prior to the date of the
Closing, to include any adjustment under Section 481 of the Code (or
any corresponding provision of state, local or foreign law) in taxable
income for any taxable period (or portion thereof) beginning after the
date of the Closing or (b) as a result of any "closing agreement," as
described in Section 7121 of the Code (or any corresponding provision
of state, local or foreign law), to include any item of income or
exclude any item of deduction from any taxable period (or portion
thereof) beginning after the date of the Closing; (9) Sellers have not
been members of an affiliated group (as defined in Section 1504 of the
Code) or filed or been included in a combined, consolidated or unitary
income Tax Return; (10) Sellers are not a parties to or bound by any
tax allocation or tax sharing agreement and has no current or potential
contractual or other obligation to indemnify any other person with
respect to Taxes; (11) to Sellers' knowledge, no taxing authority will
claim or assess any additional Taxes against Sellers for any period for
which Tax Returns have been filed; (12) no claim has ever been made by
a taxing authority in a jurisdiction where
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Sellers do not file Tax Returns that Sellers are or may be subject to
Taxes assessed by such jurisdiction; (13) Sellers do not have a
permanent establishment in any foreign country, as defined in the
relevant tax treaty between the United States of America and such
foreign country; (14) true, correct and complete copies of all income
and sales Tax Returns filed by or with respect to Sellers for the past
three years have been furnished or made available to Parent; (15)
Sellers have disclosed on each Tax Return filed by Sellers all
positions taken thereon that could give rise to a substantial
understatement of penalty of federal income Taxes within the meaning of
Code Section 6662; and (16) except as set forth on SCHEDULE 4.18, no
sales or use tax will be payable by Sellers as a result of this
transaction, and there will be no non-recurring intangible tax,
documentary stamp tax, or other excise tax (or comparable tax imposed
by an governmental entity) as a result of this transaction.
4.19 Restrictions on Business Activities. With respect to the Acquired
Assets, there are no agreements (non-compete or otherwise), commitment,
judgment, injunction, order, or decree to which Sellers are parties or otherwise
binding on Sellers, the ▇▇▇▇▇▇▇ Communities Business or the Acquired Assets that
has or reasonably could be expected to have the effect of prohibiting or
impairing the conduct necessary or required by Buyers to continue to operate the
▇▇▇▇▇▇▇ Communities Business as conducted prior to the Closing.
4.20 Intellectual Property. SCHEDULE 4.20 sets forth a description of
the Intellectual Property for which Sellers have rights to use in the conduct of
the ▇▇▇▇▇▇▇ Communities Business. The conduct of the ▇▇▇▇▇▇▇ Communities
Business as presently conducted and the conduct and the use and exploitation of
the Intellectual Property do not infringe or misappropriate any rights held or
asserted by any person, and no person is infringing on the Intellectual
Property. Except as set forth in the Acquired Contracts, no payments are
required for the continued use of the Intellectual Property. None of the
Intellectual Property has ever been declared invalid or unenforceable, or is the
subject of any pending or threatened action for opposition, cancellation,
declaration, infringement, invalidity, unenforceability, or misappropriation or
like claim, action, or proceeding.
4.21 Litigation. Except as set forth on SCHEDULE 4.21, there are no
suits, claims, actions, arbitrations, investigations, or proceedings entered
against, now pending, or, to the Knowledge of Sellers, threatened against
Sellers or any other party before any court, arbitration, administrative or
regulatory body, or any governmental agency which may result in any judgment,
order, award, decree, liability, or other determination which will or could
reasonably be expected to have any effect upon Sellers, the Acquired Assets, or
the ▇▇▇▇▇▇▇ Communities Business. Except as set forth on SCHEDULE 4.21, neither
Sellers nor any other party is subject to any continuing court or administrative
order, writ, injunction, or decree applicable to the ▇▇▇▇▇▇▇ Communities
Business or to their property or employees, and neither Sellers nor any other
party is in default with respect to any order, writ, injunction, or decree of
any court or federal, state, municipal, or other governmental department,
commission, board, agency, or instrumentality applicable to the ▇▇▇▇▇▇▇
Communities Business.
4.22 Employees. Attached as SCHEDULE 4.22 is a list of names, current
annual rates of salary, bonus, employee benefits, accrued vacation and sick
time, sick pay, and other compensation and benefits and perquisites, including
the provision of company owned automobiles, of all the employees and agents of
Sellers whose work relates, directly or indirectly,
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to the ▇▇▇▇▇▇▇ Communities Business. To the Knowledge of Sellers, no key
employee of Sellers, and no group of Sellers' employees, has any plans to
terminate his, her, or its employment. Sellers are not a party to any collective
bargaining agreement with any labor union or association. There are no
discussions, negotiations, demands, or proposals that are pending or that have
been conducted or made with or by any labor union or association, and there are
no pending or threatened labor disputes, strikes, or work stoppages that may
effect Sellers, the Acquired Assets, or the ▇▇▇▇▇▇▇ Communities Business.
Sellers are in compliance with all federal and state laws respecting employment
and employment practices, terms and conditions of employment, and wages and
hours, and are not engaged in any unfair labor practices. Except as set forth in
SCHEDULE 4.22 and for matters referred to in Section 3.5, Sellers may terminate
any employee, with or without cause, without liability or obligation other than
for salary and bonuses accrued through the date of any such termination and for
the obligations of Sellers referred to in Section 4.23 below.
4.23 Employee Benefit Plans.
A. With respect to all employees and former employees of
Sellers, except as set forth in SCHEDULE 4.23, Sellers do not presently
maintain, contribute to, or have any liability (including current or
potential multi-employer plan withdrawal liability under ERISA) under
any: (1) non-qualified deferred compensation or retirement plan or
arrangement which is an "employee pension benefit plan" as such term is
defined in Section 3(2) of ERISA; (2) defined contribution retirement
plan or arrangement designed to satisfy the requirements of section
401(a) of the Code, which is an employee pension benefit plan, (3)
defined benefit pension plan or arrangement designed to satisfy the
requirements of Section 401(a) of the Code, which is an employee
pension benefit plan; (4) "multi-employer plan" as such term is defined
in Section 3(37) of ERISA; (5) unfunded or funded medical, health, or
life insurance plan or arrangement for present or future retirees or
present or future terminated employees which is an "employee welfare
benefit plan" as such term is defined in Section 3(1) of ERISA, except
as required by Section 4980B of the Code or Sections 601 through 609 of
ERISA; or (6) any other employee welfare benefit plan.
B. With respect to each of the employee benefit plans listed
in SCHEDULE 4.23, Sellers have furnished to Buyer true and complete
copies of: (1) the plan documents (including any related trust
agreements); (2) the most recent determination letter received from the
Internal Revenue Service; (3) the latest actuarial valuation; (4) the
latest financial statement; (5) the last Form 5500 Annual Report; and
(6) all related trust agreements, insurance contracts, or other funding
agreements which implement such employee benefit plan. Neither Sellers,
nor any of their respective officers, partners, employees or any other
"fiduciary", as such term is defined in Section 3(21) of ERISA, has any
liability for failure to comply with ERISA or the Code for any action
or failure to act in connection with the administration or investment
of such plans.
C. With respect to each plan listed in SCHEDULE 4.23: (1)
Sellers have performed all obligations required to be performed by them
under each such plan and each such plan has been established and
maintained in accordance with its terms and in compliance with all
applicable laws, statutes, rules, and regulations, including but not
limited to the Code and ERISA; (2) there are no actions, suits, or
claims pending or
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threatened or anticipated (other than routine claims for benefits)
against any such plan; (3) each such plan can be amended or terminated
after the Closing in accordance with its terms, without liability to
Sellers, Parent or Buyers; and (4) there are no inquiries or
proceedings pending or threatened by the Internal Revenue Service or
the Department of Labor with respect to any such plan.
D. With respect to the insurance contracts or funding
agreements which implement any of the employee benefit plans listed in
SCHEDULE 4.23, such insurance contracts or funding agreements are fully
insured or the reserves under such contracts are sufficient to pay
claims incurred.
E. Each plan listed in SCHEDULE 4.23 that is intended to be
qualified under Section 401(a) of the Code has been determined by the
Internal Revenue Service to so qualify and each trust created
thereunder has been determined by the Internal Revenue Service to be
exempt from tax under Section 501(a) of the Code and nothing has
occurred since the date of the most recent determination that would be
reasonably likely to cause any such plan or trust to fail to qualify
under Section 401(a) of the Code.
4.24 Insurance. SCHEDULE 4.24 lists and briefly describes each
insurance policy and fidelity bond, including performance improvement bonds,
maintenance bonds, labor and material bonds and other bonds related to the Real
Property (collectively, the "BONDS"), maintained by Sellers with respect to
their properties or business, and sets forth the date of expiration of each such
insurance policy. All of such insurance policies and Bonds are in full force and
effect and Sellers are not in default with respect to its obligations under any
of such insurance policies or Bonds. Except as set forth on SCHEDULE 4.24, there
is no claim of Sellers pending under any of such policies or Bonds as to which
coverage has been questioned, denied, or disputed by the underwriters of such
policies or Bonds and there has been no threatened termination of, or material
premium increase with respect to, any of such policies. The insurance coverage
of Sellers are customary for entities of similar size engaged in similar lines
of business.
4.25 Affiliate Transactions. Except as set forth on SCHEDULE 4.25,
neither Sellers nor any employee, officer, member, shareholder or affiliate
thereof, or any member of their immediate family, or any entity in which any of
such persons owns any beneficial interest (other than a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any of such persons) has any agreement with Sellers or any interest in
any property (real, personal, or mixed, tangible or intangible) used in or
pertaining to the ▇▇▇▇▇▇▇ Communities Business. For purposes of the preceding
sentence, the members of the immediate family of a person shall consist of the
spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and
daughters-in-law, and brothers- and sisters-in-law of such person.
4.26 Compliance with Laws. Sellers and their officers, agents,
employees, members, shareholders and affiliates have substantially complied with
all Applicable Laws which affect the ▇▇▇▇▇▇▇ Communities Business or the
Acquired Assets. No claims have been filed against Sellers alleging a violation
of any Applicable Laws, except as set forth in SCHEDULE 4.26. Without limiting
the generality of the foregoing, Sellers have not violated, or received a notice
or charge asserting any violation of, OSHA, or any other state or federal acts
(including rules and
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regulations thereunder) regulating or otherwise affecting employee health and
safety. Sellers have not given or agreed to give any money, gift, or similar
benefit (other than incidental gifts of articles of nominal value) to any actual
or potential customer, supplier, governmental employee, or any other person in a
position to assist or hinder Sellers in connection with any actual or proposed
transaction.
4.27 Permits.
A. Sellers possess all approvals, authorizations,
certificates, consents, franchises, licenses, and permits necessary for
the lawful conduct of their business, the absence of which would
materially and adversely affect the ▇▇▇▇▇▇▇ Communities Business or
Acquired Assets (collectively, the "PERMITS"). SCHEDULE 4.27 sets forth
a list of Permits (including the expiration dates of the Permits for
Parent's review). Such Permits are in full force and effect, no
violations have occurred with respect thereto, and to the best
knowledge of Sellers, no basis exists for any limitation, revocation or
withdrawal thereof.
▇. ▇▇▇▇▇▇▇ also possess (or there have been granted by the
applicable governmental authorities with respect to the Real Property)
the subdivision, development, construction and sale permits, and other
authorizations, approvals, and entitlements set forth in SCHEDULE 4.27
(collectively "LAND USE ENTITLEMENTS"). With respect to the Real
Property, no approvals are required as of the Closing from any
governmental agency to complete the development and construction of
homes and the sale thereof in the respective Real Property, there are
in full force and effect validly issued building permits for each home
under construction or completed and Sellers have no notice of any
pending or threatened moratorium or other restriction that would
preclude the obtaining of building permits for any homes on such Real
Property not yet under construction or for which building permits have
not been obtained. No decision-making body has denied or withheld any
material Land Use Entitlements.
4.28 Membership Records; Minute Books. The minute books of Sellers made
available to Parent are the only minute books of Sellers and contain an accurate
summary of all meetings of directors (or committees thereof) and members or
shareholders or actions by written consent since the time of incorporation of
Sellers.
4.29 Disclosure. Neither this Agreement nor any of the Schedules or
Exhibits hereto contains any untrue statement of a material fact or, to the
Knowledge of Sellers, omits to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading, and there is no fact which has not been
disclosed to Parent or Buyers which materially adversely affects or could
reasonably be anticipated to materially adversely affect the financial
condition, results of operations, customer, employee or supplier relations,
business condition, or prospects of Sellers, the ▇▇▇▇▇▇▇ Communities Business or
the Acquired Assets.
ARTICLE V
CONDUCT OF SELLERS PENDING THE CLOSING
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Sellers hereby covenant and agree that from the date hereof to the
Closing Date:
5.1 Conduct of Business Pending the Closing. Except as specifically
contemplated in this Agreement, Sellers shall take no action except in, the
ordinary course, on an arm's length basis, and in accordance with all Applicable
Laws and past custom and practice, and Sellers will not, directly or indirectly,
do or permit to occur any of the following without the prior written consent of
Parent:
A. Cancel or terminate or permit to be canceled or terminated
Sellers' current insurance (or reinsurance) policies or permit any of
the coverage thereunder to lapse, unless simultaneous with such
termination, cancellation, or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled,
terminated, or lapsed policies for substantially similar premiums are
in full force and effect;
B. Sell, lease, encumber, or otherwise dispose of any of the
Acquired Assets other than, in the case of lots and homes held for sale
in the ordinary course, the sale of such lots or homes in the ordinary
course of ▇▇▇▇▇▇▇ Communities Business as previously conducted;
C. Except in the ordinary course of business, consistent with
historical practices, acquire or enter into any option or other
agreement to acquire any Real Property or other Acquired Assets;
D. Default under any material contract, agreement, commitment,
or undertaking;
E. Violate or fail to comply with any Applicable Laws;
F. Fail to maintain and repair the Acquired Assets in
accordance with good standards of maintenance and as required in any
leases or other agreements pertaining thereto;
G. Except in the ordinary course of business, consistent with
historical practices, enter into or modify any employment, severance,
or similar agreements or arrangements with, or grant any bonuses,
salary increases, or severance or termination pay to, any officers,
directors, employees, or consultants, or adopt or amend any bonus,
profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment, or other benefit plan, trust, fund,
or group arrangement for the benefit or welfare of any officers,
directors, or employees;
H. Except in the ordinary course of business, consistent with
historical practices, modify or terminate any of the Acquired Contracts
or enter into any new Acquired Contracts;
I. Acquire (by merger, exchange, consolidation, acquisition of
stock or assets, or otherwise) any corporation, partnership, joint
venture, or other business organization or division or material assets
thereof;
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J. Issue or create any additional shares or membership units
of Sellers;
K. Issue or create any warrants, obligations, subscriptions,
options, or other commitments under which any additional shares or
membership units of Sellers might be directly or indirectly authorized,
issued, or transferred, or incur any indebtedness for borrowed money or
issue any debt securities except the borrowing of working capital in
the ordinary course of business and consistent with past practice;
L. Except in the ordinary course of business, consistent with
historical practices, pay any obligation or liability, fixed or
contingent, other than current liabilities;
M. Waive or compromise any right or claim (other than as
required to resolve any pending or threatened litigation disclosed in
the Schedules attached hereto) or warranty claims;
N. Commit any act or permit the occurrence of any event or the
existence of any condition of the type described in Section 4.11; or
O. Agree to do any of the actions described in the preceding
clauses A through N.
5.2 Business Relationships. Sellers will exercise their best efforts
to:
A. preserve intact the Acquired Assets and any assets
associated with the ▇▇▇▇▇▇▇ Communities Business;
B. maintain all facilities and equipment in good condition,
ordinary wear and tear excepted;
C. keep available the services of Sellers' officers and
employees as a group; and
D. maintain satisfactory relationships with suppliers,
distributors, customers, and others having business relationships with
Sellers.
5.3 Notification of Certain Matters. Sellers shall:
▇. ▇▇▇▇▇▇ on a regular basis with representatives of Parent
and Buyers and report operational matters and the general status of
ongoing operations;
B. notify Parent of any material adverse change in the normal
course of their business or in the operation of its properties and of
any governmental or third party complaints, investigations, or hearings
(or communications indicating that the same may be contemplated);
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C. not take any action which would render, or which reasonably
may be expected to render, any representation or warranty made by it in
this Agreement untrue at, or at any time prior to, the Closing; and
D. promptly notify Parent if Sellers shall discover that any
representation or warranty made by it in this Agreement was when made,
or has subsequently become, untrue.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Employment. Sellers shall be responsible for any severance and/or
other payments, including, but not limited to, other compensation, benefits, and
perquisites, incurred in connection therewith and during the period prior to the
Closing Date. Subject to Section 3.5, immediately after the Closing, Buyers will
agree to hire such employees of Sellers on an "at will" basis as ▇▇▇▇ ▇▇▇▇▇▇▇
determines are necessary after consultation with Parent and in its sole
discretion, and Sellers will cooperate with Buyers to that end; PROVIDED,
HOWEVER, that Buyers hereby agree to engage ▇▇▇▇ ▇▇▇▇▇▇▇ as an employee of
Buyers and as President of Buyers pursuant to the terms of that certain
employment agreement, to be entered into, by and between Parent, Buyers and ▇▇▇▇
▇▇▇▇▇▇▇, in the form attached hereto as EXHIBIT C (the "▇▇▇▇▇▇▇ EMPLOYMENT
AGREEMENT").
6.2 Break-up Fee. If the transactions contemplated by this Agreement
are not consummated due to a material breach of any representation, warranty, or
covenant of Sellers as contained herein and, prior to January 29, 2002, any of
such parties sign a letter of intent or other agreement relating to the
acquisition of the Acquired Assets, or any assets associated with the ▇▇▇▇▇▇▇
Communities Business, in whole or in part, whether through purchase, merger,
consolidation, or other business combination (other than sales of inventory or
immaterial portions of Sellers' assets in the ordinary course) and such
transaction is ultimately consummated, then immediately upon such closing,
Sellers shall pay to Parent the sum of $500,000 (the "BREAK-UP FEE").
6.3 No Negotiations. Sellers shall not, directly or indirectly, through
any officer, director, agent, member, shareholder, affiliate or otherwise,
solicit, initiate, or encourage submission of any proposal or offer from any
person or entity (including any of its officers, directors, partners, employees,
or agents) relating to any liquidation, dissolution, recapitalization, merger,
consolidation, or acquisition or purchase of all or part of the Acquired Assets,
or any assets associated with the ▇▇▇▇▇▇▇ Communities Business, or any equity
interest in Sellers, or other similar transaction or business combination
involving Sellers or such assets or business, or participate in any negotiations
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist, participate in, facilitate, or
encourage, any effort or attempt by any other person or entity to do or seek any
of the foregoing. Sellers shall promptly notify Parent if any such proposal or
offer, or any inquiry from or contact with any person with respect thereto, is
made and shall promptly provide Parent with such information regarding such
proposal, offer, inquiry, or contact as Parent may request.
6.4 Public Announcements. The parties hereto shall not issue any press
release or public announcement, including announcements by any party for general
reception by or
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dissemination to employees, agents, or customers, with respect to this Agreement
and the other transactions contemplated by this Agreement without the prior
written consent of the other parties hereto (which consent shall not be withheld
unreasonably); PROVIDED, HOWEVER, that Parent may make any disclosure or
announcement that, in the opinion of its counsel, it is obligated to make
pursuant to applicable law or regulation of the New York Stock Exchange or any
national securities exchange, as applicable; PROVIDED FURTHER, that, upon
execution of this Agreement, Parent may make a public announcement of such
occurrence in a press release.
6.5 Confidentiality. Except as otherwise required by law or the rules
of any exchange on which any securities of a party shall be listed, all
proprietary information concerning a party provided to the other party (oral,
written or otherwise) in connection with this Agreement and the transactions
contemplated hereby, including all documents and copies of documents or papers
containing proprietary information ("EVALUATION INFORMATION") will be kept in
confidence by the receiving party. The party receiving such Evaluation
Information will take reasonable steps necessary to ensure the confidentiality
of the Evaluation Information by itself, its employees, agents, consultants,
advisors, members, shareholders and affiliates. Evaluation Information does not
include information that (i) is or becomes generally available to the public
other than as a result of an unauthorized disclosure by the receiving party or
its affiliates or representatives; (ii) was within or comes into the receiving
party's possession, provided that the source of such information was not known
by the receiving party to be bound by a confidentiality agreement with, or other
contractual, legal, or fiduciary obligation of confidentiality to the party
providing the information; (iii) is disclosed by the receiving party to others
with the consent of the other party; (iv) is required to be disclosed to any
lender under existing credit facilities, or (v) is independently developed by
the receiving party. All Evaluation Information will be returned to the
appropriate party or destroyed if the Closing does not occur.
6.6 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper, or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including obtaining all necessary
waivers, consents, and approvals and effecting all necessary registrations and
filings and submissions of information requested by governmental authorities.
Sellers agree that they, at any time before or after the Closing, will execute,
acknowledge, and deliver any further deeds, assignments, conveyances, and other
assurances, documents, and instruments of transfer reasonably requested by
Parent, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by Parent, for the purpose of
assigning, transferring, granting, conveying, and confirming to Buyers, or
reducing to possession, any or all property to be conveyed and transferred by
this Agreement. If requested by Parent or Buyers, Sellers further agree to
prosecute or otherwise enforce in its name for the benefit of Parent or Buyers,
any claims, rights, or benefits that are transferred to Buyers by this Agreement
and that require prosecution or enforcement in its name. Any prosecution or
enforcement of claims, rights, or benefits under this Section shall be solely at
Buyers' expense, unless the prosecution or enforcement is made necessary by a
breach of this Agreement by Sellers. After the Closing and for a period of 6
months, the parties will cooperate in good faith and use commercially reasonable
efforts to resolve any issues which may arise in the transition of the ▇▇▇▇▇▇▇
Communities Business.
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6.7 Right to Enter and Inspect. From time to time prior to the Closing,
Parent or Buyers may enter the Real Property and other property of Sellers with
Parent's or Buyers' representatives, contractors, and agents to examine the Real
Property and the Acquired Assets, conduct soil tests, environmental studies,
engineering feasibility studies, and other tests and studies, and otherwise to
evaluate, inspect and examine the Acquired Assets and the ▇▇▇▇▇▇▇ Communities
Business and affairs of Sellers. Sellers will make available to Parent or
Buyers, at Parent's or Buyers' request and expense for copying by Parent or
Buyers at any reasonable time after the Closing Date, any and all books and
records of Sellers relating, directly or indirectly, to the ▇▇▇▇▇▇▇ Communities
Business or the Acquired Assets which are reasonably necessary with respect to
Parent's or Buyers' ongoing operations for inspection. Nothing herein shall be
construed as imposing upon Parent or Buyers any obligation or liability for the
fact of its discovery or required disclosure of any defect or problem with any
of the Acquired Assets or Real Property. Parent and Buyers, jointly and
severally, shall indemnify and defend Sellers, their officers, directors,
members, managers, employees, representatives and agents, from all claims and
liabilities, or mechanics' or materialmens' liens which may be asserted against
Sellers, or any of the foregoing, as a result of any negligent or willful
misconduct in connection with the inspection or investigation made by Parent,
Buyers or their representatives.
6.8 [Intentionally Omitted].
6.9 [Intentionally Omitted].
6.10 [Intentionally Omitted].
6.11 Tax on Prior Sales. To the extent such certificates are prepared
by the applicable state taxing authority, if applicable, Sellers agree to
furnish to Buyers certificates from the state taxing authorities and any related
certificates that Buyers may reasonably request as evidence that all sales and
use tax liabilities of Sellers accruing before the Closing Date have been fully
satisfied or provided for.
6.12 Transfer of Permits. Sellers will use their best efforts to assist
Buyers to effect the assignment or other transfer of Permits, to the extent such
Permits are transferable, from Sellers to Buyers as of or as soon as practicable
after the Closing Date.
6.13 Performance Bonds. Buyers and Parent will replace all performance
bonds on properties acquired hereunder prior to Closing.
6.14. Tash Note. Prior to the Closing, Sellers will modify the note
relating to the Tash property to: (i) make the note non-recourse and (ii)
terminate any balloon payments relating to zoning conditions.
6.15 Mission Royale. Prior to the Closing, ▇▇▇▇ ▇▇▇▇▇▇▇ will deliver to
Parent a letter of understanding, executed by the owner of the Mission Royale
property (the "OWNER"), providing that (i) in the event the Mission Royale
property is not sold to ▇▇▇ ▇▇▇▇ or its successors or assigns, HC Builders, or
its successors or assigns (including specifically Buyers who are obtaining
Sellers' rights to this property at Closing hereunder), will have the right to
develop the Mission Royale property in accordance with the terms of a definitive
agreement to be entered into by the Owner and HC Builders, or its successors or
assigns (including Buyers), or
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(ii) upon the sale of the Mission Royale property, the agreed to amount advanced
by HC Builders will be repaid by the Owner in accordance with the terms mutually
acceptable to HC Builders, or its successors or assigns (including Buyers), and
the Owner.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligation of Sellers. The obligations of Sellers to
close this transaction are subject to the satisfaction, in their sole and
absolute discretion (or waiver by it in writing), of the following conditions on
and as of the Closing:
A. Absence of Certain Actions and Events. There shall not be
threatened, instituted, or pending any action or proceeding, before any
court or governmental authority or agency, domestic or foreign: (1)
challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly to restrain or prohibit, the consummation of the
transactions contemplated hereby, or seeking to obtain damages in
connection therewith; or (2) invalidating or rendering unenforceable
any material provision of this Agreement (including without limitation
any of the Exhibits or Schedules hereto); and there shall not be any
action taken, or any statute, rule, regulation, judgment, order, or
injunction proposed, enacted, entered, enforced, promulgated, issued,
or deemed applicable to the transactions contemplated hereby by any
federal, state, or foreign court, government, or governmental authority
or agency, which may, directly or indirectly, result in any of the
consequences referred to in clauses (1) and (2) or otherwise prohibit
consummation of the transactions contemplated hereby.
B. Truthfulness of Representations and Warranties. The
representations and warranties of Parent and Buyers set forth in
Article 3 shall be true and correct in all material respects as of the
Closing Date as if made at and as of the Closing Date.
C. Compliance. Parent and Buyers shall in all material
respects have performed each obligation and agreement and complied with
each covenant to be performed and complied with by it hereunder at or
prior to the Closing.
D. Asset Agreement and Real Property Agreement. The Asset
Agreement and the Real Property Agreement will have been executed and
performed by each of the parties thereto.
7.2 Conditions to Obligations of Parent and Buyers. Parent's and
Buyers' obligations to close this transaction are subject to the satisfaction,
in Parent's sole and absolute discretion (or waiver by Parent in writing), of
the following conditions on and as of the Closing:
A. [Intentionally Omitted].
B. Financial Statements. Sellers shall have delivered to
Parent the financial statements of the ▇▇▇▇▇▇▇ Communities Business,
required to be included by Parent in its filings with the Securities
Exchange Commission (the "SEC"), which financial statements shall
comply with GAAP and Regulation S-X promulgated by the SEC.
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C. Schedules. Sellers shall have delivered updated Schedules
to Parent immediately prior to Closing.
D. Consents and Approvals. Sellers shall have obtained all
consents and approvals set forth in SCHEDULE 4.5 hereto.
E. Absence of Material Adverse Developments. After the date
hereof, neither Parent nor Buyers shall have discovered any fact or
circumstance not disclosed herein regarding the ▇▇▇▇▇▇▇ Communities
Business, the Acquired Assets, or the properties, condition (financial
or otherwise), results of operations, or prospects of Sellers which is
or could be, individually or in the aggregate with other such facts and
circumstances, materially adverse to the ▇▇▇▇▇▇▇ Communities Business
or the Acquired Assets.
F. No Damage or Destruction. After the date hereof, there
shall have been no damage, destruction, or loss of or to any property
or properties owned or used by Sellers, whether or not covered by
insurance, which in the aggregate may have a material adverse effect on
the ▇▇▇▇▇▇▇ Communities Business, the Acquired Assets or the financial
condition, or results of operations of Sellers.
G. Environmental Matters. Parent shall be satisfied with the
results of all environmental assessments made under the Real Property
Agreement.
H. Title Insurance. Title Company shall be prepared to issue
each Title Policy (and an endorsement thereto) as required by Sections
4.1 and 5.2 of the Real Property Agreement.
I. Closing Balance Sheet.
Parent shall have received, at least five (5) days prior to
the Closing, the Closing Balance Sheet.
J. Absence of Certain Actions and Events.
(1) There shall not be threatened, instituted, or
pending any action or proceeding, before any court or
governmental authority or agency, domestic or foreign: (a)
challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly to restrain or prohibit, the
consummation of the transactions contemplated hereby, or
seeking to obtain damages in connection therewith; (b) seeking
to prohibit direct or indirect ownership or operation by
Buyers of all or a material portion of the ▇▇▇▇▇▇▇ Communities
Business or the Acquired Assets, or to compel Parent or Buyers
or any of their subsidiaries to divest of or to hold
separately all or a material portion of the business or the
Acquired Assets as a result of the transactions contemplated
hereby; (c) seeking to impose or confirm limitations on the
ability of Parent or Buyers effectively to exercise directly
or indirectly full rights of ownership of any of the Acquired
Assets; (d) seeking or causing any material diminution in the
direct or indirect benefits expected to be derived by Parent
or Buyers as a result of the transactions contemplated by this
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Agreement; (e) invalidating or rendering unenforceable any
material provision of this Agreement (including without
limitation any of the Exhibits or Schedules hereto); or (f)
which otherwise might materially adversely affect Parent or
Buyers or any of their subsidiaries as determined by Parent;
(2) There shall not be any action taken, or any
statute, rule, regulation, judgment, order, or injunction
proposed, enacted, entered, enforced, promulgated, issued, or
deemed applicable to the transactions contemplated hereby by
any federal, state, or foreign court, government, or
governmental authority or agency, which may, directly or
indirectly, prohibit consummation of the transactions
contemplated hereby; and
(3) There shall not have occurred any of the
following events having a material adverse effect on Parent or
Buyers: (a) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United
States or any limitation by United States authorities on the
extension of credit by lending institutions; (b) a
commencement of war, armed hostilities, or other international
or national calamity directly or indirectly involving the
United States; or (c) in the case of any of the foregoing
existing at the date hereof, a material acceleration or
worsening thereof.
K. Truthfulness of Representations and Warranties. The
representations and warranties of Sellers in this Agreement and in any
certificate or other instrument delivered pursuant to the provisions
hereof or in connection with the transactions contemplated hereby shall
be true and correct in all material respects as of the Closing Date as
if made at and as of the Closing Date.
L. Compliance. Sellers shall in all material respects have
performed each obligation and agreement and complied with each covenant
to be performed and complied with them hereunder at or prior to the
Closing.
M. Non-Compete Agreements. Parent shall have received a
Non-Compete Agreement executed by American West in the form of EXHIBIT
D attached hereto (the "AMERICAN WEST NON-COMPETE AGREEMENT") and a
Non-Compete Agreement executed by each of the ▇▇▇▇▇▇▇ Officers in the
form of EXHIBIT E attached hereto (the "▇▇▇▇▇▇▇ OFFICERS NON-COMPETE
AGREEMENTS").
N. [Intentionally Omitted].
O. License. The parties hereto will have executed and
delivered the License described in Sections 8.1I.
P. Releases. Parent shall have received releases in form and
substance acceptable to it of all ▇▇▇▇▇▇▇ Officers in respect of the
loans paid off.
Q. Asset Agreement. Parent shall have performed the Asset
Agreement executed by all parties thereto and all conditions to Closing
and closing deliveries thereto will be satisfied or made as the case
may be.
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R. Real Property Agreement. Parent shall have performed the
Real Property Agreement executed by all parties thereto and all
conditions to Closing and closing deliveries thereto will be satisfied
or made as the case may be.
▇. ▇▇▇▇ Note. Sellers will have modified the Tash note in
accordance with Section 6.14.
T. Mission Royale. Sellers will have delivered the letter of
understanding in accordance with Section 6.15.
ARTICLE VIII
CLOSING
8.1 Sellers' Obligations. In addition to any other documents required
to be delivered by Sellers at Closing, Sellers shall deliver to Parent at
Closing the following documents, all in form and substance reasonably
satisfactory in all respects to Parent and its counsel:
A. Deed. A Special Warranty Deed ("DEED") for each parcel
comprising the Real Property owned by Sellers in fee, in form
substantially similar to EXHIBIT G hereto, and an Assignment and
Assumption Agreement ("ASSUMPTION AGREEMENT") for each parcel
comprising the Real Property in which Sellers have an optionee's
interest, in form substantially similar to EXHIBIT L hereto, subject to
no defects, exceptions, easements, encumbrances, covenants, conditions,
restrictions, mining claims or liens, except the Approved Title
Exceptions.
B. Affidavit of Property Value. An Affidavit of Property Value
for each parcel comprising the Real Property as required by law.
C. FIRPTA Affidavit. An Affidavit, signed and acknowledged by
Sellers under penalties of perjury, certifying that Sellers are not
nonresident aliens, foreign corporations, foreign partnerships, foreign
trusts, foreign estates, or other foreign persons within the meaning of
Section 1445 and 7701 of the Internal Revenue Code of 1986, as amended,
and the associated Treasury Regulations.
D. ▇▇▇▇ of Sale. An executed ▇▇▇▇ of Sale and Assumption
Agreement dated as of the Closing Date, conveying to Buyers all of
Sellers' right, title, and interest in and to the Acquired Assets in
the form attached hereto as EXHIBIT H shall have been delivered by each
Seller.
E. Acquired Contracts. Executed assignments of all Acquired
Contracts (with consents if required) (the "CONTRACT ASSIGNMENTS").
F. Lease Assignments. Lease assignments (the "LEASE
ASSIGNMENTS") with respect to each parcel of real estate or any item of
personal property which is leased by Sellers and which is to be assumed
by Buyers hereunder, properly executed and acknowledged by Sellers, and
accompanied by all consents and estoppels of lessors required by this
Agreement and the Property Leases and other leases being assigned.
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G. American West Non-Compete Agreement. The American West
Non-Compete Agreement executed by American West.
H. [Intentionally Omitted].
I. Exclusive License and Release. An exclusive license and
release executed by American West and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "LICENSE"),
pursuant to which (i) Parent and Buyers, and their affiliates, will be
granted the right to use (exclusively in Arizona and non-exclusively
elsewhere, but in any event, not in Nevada) the architectural drawings,
plans and designs prepared by ▇▇. ▇▇▇▇▇▇▇ (C614, 908, 608-1, 614, R608,
P608, 9040, 308, 602, 904, 609, 608, 99050, 604, 607, 303, 304, G0608,
610, 612, 603, G605, 611, 905, M905, S906EX, E204 and E205).; (ii)
American West and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ acknowledge that they have no
interest in any other architectural drawings, plans or designs used by
Sellers; and (iii) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ will be paid a $75 royalty fee per
home for the use of the identified architectural plans for a period to
be agreed upon.
J. Permits. Executed assignments of all assignable Permits
issued to Sellers by any governmental entity or vendor, to the extent
assignable.
K. Books and Records. All books, records, and other data
relating to the ▇▇▇▇▇▇▇ Communities Business and/or Acquired Assets.
L. Resolutions. Copies of the texts of the resolutions by
which the corporate action on the part of Sellers and American West and
their shareholders and members necessary to approve this Agreement and
the transactions contemplated hereby were taken and certificates
executed on behalf of Sellers and American West by their corporate
secretaries or of their assistant corporate secretaries certifying to
Parent and Buyers that such copies are true, correct and complete
copies of such corporate action or resolutions and that such corporate
action and resolutions were duly adopted and have not been amended or
rescinded.
M. Legal Opinion. Parent and Buyers shall have received an
opinion from the ▇▇▇▇▇▇▇ Law Group and ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇,
addressed to Parent and Buyers, in a form reasonably acceptable to
Parent and its counsel.
N. Consents. The consents contemplated by Section 7.2.
O. Title Policies. The Title Policies contemplated by Section
5.2 of the Real Property Agreement.
P. Other Documents. Such other documents as Parent or Buyers
or its counsel or any lender of Parent or Buyers may reasonably request
in order to effectuate the transactions contemplated under this
Agreement.
8.2 Parent's or Buyers' Obligations. Parent or Buyers shall deliver to
Sellers at Closing the following, all in form and substance reasonably
satisfactory in all respects to Sellers and Sellers' counsel:
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A. Purchase Price. The Purchase Price contemplated by Section
2.5, to the extent payable at Closing.
B. Indemnification Agreement.The executed Indemnification
Agreement.
C. [Intentionally Omitted].
D. Performance Bonds. Evidence of the replacement performance
bonds contemplated by Section 6.13.
E. Other Documents. Such other documents as Sellers or
Sellers' counsel may reasonably request in order to effectuate the
transactions contemplated under this Agreement.
8.3 Transfer Fees, Title Costs, and Closing Costs and Other Fees;
Prorations.
A. Title Policy Fees. Sellers will pay the standard form
premium for each Title Policy and Parent and Buyers will pay the costs
of extended coverage and special endorsements as set forth in Section
5.2 of the Real Property Agreement.
B. Documentary Taxes and Transfer Taxes. Sellers will pay any
documentary transfer tax, stamp tax, real estate conveyance tax or
similar tax or fee due and payable in connection with this transaction.
C. Recording and Other Fees. Recording fees for each Deed,
rollup or catch up tax, if any, will be paid by Sellers. Sellers shall
also pay all fees and expenses, including assumption and transfer fees
actually incurred by Sellers in obtaining any consents and approvals
required to be obtained by Sellers under this Agreement or otherwise in
consummating the transactions contemplated by this Agreement; (provided
nothing herein shall require Sellers to pay any cost or incur any
expense with respect to (1) either Parent's or Buyers' HSR Act
requirements (which expenses will be borne by Parent or Buyers), (2)
Buyers' organizational approvals or consents, or (3) the assumption of
any loan or waiver of any due-on sale clause by any lender, and
provided, further, that wherever this Agreement may require exercise of
"best efforts" to obtain a consent it shall not be deemed to impose
upon Sellers a duty to pay any consideration, fee or other sum of an
inducement nature to such party).
D. Prorations.
(1) Taxes and Assessments. Real estate ad valorem
taxes and general and special assessments, utilities, rents,
and payments on Acquired Contracts will be prorated as of the
Closing Date, based upon the most current information then
available. If, at the Closing, actual tax or assessment
information is not available, then, following the Closing and
within twenty (20) days of receipt by either Parent, Buyers or
Sellers of the actual tax or assessment information, Parent,
Buyers and Sellers will re-prorate real estate taxes and
assessments among themselves and make any necessary adjusting
payments.
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(2) Basis of Prorations. All prorations and/or
adjustments called for in this Agreement will be made on the
basis of a 30-day month unless otherwise specifically
instructed in writing by Sellers and Parent.
E. Taxes. Sellers shall pay any sales or similar taxes or
assessments relating to the sale of the Acquired Assets by Sellers to
Buyers.
F. Other Fees. Subject to Section 6.2 and except as otherwise
specifically provided in this Agreement, each party shall bear its own
legal and accounting fees and other expenses relating to the
transactions contemplated by this Agreement.
ARTICLE IX
SURVIVAL AND INDEMNITIES
9.1 Survival of Representations and Warranties. Regardless of any
investigation at any time made by or on behalf of any party hereto, or of any
information any party may have in respect thereof, all representations, and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of two
years. Notwithstanding the foregoing, the representations and warranties
contained in:
A. Section 4.17 (Environmental Matters), Section 4.18 (Tax
Matters), and all claims for damages based upon or arising out of
fraud, intentional misstatement, or any Excluded Liabilities will
survive until the expiration of the applicable statute of limitations;
and
B. Section 4.2 (Authority) will survive the Closing Date
indefinitely and will never expire.
9.2 Nature of Statements. All statements contained herein, in any
Schedule or Exhibit hereto, or in any certificate or other written instrument
delivered by or on behalf of Sellers, Parent or Buyers pursuant to this
Agreement, or in connection with the transactions contemplated hereby, shall be
deemed representations and warranties by Sellers, Parent or Buyers, as the case
may be.
9.3 Arbitration. Except as provided in Section 2.5, any other dispute,
controversy or claim, whether contractual or non-contractual, between Parent,
Buyers and Sellers arising directly or indirectly out of or connected with this
Agreement, relating to the breach or alleged breach of any representation,
warranty, agreement, or covenant under this Agreement or otherwise relating to
this Agreement, unless mutually settled by Parent, Buyers and Sellers, shall be
resolved in accordance with the Dispute Resolution Procedures attached as
EXHIBIT I.
9.4 Indemnification Agreement. Except as provided in Article X, the
sole remedies for breach of this Agreement, the Real Property Agreement, or the
Asset Agreement are specified in the Indemnification Agreement.
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ARTICLE X
TERMINATION/REMEDIES
10.1 Termination. This Agreement shall be considered terminated at any
time:
A. By mutual written consent of duly authorized officers of
Parent and Buyers and Sellers;
B. By Buyer, pursuant to Section 5.2 of the Real Property
Agreement; or
C. By either Parent and Buyers or Seller if the other party
breaches any of its material representations, warranties, or covenants
contained herein.
D. After July 2, 2001, if not closed by then.
10.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.1, this Agreement shall become void and
there shall be no liability or further obligation hereunder on the part of
Parent, Buyers or Sellers or their respective shareholders, members, officers,
or directors, except (i) each party shall remain obligated for its obligations
under Section 6.5, (ii) Sellers shall remain obligated for the obligations set
forth in Section 6.2., and (iii) the Deposit provisions set forth in Section
2.5D will remain in effect.
10.3 Specific Performance. Upon the pricing of the Financing (provided
that such pricing is no later than June 1, 2001), the parties to this Agreement
will have the right to obtain specific performance of the other parties'
obligations to close in the event that such parties fail to close this Agreement
in accordance with the provisions of Section 2.1; PROVIDED, HOWEVER, that the
party seeking specific performance cannot be in material breach of this
Agreement; provided further that the right to seek specific performance shall be
waived if Buyers elect to extend closing to a date after June 1, 2001 in
accordance with Section 2.1. The party who is entitled to specific performance
must file and serve an action within 10 business days of the originally
scheduled Closing or waive any right to seek specific performance.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices, consents, and other communications
hereunder shall be in writing and deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, postage pre-paid
return receipt requested, or (c) when received by the addressee, if
sent by Express Mail, Federal Express, or other express delivery
service (postage pre-paid return receipt requested), in each case to
the appropriate addresses and telecopier numbers set forth below (or to
such other addresses and telecopier numbers as a party may designate as
to itself by notice to the other):
If to Buyers: Meritage Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Sellers American West Homes, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
▇▇▇▇▇▇▇ Communities, L.L.C.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: The ▇▇▇▇▇▇▇ Law Group
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇, Esq.
11.2 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute one and the same agreement.
11.3 Governing Law. The validity, construction, and enforceability of
this Agreement shall be governed in all respects by the laws of the State of
Arizona, without regard to its conflict of laws rules.
11.4 Assignment. This Agreement shall not be assigned by operation of
law or otherwise, except that Buyers may assign all or any portion of its rights
under this Agreement to any wholly owned subsidiary, but no such assignment
shall relieve Buyers or their successor of
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their primary liability for all obligations of Buyers hereunder, and except that
this Agreement may be assigned by operation of law to any corporation or entity
with or into which Buyers may be merged or consolidated or to which Buyers
transfer all or substantially all of their assets, and such corporation or
entity assumes this Agreement and all obligations and undertakings of Buyers
hereunder. Any assignment in violation of the provisions of this Agreement shall
be null and void.
11.5 Gender and Number. The masculine, feminine, or neuter pronouns
used herein shall be interpreted without regard to gender, and the use of the
singular or plural shall be deemed to include the other whenever the context so
requires.
11.6 Schedules and Exhibits. The Schedules and Exhibits referred to in
this Agreement and attached to this Agreement are incorporated in this Agreement
by such reference as if fully set forth in the text of this Agreement.
11.7 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof shall, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
11.8 Costs. If any legal action or any arbitration or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees, accounting fees, and
other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.
11.9 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
11.10 Severability. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated and the court shall modify this
Agreement or, in the absence thereof, the parties shall negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement.
11.11 Binding Effect. Subject to the provisions and restrictions of
Section 11.4, the provisions of this Agreement are binding upon and will inure
to the benefit of the parties and their respective heirs, personal
representatives, successors and assigns.
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11.12 Construction. References in this Agreement to "Sections",
"Articles", "Exhibits", and "Schedules" are to the Sections and Articles in, and
the Exhibits and Schedules to, this Agreement, unless otherwise noted.
11.13 Time Periods. Except as expressly provided for in this Agreement,
the time for performance of any obligation or taking any action under this
Agreement will be deemed to expire at 5:00 o'clock p.m. (Phoenix, Arizona time)
on the last day of the applicable time period provided for in this Agreement. If
the time for the performance of any obligation or taking any action under this
Agreement expires on a Saturday, Sunday or legal holiday, the time for
performance or taking such action will be extended to the next succeeding day
which is not a Saturday, Sunday or legal holiday.
11.14 Headings. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of this
Agreement.
11.15 Commission. Upon the Closing of the transactions contemplated
hereby, Sellers will pay a commission to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in the amount of
$500,000. American West will pay 55% of such commission and ▇▇▇▇ ▇▇▇▇▇▇▇ will
pay 45% of such commission.
11.16 Entire Agreement. This Agreement, the Asset Agreement, the Real
Property Agreement and the Indemnification Agreement, and all certificates,
schedules and other documents attached to or deliverable under such agreements
(collectively, the "AGREEMENTS") constitute the entire agreement, including with
respect to representations and warranties, between the parties pertaining to the
subject matter contained in the Agreements. All prior and contemporaneous
agreements, representations and understandings of the parties, oral or written,
are superseded by and merged in the Agreements. No supplement, modification or
amendment of the Agreements will be binding unless in writing and executed by
the parties to the Agreements.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
-----------------------------------
By:
Its:
▇▇▇▇▇▇▇-MTH BUILDERS, INC,
an Arizona corporation
-----------------------------------
By:
Its:
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC,
an Arizona corporation
-----------------------------------
By:
Its:
[SIGNATURE PAGE TO MASTER TRANSACTION AGREEMENT]
-51-
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HC BUILDERS, INC.,
an Arizona corporation
-----------------------------------
By:
Its:
▇▇▇▇▇▇▇ COMMUNITIES, L.L.C.,
an Arizona limited liability company
-----------------------------------
By:
Its:
[SIGNATURE PAGE TO MASTER TRANSACTION AGREEMENT]
-52-
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EXHIBIT A
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("AGREEMENT") is being executed as of June
___, 2001 (the "EFFECTIVE DATE"). among MERITAGE CORPORATION, a Maryland
corporation (the "MANAGER"), ▇▇▇▇▇▇▇-MTH BUILDERS, INC., an Arizona corporation
("BUILDERS") and ▇▇▇▇▇▇▇-MTH COMMUNITIES, INC., an Arizona corporation
("COMMUNITIES," and collectively with Builders, the "COMPANY"). Capitalized
terms used herein, and not otherwise defined, will have the meanings ascribed to
them in the Master Transaction Agreement dated as of May 7, 2001 (the "MASTER
AGREEMENT").
RECITALS
A. The Company will purchase all or substantially all of the assets of
the ▇▇▇▇▇▇▇ Communities Business pursuant to the Master Agreement. All
capitalized terms contained herein and not otherwise defined will have the
meaning ascribed to them in the Master Agreement.
B. ▇▇▇▇ ▇▇▇▇▇▇▇ will become President of the Company pursuant to an
Employment Agreement between himself, Manager and the Company (the "EMPLOYMENT
AGREEMENT").
C. The Company desires that Manager provide certain corporate services
and funding to the Company on the terms and conditions described herein, and
Manager wishes to provide such services and funding to commence on the Effective
Date.
AGREEMENT:
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in reliance upon the representations,
covenants and mutual agreements contained herein, the parties hereto agree as
follows:
1. DEFINITIONS.
A. "Capital" shall mean the sum of (i) the book value of the
Company's assets less (ii) non-interest bearing liabilities due third
parties (e.g., option and customer deposits, and trade payables), less
(iii) Retained Earnings.
B. "Retained Earnings" shall mean all of the Company's net
income beginning the first day of the first full month after the
Closing, after giving effect to (by way of reduction) any Earn-Out
Payments and taxes determined at the overall corporate rate of Manager
and its consolidated subsidiaries.
C. "Capital Charge" shall be the annual rate of 10.5%;
provided, however, that if ▇▇▇▇ ▇▇▇▇▇▇▇ voluntarily terminates his
employment with the Company or if ▇▇▇▇
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▇▇▇▇▇▇▇ is terminated for Cause (as defined in the Employment
Agreement), the Capital Charge will increase to 20%, and, provided,
further, that the Company will be charged on any direct financings to
the Company by a third party (which shall be limited to non-recourse
seller carryback financing to the extent permitted by Manager's credit
agreements), at the actual rate charged by the seller.
2. SERVICES FEE. Manager, or any of its affiliates, will provide
Services to the Company for a fee that is equal to any direct third-party costs
paid by Manager and the fee will not include overhead costs; provided, however,
that if ▇▇▇▇ ▇▇▇▇▇▇▇ voluntarily terminates his employment with the Company or
if ▇▇▇▇ ▇▇▇▇▇▇▇ is terminated for Cause (as defined in the Employment
Agreement), the Company will pay Manager a monthly fee equal to 1/12 of 5% of
the Company's annual revenues payable at the end of each month.
3. CAPITAL CHARGE. Manager, or its affiliates, will provide Capital to
the Company at an interest rate equal to the Capital Charge. The Company will
capitalize that portion of the Capital Charge deemed attributable to the
Company's pro rata share of the Manager's and its subsidiaries' consolidated
interest-bearing indebtedness that is capitalized in accordance with GAAP, and
will expense the balance. Schedule A hereto set forth a sample calculation.
4. TERM OF AGREEMENT; TERMINATION. The term of this Agreement shall
commence on the Effective Date and shall continue for a period of thirty-six
(36) months (the "TERM").
5. LIABILITIES. In furnishing the Company with the Services and Capital
as herein provided, neither Manager nor any of its officers, directors, or
agents shall be liable to the Company or its creditors, shareholders, officers,
or employees for errors of judgment or for anything except willful malfeasance,
bad faith, or gross negligence in the performance of its duties or reckless
disregard of its obligations and duties under the terms of this Agreement.
6. GOVERNING LAW AND VENUE. This Agreement shall be interpreted in
accordance with the substantive and procedural laws of the State of Arizona. Any
action at law or judicial proceeding instituted by either party relating to this
Agreement shall be instituted only in the state or federal courts of the State
of Arizona.
7. ASSIGNMENT. No party shall assign the rights, nor delegate the
duties existing hereunder, or otherwise dispose of any right, title, or interest
in, or any part of this Agreement, without the prior written consent of the
other party or parties.
8. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the parties and shall supersede all prior contracts, proposals,
representations, negotiations, or letters pertaining to the Services and
Capital, whether written or oral. The parties shall not be bound by, or be
liable for any statement, representation, promise, inducement, or understanding
of any kind not set forth in this Agreement. Changes of any of the provisions of
this Agreement shall not be valid unless rendered to writing and signed by both
parties.
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9. NO AGENCY. This Agreement shall not be deemed expressly or by
implication to create an agency, employee, or servant relationship between or
among any of the parties hereto, or any affiliates of the parties hereto for any
purpose whatsoever.
10. SEVERABILITY. Should any part, term, or condition hereof be
declared illegal or unenforceable or in conflict with any other law, the
validity of the remaining portions or provisions of this Agreement shall not be
affected thereby, and the illegal or unenforceable portions of the Agreement
shall be and hereby are redrafted to conform with applicable law, while leaving
the remaining portions of this Agreement intact.
11. SUCCESSORS AND ASSIGNS. This Agreement is solely for the benefit of
the parties and their respective successors and assigns. Nothing herein shall be
construed to provide any rights to any other entity or individual.
12. HEADINGS. Section headings are for convenience only and do not
control or affect the meaning or interpretation of any terms or provision of
this Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
MERITAGE CORPORATION,
a Maryland corporation
____________________________________________
By:
Its:
▇▇▇▇▇▇▇-MTH BUILDERS, INC.,
an Arizona corporation
____________________________________________
By:
Its:
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC.,
an Arizona corporation
____________________________________________
By:
Its:
Consent and Acknowledgement of ▇▇▇▇ ▇▇▇▇▇▇▇:
____________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[SIGNATURE PAGE TO MANAGEMENT AGREEMENT]
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SCHEDULE A
SAMPLE CAPITAL CHARGE CALCULATION
Meritage (w/▇ ▇▇▇▇▇▇▇) ▇▇▇▇▇▇▇ Total
---------------------- ------- -----
Assets $100 $50 $150
Non-Interest Bearing Liabilities 40 10 50
---- --- ----
"Deemed" Capital $ 60 $40 $100
Total interest bearing debt 60
----
Consolidated GAAP equity 40
----
Assume 10% interest rate on consolidated debt and for the Capital Charge.(1)
Assume 2/3 of the $6 in interest (10%) on consolidated debt (60) is capitalized
per GAAP.
▇▇▇▇▇▇▇ Capital Charge = 40 x 10% = 4
Amount capitalized = 50/150(2)(▇▇▇▇▇▇▇'▇ share of consolidated interest) x $6
(total consolidated interest) x 2/3 (the % capitalized) = $1.33.
Amount expensed = $4 (Capital Charge) less $1.33 = $2.67.
--------
(1) Actual Capital Charge is 10.5%.
(2) This is the ratio of ▇▇▇▇▇▇▇ Assets to Total Assets. Manager will use
▇▇▇▇▇▇▇ real estate inventory to total real estate inventory.
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EXHIBIT C
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "AGREEMENT") is effective as of June
___, 2001 by and among MERITAGE CORPORATION, a Maryland corporation ("PARENT"),
▇▇▇▇▇▇▇-MTH BUILDERS, INC., an Arizona corporation ("BUILDER BUYER"),
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC., an Arizona corporation ("SALES BUYER" and
collectively with Builder Buyer, the "COMPANY") and ▇▇▇▇ ▇▇▇▇▇▇▇, an individual
("EMPLOYEE"). All capitalized terms used herein and not otherwise defined shall
have the same meaning as set forth in the Master Transaction Agreement by and
among Parent, the Company and others dated May 7, 2001 ("MASTER AGREEMENT").
RECITALS
1. Pursuant to the Master Agreement, the Company will acquire all or
substantially all of the assets of the ▇▇▇▇▇▇▇ Communities Business.
2. Parent and the Company desire to obtain the consultation,
coordination and management services of Employee, and Employee desires to
provide such services to the Company, in accordance with the terms, conditions
and provisions of this Agreement.
3. Parent and the Company require, as a condition to the Closing and
payment of the Purchase Price, that Employee provide to the Company the
non-competition and confidentiality protections set forth herein.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in reliance upon the representations,
covenants and mutual agreements contained herein, Parent, the Company and
Employee agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions of this Agreement,
the Company agrees to employ Employee as President of the Company, and Employee
agrees to diligently perform the duties associated with such position,
including, but not limited to the duties and responsibilities listed on EXHIBIT
A attached hereto. Employee will report to a Co-CEO of the Parent (initially
▇▇▇▇ ▇▇▇▇▇▇). Employee will devote substantially all of his business time,
attention and energies to the business of the Company and will comply with the
policies and guidelines established by the Company from time to time applicable
to its senior management executives. However, Parent and Company acknowledge
that Employee is engaged in homebuilding with an entity called Diamond Crest
Homes in Los Angeles County and San Bernardino County, California, and is also
an owner and engaged in certain real estate development activities (but not
homebuilding) at Sundance in Maricopa County, Arizona, ▇▇▇▇▇▇▇▇ Boulevard in
Pinal County, Arizona, and with respect to the TASH, L.L.C. properties in
Maricopa County, Arizona (collectively, the "OUTSIDE ACTIVITIES"). Consequently,
Employee will, from time to time, devote some of his business time, attention
and energies to the Outside
59
Activities. Parent and the Company consent to such Outside Activities as, and in
the geographic areas, currently conducted provided they do not interfere in any
material respect with Employee's primary duties and responsibilities to the
Company.
2. TERM. Employee will be employed under this Agreement for a term of
three (3) years beginning on the date hereof (the "EFFECTIVE DATE") and ending
on the third anniversary of the Effective Date, unless Employee's employment is
terminated earlier pursuant to Section 7 or extended at the sole discretion of
Parent.
3. SALARY. The Company will pay Employee a base salary equal to
$395,000 per year, pro rated as appropriate ("BASE SALARY"), plus additional
compensation of $150,000 per year, pro rated, as appropriate, due and payable
within thirty days of each calendar year end, as compensation for his assistance
in operating the Meritage Phoenix division ("MERITAGE COMPENSATION"). Base
Salary will be payable bi-weekly in accordance with the payroll practices of the
Company as determined by Parent in effect from time to time. All of Employee's
compensation (but not benefits) under this Agreement will be subject to
deduction and withholding authorized or required by applicable law.
4. INCENTIVE COMPENSATION. Employee will be entitled to incentive
compensation based on the achievement of certain performance targets specified
in EXHIBIT B hereto, pro rated as appropriate (the "Bonus"). The Bonus will be
due and payable within thirty days of each calendar year end.
5. OPTION GRANT. Employee will be granted a four-year option to
purchase 15,000 shares of common stock of the Parent at an exercise price that
is equal to the market price of the Company's listed common stock as of the date
the option is granted, pursuant to the Stock Option Agreement in the form
attached as EXHIBIT C hereto, to be effective as of the date hereof, between the
Company and Employee. The option will be granted one day following the Closing
Date and will be subject to vesting at the rate of one-third (5,000 options) on
each of the next three anniversary dates of the Closing Date. Employee's option
rights will immediately vest in the event Employee is terminated by the Company
or Parent without Cause (as defined herein).
6. EMPLOYEE BENEFITS. During the term of this Agreement, the Company
will provide to Employee such fringe benefits and other employee benefits as are
regularly provided by Parent for its senior management (e.g., health and
long-term disability insurance, paid vacation, etc.); PROVIDED, HOWEVER, that
nothing herein shall preclude the Company or Parent from amending or terminating
any employee benefit plans or programs.
7. TERMINATION.
A. If Employee voluntarily terminates his employment with the
Company or if the Company discharges Employee for Cause (as defined
below), then the Company's obligations to pay the Base Salary and Bonus
under this Agreement will terminate immediately, except for the payment
of the Base Salary through the Date of Termination; PROVIDED, HOWEVER,
that in the event that "Cause" is attributed to Employee's willful
disregard of his primary duties to the Company, Employee must first be
notified by the
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Company in writing and be given 10 days to cure such action or inaction
to the reasonable satisfaction of the Company.
For purposes of this Agreement, "CAUSE" is defined to mean (i)
Employee's wrongful misappropriation of any money or other assets or
properties of the Company, or any subsidiary or affiliate of the
Company, resulting, or intended to result, directly or indirectly, in
substantial personal gain or enrichment to Employee; (ii) the
conviction of Employee for any felony; (iii) engagement by Employee in
conduct involving fraud, moral turpitude, dishonesty, gross misconduct,
embezzlement, theft, or similar matters that are materially detrimental
to the Company; or (iv) Employee's willful disregard of his primary
duties to the Company.
B. If Employee's employment with the Company is terminated by
the Company without Cause or as a result of Employee's death or
Disability (as defined below), then the Company will be obligated to
pay Employee's then current Base Salary and Meritage Compensation
pursuant to Section 3 for one year and Bonus pursuant to Section 4 for
the year in which termination occurs. For purposes hereof, "Disability"
means a disability (as reasonably determined by the Company by its
Board of Directors) that results in Employee being unable to fulfill
his duties under this Agreement for 90 consecutive days. Nothing
contained herein will affect or alter Employee's rights or privileges
under legislation such as ERISA, Americans with Disabilities Act or any
other existing or future federal or state employment related
legislation
C. For purposes of this Agreement, "Date of Termination" shall
mean (i) if the Agreement is terminated as a result of Employee's
death, the date of Employee's death, (ii) if the Agreement is
terminated by Employee, the date on which he delivers a notice of
termination to the Company, (iii) if this Agreement is terminated by
the Company for Disability, the date a notice of termination is given,
or (iv) if Employee's employment is terminated by the Company for any
other reason, the date on which a notice of termination is given to
Employee; or (v) upon Employee's voluntary resignation.
8. RESTRICTIVE COVENANT. In consideration of Employee's employment and
as an inducement for Company and Parent to enter into the Master Agreement,
Employee hereby agrees to the following:
A. For five years from the date of this Agreement ("FIRST
RESTRICTION PERIOD"), Employee will not, directly or indirectly, either
as an employee, partner, owner, lender, director, adviser or consultant
or in any other capacity or through any entity:
(1) except for Outside Activities as, and in the
geographic areas, currently conducted, engage in any
homebuilding business within 100 miles of any Company or
Parent project provided, however, that Employee may own less
than 1% of any publicly traded homebuilder.
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61
(2) recruit, hire or discuss employment with any
person who is, or within the six month period preceding the
date of such activity was, an employee of the Company or
Parent (other than as a result of a general solicitation for
employment);
(3) solicit any customer or supplier of the Company
or Parent for a Competing Business or otherwise attempt to
induce any such customer or supplier to discontinue its
relationship with the Company or Parent.
B. For three years from the date of this Agreement ("SECOND
RESTRICTION PERIOD"), Employee will not, directly or indirectly, either
as an employee, partner, owner, lender, director, adviser or consultant
or in any other capacity or through any entity:
(1) except for Outside Activities as, and in the
geographic areas, currently conducted, engage in any home
sales, land banking, or land development businesses within 100
miles of any Company or Parent project provided, however, that
Employee may be a passive investor, owning up to 25%, of any
land banking or land development project;
C. Employee represents to the Company that he is willing and
able to engage in businesses that are not competing businesses
hereunder and that enforcement of the restrictions set forth in this
Section 8 would not be unduly burdensome to Employee. Employee hereby
agrees that the period of time provided for in this Section 8 and other
provisions and restrictions set forth herein are reasonable and
necessary to protect the Company and its successors and assigns in the
use and employment of the goodwill of the business conducted by
Employee. Employee further agrees that damages cannot compensate the
Company in the event of a violation of this Section 8 and that, if such
violation should occur, injunctive relief shall be essential for the
protection of the Company and its successors and assigns. Accordingly,
Employee hereby covenants and agrees that, in the event any of the
provisions of this Section 7 shall be violated or breached, the Company
shall be entitled to obtain injunctive relief against the party or
parties violating such covenants, without bond but upon due notice, in
addition to such further or other relief as may be available at equity
or law. Obtainment of such an injunction by the Company shall not be
considered an election of remedies or a waiver of any right to assert
any other remedies which the Company has at law or in equity. No waiver
of any breach or violation hereof shall be implied from forbearance or
failure by the Company to take action thereof. The prevailing party in
any litigation, arbitration or similar dispute resolution proceeding to
enforce this provision will recover any and all reasonable costs and
expenses, including attorneys' fees.
D. Employee further agrees that the period of time in which
this Section 8 is in effect shall be extended for a period equal to the
duration of any breach of this Section 8 by Employee.
E. Notwithstanding anything to the contrary in this Section 8,
if Employee's employment with the Company is terminated by the Company
without Cause, the
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62
restrictions of this Section 8 will extend only for the period in which
▇▇▇▇ ▇▇▇▇▇▇▇ continues to receive compensation pursuant to Section 7B,
and will thereafter terminate.
9. CONFIDENTIAL INFORMATION AND NON-DISCLOSURE.
A. It is understood that in the course of Employee's
employment with Company, Employee will become acquainted with Company
Confidential Information (as defined in subsection 9D below). Employee
recognizes that Company Confidential Information has been developed or acquired
at great expense, is proprietary to the Company, and is and shall remain the
exclusive property of the Company. Accordingly, Employee agrees that he will
not, without the express written consent of the Company, during Employee's
employment with the Company and thereafter or until such time as Company
Confidential Information becomes generally known, or readily ascertainable by
proper means, by persons unrelated to the Company, disclose to others, copy,
make any use of, or remove from Company's premises any Company Confidential
Information, except as Employee's duties may specifically require.
B. Employee acknowledges and agrees that a breach by Employee
of the provisions of this Section 9 will cause Company irreparable injury and
damage that cannot be reasonably or adequately compensated by damages at law.
Employee expressly agrees that Company shall be entitled, without posting any
bond, to injunctive or other equitable relief to prevent a threatened breach,
breach or continued breach of this Section 9 in addition to any other remedies
legally available to it.
C. Upon termination, whether for Cause or not, Employee shall
promptly deliver to the Company the originals and all copies of any and all
materials, documents, notes, manuals, or lists containing or embodying Company
Confidential Information, or relating directly or indirectly to the business of
the Company, in the possession or control of Employee.
D. Employee agrees to pay any and all reasonable costs and
expenses, including attorneys' fees, incurred by the Company in enforcing this
provision if it is determined that Employee breached this provision.
E. "COMPANY CONFIDENTIAL INFORMATION" shall mean confidential,
proprietary information or trade secrets of Company including without limitation
the following: (1) customer lists and customer information as compiled by
Company; (2) Company's internal practices and procedures; (3) Company's
financial condition and financial results of operation to the extent not
generally available to the public; (4) supply of materials information,
including sources and costs; (5) information relating to designs or other
subject matter related to Company's business, strategic planning, manufacturing,
engineering, purchasing, finance, marketing, promotion, distribution, and
selling activities, whether now existing, or acquired, developed, or made
available anytime in the future to Company; (6) all information which Employee
has a reasonable basis to consider confidential or which is treated by Company
as confidential; and (7) any and all information having independent economic
value to Company that is not generally known to, and not readily ascertainable
by proper means by, persons who can obtain economic value from its disclosure or
use. Employee acknowledges that such information is Company Confidential
Information.
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63
10. SEVERABILITY. In the event that a court of competent jurisdiction
determines that the First Restriction Period is unenforceable, the First
Restriction Period shall mean the period ending at least 3 years from the
Effective date. If such alternative Second Restriction Period remains
unenforceable, the Second Restriction Period shall mean the period ending at
least 2 years after the Effective Date. If that alternative Second Restriction
Period remains unenforceable, the Second Restriction Period shall mean the
period ending at least 1 year after the Effective Date. In the event that a
court of competent jurisdiction determines that the Second Restriction Period is
unenforceable, the Second Restriction Period shall mean the period ending at
least 2 years from the Effective date. If such alternative First Restriction
Period remains unenforceable, the Second Restriction Period shall mean the
period ending at least 1 year after the Effective Date. Additionally, if any
provision of this Agreement is held to be illegal, invalid or unenforceable
under any applicable law, then such provision will be deemed to be modified to
the minimum extent necessary to render it legal, valid and enforceable, and if
no such modification will render it legal, valid and enforceable, then this
Agreement will be construed as if not containing the provision held to be
invalid, and the rights and obligations of the parties will be construed and
enforced accordingly.
11. INJUNCTIVE RELIEF. Employee acknowledges and agrees that the
Company would be irreparably harmed by any violation of Employee's obligations
under Sections 8 and 9 hereof and that, in addition to all other rights or
remedies available at law or in equity, the Company will be entitled to
injunctive and other equitable relief to prevent or enjoin any such violation.
12. ASSIGNMENT BY COMPANY. Nothing in this Agreement shall preclude the
Company from consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation or entity that assumes
this Agreement and all obligations and undertakings hereunder. Upon such
consolidation, merger or transfer of assets and assumption, the term "Company"
as used herein shall mean such other corporation or entity, as appropriate, and
this Agreement shall continue in full force and effect. Furthermore, the term
"Company" shall mean all joint ventures (50% or more owned by Company),
subsidiaries and parent companies of Company (whether corporate, partnership or
other form).
13. ENTIRE AGREEMENT. This Agreement embodies the complete agreement of
the parties hereto with respect to the subject matter hereof and supersedes any
prior written, or prior or contemporaneous oral, understandings or agreements
between the parties that may have related in any way to the subject matter
hereof. This Agreement may be amended only in writing executed by Parent, the
Company and Employee.
14. GOVERNING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the internal laws, and not the law of conflicts, of
the State of Arizona.
15. NOTICE. Any notice required or permitted under this Agreement must
be in writing and will be deemed to have been given when delivered personally or
by overnight courier service or three days after being sent by mail, postage
prepaid, at the address indicated below or to such changed address as such
person may subsequently give such notice of:
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if to Parent or Company: Meritage Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
if to Employee: ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (480) ____________
With a copy to: ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇, Esq.
16. ARBITRATION. Any dispute, controversy, or claim, whether
contractual or non-contractual, between the parties hereto arising directly or
indirectly out of or connected with this Agreement, relating to the breach or
alleged breach of any representation, warranty, agreement, or covenant under
this Agreement, unless mutually settled by the parties hereto, shall be resolved
by binding arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association (the "AAA"). Any arbitration shall be
conducted by arbitrators approved by the AAA and mutually acceptable to Company
and Employee. All such disputes, controversies, or claims shall be conducted by
a single arbitrator, unless the dispute involves more than $50,000 in the
aggregate in which case the arbitration shall be conducted by a panel of three
arbitrators. If the parties hereto are unable to agree on the arbitrator(s),
then the AAA shall select the arbitrator(s). The resolution of the dispute by
the arbitrator(s) shall be final, binding, nonappealable, and fully enforceable
by a court of competent jurisdiction under the Federal Arbitration Act. The
arbitrator(s) shall award compensatory damages to the prevailing party. The
arbitrator(s) shall have no authority to award consequential or punitive or
statutory damages, and the parties hereby waive any claim to those damages to
the fullest extent allowed by law. The arbitration award shall be in writing and
shall include a statement of the reasons for the award. The arbitration shall be
held in Phoenix, Arizona. The arbitrator(s) shall award reasonable attorneys'
fees and costs to the prevailing party.
17. WITHHOLDING; RELEASE. Employee acknowledges and agrees that the
Company may withhold against payments due Employee any such amounts required
under the withholding laws, as well as any other amounts payable by Employee to
Company.
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65
The Company's obligation to make any payments hereunder, other than
salary payments and expense reimbursements through the date of termination,
shall be subject to receipt by the Company from Employee of a mutually agreeable
release.
18. EARN-OUT. Nothing contained in this Agreement will modify the
Earn-Out payments payable by Parent and Company to Employee under the terms of
the Master Agreement.
19. SUCCESSORS AND ASSIGNS This Agreement is solely for the benefit of
the parties and their respective successors, assigns, heirs and legatees.
Nothing herein shall be construed to provide any right to any other entity or
individual.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
MERITAGE CORPORATION, a Maryland corporation
By: ______________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Co-Chief Executive Officer
By: ______________________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Co-Chief Executive Officer
▇▇▇▇▇▇▇-MTH BUILDERS, INC.,
an Arizona corporation
__________________________________________
By:
Its:
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC.,
an Arizona corporation
__________________________________________
By:
Its:
EMPLOYEE
__________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[SIGNATURE PAGE TO ▇▇▇▇ ▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT]
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EXHIBIT A
▇▇▇▇ ▇▇▇▇▇▇▇'▇ DUTIES AND RESPONSIBILITIES FOR CONTINUED OPERATIONS OF
"▇▇▇▇▇▇▇ COMMUNITIES"
The following include certain obligations and duties of ▇▇▇▇ ▇▇▇▇▇▇▇
under this Agreement:
- Operate the Company in a manner intended to continue its
profitability, with due regard to prudent operations and
general market conditions.
- Subject to the general oversight of the CEO designee and Board
of Directors of Parent, ▇▇▇▇ ▇▇▇▇▇▇▇ shall have daily
operating responsibility for product design, marketing,
pricing, purchasing, personnel and routine legal and
accounting matters.
- ▇▇▇▇ ▇▇▇▇▇▇▇ shall ensure that Buyer supplies Parent with
weekly closing and sales traffic reports and monthly operating
reports (by the 15th day of the following month).
- ▇▇▇▇ ▇▇▇▇▇▇▇ shall assist Parent in the following matters:
- Annual Audit - Meritage Auditors;
- Tax Returns - Meritage Tax Accountants
- Obtaining Liability Insurance - Meritage Broker
- Legal review
- Review of major legal issues
- Assist in financing, land banking and cash management
activities performed by Meritage
- Major business decisions shall require the prior written
consent and reasonable approval of Parent, including budgeting
and planning, new projects, land acquisition, financing, debt,
cash management and expansion into new product or market
areas;
- Parent shall manage liability, insurance, major legal issues,
audits, employee benefits and tax return presentation and
shall handle certain non-operating operations;
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EXHIBIT B
INCENTIVE COMPENSATION SCHEDULE
The Company shall pay Employee an annual performance based
cash bonus (the "Bonus") equal to $265,000 contingent upon Employee achieving
the following performance targets in that respective year:
- Target* is $12,494,000 Pre-Tax Net Income (as defined
in Master Agreement)
- 100% of Target = 100% bonus
- 90% - 99% of Target = 66% of bonus
- 89% -80% of Target = 33% of bonus
- less than 80% of Target = 0% of bonus
* Amount represents budgeted pre-tax net income from May through December
2001. Amount for 2002 and thereafter will be based on budgeted pre-tax
net income for the year.
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EXHIBIT C
STOCK OPTION AGREEMENT
QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made this _________ day of _________, by and between Meritage
Corporation, a corporation (the "Company") and ________________ (the Optionee").
WITNESSETH:
WHEREAS, the Optionee is now employed by the Company in a key capacity and the
Company desires to afford him/her the opportunity to acquire, or enlarge,
his/her stock ownership in the Company so that he may have a direct proprietary
interest in the Company's success;
NOW, THEREFORE, in consideration of the covenants and agreement herein
contained, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. Pursuant to the provisions of the Meritage Corporation
Stock Option Plan (the "Plan") the Company hereby grants to the
Optionee, subject to the terms and conditions of the Plan and subject
further to the terms and conditions herein set forth, the right and
option to purchase from the Company for cash all or any part of an
aggregate of _________ shares of Common Stock ($.01 par value) of the
Company at the purchase price of $_________ per share, such option to
be exercised as hereinafter provided. Such options shall vest in equal
increments of 20% of the total grant on _________, _________ and each
of the four subsequent _________ dates thereafter.
2. TERMS AND CONDITIONS. It is understood and agreed that the option
evidenced hereby is subject to the following terms and conditions:
a) EXPIRATION DATE. The option shall expire on _________ ___, ________.
3. EXERCISE OF OPTION. This option may be exercised, to the extent
exercisable by its terms, in whole or in part at anytime prior to the
expiration thereof. Any exercise shall be accompanied by a written
notice to the Company specifying the number of shares as to which the
option is being exercised.
a) PAYMENT OF PURCHASE PRICE UPON EXERCISE. At the time of any
exercise, the purchase price shall be paid in cash to the
Company.
b) EXERCISE UPON DEATH OR TERMINATION OF EMPLOYMENT.
i) If the Optionee shall cease to be employed by the
Company for any reason other than death, the Optionee
(except in the case of termination of employment in
the manner set forth in subparagraph (ii) of this
paragraph) may nevertheless exercise this Option to
the extent it is then exercisable within the three
month period following the date of such cessation of
employment, but not after the termination of such
three month period. If the Optionee shall die while
in the employ of the Company or within three months
following termination of such employment (except in
case of termination of employment in the manner set
forth in subparagraph (ii) of this paragraph) such
Option to the extent it is then exercisable may
nevertheless be exercised by the Optionee's personal
70
representative within the three month period
following the date of death of the Optionee, but not
after the termination of such three month period.
ii) If the Optionee ceases to be employed by the Company
by reason of his/her own volition (other than death)
or by reason of discharge by the Company for cause,
this Option shall expire to the extent that it is
unexercised at the time of such termination of
employment.
c) NON-TRANSFERABILITY. This option shall not be transferable
other than by will or by the laws of descent and distribution.
During the lifetime of Optionee, this option shall be
exercisable only by him/her.
d) ADJUSTMENTS. In the event of any change in the Common Stock of
the Company by reason of any stock dividend, recapitalization,
reorganization, merger, consolidated, split-up, combination or
exchange of shares, or of any similar change affecting the
Common Stock, then in any such event the number and kind of
shares subject to this option and their purchase price per
share shall be appropriately adjusted consistent with such
change in such manner as the Committee of the Plan may deem
equitable to prevent substantial dilution or enlargement of
the rights granted to Optionee hereunder. Any adjustment so
made shall be final and binding upon Optionee.
e) NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to any shares of Common Stock subject
to this option prior to the date of issuance to him/her or a
certificate or certificates for such shares. No adjustment
shall be made for dividends or distributions or other rights
with respect to such shares for which the record date is prior
to the date upon which he shall become the holder of record
thereof.
f) NO RIGHT TO CONTINUED EMPLOYMENT. This option shall not confer
upon Optionee any right with respect to continuance of
employment by the Company or any Subsidiary, nor shall it
interfere in any way with the right of his/her employer to
terminate his/her employment at any time.
g) COMPLIANCE WITH LAW AND REGULATIONS. This option and the
obligation of the Company to sell and deliver shares
hereunder, shall be subject to all applicable Federal and
State laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required.
4. INVESTMENT REPRESENTATION. If there is no Registration Statement in
effect covering the sale of the shares upon exercise, the Committee
appointed pursuant to the Plan may require Optionee to furnish to the
Company, prior to the issuance of any shares upon the exercise of all
or any part of this option, an agreement (in such form as such
Committee may specify) in which Optionee represents that the shares
acquired by him/her upon exercise are being acquired for investment and
not with a view to the sale or distribution thereof. The Committee may
further require that the certificates for the shares acquired by the
Optionee under this Option bear a special legend.
5. OPTIONEE BOUND BY PLAN. Optionee hereby acknowledges receipt of a copy
of the Plan and agrees to be bound by all the terms and provisions
thereof.
6. NOTICES. Any notice hereunder to the Company shall be addressed to it
at its office, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇: Attention: Chief Financial Officer, and any notice
hereunder to Optionee shall be addressed to him/her, either part may
designate some other address at any time hereafter in writing.
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IN WITNESS WHEREOF, Company has caused this Agreement to be executed by its
President or a Vice-President and Optionee has executed this Agreement, both as
of the day and year first above written.
_____________________________________
(Authorized Signature)
_____________________________________
Name of Individual
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EXHIBIT D
NON-DISCLOSURE AND NON-COMPETE AGREEMENT
This AGREEMENT (the "AGREEMENT"), is made as of June ___, 2001 (the
"EFFECTIVE DATE"), by and between MERITAGE CORPORATION, a Maryland corporation
("MERITAGE"), ▇▇▇▇▇▇▇-MTH BUILDERS, INC., an Arizona corporation ("BUILDERS")
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC., an Arizona corporation ("SALES" and collectively
with Builders, the "COMPANY"); and AMERICAN WEST HOMES, INCORPORATED, a Nevada
corporation ("AMERICAN WEST").
R E C I T A L S
1. American West owns a substantial interest in the homebuilding and
home sales operations of the ▇▇▇▇▇▇▇ Communities Business.
2. The assets of the ▇▇▇▇▇▇▇ Communities Business will be acquired by
the Company pursuant to a certain Master Transaction Agreement dated as of May
7, 2001 (the "MASTER AGREEMENT"). Capitalized terms not otherwise defined shall
have the meanings ascribed to them in the Master Agreement.
3. To induce Meritage and the Company to enter into the Master
Agreement, American West has agreed to execute this Agreement.
In consideration of the premises, the mutual promises and covenants of
the parties set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, American West,
intending to be legally bound, agrees as follows:
1. NONCOMPETITION. For the period beginning on the Effective Date and
ending on the third anniversary thereof (the "RESTRICTION PERIOD"), American
West, its subsidiaries and parent companies, and their respective owners,
officers and directors will not, directly or indirectly, either as a joint
venturer, partner, member, shareholder, owner, lender, director, adviser or
consultant (excluding consultation or advise made casually and without the
expectation of payment or economic gain) or in any similar capacity:
(i) engage in the homebuilding or home sales business in
Maricopa County (a "COMPETING BUSINESS");
(ii) recruit, hire or discuss employment with any person
who is, or within the six month period preceding the date of such activity was,
an employee of the Company (other than as a result of a general solicitation for
employment); or
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(iii) subject to the proviso below, solicit any customer
or supplier of the Company for a Competing Business or otherwise attempt to
induce any such customer or supplier to discontinue its relationship with
Meritage or the Company.
Notwithstanding the foregoing, after a period ending 18 months
from the Effective Date, American West, its affiliates, associates or
representatives may become a passive investor in a homebuilding enterprise in
Maricopa County; provided that American West, directly or indirectly, owns less
than 50% of the equity or profits of such enterprise. Further, nothing herein
will preclude American West or its affiliates, associates or representatives
from engaging in land banking activities.
2. PROTECTION OF INFORMATION. American West recognizes and acknowledges
that the Company's trade secrets and all other confidential and proprietary
information of a business, financial or other nature, including without
limitation, proprietary information of the Company, as it exists from time to
time (collectively, "CONFIDENTIAL INFORMATION"), are valuable and unique assets
of Meritage and the Company and therefore agrees that, during the Restriction
Period, it will not, and will use its best efforts to ensure that its directors,
officers, employees, advisers, agents and consultants do not, disclose any
Confidential Information concerning the Company and/or their subsidiaries or
affiliates, to any person, firm, corporation, association or other entity, for
any reason whatsoever, unless previously authorized in writing to do so by the
Company. It is understood that Confidential Information shall not include any
information that is or becomes generally available to the public other than as a
result of an unauthorized disclosure by American West, that is disclosed by
American West in accordance with the terms of a prior written consent of
Meritage, or that is owned jointly with the Company. For the purpose of
enforcing this provision, the Company may resort to any remedy available to it
under the law.
3. SEVERABILITY. In the event that a court of competent jurisdiction
determines that the Restriction Period is unenforceable, the Restriction Period
shall mean the period ending 24 months after the Effective Date of this
Agreement. If such alternative Restriction Period remains unenforceable, the
Restriction Period shall mean the period ending 12 months after the Effective
Date of this Agreement. Additionally, if any provision of this Agreement is held
to be illegal, invalid or unenforceable under any applicable law, then such
provision will be deemed to be modified to the minimum extent necessary to
render it legal, valid and enforceable, and if no such modification will render
it legal, valid and enforceable, then this Agreement will be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties will be construed and enforced accordingly.
4. WAIVER. The waiver by either party of a breach of any provision of
this Agreement by the other shall not operate or be construed as a waiver of any
subsequent breach.
5. INJUNCTIVE RELIEF. American West acknowledges and agrees that
Meritage and the Company would be irreparably harmed by any violation of
American West's obligations under Sections 1 and 2 hereof and that, in addition
to all other rights or remedies available at law or in
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equity, Meritage and the Company will be entitled to injunctive and other
equitable relief to prevent or enjoin any such violation. The prevailing party
in any litigation hereunder agrees to pay any and all reasonable costs and
expenses, including attorneys' fees, incurred by the other party.
6. ASSIGNMENT BY MERITAGE OR THE COMPANY. Nothing in this Agreement
shall preclude Meritage or the Company from consolidating or merging into or
with, or transferring all or substantially all of their assets to, another
corporation or entity that assumes this Agreement and all obligations and
undertakings hereunder. Upon such consolidation, merger or transfer of assets
and assumption, the term "Company" as used herein shall mean such other
corporation or entity, as appropriate, and this Agreement shall continue in full
force and effect. For purposes of Sections 1 and 2 hereof, the term "Company"
shall mean all joint ventures (50% or more owned by Company), subsidiaries and
parent companies of Company (whether corporate, partnership or other form).
7. ENTIRE AGREEMENT. This Agreement embodies the complete agreement of
the parties hereto with respect to the subject matter hereof and supersedes any
prior written, or prior or contemporaneous oral, understandings or agreements
between the parties that may have related in any way to the subject matter
hereof. This Agreement may be amended only in writing executed by Meritage and
American West.
8. GOVERNING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the internal laws, and not the law of conflicts, of
the State of Arizona.
9. NOTICE. Any notice required or permitted under this Agreement must
be in writing and will be deemed to have been given when delivered personally or
by overnight courier service or three days after being sent by mail, postage
prepaid, at the address indicated below or to such changed address as such
person may subsequently give such notice of:
if to Meritage or the Company: Meritage Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
if to American West: American West Homes, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
MERITAGE CORPORATION, a Maryland corporation
By:_____________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Co-Chief Executive Officer
By:_____________________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Co-Chief Executive Officer
▇▇▇▇▇▇▇-MTH BUILDERS, INC.,
an Arizona corporation
________________________________________
By:
Its:
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC.,
an Arizona corporation
________________________________________
By:
Its:
AMERICAN WEST HOMES, INCORPORATED,
a Nevada corporation
By:____________________________________
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
[SIGNATURE PAGE TO AMERICAN WEST NON-COMPETE AGREEMENT]
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EXHIBIT E
June __, 2001
Mr. ▇▇▇▇▇ ▇▇▇▇▇▇, co-CEO
Meritage Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇, co-CEO
Meritage Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Messrs. Hilton and ▇▇▇▇▇▇:
I am aware of and understand the importance of Meritage Corporation and
its subsidiaries, including ▇▇▇▇▇▇▇-MTH Builders, Inc. and ▇▇▇▇▇▇▇-MTH
Communities, Inc. (collectively, the "Company") in protecting their rights in
and to Proprietary Information as defined below. Furthermore, I understand the
role my adherence to the obligations contained herein will play in protecting
the Company and my co-workers.
Thus, in consideration of the payoff of the officer loans in connection
with the acquisition of the assets of the ▇▇▇▇▇▇▇ Communities by Meritage
Corporation and my employment by the Company, I agree to assume each of the
following obligations and to make the following grants:
1. Proprietary Information. I agree that I will promptly disclose to
the Company, in writing, all Proprietary Information generated, conceived,
developed or first reduced to practice by me alone, or in conjunction with
others, while I am an employee of the Company. I further agree to assign and do
assign to the Company all Proprietary Information generated, conceived,
developed or first reduced to practice by me alone, or in conjunction with
others, while I am an employee of the Company, unless the same shall be
specifically released to me in writing by the Company. I further agree to give
the Company all assistance it reasonably requires to perfect, protect, enforce
and use its rights in and to Proprietary Information without further
compensation to me.
2. Nondisclosure of Proprietary Information. Unless specifically
authorized in writing by the Company, during my employment and at all times
thereafter, I will not divulge or use any Proprietary Information, except in the
ordinary course of my employment with the Company, and will exercise my best
efforts to protect Proprietary Information from disclosure to or use by others.
Further, I will not accept any employment outside of the Company that would
involve the use or disclosure of Proprietary Information.
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3. Documents and Tangible Property. All documents, devices or other
tangible property relating in any way to the Company's business, including any
such documents, devices, or property that embody any Proprietary Information
that come into my possession during my employment are and shall remain the
property of the Company. I agree to return all such documents, devices and
tangible property to the Company upon the termination of my employment, or at
any other time requested in writing by the Company.
4. Non-Competition. I agree that for 36 months from the date that I am
first employed by the Company (the "Restriction Period"), I will not directly or
indirectly, either as an employee, partner, owner, director, adviser, or
consultant, or in any other capacity, engage in a Competing Business (as defined
below) in tandem with, in connection with or together with two or more of the
other ▇▇▇▇▇▇▇ Officers (as defined below); provided, however, that if my
employment with the Company is terminated by the Company without Cause, the
restrictions of this Section 4 will extend only for the period in which I
continue to receive compensation from the Company and will thereafter terminate.
5. Non-Solicitation of Employees and Clients. I agree that for 36
months from the date that I am first employed by the Company, I will not,
directly or indirectly: (a) induce or encourage or solicit any employee of the
Company to become employed by any competitor or potential competitor of the
Company or (b) attempt to divert any customer or supplier or prospective
customer or supplier of the Company with whom I, or any employees under my
supervision, had contact during the time of my employment to any competitor or
potential competitor of the Company.
6. Related Matters.
(a) Disclosure. I hereby agree that upon commencement of
my employment with any third party during the period
in which any of the terms contained herein are in
effect, I shall promptly disclose such terms to each
such new employer. I further agree and authorize the
Company to notify others, including suppliers and
customers of the Company and any such future
employers, of such terms and of my obligations
thereunder.
(b) Extension. I hereby agree that the period of time in
which the terms hereof are in effect shall be
extended for a period equal to the duration of any
breach of such terms.
(c) Survival of Provisions. The provisions of the terms
hereof will survive any termination of this letter
agreement.
(d) Enforcement. I agree to pay any and all reasonable
costs and expenses, including attorneys' fees,
incurred by the Company in enforcing the terms
hereof.
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78
7. Applicable Law. This letter agreement, and any disputes arising
under or in connection with it, shall be governed and construed in accordance
with the internal laws of the State of Arizona. I agree and understand that any
breach or threatened breach of this letter agreement shall cause irreparable
injury to the Company for which money damages would be an inadequate remedy.
Therefore, I consent to the issuance of an injunction restraining such breach or
threatened breach in addition to any other right or remedy available to the
Company.
8. Severability and Interpretation. The obligations I have undertaken
herein are independent of any other agreement with the Company and I agree that
the existence of any claim or cause of action against the Company shall not
constitute a defense to the enforcement by the Company of such obligations. In
the event that a court of competent jurisdiction determines that the Restriction
Period is unenforceable, the Restriction Period shall be reduce to at least 24
months. If such alternative Restriction Period remains unenforceable, the
Restriction Period shall be reduced to at least 12 months. I agree that if any
such obligations are held invalid by a court of competent jurisdiction, the
remaining obligations I have undertaken shall nevertheless be enforceable
according to their terms. Further, if any obligations I have undertaken are held
to be invalid or unenforceable by reason of the extent, duration or geographical
scope thereof, then I agree that the court making such determination may reduce
my obligations so as to be enforceable according to applicable law and enforce
such obligations as reduced.
9. Waiver. I agree that the Company's failure to enforce or its delay
in enforcing any of the terms contained herein or any similar agreement in any
instance shall not constitute a waiver of its rights against me with respect to
any violation or breach of the terms hereof.
10. Attorneys' Fees. In the event of any action to enforce any rights
or obligations arising hereunder, the prevailing party shall be entitled to
recover its reasonable attorneys' fees.
11. Other Agreements. I have not entered into any agreements
inconsistent with any of the terms hereof.
12. Definitions. As used herein:
(a) "Cause" means (i) employee's wrongful
misappropriation of any money or other assets or
properties of the Company, or any subsidiary or
affiliate of the Company, resulting, or intended to
result, directly or indirectly, in substantial
personal gain or enrichment to employee; (ii) the
conviction of employee for any felony; (iii)
engagement by employee in conduct involving fraud,
moral turpitude, dishonesty, gross misconduct,
embezzlement, theft, or similar matters that are
materially detrimental to the Company; or (iv)
employee's willful disregard of his primary duties to
the Company.
(b) "Competing Business" means any homebuilding, home
sales, land banking, or land development business or
project within 100 miles of any Company project;
except for (i) any involvement in Diamond Crest Homes
in Los
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Angeles County and San Bernardino County, California,
(ii) certain land development (but not homebuilding)
activities at Sundance in Maricopa County, Arizona
and ▇▇▇▇▇▇▇▇ Blvd. in Pinal County, Arizona, or (iii)
passive investment (up to 25%) in any land banking or
land development project.
(c) "▇▇▇▇▇▇▇ Officers" shall mean ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ and/or ▇▇▇▇▇▇▇
▇▇▇▇▇.
(d) "Proprietary Information" means any information
relating to the Company's business practices,
including, but not limited to trade secrets,
financial information, data, reports,
recommendations, plans, proposals, customer or
supplier lists and information, all methods,
concepts, and ideas reasonably related to the
business of the Company, sales and marketing plans
and techniques, and other documents of every
description disclosed to and made available to me by
the Company that is not generically known to, and not
readily ascertainable by proper means by, persons who
can obtain economic value from its disclosure or use.
I HAVE CAREFULLY READ THE TERMS AND PROVISIONS CONTAINED IN THIS LETTER
AGREEMENT AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS WHICH THEY IMPOSE UPON ME
WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO
INDUCE ME TO SIGN THIS LETTER AGREEMENT. I SIGN THIS LETTER AGREEMENT
VOLUNTARILY AND FREELY.
Employee:
_________________________________________
Signature
_________________________________________
Name (Printed)
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EXHIBIT F
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is effective as of the 7th day of May, 2001, by and among
MERITAGE CORPORATION, a Maryland corporation ("MERITAGE or PARENT"); ▇▇▇▇▇▇▇-MTH
BUILDERS, INC., an Arizona corporation ("BUILDER BUYER") ▇▇▇▇▇▇▇-MTH
COMMUNITIES, INC., an Arizona corporation ("SALES BUYER," and collectively with
Builder Buyer, "BUYERS"); EXETER HOLDING COMPANY, L.L.C., an Arizona limited
liability company ("EXETER"); HC BUILDERS, CORP., an Arizona corporation ("HC
BUILDERS or SELLER"); ▇▇▇▇▇▇▇ COMMUNITIES, L.L.C., an Arizona limited liability
company ("HC SALES or SELLER," and collectively with HC Builders, "SELLERS");
AMERICAN WEST HOMES, INCORPORATED, a Nevada corporation ("AMERICAN WEST or
OWNER"); and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual ("▇▇▇▇ ▇▇▇▇▇▇▇ or OWNER," and
collectively with American West, "OWNERS"). Collectively, Exeter, Sellers and
Owners will be referred to herein as "SELLING PARTIES."
RECITALS:
A. As of the date hereof, Parent, Buyers and Sellers entered into a
Master Transaction Agreement (the "MASTER AGREEMENT"), pursuant to which Buyers
have agreed to purchase from Sellers and Sellers have agreed to sell to Buyers
the assets of the ▇▇▇▇▇▇▇ Communities Business. Capitalized terms not otherwise
defined shall have the meanings ascribed to them in the Master Agreement.
B. As a material condition to the consummation of the Master Agreement,
Selling Parties, Buyers and Parent are willing to enter into this
Indemnification Agreement.
AGREEMENT:
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Selling Parties and Parent and Buyers agree as
follows:
1. INDEMNIFICATION OF PARENT AND BUYERS BY SELLING PARTIES. Subject to
the limitations set forth in Section 4 of this Agreement, Selling Parties will
indemnify and defend Parent and Buyers and their direct and indirect parent
companies, subsidiaries, and affiliates, and their respective officers,
directors, shareholders, successors and assigns, from and against any and all
costs, expenses, losses, damages, fines, penalties, or liabilities (including,
without limitation, interest which may be imposed in connection therewith, court
costs, litigation expenses, and reasonable attorneys' and accounting fees)
(collectively, "Losses") incurred by them, directly or indirectly, with respect
to, in connection with, arising from, or alleged to result from, arise out of,
or be in connection with:
A. A breach by any Selling Party of any representation, warranty,
covenant, restriction or agreement made by any Selling Party and contained
in the Master Agreement or in any certificate or other document delivered
by such parties to Parent or Buyer thereunder;
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B. Any Excluded Liabilities; or
C. Any other claim, contingency, debt, suit, cause of action,
investigation, or proceeding of any kind whatsoever, including those
listed on any disclosure schedule pursuant to the Master Agreement other
than Assumed Liabilities, whether instituted or commenced prior to or
after the Closing Date and which relates to or arises from the ▇▇▇▇▇▇▇
Communities Business or Acquired Assets on or before the Closing Date,
except for claims arising out of Buyers' liabilities to Selling Parties or
obligations to Selling Parties under the Master Agreement, Asset Agreement
or Real Property Agreement.
2. INDEMNIFICATION OF SELLING PARTIES BY BUYERS AND PARENT Buyers and
Parent each, jointly and severally, will indemnify and defend Selling Parties
and their direct and indirect parent companies, subsidiaries and affiliates, and
their respective officers, directors, shareholders, successors and assigns from
and against any Losses incurred by them, directly or indirectly, with respect
to, in connection with, arising from, or alleged to result from, arise out of,
or be in connection with:
A. A breach by any of the Buyers of any representation, warranty,
covenant, restriction or agreement made by Buyers and contained in the
Master Agreement or in any certificate or other document delivered by
Buyers to the Selling Parties thereunder;
B. Any Assumed Liabilities;
C. Any other claim, contingency, debt, suit, cause of action,
investigation, or proceeding of any kind whatsoever instituted or
commenced after the Closing Date which relates to or arises from Buyers'
operation of the ▇▇▇▇▇▇▇ Communities Business after the Closing Date,
except for any claims arising out of Selling Parties' liabilities to
Buyers or obligations to Buyers under the Master Agreement, Asset
Agreement or Real Property Agreement.
3. PROCEDURE FOR INDEMNIFICATION.
A. The party which is entitled to be indemnified hereunder (the
"Indemnified Party") shall promptly give notice hereunder to the party
required to indemnify (the "Indemnifying Party") after obtaining written
notice of any claim as to which recovery may be sought against the
indemnifying party because of the indemnity in Section 1 and Section 2
hereof and, if such indemnity shall arise from the claim of a third party,
shall permit the Indemnifying Party to assume the defense of any such
claim and any litigation resulting from such claim, PROVIDED THAT, Parent
or Buyers may, in their discretion, undertake, at Seller's cost and
expense, the defense of any claim for which Sellers are responsible
hereunder with respect to any incomplete project or subdivision purchased
by Buyers from Sellers. Notwithstanding the foregoing, the right to
indemnification hereunder shall not be affected by any failure of an
Indemnified Party to give such notice, or delay by an Indemnified Party in
giving such notice, unless, and then only to the extent that, the rights
and remedies of the Indemnifying Party shall have been prejudiced as a
result of the failure to give, or delay in giving, such notice. Failure by
an Indemnifying Party to notify an Indemnified Party of its election to
defend any such claim or action by
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a third party within 10 days after notice thereof shall have been given to
the Indemnifying Party shall be deemed a waiver by the Indemnifying Party
of its right to defend such claim or action.
B. If the Indemnifying Party assumes the defense of such claim or
litigation resulting therefrom, the obligations of the Indemnifying Party
hereunder as to such claim shall include taking all steps necessary in the
defense or settlement of such claim or litigation and holding the
Indemnified Party harmless from and against any and all damages caused by
or arising out of any settlement approved by the Indemnifying Party or any
judgment in connection with such claim or litigation. The Indemnifying
Party shall not, in the defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) except with the written consent of
the Indemnified Party, or enter into any settlement (except with the
written consent of the Indemnified Party) which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to
the Indemnified Party of a release from all liability in respect of such
claim or litigation. Anything in this Section 3 to the contrary
notwithstanding, the Indemnified Party may, with counsel of its choice and
at its expense, participate in the defense of any such claim or
litigation.
C. If the Indemnifying Party shall not assume the defense of any
such claim by a third party or litigation resulting therefrom after
receipt of notice from such Indemnified Party, the Indemnified Party may
defend against such claim or litigation in such manner as it deems
appropriate, and unless the Indemnifying Party shall deposit with the
Indemnified Party a sum equivalent to the total amount demanded in such
claim or litigation plus the Indemnified Party's estimate of the costs of
defending the same, the Indemnified Party may settle such claim or
litigation on such terms as it may deem appropriate and the Indemnifying
Party shall promptly reimburse the Indemnified Party for the amount of
such settlement and for all damages incurred by the Indemnified Party in
connection with the defense against or settlement of such claim or
litigation.
D. The Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of any judgment rendered with respect to
any claim by a third party in such litigation and for all damage incurred
by the Indemnified Party in connection with the defense against such claim
or litigation, whether or not resulting from, arising out of, or incurred
with respect to, the act of a third party.
4. LIMITS ON INDEMNITY.
A. The parties agree that the indemnification obligation of the
Selling Parties under Section 1 will be capped at a total amount of
$3,000,000. Notwithstanding anything in this paragraph to the contrary,
the $3,000,000 cap will not apply: (i) in the event of fraud or
intentional misstatement, (ii) for breach of any representation, warranty
or covenant regarding environmental or tax matters, or (iii) to any
Excluded Liability.
B. Selling Parties will have no obligation to indemnify Parent or
Buyer from and against any Losses resulting from, arising out of, relating
to or caused by breach of any representation, warranty, covenant,
restriction or agreement of the other party until
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the aggregate Losses suffered by reason of all such breaches is in excess
of $100,000, and then only for such loss in excess of $100,000.
Notwithstanding anything in this paragraph to the contrary, the $100,000
deductible will not apply to (i) Construction Claims brought by home
owners of Housing Units for which Sellers remain liable, (ii) any Excluded
Liability, or (iii) any indemnification obligation arising as the result
of fraud or intentional misstatement.
C. All claims by Parent or Buyers for indemnification, with
respect to ▇▇▇▇ ▇▇▇▇▇▇▇'▇ 45% share, will be satisfied by the Earn-Out set
forth in Section 2.5 of the Master Agreement (to the extent of (i)
$1,350,000 for the first 12 months after Closing, (ii) $675,000 for the
period beginning at the end of the 12th month after Closing and ending at
the end of the 24th month after Closing, and (iii) $0 thereafter; subject,
however, to any amount that Parent or Buyers are entitled to retain under
the provisions hereof, or that is disputed and subject to the
dispute-resolution provisions of Exhibit I of the Master Agreement).
D. With respect to the right to set-off against the Earn-Out
Payments, in lieu of seeking direct recourse against ▇▇▇▇ ▇▇▇▇▇▇▇, if as a
result of Buyer's operating performance Parent would be required to accrue
Earn-Out Payments to ▇▇▇▇ ▇▇▇▇▇▇▇ under generally accepted accounting
principles, Parent agrees that it will offset its Losses against such
accruals, PROVIDED, HOWEVER, that if the Earn-Out Payments are not
ultimately earned, ▇▇. ▇▇▇▇▇▇▇ will make payment directly to Parent for
the indemnified claim within 10 days of notice of such determination.
E. Parent and Buyers acknowledge that American West shall be
responsible to the extent of 55% of any indemnifiable Losses and ▇▇▇▇
▇▇▇▇▇▇▇ shall be responsible to the extent of 45% of any indemnifiable
Losses. Accordingly, Parent and Buyers shall seek reimbursement for
indemnification obligations in these proportions against them.
5. AGREEMENT TO BE BOUND. Selling Parties will use reasonable best
efforts to ensure that the Sellers comply with all representations and
warranties, covenants and agreements contained in or contemplated by the Master
Agreement and satisfy all conditions to the Closing, and they further agree that
Selling Parties shall be bound by the covenants and agreements contained in
Sections 2.5, 2.6, 6.3, 6.4, 6.5, and 6.6 of the Master Agreement, as if a
signatory thereto.
6. ARBITRATION. Any dispute, controversy or claim, whether contractual
or non-contractual, between Parent, Buyers and Selling Parties arising directly
or indirectly out of or connected with the Master Agreement, relating to the
breach or alleged breach of any representation, warranty, agreement, or covenant
under the Master Agreement, Asset Agreement or Real Property Agreement or
otherwise relating to the indemnification obligations set forth under this
Agreement, unless mutually settled by Parent and Selling Parties, shall be
resolved in accordance with the dispute resolution procedures attached as
EXHIBIT I to the Master Agreement, incorporated herein by this reference.
8. NOTICES. All notices, consents, and other communications hereunder
shall be in writing and deemed to have been duly given when (a) delivered by
hand, (b) sent by telecopier
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(with receipt confirmed), provided that a copy is mailed by registered mail,
postage pre-paid return receipt requested, or (c) when received by the
addressee, if sent by Express Mail, Federal Express, or other express delivery
service (postage pre-paid return receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate as to itself by notice
to the other):
If to Parent or Buyers: Meritage Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Selling Parties American West Homes, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
▇▇▇▇▇▇▇ Communities, L.L.C.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: The ▇▇▇▇▇▇▇ Law Group
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇, Esq.
9. MISCELLANEOUS. All obligations of Selling Parties hereunder shall be
joint and several. None of the rights of any party under this Agreement may be
transferred or assigned
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without the prior written consent of the other parties hereto. The captions
which precede the articles and the sections of this Agreement are for
convenience only and shall in no way affect the manner in which any provision
hereof is construed. Whether the context or circumstance requires, the singular
shall include the plural and the plural shall include the singular and the whole
shall include any part thereof and any gender shall include both other genders.
Each right or remedy required by the provisions of this Agreement shall be in
addition to and not in substitution of, any rights or remedies available or now
existing or hereafter arising under applicable law. Any rights or remedies
provided for by this Agreement or afforded by law or equity are distinct and
cumulative and may be exercised concurrently or independently or successively.
This Agreement supersedes all prior agreements, negotiations or understandings
between the parties hereto in any way related to the specific subject matter of
this Indemnification Agreement. None of the provisions of this Agreement may be
altered or modified except through an instrument in writing signed by all of the
parties hereto. All of the terms, provisions, agreements and undertakings herein
contained shall be binding upon and shall inure to the benefit of the respective
heirs, personal representatives, successors and assigns of the parties hereto.
This Agreement shall be governed by, construed in accordance with the laws of
the State of Arizona. The provisions of this Agreement are severable and should
any provision hereof be void, voidable or unenforceable under any applicable
law, such provision shall not affect or invalidate any other provision of this
Agreement, which shall continue to govern the relative rights and duties of the
parties as though the void, voidable or unenforceable provision were not a part
hereof. It is the intention and agreement of the parties that all of the terms
and conditions hereof shall be enforced to the fullest extent permitted by law.
All warranties, representation, indemnities, covenants and other agreements of
the parties hereto shall survive the execution and delivery of this Agreement
and shall, notwithstanding the execution and delivery of this Agreement,
continue in full force and effect; provided, however that the indemnity
provisions herein with respect to the representations and warranties set forth
in the Master Agreement will survive for the same period as set forth in Section
9.1 thereof (except as to claims outstanding on the date of expiration of the
survival period for which the applicable statute of limitations has not yet
expired). Nothing in this Agreement shall be deemed to amend or otherwise
diminish the rights and obligations of the parties under the Master Agreement,
except that if there should be any conflict between the terms of the Master
Agreement and this Agreement with respect to indemnification matters, the terms
of this Agreement shall govern. Further, nothing in this contract will apply to
the American West Non-Disclosure and Non-Compete Agreement, ▇▇▇▇ ▇▇▇▇▇▇▇'▇
Employment Agreement, the ▇▇▇▇▇▇▇ Officer's Non-Compete Agreement or the
Management Agreement, which shall be binding only on, enforceable against, and
inure to the benefit of the parties thereto and the other persons specifically
identified therein; and, further, nothing herein shall be deemed to preclude
Parent or Buyers from seeking injunctive or other equitable relief to enforce
any covenant not to compete or confidentiality provision
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first written above by their respective officers thereunder duly
authorized.
MERITAGE CORPORATION,
a Maryland corporation
__________________________________
By:
Its:
▇▇▇▇▇▇▇-MTH BUILDERS, INC.,
an Arizona corporation
__________________________________
By:
Its:
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC.,
an Arizona corporation
__________________________________
By:
Its:
AMERICAN WEST HOMES, INCORPORATED,
a Nevada corporation
__________________________________
By:
Its:
[SIGNATURE PAGE TO MERITAGE INDEMNIFICATION AGREEMENT]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first written above by their respective officers thereunder duly
authorized.
▇▇▇▇ ▇▇▇▇▇▇▇
__________________________________
EXETER HOLDING COMPANY, L.L.C.,
an Arizona limited liability company
__________________________________
By:
Its:
HC BUILDERS, INC.,
an Arizona corporation
__________________________________
By:
Its:
▇▇▇▇▇▇▇ COMMUNITIES, L.L.C.,
an Arizona limited liability company
__________________________________
By:
Its:
[SIGNATURE PAGE TO MERITAGE INDEMNIFICATION AGREEMENT]
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EXHIBIT G
When Recorded Return to:
______________________________
______________________________
______________________________
________________________________________________________________________________
SPECIAL WARRANTY DEED
FOR THE CONSIDERATION of Ten Dollars ($10.00), and other valuable
consideration, _____________________________________________ ("Grantor"), hereby
conveys to _____________________________________________ ("Grantee"), the real
property ("Property") situated in ________________ County, Arizona, and more
particularly described on Exhibit "A" attached hereto and made a part hereof,
together with all rights and privileges appurtenant thereto.
SUBJECT to current taxes and assessments, and to reservations in patents,
all easements, rights-of-way, encumbrances, liens, covenants, conditions,
restrictions, obligations, and liabilities as may appear of record, and to all
matters which an accurate survey of the Property would disclose.
And Grantor hereby binds itself and its successors to warrant and defend
the title, as against all acts of Grantor herein and none other, subject to the
matters above set forth.
Dated this _____ day of _____________, 2001.
______________________________________
By: __________________________________
Name:_________________________________
Title:________________________________
89
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this, the _______ day of __________, 2001, before me, the
undersigned Notary Public, personally appeared __________________________, who
acknowledges himself to be the ____________________________ of
__________________________, (a)n ______________ corporation, and that he as such
officer, being authorized so to do, executed the forgoing instrument for the
purposes therein contained by signing the name of the corporation by himself as
such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
______________________________________
Notary Public
My Commission Expires:
______________________
2
90
EXHIBIT H
▇▇▇▇ OF SALE AND ASSUMPTION AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that HC Builders, Inc., an Arizona
corporation and ▇▇▇▇▇▇▇ communities, LLC, an Arizona limited liability company
(collectively, "Sellers") do hereby sell, convey, transfer, assign and set over
unto ▇▇▇▇▇▇▇-MTH Builders, Inc., an Arizona corporation and ▇▇▇▇▇▇▇-MTH
Communities, Inc., an Arizona corporation (collectively, "Buyers"), and their
successors and assigns, all of Sellers' rights, title, and interest in and to
the Acquired Assets as that term is defined in that certain Master Transaction
Agreement by and among Meritage Corporation, a Maryland corporation ("Parent"),
Buyers and Sellers dated May 7, 2001 ("Master Agreement"). Capitalized terms
used herein and not otherwise defined will have the same meaning as set forth in
the Master Agreement.
As contemplated by the Master Agreement, all Excluded Assets and
Excluded Liabilities will remain with Sellers; provided that Buyers will acquire
the Reserves and will administer the Unassumed Construction Claims. Buyers
hereby assume and agree to pay and perform when due the Assumed Liabilities.
As provided in the Master Agreement, Sellers represent, warrant and
covenant that they are the lawful owners of the Acquired Assets, free from all
liens, claims and encumbrances except as provided in the Master Agreement and
the schedules thereto. Sellers will warrant and defend the same to Parent and
Buyers and their successors and assigns in accordance with the terms and
provisions of the Master Agreement and the Indemnification Agreement.
Sellers hereby constitute and appoint Buyers, their successors and
assigns, the true and lawful attorneys of Sellers, with full power of
substitution, for Sellers and in their name and ▇▇▇▇▇ or otherwise, by and on
behalf and for the benefit of Buyers, their successors and assigns, to demand
and receive from time to time any and all of the Acquired Assets and to give
receipts and releases for or in respect of the same and any part thereof, and
from time to time to institute and prosecute in the name of Sellers or
otherwise, but at the expense and for the benefit of Buyers, their successors
and assigns, any and all proceedings at law, in equity, or otherwise which
Buyers, their successors and assigns, may deem proper in order to collect,
assert, or enforce any claim, right, or title of any kind in or to the Acquired
Assets and to defend or compromise any and all actions, suits, or proceedings in
respect of any of the Acquired Assets and to do all such acts and things in
relation thereto as Buyers, their successors or assigns, deem desirable. Sellers
hereby declare that the appointment made and the powers hereby granted are
coupled with an interest and are and will be irrevocable by Sellers in any
manner or for any reason.
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Sellers covenant with Buyers that each will do, execute, and deliver
or cause to be done, executed, and delivered all such further acts, documents,
or things, including without limitation, transfers, assignments, conveyances,
powers of attorney, and assurances for better assuring, conveying, and
confirming unto Buyers, their successors and assigns, all and singular, the
entire right, title, and interest of Sellers throughout the world in, to, and
under the Acquired Assets as Buyers, their successors and assigns, reasonably
require.
This ▇▇▇▇ of Sale and Assumption Agreement will inure to the benefit
of, and will bind Sellers and Buyers and their respective successors and
assigns.
[The Remainder of this Page left Intentionally Blank]
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IN WITNESS WHEREOF, the undersigned Sellers and Buyers have executed this
▇▇▇▇ of Sale and Assumption Agreement to be effective as of the ____ day of
______, 2001.
BUYERS
▇▇▇▇▇▇▇-MTH BUILDERS, INC,
an Arizona corporation
__________________________________
By:
Its:
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC,
an Arizona corporation
__________________________________
By:
Its:
▇▇▇▇▇▇▇
▇▇ BUILDERS, INC.,
an Arizona corporation
__________________________________
By:
Its:
▇▇▇▇▇▇▇ COMMUNITIES, L.L.C.,
an Arizona limited liability company
__________________________________
By:
Its:
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EXHIBIT I
DISPUTE RESOLUTION PROCEDURES
All claims, disputes and other matters in controversy (herein called
"DISPUTE") arising directly or indirectly out of or related to this Agreement or
the American West Non-Compete Agreement (collectively, the "Agreements" and
individually, an "Agreement"), or the breach thereof, whether contractual or
noncontractual, and whether during the term or after the termination of such
Agreement, shall be resolved exclusively according to the procedures set forth
in this EXHIBIT I.
A. Negotiation. The parties shall attempt to settle disputes
arising out of or relating to the Agreement or the breach thereof by a meeting
of two designated representatives of each party within five (5) days after a
request by either of the parties to the other party asking for the same.
B. Mediation. If such dispute cannot be settled at such meeting
either party within five (5) days of such meeting may give a written notice (a
"DISPUTE NOTICE") to the other party setting forth the nature of the dispute.
The parties shall attempt in good faith to resolve the dispute by mediation in
Phoenix, Arizona under the Commercial Mediation Rules of the American
Arbitration Association ("AAA") in effect on the date of the Dispute Notice. The
parties shall select a person who will act as the mediator under this Paragraph
B within 60 days of the date of the Agreement. If the dispute has not been
resolved by mediation as provided above within thirty (30) days after delivery
of the Dispute Notice, then the dispute shall be determined by arbitration in
accordance with the provisions of Paragraph C hereof.
C. Arbitration. Any dispute that is not settled through mediation
as provided in Paragraph B above shall be resolved by arbitration in Phoenix,
Arizona, governed by the Federal Arbitration Act, 9 U.S.C. Section 1 et seq, and
administered by the AAA under its Commercial Arbitration Rules in effect on the
date of the Dispute Notice, as modified by the provisions of this Section C, by
a single arbitrator. The arbitrator selected, in order to be eligible to serve,
shall be a lawyer with at least 15 years experience specializing in business
matters. In the event the parties cannot agree on a mutually acceptable single
arbitrator from the list submitted by the AAA, the AAA shall appoint the
arbitrator who shall meet the foregoing criteria. The arbitrator shall base the
award on applicable law and judicial precedent and, unless both parties agree
otherwise, shall include in such award the findings of fact and conclusions of
law upon which the award is based. Judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
Notwithstanding the foregoing:
(a) Upon the application by either party to a court for
an order confirming, modifying or vacating the award, the court shall have the
power to review whether, as a matter of law based on the findings of fact
determined by the arbitrator, the award should be confirmed, modified or vacated
in order to correct any errors of law made by the arbitrator. In order to
effectuate such judicial review limited to issues of law, the parties agree (and
shall stipulate to the court) that the findings of fact made by the arbitrator
shall be final and binding on the parties
94
and shall serve as the facts to be submitted to and relied on by the court in
determining the extent to which the award should be confirmed, modified or
vacated.
(b) Either party shall have the right to apply to any
court for an order to enforce any of the ownership and confidentiality
provisions contained in the Agreement.
D. Costs and Attorneys' Fees. If either party fails to proceed
with mediation or arbitration as provided herein or unsuccessfully seeks to stay
such mediation or arbitration, or fails to comply with any arbitration award, or
is unsuccessful in vacating or modifying the award pursuant to a petition or
application for judicial review, the other party shall be entitled to be awarded
costs, including reasonable attorneys' fees, paid or incurred by such other
party in successfully compelling such arbitration or defending against the
attempt to stay, vacate or modify such arbitration award and/or successfully
defending or enforcing the award.
E. Tolling of Statute of Limitations. All applicable statutes of
limitations and defenses based upon the passage of time shall be tolled while
the procedures specified in this EXHIBIT I are pending. The parties will take
such action, if any, required to effectuate such tolling.
95
EXHIBIT J
AGREEMENT OF PURCHASE AND SALE OF ASSETS
BY AND AMONG
MERITAGE CORPORATION,
▇▇▇▇▇▇▇-MTH BUILDERS, INC.,
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC.,
HC BUILDERS, INC.
AND
▇▇▇▇▇▇▇ COMMUNITIES, L.L.C.
Dated May 7, 2001
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AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS (the "AGREEMENT") is made
as of May 7, 2001, by and among MERITAGE CORPORATION, a Maryland corporation
("MERITAGE or PARENT"); ▇▇▇▇▇▇▇-MTH BUILDERS, INC., an Arizona corporation
("BUILDER BUYER"); ▇▇▇▇▇▇▇-MTH COMMUNITIES, INC., an Arizona corporation ("SALES
BUYER," and collectively with Builder Buyer, "BUYERS"); HC BUILDERS, INC., an
Arizona corporation ("HC BUILDERS" or "SELLER"), and ▇▇▇▇▇▇▇ COMMUNITIES,
L.L.C., an Arizona limited liability company ("HC SALES" or "SELLER," and
collectively with HC Builders, "SELLERS").
RECITALS
1. Pursuant to this Agreement, Buyers will acquire all or
substantially all of the non-real property assets of the ▇▇▇▇▇▇▇ Communities
Business.
2. The parties to this Agreement have concurrently entered into a
Master Transaction Agreement ("MASTER AGREEMENT"), Agreement of Purchase and
Sale of Real Property ("REAL PROPERTY AGREEMENT"), Escrow Agreement, and
Indemnification Agreement, all described in the Master Agreement. All
capitalized terms contained herein but not otherwise defined will have the
meaning ascribed to it in the Master Agreement.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in reliance upon the representations and
warranties contained herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Agreement. This Agreement, together with the Master Agreement
and Indemnification Agreement, each incorporated herein by reference, will
constitute a binding contract on the part of Sellers to sell and Buyers to
purchase certain assets of the ▇▇▇▇▇▇▇ Communities Business unrelated to real
property.
1.2 Assets to be Purchased. Upon the terms and subject to the
conditions set forth herein and in the Master Agreement, and in reliance on the
respective representations and warranties of the parties contained herein and in
the Master Agreement, at the Closing, (i) HC Builders agrees to sell, convey,
grant, assign, and transfer to Builder Buyer and Builder Buyer agrees to
purchase and acquire from HC Builders all of the Assets, held by HC Builders,
and (ii) HC Sales agrees to sell, convey, grant. assign and transfer to Sales
Buyer and Sales Buyer agrees to purchase and acquire from HC Sales all of the
Assets held by HC Sales. The term "ASSETS" will mean:
A. All assets disclosed on the Closing Balance Sheet,
except for the Real Property Assets (as defined in the Real Property
Agreement);
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97
B. Any cash, cash equivalents, current assets, accounts
receivable and notes receivable;
C. All prepaid expenses, a list and description of which
is set forth on SCHEDULE 1.2;
D. All equipment, furniture, furnishings, inventory,
machinery, software, supplies, tools, vehicles, and other personal
property owned or leased by Sellers, as listed and described on
SCHEDULE 1.2;
E. All rights and benefits in all (1) processes,
know-how, technical data, and other trade secrets; (2) sales forms and
promotional and advertising materials; (3) copyrights, patents,
trademarks, and applications, registrations, and renewals with respect
thereto; (4) customer, supplier and contractor lists, (5) software
licensing and equipment rental agreements associated with computers or
data processing, and (6) goodwill associated therewith. Additionally,
▇▇▇▇ ▇▇▇▇▇▇▇ and Sellers hereby grant to Buyers an exclusive license to
use the names "▇▇▇▇▇▇▇ Homes" and "▇▇▇▇▇▇▇ Communities," and all
variations of or derivations from such names and any and all logos used
in connection therewith for a period of six years from the date of the
Closing. The foregoing is hereinafter referred to as the "INTELLECTUAL
PROPERTY";
F. All of the books, instruments, papers, and records of
whatever nature and wherever located, whether in written form or
another storage medium, including without limitation (1) accounting and
financial records; (2) property records and reports; (3) environmental
records and reports; (4) personnel and labor relations records; and (5)
property, sales, or transfer tax records and returns; PROVIDED,
HOWEVER, that such books, instruments, papers, and records shall
exclude any documents relating exclusively to the Excluded Assets;
G. To the extent transferable, all the right, title, and
interest in all approvals, authorizations, certificates, consents,
franchises, licenses, permits, rights, variances, subdivision maps,
plans, entitlements, and waivers acquired, being acquired, applied for,
or used, and all agreements with, and any waivers, licenses, permits,
and approvals from or to any governmental or quasi-governmental agency,
department, board, commission, bureau or any other entity or
instrumentality, and other authorities in the nature thereof, all as
related to the Assets, a list and description of which is set forth on
SCHEDULE 1.2; and
H. All rights and benefits in, to and under all vendor,
supplier and equipment lessor agreements concerning any supplies,
services, equipment and furniture utilized for office purposes.
1.3 Purchase Price. The purchase price to be paid by Buyers for
the Assets will be as provided in Section 2.5 of the Master Agreement.
1.4 Closing. Articles VII and VIII of the Master Agreement is
incorporated herein by reference as applicable.
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98
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYERS
2.1 Incorporation by Reference. The representations and warranties
contained in Article III of the Master Agreement are incorporated herein by
reference.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLERS
3.1 Incorporation by Reference. The representations and warranties
contained in Article IV of the Master Agreement are incorporated herein by
reference.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper,
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including obtaining all necessary
waivers, consents, and approvals and effecting all necessary registrations and
filings and submissions of information requested by governmental authorities.
Sellers agree that they, at any time before or after the Closing, will execute,
acknowledge, and deliver any further deeds, assignments, conveyances, and other
assurances, documents, and instruments of transfer reasonably requested by
Parent, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by Parent, for the purpose of
assigning, transferring, granting, conveying, and confirming to Buyers, or
reducing to possession, any or all property to be conveyed and transferred by
this Agreement. If requested by Parent or Buyers, Sellers further agree to
prosecute or otherwise enforce in its name for the benefit of Parent or Buyers,
any claims, rights, or benefits that are transferred to Buyers by this Agreement
and that require prosecution or enforcement in its name. Any prosecution or
enforcement of claims, rights, or benefits under this Section shall be solely at
Buyers' expense, unless the prosecution or enforcement is made necessary by a
breach of this Agreement by Sellers. After the Closing and for a period of 6
months, the parties will cooperate in good faith and use commercially reasonable
efforts to resolve any issues which may arise in the transition of the ▇▇▇▇▇▇▇
Communities Business.
ARTICLE V
GENERAL PROVISIONS
5.1 Notices. All notices, consents, and other communications
hereunder shall be in writing and deemed to have been duly given when (a)
delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, postage pre-paid return receipt
requested, or (c) when received by the addressee, if sent by Express Mail,
Federal Express, or other express delivery service (postage pre-paid return
receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate as to itself by notice to the other):
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99
If to Buyers: Meritage Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Sellers American West Homes, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
▇▇▇▇▇▇▇ Communities, L.L.C.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: The ▇▇▇▇▇▇▇ Law Group
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇, Esq.
5.2 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute one and the same agreement.
5.3 Governing Law. The validity, construction, and enforceability
of this Agreement shall be governed in all respects by the laws of the State of
Arizona, without regard to its conflict of laws rules.
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5.4 Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that Buyers may assign all or any portion of its
rights under this Agreement to any wholly owned subsidiary, but no such
assignment shall relieve Buyers or their successor of their primary liability
for all obligations of Buyers hereunder, and except that this Agreement may be
assigned by operation of law to any corporation or entity with or into which
Buyers may be merged or consolidated or to which Buyers transfer all or
substantially all of their assets, and such corporation or entity assumes this
Agreement and all obligations and undertakings of Buyers hereunder. Any
assignment in violation of the provisions of this Agreement shall be null and
void.
5.5 Gender and Number. The masculine, feminine, or neuter pronouns
used herein shall be interpreted without regard to gender, and the use of the
singular or plural shall be deemed to include the other whenever the context so
requires.
5.6 Schedules and Exhibits. The Schedules and Exhibits referred to
in this Agreement and attached to this Agreement are incorporated in this
Agreement by such reference as if fully set forth in the text of this Agreement.
5.7 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof shall, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
5.8 Costs. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees, accounting fees, and
other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.
5.9 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
5.10 Severability. If any term, provision, covenant, or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated and the court shall modify this
Agreement or, in the absence thereof, the parties shall negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement.
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5.11 Binding Effect. Subject to the provisions and restrictions of
Section 5.4, the provisions of this Agreement are binding upon and will inure to
the benefit of the parties and their respective heirs, personal representatives,
successors and assigns.
5.12 Construction. References in this Agreement to "Sections",
"Articles", "Exhibits", and "Schedules" are to the Sections and Articles in, and
the Exhibits and Schedules to, this Agreement, unless otherwise noted.
5.13 Time Periods. Except as expressly provided for in this
Agreement, the time for performance of any obligation or taking any action under
this Agreement will be deemed to expire at 5:00 o'clock p.m. (Phoenix, Arizona
time) on the last day of the applicable time period provided for in this
Agreement. If the time for the performance of any obligation or taking any
action under this Agreement expires on a Saturday, Sunday or legal holiday, the
time for performance or taking such action will be extended to the next
succeeding day which is not a Saturday, Sunday or legal holiday.
5.14 Headings. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of this
Agreement.
5.15 Entire Agreement. This Agreement, the Real Property Agreement,
the Master Agreement and the Indemnification Agreement and all certificates,
schedules and other documents attached to or deliverable under such agreements
(collectively, the "AGREEMENTS") constitute the entire agreement, including with
respect to representations and warranties, between the parties pertaining to the
subject matter contained in the Agreements. All prior and contemporaneous
agreements, representations and understandings of the parties, oral or written,
are superseded by and merged in the Agreements. No supplement, modification or
amendment of the Agreements will be binding unless in writing and executed by
the parties to the Agreements.
5.16 Arbitration. Any disputes arising hereunder will be resolved
pursuant to the dispute resolution provisions of EXHIBIT I to the Master
Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
__________________________________
By:
Its:
▇▇▇▇▇▇▇-MTH BUILDERS, INC,
an Arizona corporation
__________________________________
By:
Its:
▇▇▇▇▇▇▇-MTH COMMUNITIES, INC,
an Arizona corporation
__________________________________
By:
Its:
[SIGNATURE PAGE TO ASSET AGREEMENT]
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HC BUILDERS, INC.,
an Arizona corporation
____________________________________
By:
Its:
▇▇▇▇▇▇▇ COMMUNITIES, L.L.C.,
an Arizona limited liability company
____________________________________
By:
Its:
[SIGNATURE PAGE TO ASSET AGREEMENT]
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EXHIBIT K
AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY
BY AND AMONG
MERITAGE CORPORATION,
▇▇▇▇▇▇▇-MTH BUILDERS, INC.,
AND
HC BUILDERS, INC.
Dated May 7, 2001
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AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY
This AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY (the "AGREEMENT")
is made as of May 7, 2001, by and among MERITAGE CORPORATION, a Maryland
corporation ("MERITAGE or PARENT"); ▇▇▇▇▇▇▇-MTH BUILDERS, INC., an Arizona
corporation ("BUILDER BUYER" or "BUYER"); and HC BUILDERS, INC., an Arizona
corporation ("HC BUILDERS" or "SELLER").
RECITALS
1. Pursuant to this Agreement, Buyer will acquire all or
substantially all of the real property assets of the ▇▇▇▇▇▇▇ Communities
Business.
2. Although not a condition to Closing, Parent and Buyer
anticipate financing the acquisition of the real property assets of the ▇▇▇▇▇▇▇
Communities Business using the proceeds of a new bridge financing or the sale of
notes pursuant to Rule 144A under the Securities Act of 1933.
3. The parties to this Agreement have concurrently entered into a
Master Transaction Agreement ("MASTER AGREEMENT"), Agreement of Purchase and
Sale of Assets ("ASSET AGREEMENT"), and Indemnification Agreement, all described
in the Master Agreement. All capitalized terms contained herein but not
otherwise defined will have the meaning ascribed to them in the Master
Agreement.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in reliance upon the representations and
warranties contained herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF REAL PROPERTY
1.1 Agreement. This Agreement, together with the Master Agreement
and Indemnification Agreement, each incorporated herein by reference, will
constitute a binding contract on the part of Seller to sell and Buyer to
purchase certain real property assets of the ▇▇▇▇▇▇▇ Communities Business.
1.2 Real Property Assets to be Purchased. Upon the terms and
subject to the conditions set forth herein and in the Master Agreement, and in
reliance on the respective representations and warranties of the parties
contained herein and in the Master Agreement, at the Closing, HC Builders agrees
to sell, convey, grant, assign, and transfer to Builder Buyer and Builder Buyer
agrees to purchase and acquire from HC Builders all of the Real Property Assets.
The "REAL PROPERTY ASSETS" will include, but are not limited to the following:
A. All real property assets, whether or not disclosed on
the Closing Balance Sheet, including all (1) land and buildings,
fixtures, and improvements located thereon or attached thereto; (2)
lots under development and finished lots, and all houses under
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development, completed homes, and model homes; (3) all land under
lease, contract or option; and (4) easements, franchises, licenses,
permits, and rights-of-way appurtenant to or otherwise benefiting, and
all development rights, mineral rights, water rights, utility capacity
reservations, and other rights and appurtenances affecting or
pertaining to, the items described in Clauses (1), (2) and (3)
(collectively, the "REAL PROPERTY"). SCHEDULE 5.2 as referenced in
Section 5.2 sets forth the Reports or a listing of the Reports in
respect of the Real Property;
B. All rights and benefits in, to and under all (1)
leases, purchase contracts, and option agreements for the purchase of
lots or land for development and related escrow instructions and
deposits; (2) sale agreements or other contracts and related escrow
instructions and escrow deposits relating to the sale of lots, homes or
other aspects of the Real Property; (3) contracts with suppliers,
materialmen, contractors, subcontractors and others furnishing any work
or materials to or for any of the Real Property; (4) reimbursement and
indemnity agreements pertaining to or of any improvement, performance,
payment, maintenance, fidelity, lien release, or other bonds,
undertakings or similar sureties; (5) contracts with architects,
designers, engineers, planners, environmental consultants, surveyors,
and other consultants; (6) commission, listing and brokerage
agreements; (7) office leases; (8) management service and construction
supervisor contracts or agreements; and (9) model home furniture,
fixtures and equipment leases and any model home lease or sale
agreements (collectively, the "ACQUIRED CONTRACTS"). SCHEDULE 1.2 sets
forth a listing of the Acquired Contracts;
C. All rights and benefits in all (1) architectural,
building, and engineering designs, drawings, specifications, and plans;
(2) all proprietary information or rights including any and all plans,
and other project related information of prior and currently active
real estate projects; (3) copyrights, patents, trademarks, and
applications, registrations, and renewals with respect thereto; and (4)
goodwill associated therewith. The names "▇▇▇▇▇▇▇ Homes" and "▇▇▇▇▇▇▇
Communities" shall be subject to the license provisions set forth in
Section 1.2E of the Asset Agreement. The foregoing is hereinafter
referred to as the "INTELLECTUAL PROPERTY";
D. To the extent transferable, all the right, title, and
interest in all approvals, authorizations, certificates, consents,
franchises, licenses, permits, rights, variances, subdivision maps,
plans, entitlements, and waivers acquired, being acquired, applied for,
or used, and all agreements with, and any waivers, licenses, permits,
and approvals from or to any governmental or quasi-governmental agency,
department, board, commission, bureau or any other entity or
instrumentality, and other authorities in the nature thereof, all as
related to the Real Property, a list and description of which is set
forth on SCHEDULE 1.2; and
E. All rights and benefits under any manufacturer's,
subcontractor's, supplier's, merchant's, repairmen's, or other
third-party warranties, guarantees, and service or replacement programs
relating to Assumed Construction Claims.
1.3 Purchase Price. The purchase price to be paid by Buyer for the
Real Property Assets will be as provided in Section 2.5 of the Master Agreement.
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1.4 Closing. Articles VII and VIII of the Master Agreement are
incorporated herein by reference as applicable; provided, that all references to
"Buyers" therein will be read as the Buyer named in this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
2.1 Incorporation by Reference. The representations and warranties
contained in Article III of the Master Agreement are incorporated herein by
reference; provided that all references to "Buyers" will be read as the Buyer
named in this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
3.1 Incorporation by Reference. The representations and warranties
contained in Article IV of the Master Agreement are incorporated herein by
reference; provided that all references to "Buyers" will be read as the Buyer
named in this Agreement.
ARTICLE IV
CONDUCT OF SELLER PENDING THE CLOSING
Section 5.1 of the Master Agreement is incorporated herein by reference
as applicable; provided that all references to "Buyers" will be read as the
Buyer named in this Agreement. In addition, Seller hereby covenants and agrees
that from the date hereof to the Closing Date:
4.1 Additional Real Property. If Seller or ▇▇▇▇▇▇▇ Communities,
L.L.C. acquires or enters into any options or other agreements to acquire any
Real Property not listed or described on SCHEDULE 1.2 ("ADDITIONAL REAL
PROPERTY"), regardless of whether in the ordinary course of business, Seller
promptly shall give Parent and Buyer notice thereof accompanied by copies of all
legal descriptions, options, contracts, agreements, leases, entitlements,
permits, soil and environmental reports, title policies or reports, and other
information obtained by or in Seller's possession or control relating to the
Additional Real Property. Seller shall cooperate with Parent and Buyer to enable
Parent or Buyer to evaluate, inspect and examine the Additional Real Property,
including without limitation as follows:
A. Environmental Assessment. If Seller has not obtained
or furnished to Parent and Buyer a current environmental report of the
Additional Real Property reasonably satisfactory to Parent and Buyer,
Seller at no cost to Parent or Buyer will engage a consultant selected
by Seller to perform Phase I environment site assessments with respect
to the Additional Real Property prior to the Closing. Upon its
availability, Parent or Buyer will deliver the final report of such
assessments to Seller. If any such assessment recommends the
performance of additional investigation (including, without limitation,
Phase II environmental site assessments), such additional investigation
shall, if requested by Parent or Buyer, be undertaken promptly and
delivered to each of Seller, Parent and Buyer. If Seller does not do
so, Parent or Buyer may, but shall not be
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obligated to, undertake on behalf of Seller the environmental
assessments and investigations required of Seller pursuant to this
Section. The cost of the environmental assessments (other than Phase I)
shall be paid by Buyer.
B. Preliminary Title Report; Survey. Seller will deliver
to Parent and Buyer, at no cost to Parent or Buyer, and will attach to
SCHEDULE 1.2, a current preliminary title report (the "REPORT") of the
Additional Real Property prepared by Escrow Agent. The Report will show
the status of title to the Additional Real Property as of the date of
the Report and will be accompanied by legible copies of all documents
referred to in the Report. If any of the Additional Real Property is
unsubdivided, Seller at no cost to Parent or Buyer also will deliver to
Parent and Buyer, and will attach to SCHEDULE 1.2, a current survey
acceptable to Title Company (the "SURVEY") of the unsubdivided Real
Property prepared by a duly licensed civil engineer. The Survey will be
an ALTA survey and will (a) show all easements, encroachments (both
onto such Additional Real Property and onto such property contiguous to
such Additional Real Property), the location of any improvements, and
other matters affecting such Additional Real Property, (b) specify the
gross and net square footage of such Additional Real Property, (c) be
certified to be accurate, complete and correct to Seller, Parent, Buyer
and Title Company, and (d) include the legal description of such
Additional Real Property.
C. Inspection. Parent or Buyer may enter the Additional
Real Property with Parent's or Buyer's representatives, consultants,
contractors, and agents to examine the Additional Real Property and to
conduct soil tests, environmental studies, engineering feasibility
studies and other tests and studies, and otherwise evaluate, inspect
and examine the Additional Real Property. Parent and Buyer, jointly and
severally, will indemnify and defend Seller and its officers,
directors, members, managers, employees, representatives, and agents,
from all claims and liabilities, or mechanics' or materialmens' liens,
which may be asserted against Seller, or any of the foregoing, as a
result of, or in connection with, any inspection or examination of the
Additional Real Property made by Parent, Buyer or their
representatives.
Upon consent by Parent given to Seller, but not otherwise, approving the
Additional Real Property, such approval not to be unreasonably withheld if the
evaluation, inspection and examination pursuant to the foregoing provisions of
this Section 4.1 are reasonably satisfactory to Parent or, with respect to
matters which are not reasonably satisfactory, such matters are cured or
resolved by Seller to the reasonable satisfaction of Parent, the Additional Real
Property will become part of the Real Property for all purposes of this
Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Escrow. An escrow for the Real Property portion of this
transaction (the "ESCROW") shall be established with First American Title
Insurance Company (the "ESCROW AGENT" or "TITLE COMPANY"), ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇. Executed copies of this Agreement and the
Master Agreement will be delivered to Escrow Agent within twenty-four (24) hours
of the execution of this Agreement by Seller and Buyer. The date that the
executed copies of this Agreement and Master Agreement are delivered to Escrow
Agent is
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referred to in this Agreement as the "OPENING DATE." This Agreement and the
provisions of the Master Agreement referenced herein constitute escrow
instructions to Escrow Agent. If Escrow Agent requires the execution of its
standard form printed escrow instructions, Seller and Buyer agree to execute
those instructions; HOWEVER, those instructions will be construed as applying
only to Escrow Agent's engagement. If there are conflicts between the terms of
this Agreement or the Master Agreement and the terms of the printed escrow
instructions, the terms of this Agreement or the Master Agreement will control.
5.2 Title Matters.
A. Title Report. SCHEDULE 5.2 sets forth the current
preliminary title reports or a list thereof (individually, a "REPORT",
or collectively, the "REPORTS") prepared by Escrow Agent for the status
of title to each parcel or parcels of Real Property. Also listed on
SCHEDULE 5.2 is each survey (the "SURVEY") of any unsubdivided Real
Property which is acceptable to the Title Company for the issuance of
the extended coverage Title Policy for such unsubdivided Real Property
in accordance with Section 5.2D of this Agreement.
B. Title Supplements. If, prior to Closing, Escrow Agent
issues a supplemental title report showing additional exceptions to
title, other than exceptions arising due to acts or omissions of Parent
or Buyer or as set forth on any prior Report (a "TITLE REPORT
SUPPLEMENT"), Parent shall have 10 days (a "SUPPLEMENTAL TITLE REVIEW
PERIOD") from the date of receipt of the Title Report Supplement and a
copy of each document referred to in the Title Report Supplement in
which to give notice of dissatisfaction as to any additional exceptions
to Seller. If Parent is dissatisfied with any additional exceptions
shown in the Title Report Supplement, then Parent may either (i)
terminate this Agreement, the Asset Agreement and the Master Agreement,
or (ii) accept title subject to such additional exceptions. If Parent
has not notified Seller of its election prior to the close of business
on the 10th day following Parent's receipt of the Title Report
Supplement, Parent and Buyer will be deemed to have accepted title
subject to such additional exceptions. Upon any termination by Parent,
the Deposit will be immediately returned to Parent and this Agreement,
the Asset Agreement and the Master Agreement will be terminated.
C. Approved Title Exceptions. Except as otherwise
indicated by Parent or Buyer on SCHEDULE 5.2 (the "DISAPPROVED TITLE
EXCEPTIONS"), the exceptions to title disclosed by Schedule B in each
Report, and in any Title Report Supplement accepted by Parent pursuant
to Section 5.2B, are referred to in this Agreement as the "APPROVED
TITLE EXCEPTIONS." In any event the Disapproved Title Exceptions will
include all monetary liens or encumbrances (other than liens for year
2001 property taxes, existing improvement district liens, or specific
assessments not due and payable when the Closing occurs). If, prior to
Closing, any of the Disapproved Title Exceptions are not cured by
Seller to the reasonable satisfaction of Parent, then Parent may either
(i) terminate this Agreement, the Asset Agreement and the Master
Agreement, or (ii) accept title subject to the Disapproved Title
Exceptions. If Parent has not notified Seller of its election prior to
the Closing, Parent and Buyer will be deemed to have accepted title
subject to the Disapproved Title Exceptions. Upon any termination by
Parent pursuant to this
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paragraph, the Deposit will be immediately returned to Parent and this
Agreement, the Asset Agreement and the Master Agreement will be
terminated.
D. Title Policy. At Closing, Sellers shall cause the
Title Company to provide Parent and Buyer with a standard coverage
owner's title policy (a "TITLE POLICY") for the subdivided Real
Property, and with an extended coverage owner's title insurance policy
(also a "TITLE POLICY") for any unsubdivided Real Property, issued by
the Title Company effective as of the Closing, naming Buyer as insured
in the amount of that portion of the Purchase Price allocated to the
Real Property, insuring that the estate or interest described by
Schedule A, Part II, of each Report (or of each Title Report Supplement
acceptable to Parent) to the Real Property is vested in Buyer, subject
only to the usual printed exceptions contained in such an title
insurance policy issued by the Title Company, to the Approved Title
Exceptions, and to any other matters approved in writing by Parent.
Seller will pay the premium of a standard form title policy. Parent and
Buyer will be responsible for the difference in premium between the
standard policy and the extended coverage policy as well as the premium
relating to any special endorsements. The Title Policy shall include
such endorsements issued by the Title Company as Parent may reasonably
require, including without limitation a patent endorsement, access
endorsement, surface water right endorsement and successor interest
endorsement, the cost of which endorsements shall be borne by Seller.
Seller, at its expense, shall use reasonable good faith efforts to
satisfy all of the Title Company's customary requirements for the
issuance of such Title Policy and endorsements, other than those, if
any, within Buyer's control.
5.3 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper,
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including obtaining all necessary
waivers, consents, and approvals and effecting all necessary registrations and
filings and submissions of information requested by governmental authorities.
Seller agrees that they, at any time before or after the Closing, will execute,
acknowledge, and deliver any further deeds, assignments, conveyances, and other
assurances, documents, and instruments of transfer reasonably requested by
Parent, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by Parent, for the purpose of
conveying, assigning, transferring, granting, conveying, and confirming to
Buyer, or reducing to possession, any or all property to be conveyed and
transferred by this Agreement. If requested by Parent or Buyer, Seller further
agrees to prosecute or otherwise enforce in its name for the benefit of Parent
or Buyer, any claims, rights, or benefits that are transferred to Buyer by this
Agreement and that require prosecution or enforcement in its name. Any
prosecution or enforcement of claims, rights, or benefits under this Section
shall be solely at Buyer's expense, unless the prosecution or enforcement is
made necessary by a breach of this Agreement by Seller. After the Closing and
for a period of 6 months, the parties will cooperate in good faith and use
commercially reasonable efforts to resolve any issues which may arise in the
transition of the ▇▇▇▇▇▇▇ Communities Business.
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ARTICLE VI
GENERAL PROVISIONS
6.1 Notices. All notices, consents, and other communications
hereunder shall be in writing and deemed to have been duly given when (a)
delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, postage pre-paid return receipt
requested, or (c) when received by the addressee, if sent by Express Mail,
Federal Express, or other express delivery service (postage pre-paid return
receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate as to itself by notice to the other):
If to Buyer: Meritage Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
With a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Seller American West Homes, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
▇▇▇▇▇▇▇ Communities, L.L.C.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: The ▇▇▇▇▇▇▇ Law Group
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
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FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇, Esq.
6.2 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute one and the same agreement.
6.3 Governing Law. The validity, construction, and enforceability
of this Agreement shall be governed in all respects by the laws of the State of
Arizona, without regard to its conflict of laws rules.
6.4 Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that Buyer may assign all or any portion of its
rights under this Agreement to any wholly owned subsidiary, but no such
assignment shall relieve Buyer or its successor of its primary liability for all
obligations of Buyer hereunder, and except that this Agreement may be assigned
by operation of law to any corporation or entity with or into which Buyer may be
merged or consolidated or to which Buyer transfers all or substantially all of
its assets, and such corporation or entity assumes this Agreement and all
obligations and undertakings of Buyer hereunder. Any assignment in violation of
the provisions of this Agreement shall be null and void.
6.5 Gender and Number. The masculine, feminine, or neuter pronouns
used herein shall be interpreted without regard to gender, and the use of the
singular or plural shall be deemed to include the other whenever the context so
requires.
6.6 Schedules and Exhibits. The Schedules and Exhibits referred to
in this Agreement and attached to this Agreement are incorporated in this
Agreement by such reference as if fully set forth in the text of this Agreement.
6.7 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof shall, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
6.8 Costs. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees, accounting fees, and
other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.
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6.9 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
6.10 Severability. If any term, provision, covenant, or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated and the court shall modify this
Agreement or, in the absence thereof, the parties shall negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement.
6.11 Binding Effect. Subject to the provisions and restrictions of
Section 6.4, the provisions of this Agreement are binding upon and will inure to
the benefit of the parties and their respective heirs, personal representatives,
successors and assigns.
6.12 Construction. References in this Agreement to "Sections",
"Articles", "Exhibits", and "Schedules" are to the Sections and Articles in, and
the Exhibits and Schedules to, this Agreement, unless otherwise noted.
6.13 Time Periods. Except as expressly provided for in this
Agreement, the time for performance of any obligation or taking any action under
this Agreement will be deemed to expire at 5:00 o'clock p.m. (Phoenix, Arizona
time) on the last day of the applicable time period provided for in this
Agreement. If the time for the performance of any obligation or taking any
action under this Agreement expires on a Saturday, Sunday or legal holiday, the
time for performance or taking such action will be extended to the next
succeeding day which is not a Saturday, Sunday or legal holiday.
6.14 Headings. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of this
Agreement.
6.15 Entire Agreement. This Agreement, the Asset Agreement, the
Master Agreement and the Indemnification Agreement and all certificates,
schedules and other documents attached to or deliverable under such agreements
(collectively, the "AGREEMENTS") constitute the entire agreement, including with
respect to representations and warranties, between the parties pertaining to the
subject matter contained in the Agreements. All prior and contemporaneous
agreements, representations and understandings of the parties, oral or written,
are superseded by and merged in the Agreements. No supplement, modification or
amendment of the Agreements will be binding unless in writing and executed by
the parties to the Agreements.
6.16 Arbitration. Any disputes arising hereunder will be resolved
pursuant to the dispute resolution provisions of EXHIBIT I to the Master
Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
____________________________________
By:
Its:
▇▇▇▇▇▇▇-MTH BUILDERS, INC,
an Arizona corporation
____________________________________
By:
Its:
HC BUILDERS, INC.,
an Arizona corporation
____________________________________
By:
Its:
[SIGNATURE PAGE TO REAL PROPERTY AGREEMENT]
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EXHIBIT L
ASSIGNMENT AND ASSUMPTION AGREEMENT
DATE: ________________, 2001
ASSIGNOR: _________________________________________________________,
__________________________________________________________
__________________________________________________________
__________________________________________________________
ASSIGNEE: _________________________________________________________,
__________________________________________________________
__________________________________________________________
__________________________________________________________
RECITALS:
A. Assignor, as optionee, and _________________________________,
as optionor ("Optionor") are parties to that certain
_________________________________ Agreement, dated ____________, ______, a
Memorandum of which is recorded at ____________, Official Records of Maricopa
County, Arizona (collectively, the "Option Agreement"), concerning among other
things Assignor's option to purchase certain real property described on Exhibit
"A" attached hereto and made a part hereof (the "Property").
B. Assignor desires to assign all of its right, title and interest in, to and
under the Option Agreement and the Property to Assignee, and Assignee desires to
acquire the same and to assume the remaining obligations thereunder, in
accordance with the terms and conditions of this Assignment and Assumption
Agreement (the "Assignment").
COVENANTS:
FOR VALUABLE CONSIDERATION, it is agreed as follows:
1. Assignment. Effective as of _______________, 2000 (the
"Effective Date"), Assignor hereby assigns and conveys to Assignee, subject to
the other terms and conditions of this Assignment, all of Assignor's right,
title and interest in, to and under the Option Agreement and the Property [and
Assignor's rights under the Assignment and subordination of Option Agreement, if
applicable].
2. Assumption. Assignee hereby assumes and agrees to be bound by
all of Assignor's obligations under the Option Agreement, subject to the terms
and conditions of this Assignment, arising after the Effective Date.
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3. Consent of Optionor. The validity and enforceability of this
Assignment is contingent upon the execution by Optionor, on or before the
Effective Date, of the Consent of Optionor attached hereto and made a part
hereof.
4. Representations and Warranties of Assignor. Assignor
represents and warrants to Assignee, as of the Effective Date, as follows:
(a) The copy of the Option Agreement attached to this
Assignment is a true and complete copy of the only
agreement between Assignor and Optionor pertaining to
the Property.
(b) Assignor is the holder of the entire Optionee's
right, title and interest under the Option Agreement
("Optionee's Interest"), and Optionee's Interest has
not been and will not be assigned, encumbered,
pledged or otherwise transferred in any manner
whatsoever, nor be subject to the interest of any
third person or entity, except to Assignee pursuant
to this Assignment [and rights of any financing
institution pursuant to an Assignment and
subordination of Option Agreement or similar
documents].
(c) To the actual knowledge of Assignor (and with no duty
of Assignor to investigate or make inquiries),
neither Optionor nor Assignor is in default under the
Option Agreement nor has any event occurred which
would result in a default by Optionor or Assignor
under the Agreement, nor has any notice of default
under the Option Agreement been given by Optionor or
Assignor to the other.
5. Further Instruments and Documents. Each party hereto shall,
promptly upon the request of the other party, or Optionor, acknowledge and
deliver to the other party or Optionor, any and all further instruments and
assurances reasonably requested or appropriate to evidence or give effect to the
provisions of this Assignment or to satisfy Optionor's requirements in
connection with this Assignment.
6. Recordation. In lieu of recording this Assignment in any
public records, a Memorandum of Assignment in substantially the same form
attached hereto shall be executed before a notary public by Assignor and
Assignee, and recorded on the Effective Date in the Official Records of Maricopa
County, Arizona.
7. Successors and Assigns. This Assignment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Assignment as
of the day and year first above set forth.
ASSIGNOR: ASSIGNEE:
______________________________________ ______________________________________
______________________________________ ______________________________________
By____________________________________ By____________________________________
Name__________________________________ Name__________________________________
Title_________________________________ Title_________________________________
CONSENT OF OPTIONOR
Pursuant to the Option Agreement described in the foregoing Assignment
and Assumption of Agreement (the "Assignment"), the undersigned Optionor hereby
consents to the Assignment and, in consideration of Ten Dollars and other
valuable consideration, receipt of which is hereby acknowledged by Optionor,
agrees to the following additional representations, warranties and covenants:
1. Optionor represents and warrants to Assignor and to Assignee,
as of the Effective Date of the foregoing Assignment, as follows:
(a) The copy of the Option Agreement attached to this
Assignment is a true and complete copy of the only
agreement between Assignor and Optionor pertaining to
the Property.
(b) Optionor is the holder of the entire Optionor's
right, title and interest under the Option Agreement.
(c) To the actual knowledge of Optionor (and with no duty
of Optionor to investigate or make inquiries),
neither Optionor nor Assignor is in default under the
Option Agreement nor has any event occurred which
would result in a default by Optionor or Assignor
under the Agreement, nor has any notice of default
under the Agreement been given by Optionor or
Assignor to the other.
2. Optionor hereby releases Assignor from all liability and
obligations under the Option Agreement arising after the Effective Date.
3. From and after the Effective Date of the foregoing Assignment,
notices to Assignor under the Option Agreement shall be given to Assignee at its
address set forth on the first page of the foregoing Assignment.
4. Any capitalized terms which are not defined in this Consent of
Optionor shall have the same meaning as set forth in the foregoing Assignment.
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This Consent of Optionor is dated as of the Effective Date of the foregoing
Assignment.
OPTIONOR:
______________________________________
______________________________________
By____________________________________
Name__________________________________
Title_________________________________
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