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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): September 16, 1996
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The Fortress Group, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-28024 54-1774997
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1921 Gallows Road, Suite 730, Vienna, Virginia 22182
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (703) 442-4545
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) Effective August 31, 1996, Registrant purchased certain assets and assumed
certain liabilities of Landmark Homes, Inc. ("Landmark") for an aggregate
purchase price of $5 million, payable in the form of $4,750,000 in cash and
$250,000 in a promissory note maturing on November 1, 1996 and bearing
interest at 10% per annum.
All cash consideration from Registrant in this transaction was paid out of
Registrant's existing working capital.
(b) Certain of the assets acquired pursuant to this transaction constitute
equipment or other physical property used by Landmark in its business of
constructing and selling residential single-family detached homes. The
Registrant will continue to use these assets for the same purpose.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Audited financial statements of Landmark required pursuant to Regulation
S-X cannot be provided at this time, but shall be filed as soon as
practicable and in no event later than 60 days after the filing date of
this Report on Form 8-K.
(b) Pro Forma Financial Information.
The pro forma financial information required pursuant to Article 11 of
Regulation S-X cannot be provided at this time, but shall be filed as soon
as practicable and in no event later than 60 days after the filing date of
this Report on Form 8-K.
(c) Exhibits.
2.1 Asset Purchase Agreement by and among The Fortress Group, Inc.,
Fortress Acquisition, Inc., and Landmark Homes, Inc. and B. Rex
Stephens and Bobby W. Harrelson, effective as of August 31, 1996 (the
"Landmark Agreement"). Registrant agrees to furnish, supplementally
to the Commission, upon request, copies of any omitted exhibits or
schedules to the Landmark Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE FORTRESS GROUP, INC.
Dated: September 16, 1996 By: /s/ JAMES J. MARTELL, JR.
--------------------------
James J. Martell, Jr.
President and Chief Executive Officer
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Exhibit Index
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<TABLE>
<CAPTION>
Exhibit # Item
- ----------- -------------------------------
<C> <S>
2.1 Asset Purchase Agreement by and
among The Fortress Group, Inc.,
Fortress Acquisition, Inc., and
Landmark Homes, Inc. and B. Rex
Stephens and Bobby W. Harrelson,
effective as of August 31, 1996.
</TABLE>
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ASSET PURCHASE AGREEMENT
AMONG
THE FORTRESS GROUP, INC.
LANDMARK HOMES, INC.
AND
THE PRINCIPALS NAMED HEREIN
<PAGE>
Purchase Agreement
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THIS PURCHASE AGREEMENT (this "Agreement") is made as of this 29th day of
August, between the Fortress Group, Inc., a Delaware corporation ("Fortress")
and Fortress Acquisition, Inc., a Delaware corporation (the "Purchaser") and
Landmark Homes, Inc. a North Carolina corporation ("Landmark") and B. Rex
Stephens and Bobby W. Harrelson, (collectively the "Principals" and together
with the Landmark, the "Seller")
WHEREAS, Landmark has its principal place of business in Wilmington, NC and
is engaged in the business of constructing and selling residential single-
family, detached homes (the "Business").
WHEREAS, Seller desires to sell and Purchaser desires to purchase all of
Landmark's Assets (as defined below), except those certain Excluded Assets (as
defined below).
NOW THEREFORE, in consideration of the mutual covenants of the parties set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Agreement to Sell and Purchase. Upon the terms and subject to the
conditions set forth herein and in reliance on the respective representations
and warranties of the parties, Landmark shall sell the Assets to Purchaser, and
Purchaser shall purchase the Assets from Landmark, on the Closing Date and at
the time and place of Closing referred to below, for the consideration and in
accordance with the provisions of Article II hereof.
1.2 Assets. The term "Assets" means all the assets of Landmark (other
than the Excluded Assets), including, without limitation, the following:
(a) Balance Sheet Assets. All of the assets reflected on the
balance sheet as of December 31, 1995 of Landmark attached hereto
as Schedule 1.2(a) (collectively, the "1995 Balance Sheet"),
except for the Excluded Assets reflected thereon and those assets
disposed of after December 31, 1995 in the ordinary course of
business consistent with past practices and this Agreement, and
all assets subsequently acquired.
(b) Real Property. All real property described under the heading
"Real Property" on Schedule 1.2(b) hereto (the "Real Property")
and all real property acquired by Landmark after the date hereof
(collectively, the
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"Transferred Real Property"), together with (i) all buildings,
fixtures, and improvements located thereon or attached thereto,
(ii) all easements, franchises, licenses, permits, and rights-of-
way appurtenant to or otherwise benefiting the Transferred Real
Property or the buildings, fixtures, or improvements located
thereon, and (iii) all development rights, mineral rights, water
rights, utility capacity reservations, and other rights and
appurtenances affecting or pertaining to the Transferred Real
Property or the buildings, fixtures, or improvements located
thereon.
(c) Acquired Contracts. All rights and benefits of Landmark in
each written and oral agreement, arrangement, contract, and
commitment described on Schedule 1.2(c ) hereto under which
Landmark is obligated to construct a residence or other building
(the "Acquired Contracts") and all such agreements, arrangements,
commitments, contracts and options that Landmark enters into
after the date hereof in the ordinary course of business
consistent with past practices and this Agreement.
(d) Land Contracts. All rights and benefits of Landmark in each
land contract it holds either as land contract vendor or land
contract vendee described on Schedule 1.2(d), hereto ("Land
Contracts").
(e) Deposits. All deposits relating to any Acquired Contract or the
business of Landmark and all earnest money and escrowed amounts
in respect thereof to the extent of Landmark's rights or benefits
therein.
(f) Personal Property. All equipment, furniture, furnishings,
inventory, machinery, software, supplies, tools, vehicles, and
other personal property used in connection with the business of
Landmark (the "Personal Property").
(g) Intellectual Property. All rights and benefits of Landmark in
(i) all architectural, building, and engineering designs,
drawings, specifications, and plans, including those described on
Schedule 1.2(a) hereto, (ii) all processes, know-how, technical
data, and other trade secrets (the " Trade Secrets"), (iii) all
sales forms and promotional and advertising materials, (iv) all
copyrights, patents, trademarks, and applications, registrations,
and renewals with respect thereto described under the heading
"Intellectual Property" on Schedule 1.2(a) hereto, and the name
"Landmark Homes" (collectively, the "Intellectual Property"), and
(v) all other proprietary information or rights acquired since
the date hereof. The rights and benefits with respect to each
transferred trademark shall also include all goodwill associated
therewith.
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(h) Permits. To the extent transferable, all approvals,
authorizations, certificates, consents, franchises, licenses,
permits, rights, variances, and waivers acquired to used in
connection with the business of Landmark, and all agreements with
governmental and other authorities in the nature thereof.
(i) Cash and Receivables. All of Landmark cash on hand, on deposit,
or invested not to exceed $100,000 and all accounts and notes
receivable, and other receivables.
(j) Third Party Warranties. To the extent assignable, 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 any
Asset or the Business of Landmark.
(k) Books and Records. All of the books, instruments, papers, and
records of whatever nature and wherever located that relate to
the Business of Landmark, whether in written form or another
storage media, including without limitation (i) accounting and
financial records, (ii) property records and reports, (iii)
customer, subcontractor, and supplier lists, (iv) environmental
records and reports, (v) personnel and labor relations records,
and (vi) property, sales, or transfer tax records and returns,
provided that such books, instruments, papers, and records shall
exclude any documents relating exclusively to the Excluded
Assets, the formation of Landmark, corporate minutes and stock
records, other organizational documents, and the income tax
records and returns of Landmark.
1.3 Excluded Assets. Notwithstanding Section 1.2 hereof, Landmark
retains all of its right, title, and interest in, to, and under the assets,
interests, franchises, properties, and rights described on Schedule 1.3 hereto
(collectively with any other items excluded pursuant to this Section 1.3, the
"Excluded Assets").
1.4 Consents. Promptly after the date hereof and except as otherwise
provided herein, the Seller shall use reasonable efforts to obtain all
approvals, consents, notices, and waivers required to transfer any Asset to the
Purchaser or Fortress, and to permit the Purchaser or Fortress to assume the
Assumed Liabilities described in Section 2.1(a) hereof (collectively, the
"Consents"), in form and substance satisfactory to the Purchaser. Schedule 4.7
hereto describes each Consent. Landmark shall not be required to pay or
relinquish any amount or benefit in order to obtain such Consents.
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ARTICLE II
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CONSIDERATION AND MANNER OF PAYMENT
-----------------------------------
2.1 Purchase Price. The consideration for the Assets purchased by
Purchaser shall be determined and paid as follows:
(a) The assumption at Closing of the Assumed Liabilities (as
hereinafter defined) by Fortress and Purchaser, jointly and
severally, subject to their obligation to pay certain Assumed
Liabilities in full as provided in Section 2.4 hereof;
(b) $4,750,000 payable in cash at Closing to Landmark by wire
transfer of immediately available funds to an account or accounts
of Landmark at a bank or banks specified in writing at least one
(1) business day prior to the Closing Date; and
(c) $250,000 payable pursuant to the terms of the promissory note
("Adjustment Promissory Note") attached as Exhibit 2.1(c) to
operate in conjunction with the closing audit mechanism provided
in Section 2.2, below.
2.2 Adjustment to the Purchase Price. The Purchase Price shall be
subject to adjustments as follows:
(a) Closing Balance Sheet. At Closing Landmark shall deliver to
Seller an unaudited balance sheet for Landmark dated as of the
close of business on the date of the Closing. Within sixty (60)
days after Closing, Purchaser shall cause Price Waterhouse, LLP
("Purchaser's Auditor") to prepare an audited closing balance
sheet of Landmark (as it may be adjusted pursuant to subsection
2.2(a)(2) below, the "Closing Balance Sheet"), which Closing
Balance Sheet shall set forth the Assets and Assumed Liabilities
of Landmark as of the close of business on the date of the
Closing. The Closing Balance Sheet shall be prepared in
accordance with generally accepted accounting principles
("GAAP"). The Closing Balance Sheet shall include footnotes and
shall include all adjustments which would be made if the date of
the Closing were year-end. Purchaser shall pay all of the fees
and expenses incurred in preparation of the Closing Balance Sheet
and each party hereto shall pay its own expenses in connection
with its review of the Closing Balance Sheet.
(1) If Landmark shall determine in good faith that the
Closing Balance Sheet has not been prepared in accordance with
the procedures described in Section 2.2(a) above, Landmark shall
notify
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Purchaser in writing thereof ("Seller's Notice"), within thirty
(30) days after delivery of the Closing Balance Sheet to
Landmark, which notice shall set forth in reasonable detail the
alleged nonconformance with such procedures and the amount(s)
being disputed. If Landmark does not so notify Purchaser within
such period, the Closing Balance Sheet shall become final and
binding upon all parties at the end of such period.
(2) If Landmark does so notify Purchaser, Landmark and
Purchaser shall attempt in good faith to resolve such dispute(s).
If Purchaser and Landmark are unable to resolve any disputed item
within ten (10) days after receipt of Seller's Notice, such
disputed item(s), shall be submitted to one of the five largest
nationally recognized accounting firms or any of their successors
(other than Purchaser's Auditor or Landmark or regular auditors
or their successors) chosen by lot which shall be instructed to
arbitrate such disputed item(s) and determine Landmark's Net
Shareholders' Equity (as defined below) within thirty (30) days.
The resolution of disputes by the accounting firm so selected
shall be set forth in writing and shall be conclusive and binding
upon and non-appealable by the parties, and the Closing Balance
Sheet shall become final and binding upon the date of such
resolution. The costs of such resolution by such accounting firm
shall be shared by the two parties. The term "Net Shareholders'
Equity" means the excess of the Assets over the Assumed
Liabilities, determined in accordance with GAAP.
(b) Adjustment to Closing Balance Sheet. The Purchase Price shall
be adjusted downward or upward (the "Adjustment") on a dollar-
for-dollar basis to the extent that the Net Shareholders' Equity
of Landmark reflected on the Closing Balance Sheet is less than
or greater than $1,000,000, respectively. For purposes of this
Adjustment, Items 4, 5 and 6 on Schedule 2.4 shall not be taken
into account or treated as Assumed Liabilities in computing Net
Shareholder's Equity.
(c) Payment of Adjustment. Upon the Adjustment amount becoming
final pursuant to Section 2.2(a), the Adjustment Promissory Note
shall be due and payable, and Seller shall be entitled to the
principal amount of the Adjustment Promissory Note, as adjusted
pursuant Section 2.2(b), together with any additional cash due
and interest accrued thereon since the Closing Date at the rate
of 10% per annum.
(d) Cooperation of Auditors. Landmark and its auditors shall fully
cooperate with Purchaser and Purchaser's Auditor in their
preparation of the Closing Balance Sheet, including, without
limitation, by providing Purchaser and Purchaser's Auditor with
access to Landmark's auditors' workpapers relevant to the Closing
Balance Sheet, as well as Landmark's books and records related
thereto.
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2.3 Closing Expenses and Related Taxes. Landmark shall pay at the Closing
any stamp or other sales, transfer or transaction tax ("Transfer Tax")
imposed under the laws of the United States or any state, county,
municipality or other subdivision thereof on the direct or indirect
transfer of the Assets by Landmark to Purchaser.
2.4 Assumed Liabilities. On the Closing Date, Landmark shall assign to
Purchaser and Purchaser and Fortress shall assume, discharge and
perform in a timely fashion and shall indemnify and hold harmless
Landmark from each and every obligation with respect to the liabilities
(whether arising by contract, at law or otherwise) set forth on
Schedule 2.4 attached hereto (collectively, the "Assumed Liabilities").
Purchaser and Fortress acknowledge that Landmark may be unable to
obtain the Consents required for Purchaser to assume the Bank
Obligations (as hereinafter defined) and/or the Releases (as
hereinafter defined) with respect to the Bank Obligations. If any of
the Consents or the Releases (and all documents related thereto) have
not been obtained or executed by all necessary parties either prior to
or within 45 days after Closing, then Purchaser and Fortress, jointly
and severally, agree to pay cash or other immediately available funds
to or as directed by Landmark to discharge the Bank Obligations in full
immediately and without further notice or demand from Landmark. "Bank
Obligations" shall mean all of Landmark's indebtedness, liabilities and
obligations outstanding as of the Closing Date, together with all
interest accruing from and after the Closing Date, with respect to
Items 1(a) through 1(g) on Schedule 2.4 attached hereto. "Releases"
shall mean an absolute, unconditional and complete release of Bobby W.
Harrelson, B. Rex Stephens, their respective spouses, Landmark and each
of its affiliates, and their respective properties from any liability,
obligation or lien related to the Bank Obligations.
2.5 Excluded Liabilities. For purposes of this Agreement "Excluded
Liabilities" shall mean the following except to the extent included on
Schedule 2.4 hereof: (a) any liabilities or obligations that secure or
relate solely to Excluded Assets, (b) any liabilities or obligations
owed for any broker or similar services rendered in connection with
the transactions contemplated hereby, (c) any liabilities due
employees, (d) any liabilities or obligations with respect to any
Environmental Laws or Material of Environmental Concern (each as
defined in Article 4.19 hereof), (e) any expenses incurred by Landmark
in connection with this Agreement or the transactions contemplated
hereby, (f) any liabilities or obligations with respect to any pending
or threatened action, alternate dispute resolution process,
arbitration, charge, claim, counterclaim, inquiry, investigation,
legal action, litigation, suit, or other proceeding, whether involving
private parties or involving or before any administrative or other
governmental authority (collectively, "Legal Proceeding" to the extent
not
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reserved in Landmark's balance sheet for the period ended June 30,
1996 arising out of operations of the Business prior to Closing (g)
any product liabilities in respect of construction work performed
prior to the Closing Date on homes completed and closed prior to the
Closing Date, (h) any Taxes (as defined in Article 4.9(a) hereof),
(i) warranty obligations (whether in respect of express or implied
warranties) on homes completed and closed prior to the Closing Date,
(j) any other contingent liability or obligation, and (k) any
liability or obligation other than those liabilities and obligations
that the Purchaser specifically assumes pursuant to Section 2.1(a)
hereof.
Section 2.6 Tax Reporting and Allocations. The Purchaser and Landmark
agree to allocate among the Assets (a) the consideration to be paid to Landmark
pursuant hereto and (b) the Assumed Liabilities as set forth in Schedule 2.6
subject to final adjustment only for the Adjustment provided in Section 2.2
hereof. The final allocation shall be attached to this Agreement not later than
30 days after final determination of the Adjustment to the purchase price as
provided in Section 2.2 hereof.
Section 2.7 Form 8-K Financial Statements. Landmark acknowledges that
within 15 days after the Closing Date, the Purchaser must file a Form 8-K with
the Securities and Exchange Commission (the "Commission") disclosing the
Purchaser's acquisition of the Assets. With the Form 8-K or within 60 days
after filing thereof, the Purchaser must file with the Commission in accordance
with the rules and regulations thereof audited financial statements of Landmark
(the "Audited Form 8-K Financial Statements") and other financial statements and
information. The fees and expenses associated with the preparation and filing of
the Form 8-K and Audited Form 8-K Financial Statements shall be the sole
responsibility of the Purchaser. Landmark shall cooperate with the Purchaser in
the preparation of the other financial statements and information that the
Purchaser is required to prepare in connection with the Form 8-K. Such
cooperation shall include, but not be limited to, allowing consultations with
Landmark's current accounting firm.
ARTICLE III
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CLOSING
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3.1 TIME AND PLACE OF CLOSING. The purchase and sale (the "Closing")
provided for in this Agreement will take place at the offices of
Murchison, Taylor, Kendrick, Gibson & Davenport, L.L.P., 16 North
Fifth Avenue, Wilmington, NC 28401, at 10:00 a.m. (local time) on
August 29, 1996, or at such other time and place as the parties may
agree. The Closing and all transactions contemplated hereunder shall
be deemed effective as of August 31, 1996.
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3.2 Deliveries. At the Closing:
(a) Seller Deliveries. Seller will, at its sole cost and expense,
execute and deliver or cause to be executed and delivered to
Purchaser:
(i) A Bill of Sale and Assignment of personal property (the
"Assignment Agreement") in the form of Exhibit 3.2(a)
attached hereto, pursuant to which Seller assigns the Assets
to Purchaser;
(ii) Certificates of Existence, dated not more than twenty (20)
days prior to the Closing, with respect to Seller issued by
the offices of the Secretary of State of North Carolina and
by the Secretary of State of each jurisdiction in which
Seller is qualified to do business as a foreign corporation;
(iii) With respect to each parcel of Real Property, (A) an
executed, acknowledged and recordable warranty deed to such
parcel in form and substance satisfactory to Purchaser, and
(B) all other documentation (including IRPTA and FIRPTA
affidavits and trust declarations) which Purchaser may
reasonably request;
(iv) Evidence that the Consents have been obtained by Seller,
except as otherwise provided herein;
(v) Certified copies of the Articles of Incorporation and Bylaws
of Landmark as in effect at the Closing;
(vi) A certificate from an officer of Landmark dated the Closing,
containing the information required pursuant to Section
7.1(a) hereof;
(vii) Copies of resolutions of the stockholders and Board of
Directors of Landmark certified by the secretary thereof as
having been duly and validly adopted and in full force and
effect authorizing the Asset Sale, execution and delivery of
this Agreement, the Other Seller Agreements and performance
of the transactions contemplated hereby and thereby;
(viii) Clearance certificates or similar documents required by any
state taxing authority in order to relieve Purchaser of any
obligation to withhold any portion of the purchase price; and
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(ix) Such other documents and instruments as Purchaser or
its counsel reasonably shall deem necessary to
consummate the transactions contemplated hereby.
All documents delivered to Purchaser shall be in form and substance
reasonable satisfactory to counsel for Purchaser.
(b) Purchaser Deliveries. Purchaser will execute and deliver or cause to
be executed and delivered to seller simultaneously with delivery of the items
referred to in subsection 6(a) above:
(i) Bank wire transfer as provided in Section 2.1(a) and the
Adjustment Promissory Note as provided in Section 2.1(c);
(ii) An assumption agreement (the "Assumption Agreement") evidencing
Purchaser's and Fortress' assumption of the Assumed Liabilities
in the form of Exhibit 3.2(b)(ii);
(iii) A copy of a resolution of each of the Boards of Directors of
Purchaser and Fortress certified by the secretary thereof as
having been duly and validly adopted and in full force and effect
authorizing execution and delivery of this Agreement and
performance of the transactions contemplated hereby by Purchaser
and Fortress;
(iv) A certificate from an officer of Fortress and an officer of
Purchaser, dated the Closing, containing the information required
pursuant to Section 7.2(a) hereof; and
(v) Such other documents and instruments as Seller or its counsel
reasonable shall deem necessary to consummate the transactions
contemplated hereby.
All documents delivered to Seller shall be in form and substance reasonably
satisfactory to counsel for Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LANDMARK AND PRINCIPALS
Landmark and the Principals each jointly and severally represent and
warrant that all of the following representations and warranties in this Article
IV are true and correct at the date of this Agreement, shall be true at the time
of Closing and that such representations and warranties as made at the time of
Closing shall survive the Closing.
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4.1 Corporate Power and Authority; Effect of Agreement. Seller is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of North Carolina and has all requisite
power and authority to carry on the Business and to own or hold under
lease the Assets. Seller has all requisite corporate power and
authority to execute and deliver this Agreement and the other
documents listed on Schedule 4.1 (the "Other Seller Agreements") or
delivered at Closing, to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the
Other Seller Agreements by hereof Landmark and performance by
Landmark of its obligations under this Agreement and the Other Seller
Agreements and the consummation by Landmark of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Landmark, and its
stockholders, in accordance with applicable law and the Certificate
of Incorporation and Bylaws of Landmark. This Agreement and the Other
Seller Agreements have been duly and validly executed and delivered
by Landmark and constitute the valid and binding obligations of
Landmark, enforceable in accordance with their respective terms,
except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general applicability relating to or affecting creditors'
rights generally.
4.2 Qualification of Landmark. Landmark is duly qualified to do business
in good standing as a foreign corporation in the jurisdictions listed
on Schedule 4.2 and there are no other jurisdictions in which the
conduct of Landmark's business or activities or its ownership of the
Assets requires any other qualification under applicable law. The
minute books of Landmark contain true and correct copies of (i) the
minutes of each meeting of and (ii) all written consents of the board
of directors and stockholders of Landmark.
4.3 Capitalization. The entire authorized and issued capital stock of
Landmark is listed on Schedule 4.3, and is issued only to the holders
reflected on such Schedule. There are no voting agreements, voting
trusts or other agreements (including cumulative voting rights),
commitments or understandings with respect to any of the stock
reflected on Schedule 4.3.
4.4 Articles of Incorporation, Bylaws, Officers and Directors. True and
complete copies of Landmark's Articles of Incorporation, and all
amendments thereof to date, and Bylaws of Landmark, as amended to
date, have been delivered to Purchaser. Schedule 4.4 is a true and
complete list of all of the officers and directors of Landmark.
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4.5 Assets Used in the Business. Except for the Excluded Assets, the
Assets constitute all of the rights, properties, privileges and other
assets used in the conduct of the activities, operations or business
of Landmark (the "Business") as conducted during the twelve months
preceding the date of this Agreement, except for assets sold, disposed
of or discarded in the ordinary course of business.
4.6 Title to Personal Property. Except as disclosed in Schedule 4.6 or
Schedule 2.4, Seller is the owner of all of the Personal Property free
and clear of any claims, liens, charges, restrictions, security free
interests or encumbrances whatsoever.
4.7 No Restrictions Against Sale of Assets. Except as disclosed in
Schedule 4.7, Landmark has full right, power and authority to sell the
Assets to Purchaser as provided herein without obtaining the consent
or approval of any "Governmental Authority" (other than the approval
of the Federal Trade Commission or the United States Department of
Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations thereunder (the
"HSR Act") (the "Governmental Consents"). Except as disclosed on
Schedule 4.7, (i) the execution and delivery by Landmark of this
Agreement and the Other Seller Agreements, (ii) the performance by
Landmark of its obligations hereunder and thereunder and (iii) the
consummation of the transactions contemplated hereunder and thereunder
do not require Landmark to obtain any consent, approval, waiver of any
acceleration, termination or other right or remedy or action of or by,
or make any filing with or give any notice to any other party. As used
in this Agreement, "Governmental Authority" shall mean the United
States or any state, local or foreign government, or any subdivision,
agency or authority of any thereof.
4.8 Financial Statements. Except as set forth in Schedule 4.8, Landmark
has delivered to Fortress (as Schedule 4.8 copies of the following
financial statements (the "Financial Statements").
(a) Unaudited Balance Sheets, Income Statements, Statements of
Stockholders' Equity, and Statements of Cash Flows for the
years ended December 31, 1993, 1994 and 1995.
(b) Unaudited Balance Sheets and Income Statements for the three
months ended March 31, 1995 and 1996, the three months ended
June 30, 1995 and 1996, and the three months ended September
30, 1994 and 1995.
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(c) Unaudited Balance Sheets, Income Statements, Statements of
Stockholders' Equity, and Statements of Cash Flows for the
six months ended June 30, 1995 and 1996, and the nine
months ending September 30, 1994 and 1995.
Each of the Financial Statements is accurate and complete in all material
respects, is consistent with the books and records of Landmark (which, in turn,
are accurate and complete in all material respects) and fairly presents
Landmark's financial condition, assets and liabilities as of their respective
dates and thereto in accordance with GAAP, consistently applied among the
periods which are subject of the Financial Statements, except unaudited interim
financial statements which were or are subject to normal and recurring year-end
adjustments which were not and are not expected to be material in amount and the
addition of required footnotes thereto.
Except as reflected on Schedule 4.8, as of the date hereof and as of the
Closing, Landmark does not have any debts, liabilities or obligations of any
nature (whether accrued, absolute, contingent, direct, indirect, perfected,
inchoate, unliquidated or otherwise), except
(i) to the extent clearly and accurately reflected and accrued
for or fully reserved against in the Financial Statements,
(ii) for liabilities specifically delineated as to nature and
amount on the Schedules to this Agreement, or
(iii) for liabilities and obligations which have arisen after
December 31, 1995 in the ordinary course of business
consistent with past custom and practice (none of which is
a liability resulting from breach of contract, material
breach of warranty, tort, infringement claim or lawsuit).
4.9 Taxes.
(a) Definitions.
(i) The term "tax" shall mean any federal, state, local or
foreign income, gross receipts, franchise, estimated, alternative minimum,
add-on minimum, sales, use, transfer, registration, value added, excise,
natural resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital
stock, social security, unemployment, disability, payroll, license,
employee or other withholding, or other tax of any kind whatsoever,
including any interest, penalties or additions to tax or additional amounts
in respect to the foregoing.
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(ii) The term "Tax Return(s)" shall mean returns, declarations,
reports, claims for refund, information returns or other documents
(including any related or supporting schedules, statements or information)
filed or required to be filed in connection with the determination,
assessment or collection of any Taxes of Landmark or the administration of
any laws, regulations or administrative requirements relating to any
Taxes.
(b) Tax Returns and Audits.
(i) Except as set forth in Schedule 4.9, Landmark has timely
filed all Tax Returns for all periods ended on or before the Closing Date.
All such Tax Returns are true and correct in all material respects. As of
the time of filing, the foregoing Tax Returns correctly reflected in all
material respects the facts regarding the income, business, assets,
operations, activities, status, or other matters of the Company or any
other information required to be shown thereon. In particular, the
foregoing Tax Returns are not subject to penalties under Section 6662 of
the Code, relating to accuracy-related penalties (or any corresponding
provision of the state, local or foreign Tax law) or any predecessor
provision of law. An extension of time within which to file any Tax
Return that has not been filed has been requested or granted.
(ii) With respect to all amounts of Taxes imposed on Landmark
or for which Landmark is or could be liable, whether to taxing authorities
(as, for example, under law) or to other persons or entities (as, for
example, under Tax allocation portions of periods ending on or before the
Closing Date, all applicable Tax laws and such amounts required to be paid
by Landmark to taxing authorities or others on or before the Closing Date
have been paid, or accrued for or fully reserved against on Financial
Statements.
(iii) There are no Liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of Landmark.
4.10 Material Contracts. Except as listed or described on Schedule 4.10
or any other Schedule to this Agreement (such contracts, or those which should
have been listed on Schedule 4.10, are the "Material Contracts"), as of or on
the date hereof, Landmark is not a party to or bound by, nor does there exist
any written or oral leases, agreements or other contracts or legally binding
contractual rights or contractual obligations or contractual commitments
relating to or in any way affecting the operation or ownership of Landmark's
business ("Contracts") that are of a type described below:
(a) any collective bargaining arrangement with any labor union or any
such agreements currently in negotiation or proposed;
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(b) any contract for capital expenditures or the acquisition or
construction of fixed assets for or in respect to real property other than in
Landmark's ordinary course of business in excess of $50,000;
(c) any contract with a term in excess of one year for the purchase,
maintenance, acquisition, sale or furnishing of materials, supplies,
merchandise, machinery, equipment, parts or other property or services (except
that Landmark need not list any such contract made in the ordinary course of
business which requires aggregate future payments of less than $100,000);
(d) any contract relating to the borrowing of money, or the guaranty of
another person's borrowing of money, including, without limitation, all notes,
mortgages, indentures and other obligations, agreements and other instruments
for or relating to any lending or borrowing, including assumed indebtedness;
(e) any contract granting any person a Lien on any of the assets of
Landmark, in whole or in part;
(f) any contract for the cleanup, abatement or other actions in
connection with Hazardous Materials (as defined in Section 4.19), the
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any contract granting to any person a first-refusal, first-offer or
similar preferential right to purchase or acquire any of the Assets of the
Business other than in the ordinary course of business;
(h) any contract under which Landmark is -
(i) a lessee or sublessee of any machinery, equipment, vehicle or other
tangible personal property or real property, or
(ii) a lessor of any real property or tangible personal property owned
by Landmark,
in either case having an original value in excess of $50,000;
(i) any contract providing for the indemnification of any officer,
director, employee or other person; where such indemnification may exceed the
sum of $50,000;
(j) any joint venture or partnership contract; and
(k) any other contract with a term in excess of one year, whether or not
made IA the ordinary course of business, which involves payments in excess of
$100,000.
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Landmark has provided Fortress with a true and complete copy of each
written Material Contract, including all amendments or other modifications
thereto. Except as set forth on Schedule 4.10, each Material Contract is a valid
and binding obligation of Landmark enforceable in accordance with its terms, and
is in full force and effect, subject to bankruptcy, reorganization, receivership
and other laws affecting creditors' rights generally. Except as set forth on
Schedule 4.10, Landmark has performed all obligations required to be performed
by it under each Material Contract and Landmark is not, nor, to the Knowledge of
Landmark, is any other party to any Contract (with or without the lapse of time
or the giving of notice, or both) in breach or default in any material respect
thereunder; and there exists no condition which, to the Knowledge of Landmark
would constitute a breach or default thereunder. Landmark has not been notified
that any party to any Material Contract intends to cancel, terminate, not renew
or exercise an option under any Material Contract, whether in connection with
the transactions contemplated hereby or otherwise.
4.11 Other Acquired Home Contracts.
Under the appropriate subheading, Schedule 1.2(c) hereto lists as of the
date hereof all written and oral agreements, arrangements, contracts and
commitments to which Landmark is a party or entered into on behalf thereof
pursuant to which Landmark is obligated to construct a residence or other
building or improvement or which relates to the development of any real property
or interest in real property.
4.12 Permits. Landmark possesses all approvals, authorizations,
certificates, consents, franchises, licenses, permits, rights, variances, and
waivers necessary for the lawful conduct of its Business, the absence of which
would materially adversely affect the Assets or the Business of Landmark
(collectively, the "Permits"). Each of the Permits is listed on Schedule 4.12
hereto. All Permits are in full force and effect, no violations have occurred
with respect thereto, and to Landmark's Knowledge no basis exists for any
limitation, revocation, or withdrawal thereof or any denial of any extension or
renewal with respect thereto. Except as indicated on Schedule 4.12, each Permit
is transferable to the Purchaser.
4.13 Real Property. (a) Schedule 1.2(b) hereto sets forth each parcel of
Real Property that Landmark owns as of the date hereof. Real Property has all
necessary access to and from public highways, streets, and roads and no pending
or, to the best Knowledge of Landmark, threatened proceeding or other fact or
condition exists that could limit or result in the termination of such access.
The Real Property is connected to and serviced by electric, gas, sewage,
telephone, and water facilities, which facilities are in compliance, in all
material respects, with all Applicable Laws and installation and connection
charges with respect thereto have been paid in full.
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(b) Under the heading "Real Property Leases", Schedule 1.2(b) hereto
describes each agreement, arrangement, contract, commitment, or lease (the "Real
Property Leases") pursuant to which Landmark is the lessor or the lessee with
respect to any real property (the "Leased Real Property") as of the date hereof.
(c) Land Contracts. Under the heading "Land Contracts", Schedule 1.2(d)
hereto lists all written and oral agreements, arrangements, contracts, and
commitments to which Landmark is a party or entered into on behalf thereof
pursuant to which Landmark is obligated to purchase any developed or undeveloped
real property (the "Land Contract Property") as of the date hereof or possesses
an option to acquire any developed or undeveloped real property (the "Option
Real Property") as of the date hereof. Each such parcel of developed real
property included in the Land Contract Property satisfies all of the
representations and warranties set forth herein concerning the Real Property.
Moreover, any developed or undeveloped real property that Landmark becomes
obligated to purchase after the date hereof will satisfy all of the
representations and warranties set forth herein for the Real Property as of the
Closing Date.
(d) Good and Marketable Title. Landmark has good and marketable title in
fee simple to its Real Property and Land Contract Property (collectively, the
"Real Property"), subject to the Permitted Liens referred to in Section 4.14
hereof and except that Landmark will not acquire such title to its Land Contract
Property until the acquisition thereof and will not have recorded deeds to
certain other property set forth on Schedule 1.2(b). The Real Property
constitutes all of the Real Property which Landmark owns or has a right to
acquire or in which it otherwise has an interest, except for the Leased Real
Property and the Excluded Assets.
(e) No Breach or Default. Except as set forth in Schedule 4.13 hereto,
with respect to any agreements, arrangements, contracts, covenants, conditions,
deeds, deeds of trust, rights-of-way, easements, mortgages, restrictions,
surveys, title insurance policies, and other documents granting to Landmark
title to or an interest in or otherwise affecting its Real Property, no material
breach or event has occurred that with the giving of notice, the lapse of time,
or both would constitute a breach or event of default, by Landmark or, to the
best Knowledge of Landmark, any other Person.
(f) No Condemnation. No condemnation, eminent domain, or similar
proceeding exists, is pending or, to the best Knowledge of Landmark, is
threatened with respect to, or that could affect, any Real Property or Leased
Real Property.
(g) Compliance with Laws. The buildings and improvements on the Real
Property and the Leased Real Property and the subdivision and improvements of
the Real Property do not violate, in any material respect, (i) any Applicable
Law, including any building, set-back, or zoning law, ordinance, regulation, or
statute, or other governmental restriction in the nature thereof, or (ii) any
restrictive covenant affecting any such property.
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(h) Parties in Possession. To the Knowledge of Landmark there are no
parties in possession of any portion of the Real Property as lessees, tenants at
sufferance, or trespassers.
(i) Unpaid Obligations. Except as set forth on Schedule 4.13(i) , there
are not unpaid charges, debts, liabilities, claims or obligations arising from
the construction, occupancy, ownership, use, or operation of the Real Property
(other than those being assumed by the Purchaser pursuant to Section 2.1 hereof)
or being prorated pursuant to Section 2.7 hereof. No such 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.
(j) Assessments. Except as set forth on Schedule 4.13(j), no developer-
related charges or assessments for public improvements or otherwise made against
the Real Property or any lots included therein are 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.
(k) Subdivision Standards. The Real Property and all lots included
therein conform in all material respects to the appropriate governmental
authority's subdivision standards.
(l) Moratoria. There is no moratorium applicable to any of the Real
Property on (i) the issuance of building permits for the construction of houses,
or certificates of occupancy therefor, or (ii) the purchase of sewer or water
taps.
(m) Construction Conditions. Each of the lots included in the Real
Property is stable and otherwise suitable for the construction of a residential
structure by customary means and without extraordinary site preparation
measures.
(n) Environmental Matters. Except for the Wetlands contained within the
Wrens Landing subdivision, the Real Property does not contain wetlands or a
level of radon above action levels of the U.S. Environmental Protection Agency
and is not located within a "critical", "preservation", "conservation" or
similar type of area. 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.
(o) Certain Prior Uses. None of the Real Property has been used as a
grave site or fill or borrow area.
(p) Claims. No Legal Proceeding is pending or, to the best Knowledge of
Landmark, threatened which involves any of the Real Property or against Landmark
with respect to any of the Real Property; all of the Real Property and the lots
included therein are in compliance, in all material respects, with all
applicable zoning and subdivision
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ordinances; 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.
(q) Third Party Rights. Landmark has not granted to any Person any
contact 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.
(r) Zoning. All of the Real Property is zoned to permit single-family
home construction and occupancy thereon, except as set forth on Schedule 4.13.
(s) No Foreign Sellers. No Seller is a "foreign person" within the
meaning of Sections 1445 and 7701 of the Code.
4.14 Permitted Liens. Except as disclosed on any of the Schedules
attached hereto, Landmark's title to the Assets is free and clear of all liens
other than liens listed on Schedule 4.14 hereto (collectively, the "Permitted
Liens") and such other liens as may be described in the commitments for title
insurance delivered pursuant to Section 3.2(a)(iv) hereof prior to Closing.
Moreover, except for such Permitted Liens, no liens except with respect to any
Land Contract property or other property Landmark is obligated to acquire
pursuant to a Contract.
4.15 Litigation. Except as set forth in Schedule 4.15 (which shall
disclose the parties to, nature of, and relief sought for each matter to be
disclosed on Schedule 4.15):
(a) There is no suit, action, proceeding, investigation, claim or order
pending, or to Landmark or any employee plan, or any fiduciary of any such plan
(or to the Knowledge of Landmark pending or threatened against any of the
officers, directors or employees of Landmark with respect to its business or
proposed business activities) which is material to Landmark or to which Landmark
is otherwise a party, or which may affect either Landmark, its assets or the
Business, before any court, or before any Governmental Authority (collectively,
"Claims"); nor, to Landmark's Knowledge, is there any basis for any such Claims.
(b) Landmark is not subject to any judgment, order or decree of any court
or Governmental Authority; has not received any opinion or memorandum from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to the Business. Landmark is not
engaged in any legal action to recover money due it or for damages sustained by
it.
(c) Landmark's current insurance is believed to be adequate to cover all
pending or threatened Claims, Landmark has given all required notice of such
Claims to its appropriate insurance carrier(s) and/or all such Claims have been
fully reserved for on the financial statements of Landmark as delivered to
Fortress pursuant to the terms of this Agreement. Schedule 4.15 lists the
insurer for each Claim covered by insurance or
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designates each Claim, or portion of each Claim, as uninsured and the individual
and aggregate policy limits for the insurance covering each insured Claim and
the applicable policy deductibles for each insured Claim.
(d) Schedule 4.15 sets forth all closed litigation matters (other than
workers compensation claims) to which Landmark was a party during the three
years preceding the Closing, the date such litigation was commenced and
concluded, and the nature of the resolution thereof (including amounts paid in
settlement or judgment).
4.16 Compliance with Applicable Laws. Except as set forth on Schedule
4.16, to its Knowledge Landmark has complied with all laws, rules, regulations,
writs, injunctions, decrees, and orders applicable to it or to the operation of
its Business (collectively, "Laws") and has not received any notice of any
alleged claim or threatened claim, violation of, liability or potential
responsibility under, any such Law which has not heretofore been cured and for
which there is no remaining liability other than those not having a material
adverse effect on the Business taken as a whole. Without limiting the generality
of the foregoing, to its Knowledge, Landmark has complied in all material
respects with all applicable federal, state and local Laws relating to antitrust
and trade regulations.
4.17 Transaction Not a Breach. Except as set forth on Schedule 4.17 and
except to the extent the Consents are required to transfer the Assets, the
execution, delivery or performance by Landmark of this Agreement, the Other
Company Agreements, and the consummation of the transactions contemplated hereby
and thereby will not:
(a) To the Knowledge of Landmark, violate or conflict with or result in a
breach of any provision of any Law, order, permit, judgment, injunction, decree
or other decision of any court or other tribunal or any Governmental Authority
binding on Landmark, or any of their respective Affiliates, or conflict with or
result in the breach of any of the terms, conditions or provisions thereof.
(b) Constitute a default under the Certificate or Articles of
Incorporation or the By-Laws of Landmark or of any contract, agreement,
commitment, indenture, mortgage, note, bond, license or other instrument or
obligation to which Landmark is a party.
(c) Constitute an event which would permit any party to terminate any
material agreement or accelerate the maturity of any material indebtedness or
other obligation.
(d) Result in the creation or imposition of any material Lien upon the
Assets.
(e) With the exception of the notice, if any, required to be given to the
Federal Trade Commission and the United States Department of Justice pursuant to
the Hart-Scott-Rodino Antitrust Improvements Act, as amended, require any
authorization,
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consent, approval, exemption or other action by or notice to any court or
Governmental Authority.
4.18 Insurance Policies. Schedule 4.18 is a correct and complete list and
description of all insurance policies (including "self-insurance" programs) now
maintained by Landmark (the "Insurance Policies"). The Insurance Policies are in
full force and effect, Landmark is not in default under any of them, and no
material claim for coverage thereunder has been denied under any such current
policies with respect to any matter.
4.19 Environment.
(a) Except as set forth in Schedule 4.19,
(i) Landmark is in compliance with all Environmental Requirements, and
(ii) Landmark possesses all required permits, licenses and certificates,
and have filed all notices or application required thereby, except where such
noncompliance with Environmental and Safety Laws or failure to possess required
permits, licenses and certificates would not, individually or in the aggregate,
have a material adverse effect upon the financial condition, assets, operations,
or prospects of Landmark taken as a whole. As used herein, "Environmental
Requirements" shall mean all applicable federal, state and local laws, rules,
regulations, ordinances and requirements relating to pollution and protection of
the environment, all as amended or hereafter amended.
(b) Except as disclosed in Schedule 4.19:
(i) Landmark has not been subject to, or received any notice of any
private, administrative or judicial action, or notice of any intended private,
administrative or judicial action relating to the presence or alleged presence
of Hazardous Materials in, under or upon any Real Property currently or formerly
owned, leased or used by (A) Landmark, or (B) any other person that has, at any
time, disposed of Hazardous Materials on behalf of Landmark; and
(ii) Landmark does not have any basis for any such notice or action; and
(iii) there are no pending or, to the Knowledge of Landmark, threatened
actions or proceedings (or notice of potential actions or proceedings) from any
Governmental Authority or any other entity regarding any matter relating to
health, safety or protection of the environment.
"Hazardous Materials" for purposes of this Agreement shall include, without
limitation: (A) hazardous materials, hazardous substances, extremely hazardous
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substances or hazardous wastes, as those terms are defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S)9601 et
seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. (S)6901
et seq. ("RCRA"), and any other Environmental and Safety Requirements; (B)
petroleum, including, without limitation, crude oil or any fraction thereof
which is liquid at standard conditions of temperature and pressure (60 degrees
Fahrenheit and 14.7 pounds per square inch absolute); (C) any radioactive
material, including, without limitation, any source, special nuclear, or by-
product material as defined in 42 U.S.C. (S)2011 et seq.; and (D) asbestos in
any form or condition.
(c) There are and have been no past or present events, conditions,
circumstances, activities, practices, incidents or actions which could
reasonably be expected to interfere with or prevent continued compliance with
any Environmental Requirements, give rise to any legal obligation or liability,
or otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation against or involving Landmark or any Real Property presently or
previously owned or used by Landmark under any Environmental Requirements or
related common law theories, except as identified in Schedule 4.19.
(d) To Landmark's Knowledge, Schedule 4.19 sets forth the name and
principal place of business of every off-site waste disposal organization, and
each of the haulers, transporters or cartage organization engaged now or in the
preceding three years by Landmark to dispose of Hazardous Materials to any such
off-site waste disposal location on behalf of Landmark.
4.20 Compensation: Employment Agreements. Landmark has delivered to
Fortress an accurate schedule (Schedule 4.20) showing all current officers,
directors and key employees of Landmark listing all employment agreements with
such officers, directors and key employees, and the rate of compensation (and
the portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (i) December 31, 1995 and (ii) the
date hereof. Landmark has provided to Fortress true, complete and correct copies
of any employment agreements for persons listed on Schedule 4.20.
4.21 Labor Matters. Except as set forth in Schedule 4.21, there is no, and
within the last three years Landmark has not experienced any strike, picketing,
boycott, work stoppage or slowdown, other labor dispute, union organizational
activity, allegation, charge or complaint of unfair labor practice, employment
discrimination or other matters relating to the employment of labor pending or,
to Landmark's Knowledge, is threatened against Landmark; nor, to Landmark's
Knowledge, is there any basis for any such allegation, charge, or complaint.
Except as set forth in Schedule 4.21 to the Knowledge of Landmark, none of the
employees of any critical subcontractor utilized by Landmark are represented by
a labor union. There is no request directed to Landmark for union or similar
representation pending, and to Landmark's Knowledge, no question concerning
representation has been raised. To Landmark's Knowledge, there is no grievance
pending which might have a material adverse effect on Landmark nor any
arbitration proceeding
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arising out of the union agreement. There are no arbitration awards, court
orders, orders of the National Labor Relations Board or private settlement
agreements which in any way alter, amend or clarify any union agreement or which
restrict or otherwise impact Landmark's ability to act with respect to the
employees covered by any union agreement in the future. To Landmark's Knowledge,
no key employee and no group of employees has any plans to terminate employment
with Landmark. Landmark has complied in all material respects with all
applicable laws relating to the employment of labor, including provisions
thereof relating to wages, house, equal opportunity, collective bargaining and
the payment of social security and other taxes. Landmark is not liable for any
arrears of wages or any taxes or penalties for failure to comply with any such
laws, ordinances or regulations.
4.22 Business Conduct. Except as set forth on Schedule 4.22, since December
31, 1995, Landmark has conducted its Business only in the ordinary course
consistent with past custom and practices and has incurred no liabilities other
than in the ordinary course of business consistent with past custom and
practices. Except as set forth on Schedule 4.22, since December 31, 1995, there
has not been any:
(a) material adverse change in Landmark's operations, condition (financial
or otherwise), operating results, employee, customer or supplier relations or
business prospects;
(b) damage, destruction or loss of any property owned by Landmark or used
in the operation of the business, whether or not covered by insurance, having a
replacement cost or fair market value in excess of $50,000 affecting Landmark's
property, financial status or the Business;
(c) loan or advance by Landmark to any party other than sales to customers
on credit in the ordinary course of business consistent with past custom and
practices;
(d) notice (formal or otherwise) of any liability, potential liability or
claimed liability relating to environmental matters;
(e) incurrence of debts, liabilities or obligations except current
liabilities incurred in connection with or for services rendered or goods
supplied in the ordinary course of business consistent with past custom and
practices, liabilities on account of taxes and governmental charges but not
penalties, interest or fines in respect thereof, and obligations or liabilities
incurred by virtue of the execution of this Agreement;
(f) issuance by Landmark of any notes, bonds, or other debt securities or
any equity securities or securities convertible into or exchangeable for any
equity securities;
(g) cancellation, waiver or release by Landmark of any debts, rights or
claims, except in each case in the ordinary course of business consistent with
past custom and practices;
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(h) amendment or termination of any Material Contract other than
expiration of such contract in accordance with its terms;
(i) change in accounting principles, methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) utilized by Landmark;
(j) discharge or satisfaction of any material liability, encumbrance or
payment or any material obligation or liability, other than current liabilities
paid in the ordinary course of business consistent with past custom and
practices or cancellation of any debts or claims;
(k) sale or assignment by Landmark of any tangible assets other than in
the ordinary course of business;
(l) capital expenditures or commitments therefor by Landmark other than in
the ordinary course of business in excess of $100,000 in the aggregate;
(m) charitable contributions or pledges by Landmark in excess of $25,000
in the aggregate;
(n) mortgage, pledge or other encumbrance of any asset of Landmark other
than in the ordinary course of business;
(o) adoption, amendment or termination of any employee benefit pension
plan;
(p) increase in the benefits provided under any employee benefit pension
plan; or
(q) an occurrence or event not included in clauses (a) through (t) that
has resulted or would reasonably be expected to result in a material adverse
change in Landmark's operations, condition (financial or otherwise), operation
results, assets, liabilities, employee, customer or supplier relations or
business prospects. For purposes of this Section 4.22, the activities directly
involved with the sale, construction, and delivery of individual homes is deemed
activities in the "ordinary course".
4.24 Misrepresentation. To the Knowledge of Landmark and the Principals
none of the representations and warranties set forth in this Agreement or in any
of the certificates, schedules, exhibits, lists, documents, exhibits, or other
instruments delivered, or to be delivered, to Landmark as contemplated by any
provision hereof, contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FORTRESS AND PURCHASER
Fortress and Purchaser each jointly and severally represent and warrant
that the representations and warranties set forth below are true and correct as
of the date of this Agreement and shall be true and correct at the time of
Closing and that such representations and warranties as made at the time of
Closing shall survive the Closing.
5.1 Organization. Fortress and Purchaser are duly organized, validly
existing, and in good standing under the laws of the state of Delaware.
5.2 Authorization. Fortress and Purchaser have full power, right and
authority to execute and deliver this Agreement and the other documents and
agreements required in connection with the transactions contemplated hereby (the
"Other Purchaser Agreements") and to perform their obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Other Purchase
Agreements by Fortress and Purchaser and performance of the obligations under
this Agreement and Other Purchaser Agreements have been duly and properly
authorized by all requisite corporate action in accordance with applicable law
and with the Certificate of Incorporation and By-Laws of each. This Agreement
and the Other Purchaser Agreements are valid and binding upon Fortress and
Purchaser in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights generally.
5.3 Transaction Not a Breach. Neither the execution and delivery of
this Agreement or the Other Purchaser Agreements, nor their performance will
violate, conflict with, or result in a breach of any provision of any Law, rule,
regulation, order, permit, judgment, injunction, decree or other decision of any
court or other tribunal or any Governmental Authority binding on Fortress or
Purchaser or conflict with or result in the breach of any of the terms,
conditions or provisions of the Certificate of Incorporation or the By-laws of
Fortress or Purchaser or of any contract, agreement, mortgage or other
instrument or obligation of any nature to which Fortress or Purchaser is a party
or by which Fortress or Purchaser is bound.
5.4 Misrepresentation. None of the representations and warranties set
forth in this Agreement or in any of the certificates, schedules, exhibits,
lists, documents, exhibits, or other instruments delivered, or to be delivered,
to Landmark as contemplated by any provision hereof, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
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ARTICLE VI
COVENANTS PRIOR TO CLOSING
6.1 Access and Cooperation; Due Diligence. Between the date of this
Agreement and the Consummation Date, Landmark will afford to the officers and
authorized representatives of Fortress reasonable access to all of Landmark's
sites, properties, books and records during normal business hours and with prior
notice and will furnish Fortress with such additional financial and operating
data and other information as to the business and properties of Landmark as
Fortress may from time to time reasonably request. Landmark will cooperate with
Fortress, its representatives, engineers, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. Fortress
and Landmark will treat with strict confidence all information obtained in
connection with the negotiation and performance of this Agreement.
6.2 Business Conduct. From the date hereof through the Consummation
Date, except as otherwise provided for in, or contemplated by, this Agreement,
Landmark covenants and agrees that:
(a) Landmark will operate the business in the ordinary and usual
course in substantially the same manner as it is presently operated.
(b) Except in the ordinary course of business or as required by Law or
contractual obligations or other understandings or arrangements existing on
the date hereof, Landmark will not (i) increase in any manner the base
compensation of, or enter into any new bonus or incentive agreement or
arrangement with any of the employees at the business; (ii) pay or agree to
pay any additional pension, retirement allowance or other employee benefit
to any such employee, whether past or present, (iii) enter into any new
employment, severance, consulting, or other compensation agreement with any
existing employee of the business, or (iv) engage in any Affiliate
Transaction, except as is consistent with past practice.
(c) Subject to the terms and conditions of this Agreement, Landmark
will use its best efforts to keep available the services of its present
employees of the business, and preserve the goodwill, reputation and
present relationships of the business with its suppliers, customers, and
others having business relations with the business.
(d) Landmark will (i) use its best efforts to maintain and keep in
full force existing insurance, (ii) maintain Landmark's records in the
usual, regular and ordinary manner on a basis consistent with the past
practices, and (iii) perform and comply with its obligations under all
Material Contracts.
(e) Except in the ordinary course of business or as otherwise provided
for in, or contemplated by this Agreement, Landmark will not (i) sell,
lease,
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transfer or otherwise dispose of any of the Assets of the Business,
(ii) create or permit to exist any new lien on the Assets of the Business,
(iii) enter into any joint venture, partnership or other similar
arrangement or form any other new arrangement for the operation of the
Assets of the Business, or (iv) accelerate or delay the sale or
construction of any inventory in a manner inconsistent with past practices.
(f) Landmark will use its best efforts between the date hereof and the
Closing to secure fulfillment of all of the conditions precedent to
Fortress's obligations hereunder.
(g) Neither the Principals nor Landmark shall undertake any action or
fail to take any action that will result in a breach of the representations
and warranties set forth in Articles III and IV hereof as made again as of
the Closing.
(h) Landmark will comply with all Laws.
6.3 Non-Negotiation. In consideration of the substantial expenditure of
time, effort and expense undertaken by Fortress in connection with its due
diligence review and the preparation and execution of this Agreement, Landmark
and the principals agree that neither they nor their representatives, agents or
employees will, after the execution of this Agreement until the earlier of (i)
the termination of this Agreement, or (ii) the Closing, directly or indirectly,
solicit, encourage, negotiate or discuss with any third party (including by way
of furnishing any information concerning Landmark) any acquisition proposal
relating to or affecting the Company or any part of it, or any direct or
indirect interests in Landmark, whether by purchase of assets or stock, purchase
of interest, merger or other transaction ("Acquisition Transaction"), and that
Landmark will promptly advise Fortress of the terms of any communications
principals or Landmark may receive or become aware of relating to any bid for
all or any part of the Assets of the Business.
6.4 Schedules. Each party hereto agrees that with respect to the
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Closing timely to
supplement or amend promptly all the schedules to this Agreement (the
"Schedules"), to correct any matter which would constitute a breach of any such
party's representations and warranties herein, or to reflect any change in the
information disclosed therein, provided that no amendment or supplement to a
Schedule that constitutes or reflects a material adverse change to Landmark may
be made unless Fortress consents to such amendment or supplement. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 7.1 and 7.2 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 6.4.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE CLOSING
7.1 Conditions Precedent to Obligations of Purchaser. The obligations
of Purchaser under this Agreement to consummate the transactions contemplated
hereby will be subject to the satisfaction, at or prior to the Closing, of all
of the following conditions, any one or more of which may be waived at the
option of Purchaser:
(a) No Breach of Covenants; True and Correct Representations and
Warranties. There shall have been no material breach by Landmark in the
performance of any of its covenants herein to be performed by it in whole
or in part prior to Closing, and the representations and warranties of
Landmark contained in this Agreement and the Other Seller Agreements shall
be true and correct in all material respects as of the Closing, except for
representations or warranties that are made by their terms as of a
specified date, which shall be true and correct in all material respects as
of the specified date. Purchaser shall receive at the Closing a
certificate dated and validly executed on behalf of Landmark by an
executive officer certifying, in such detail as Purchaser may require, the
fulfillment of the foregoing conditions, and restating and reconfirming as
of the Closing all of the representations and warranties of Landmark
contained in this Agreement and the Other Seller Agreements.
(b) Delivery of Documents. Purchaser shall have received all
documents and other items to be delivered under Section 3.2(a).
(c) Title Commitment. Purchaser shall have received (at its expense)
with respect to each parcel of Real Property a commitment to issue an
Owner's Policy of Title Insurance issued by a title insurer satisfactory to
Purchaser in an amount equal to the fair market value of such Real
Property, insuring fee simple title to such Real Property to be in
Purchaser. Each title insurance policy to be delivered pursuant to the
commitment shall insure title to the Real Property and all recorded
appurtenant easements fitting such Real Property free of any mortgages,
claims, pledges, liens, encumbrances or charges except those set forth in
Schedule 4.14, (2) contain an "extended coverage endorsement" insuring over
all general exceptions customarily contained in such policies, (3) contain
a Zoning Endorsement, (4) contain an endorsement insuring that each street
adjacent to the Real Property is or has access to a public street and that
there is direct and unencumbered pedestrian and vehicular access to such
street from the Real Property, (5) if the Real Property consists of more
than one record parcel, contain a "contiguity" endorsement insuring that
all of the record parcels are contiguous to one another, and (6) contain a
"non-imputation" endorsement to the effect that title defects known to the
officers, directors and stockholders of the owner prior to
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the Closing shall not be deemed "facts known to the insured" for purposes
of the policy.
(d) No Legal Obstruction. Except as provided in Section 2.4 hereof, of
the Consents required for Purchaser to conduct the business in the normal
course after the Closing shall have been given or obtained, as the case may
be. No suit, action or proceeding by any person or Governmental Authority
shall be pending or threatened in writing, which if determined adverse to
Landmark or Purchaser's interest, could have a material adverse effect upon
(i) Landmark, the Business or the Assets, (ii) Purchaser, or (iii) the
benefits of Purchaser of the transactions contemplated hereby. No
injunction, restraining order or order of any nature shall have been issued
by or be pending before any court of competent jurisdiction or any
Governmental Authority challenging the validity or legality of the
transactions contemplated hereby or restraining or prohibiting the
consummation of such transactions or compelling Purchaser to dispose of or
discontinue or materially restrict the operations of a significant portion
of the Business or of the Business conducted by Purchaser as a result of
the consummation of the transactions contemplated hereby.
(e) Damage or Destruction. There shall have been no material loss or
destruction of any portion of the Assets or of the Business, nor any
institution or threat of any condemnation or other proceedings to acquire
or limit the use of any of the Assets or the business. Risk of loss for
the Assets shall be that of Landmark until the Closing.
(f) No Material Adverse Change. There shall have been no material
adverse change in the Assets, condition (financial or otherwise), operating
results, employee, customer or supplier relations, business activities or
business prospects of Landmark and Landmark will not have lost any material
customer (or any material portion of any customer's business).
(g) Approval by Purchaser's Counsel. All actions, proceedings,
instruments and documents reasonably required to carry out this Agreement
and all other related legal matters shall have been approved as to form and
substance by counsel for Purchaser.
(h) Required Consents. Except as set forth in Section 2.4 hereof,
Landmark shall have obtained the Consents.
(i) Bobby H. Harrelson, B. Rex Stephens, Daniel Siebert, and Robert C.
G. Exum have entered into Employment Agreements in the forms set forth in
Exhibit 7.1(i);
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(j) Purchasers and Landmark's Affiliate, Landmark Developers, Inc.,
have entered into a lot purchase and agreement in the form set forth in
Exhibit 7.1(j);
(k) Purchaser, Bobby W. Harrelson and B. Rex Stephens have entered
into the Right of First Refusal set forth in Exhibit 7.1(k).
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS TO LANDMARK. The obligations of
Landmark under this Agreement to consummate the transactions contemplated hereby
will be subject to the satisfaction, at or prior to the Closing, of all the
following conditions, any one or more of which may be waived at the option of
Landmark:
(a) No Breach of Covenants; True and Correct Representations and
Warranties. There shall have been no material breach by Purchaser in the
performance of any of the covenants herein to be performed by it in whole
or in part prior to the Closing, and the representations and warranties of
Purchaser contained in this Agreement shall be true and correct in all
material respects as of the Closing, except for representations or
warranties that are made by their terms as of a specified date, which shall
be true and correct in all material respects as of the specified date.
Landmark shall receive at Closing a certificate dated as of the Closing and
executed by an executive officer on behalf of Purchaser, certifying in such
detail as Landmark may require, the fulfillment of the foregoing
conditions, and restating and reconfirming as of Closing all of the
representations and warranties of Purchaser and Fortress contained in this
Agreement.
(b) Delivery of Documents. Landmark shall have received all documents
and other items to be delivered by Purchaser under Section 3.2(b).
(c) No Legal Obstruction. Except as set forth in Section 2.4 hereof,
of the Consents required for Purchaser to conduct the business in the
normal course after the Closing shall have been given or obtained, as the
case may be. No suit, action or proceeding by any person or Governmental
Authority shall be pending or threatened in writing, which if determined
adverse to Landmark or Purchaser's interest, could have a material adverse
effect upon (i) Landmark, the business or the Assets, (ii) Purchaser, or
(iii) the benefits of Landmark of the transactions contemplated hereby. No
injunction, restraining order or order of any nature shall have been issued
by or be pending before any court of competent jurisdiction or any
Governmental Authority challenging the validity or legality of the
transactions contemplated hereby or restraining or prohibiting the
consummation of such transactions or compelling Purchaser to dispose of or
discontinue or materially restrict the operations of a significant portion
of the Business or of the Business conducted by Purchaser as a result of
the consummation of the transactions contemplated hereby.
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(d) Approval by Landmark's Counsel. All actions, proceedings,
instruments and documents reasonably required to carry out this Agreement
and all other related legal matters shall have been approved as to form and
substance by counsel for Landmark.
(e) Bobby H. Harrelson, B. Rex Stephens, Daniel Siebert, and Robert
C. G. Exum have entered into Employment Agreements in the forms set forth
in Exhibit 7.1(i);
(f) Purchaser and Landmark's Affiliate, Landmark Developers, Inc.,
have entered into a lot purchase and agreement in the form set forth in
Exhibit 7.1(j);
(g) Purchaser, Bobby W. Harrelson and B. Rex Stephens have entered
into the Right of First Refusal set forth in Exhibit 7.1(k).
ARTICLE VIII
OTHER AGREEMENTS
8.1 NONASSIGNABLE CONTRACTS.
(a) Non-assignability. Without limiting the generality or effect of
any provision of this Agreement, to the extent that any Contract or License
to be assigned, transferred or contributed ("Transferred") pursuant to the
terms of this Agreement is not capable of being Transferred without the
consent, approval, novation or waiver of a third person or entity or a
Governmental Authority, or if such Transfer or attempted Transfer would
constitute a breach thereof or a violation of any Law, nothing in this
Agreement will constitute a Transfer or an attempted Transfer thereof.
(b) Landmark to Use Reasonable Efforts. Notwithstanding anything
contained in this Agreement to the contrary, Landmark will not be obligated
to Transfer to Purchaser any of its rights and obligations in and to any of
the Contracts referred to in Section 4.10 without first having obtained all
of the consents necessary for such Transfers (the "Required Consents").
Landmark will use its reasonable efforts, and Purchaser will cooperate with
Landmark to obtain such Consents.
(c) If Waivers or Consents Cannot Be Obtained. To the extent that the
Consents referred to in Section 1.4 are not obtained by Landmark and except
as otherwise provided in Section 2.4 hereof with respect to the Bank
Obligations, Landmark will, during the six-month period commencing with the
Closing Date (i) use reasonable efforts to provide to Purchaser the
benefits (and the burdens) of any Contract to the extent relating to the
Business, (ii) cooperate in any reasonable and lawful arrangement designed
to provide such benefits (and burdens) to Purchaser without incurring any
obligation to any other person or entity other than
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to provide such benefits to Purchaser and (iii) enforce, at the request of
Purchaser for the account of Purchaser any rights of Landmark arising from
any such Contracts (including, without limitation, the right to elect to
terminate in accordance with the terms thereof upon the advice of
Purchaser). Purchaser agrees to cooperate with Landmark in connection with
the foregoing. At the end of such six-month period Landmark will have no
further obligations hereunder with respect to any such Contract and the
failure to obtain any Consent with respect thereto will not be a breach of
this Agreement; provided that nothing contained in this Section 8.1(c)
shall affect the liability of Landmark, if any, pursuant to this Agreement
for having failed to disclose the need for such Consent or to use its
reasonable efforts in accordance with the provisions hereto to obtain such
Consent.
8.2 OBLIGATIONS OF PURCHASER TO PERFORM. Provided (and for so long as)
Landmark obtains the benefits of any Contract for Purchaser, Purchaser will
perform in a timely fashion the obligations of Landmark under or in connection
with such Contract (to the extent permitted thereunder) for the benefit of the
other party or parties thereto. In addition, Purchaser and Fortress, jointly
and severally, agree: (i) to pay, perform and discharge in a timely fashion
each and every obligation related to the Assumed Liabilities; and (ii) if any of
the Consents or Releases related to the Bank Obligations are not obtained within
the time provided in Section 2.4 hereof, then such Bank Obligations shall become
due and payable in full immediately and Purchaser and Fortress, jointly and
severally, agree to pay such Bank Obligations in full immediately.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLER. From and after the Closing, Landmark,
Bobby W. Harrelson and B. Rex Stephens jointly and severally agree to indemnify,
defend and save Purchaser, and its officers, directors, employees, agents,
Employee Plans, and fiduciaries, plan administrators or other parties dealing
with any such plans (each, a "Purchaser Indemnified Party"), forever harmless
from and against, and to promptly pay to a Purchaser Indemnified Party or
reimburse a Purchaser indemnified Party for, any and all liabilities (whether
contingent, fixed or unfixed, liquidated or unliquidated, or otherwise),
obligations, deficiencies, demands, claims, suits, actions, or causes of action,
assessments, losses, costs, expenses, interest, fines, penalties, actual or
punitive damages or costs or expenses of any and all investigations,
proceedings, judgments, environmental analyses, remediations, settlements and
compromises (including reasonable fees and expenses of attorneys, accountants
and other experts) (individually and collectively, the "Losses") sustained or
incurred by any Purchaser Indemnified Party relating to, resulting from, arising
out of or otherwise by virtue of any of the following:
(a) any misrepresentation or breach of a representation or warranty
made herein by Landmark, or non-compliance with or breach by Landmark of
any
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of the covenants or agreements contained in this Agreement or the Other
Seller Agreements to be performed by Landmark of any of its Affiliates; and
(b) any Losses relating to, resulting from or arising out of any
violations of, or obligations under, Environmental Requirements relating to
acts, omissions, circumstances or conditions existing on or prior to the
Closing whether or not such acts, omissions, circumstances or conditions
constituted a violation of Environmental Requirements as then in effect;
(c) the Excluded Liabilities.
9.2 Indemnification by Purchaser. From and after the Closing, Purchaser
and Fortress, jointly and severally, agree to indemnify, defend and save
Landmark and its Affiliates, and their respective officers, directors, employees
and agents (each, a "Landmark Indemnified Party") forever harmless from and
against, and to promptly pay to a Landmark Indemnified Party or reimburse a
Landmark Indemnified Party for, any and all Losses sustained or incurred by any
Landmark Indemnified Party relating to, resulting from, arising out of or
otherwise by virtue of any of the following: (i) any misrepresentation or breach
of a representation or warranty made herein by Purchaser or Fortress, (ii) non-
compliance with or breach by Purchaser or Fortress of any of the covenants or
agreements contained in this Agreement or any of the Other Purchaser Agreements
to be performed by Purchaser; or (iii) the Assumed Liabilities.
9.3 Indemnification Procedure for Third Party Claims. In the event that
subsequent to the Closing any person or entity entitled to indemnification under
this Agreement (an "Indemnified Party") asserts a claim for indemnification or
receives notice of the assertion of any claim or of the commencement of any
action or proceeding by any entity who is not a party to this Agreement or an
Affiliate of such a party (including, but not limited to any domestic or foreign
court, government, or Governmental Authority or instrumentality, federal state
or local) (a "Third Party Claim") against such Indemnified Party, against which
a party to this Agreement is required to provide indemnification under this
Agreement (an "Indemnifying Party"), the Indemnified Party shall give written
notice together with a statement of any available information regarding such
claim to the Indemnifying Party within sixty (60) days after learning of such
claim (or within such shorter time as may be necessary to give the Indemnifying
Party a reasonable opportunity to respond to such claim. The Indemnifying Party
shall have the right, upon written notice to the Indemnified Party (the "Defense
Notice") within thirty (30) days after receipt from the Indemnified Party of
notice of such claim, which notice by the Indemnifying Party shall specify the
counsel it will appoint to defend such claim ("Defense Counsel"), to conduct at
its expense the defense against such claim in its own name, or if necessary in
the name of the Indemnified Party; provided, however, that the Indemnified Party
shall have the right to approve the Defense Counsel, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party shall propose an
alternate Defense Counsel, which shall be subject again to the Indemnified
Party's approval.
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(a) In the event that the Indemnifying Party shall fail to give such
notice, it shall be deemed to have elected not to conduct the defense of
the subject claim, and in such event the Indemnified Party shall have the
right to conduct such defense in good faith an to compromise and settle the
claim without prior consent of the Indemnifying Party and the Indemnifying
Party will be liable for all costs, expense, settlement amounts or other
Losses paid or incurred in connection therewith.
(b) In the event that the Indemnifying Party does elect to conduct the
defense of the subject claim, the Indemnified Party will cooperate with and
make available to the Indemnifying Party such assistance and materials as
may be reasonably requested by it, all at the expense of the Indemnifying
Party, and the Indemnified Party shall have the right at its expense to
participate in the defense assisted by counsel of its own choosing,
provided that the Indemnified Party shall have the right to compromise and
settle the claim only with the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed.
Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive or other equitable relief
would be imposed against the Indemnified Party, or (ii) such settlement or
cessation would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder. The Indemnifying Party
shall not be entitled to control, and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any claim
to the extent that claim seeks an order, injunction or other equitable
relief against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial or
otherwise) or prospects of the Indemnified Party (and the cost of such
defense shall constitute a Loss for which the Indemnified Party is
entitled to indemnification hereunder). If a firm decision is made to
settle a Third Party Claim, which offer the Indemnifying Party is permitted
to settle under this Section and the Indemnifying Party desires to accept
and agree to such offer, the Indemnifying Party will give written notice to
the Indemnified Party to that effect. If the Indemnified Party fails to
consent to such firm offer within 30 calendar days after its receipt of
such notice, the Indemnified Party may continue to contest or defend such
third Party Claim and, in such event, the maximum liability of the
Indemnifying Party as to such Third Party Claim will not exceed the amount
of such settlement offer, plus costs and expenses paid or incurred by the
Indemnified Party through the end of such 30 day period.
(c) Any judgment entered or settlement agreed upon in the manner provided
herein shall be binding upon the Indemnifying Party, and shall
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conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
9.4 Direct Claims. It is the intent of the parties hereto that all
direct claims by an Indemnified Party against a party hereto not arising out of
this Article IX. Any claim under this Article IX by an Indemnified Party for
indemnification other than indemnification against a Third Party Claim, (a
"Direct Claim") will be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, and the Indemnifying Party will have a period of
30 calendar days within which to satisfy such Direct Claim. If the Indemnifying
Party does not so respond within such 30 calendar day period, the Indemnifying
Party will be deemed to have rejected such claim, in which event the Indemnitee
will be free to pursue such remedies as may be available to the Indemnitee under
this Article IX or otherwise.
9.5 Failure to Give Timely Notice. A failure by an Indemnified Party to
give timely, complete or accurate notice as provided in Sections 9.3 and 9.4
will not affect the rights or obligations of any party hereunder except and only
to the extent that, as a result of such failure, any party entitled to receive
such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise directly and materially damaged
as a result of such failure to give timely notice.
9.6 Reduction of Loss. To the extent any Loss of an Indemnified party
is reduced by receipt of payment (i) under insurance policies which are not
subject to retroactive adjustment or other reimbursement to the insurer in
respect of such payment, or (ii) from third parties not Affiliated with the
Indemnified Party, such payments (net of the expenses of the recovery thereof)
(such net payment being referred to herein as a "Reimbursement") shall be
credited against such Loss; provided, however, (x) the pendency of such payments
shall not delay or reduce the obligation of the Indemnifying Party to make
payment to the Indemnified Party in respect of such Loss, and (y) the
Indemnified Party shall have no obligation, hereunder or otherwise, to pursue
payment under or from any insurer or third party in respect of such loss. If
any Reimbursement is obtained subsequent to payment by an Indemnifying Party in
respect of a Loss, such Reimbursement shall be promptly paid over to the
Indemnifying Party.
9.7 Subrogation. The Indemnifying Party shall be subrogated to the
Indemnified Party's rights of recovery to the extent of any Loss satisfied by
the Indemnifying Party. The Indemnified party shall execute and deliver such
instruments and papers as are necessary to assign such rights and assist in the
exercise thereof, including access to books and records of Landmark.
9.8 Limitation on Indemnities. No Seller shall have any liability
pursuant to Section 9.1 hereof unless and until the aggregate amount of Losses
accrued pursuant to Section 9.1 is greater than $50,000 and then only for the
amount by which such Losses exceed $50,000.
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ARTICLE X
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
referred to in this Article 10:
"Affiliate Transaction" - a transaction between Landmark and any other Person or
entity that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, Landmark.
"Hazardous Material" -- as defined in Section 3.18(b).
"Knowledge" -- and individual will be deemed to have "Knowledge" of a particular
fact if:
(a) Such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of such fact or
other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or any time had, Knowledge of such fact
or other matter.
"Lien" - any charge, claim, equity, judgment, lease, liability, lien, mortgage,
pledge, restriction, security interest, Tax lien, or encumbrance of any kind.
"Person" -- any individual, corporation (including non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity of
Governmental Body.
ARTICLE XI
FEDERAL SECURITIES ACT
11.1 Economic Risk: Sophistication. Each Principal is able to bear the
economic risk of an investment in Fortress common stock issued pursuant to Annex
I and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the proposed investment in Fortress common
stock. The Principal or his respective purchaser representative has had an
adequate opportunity to ask questions and receive answers from the officers of
Fortress concerning any and all matters relating to the background and
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experience of the current and proposed officers and directors of Fortress, the
business, operations and financial condition of Fortress, and the plans for
additional acquisitions and the like. The Principal or his representative
purchaser representative has asked any and all questions in the nature described
in the preceding sentence and all questions have been answered to their
satisfaction. The Principal represents that after taking into consideration the
information and advice provided herein he has the requisite knowledge and
experience in financial and business matters to be capable of evaluating the
merits and risks of this investment and is an "accredited investor" as defined
in Regulation D of the Securities Act of 1933, as amended (the "Securities
Act").
11.2 Covenant to Register. Fortress covenants that, prior to the time
when issuance of any of its common stock to Seller pursuant to Annex I is
required, Fortress shall register the stock under the Securities Act at its sole
cost and expense. Fortress further agrees and represents and warrants to each
Seller that, based upon the information available as of the Closing Date, no
Seller shall be considered an "Affiliate" of Fortress within the meaning of Rule
144, promulgated under the Securities Act.
ARTICLE XII
MISCELLANEOUS
12.1 Notices, Consents, Etc. Any notices, consents or other
communication required to be sent or given hereunder by any of the parties shall
in every case be in writing and shall be deemed properly served if (i) delivered
personally, (ii) sent by registered or certified mail, in all such cases with
first class postage prepaid, return receipt requested, or (iii) delivered by a
recognized overnight courier service, to the parties at the addresses as set
forth below or at such other addresses as may be furnished in writing.
(a) If to Landmark:
Landmark Homes, Inc.
P. O. Box 4127
Wilmington, NC 28406
Attention: Bobby W. Harrelson or
B. Rex Stephens
with a copy to:
Murchison, Taylor, Kendrick, Gibson & Davenport L.L.P.
16 N. Fifth Avenue
Wilmington, NC 28401
Attention: Joseph O. Taylor
(b) If to Purchaser:
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THE FORTRESS GROUP, INC.
1921 GALLOWS ROAD, SUITE 730
VIENNA, VA 22182
Attention: J. MARSHALL COLEMAN
----------------------
with a copy to:
Katten, Muchin & Zavis
525 W. Monroe
Chicago, IL 60661-3693
Attention: Howard S. Lanznar, Esquire
Date of service of such notice shall be (x) the date such notice is personally
delivered, (y) three (3) days after the date of mailing if sent by certified or
registered mail, or (z) one (1) day after date of delivery to the overnight
courier if sent by overnight courier.
12.2 Severability. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision.
12.3 Documents. Each party will execute all documents and take such
other actions as the other party may reasonably request in order to consummate
the transactions provided for herein and to accomplish the purposes of this
Agreement.
12.4 Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
12.5 Expenses. Except as otherwise specifically provided herein, each
of the parties shall pay all costs and expenses incurred or to be incurred by it
in negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement. Seller shall not pay or obligate
Purchaser to pay any of such costs and expenses from the Assets.
12.6 Cooperation by the Parties. In addition to the covenants of
Seller contained in Article VII herein, the parties to this Agreement will use
their reasonable efforts, and will cooperate with each other of them, to secure
all necessary consents, approvals, authorizations, exemptions and waivers from
third parties as shall be required in order to enable each of them to effect the
transactions contemplated hereby, and will otherwise use their best efforts to
cause the consummation of such transactions in accordance with the terms and
conditions hereof.
12.7 Further Assurances. At any time or from time to time up to one
year after the Closing, each of the parties hereto shall, at the request of the
other of the parties hereto and at such other parties' expense, execute and
deliver any further instruments or
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documents and take all such further actions are reasonably requested of it in
order to consummate and make effective the sale of the Stock pursuant to this
Agreement.
12.8 Governing Law. This Agreement shall be construed and governs in
accordance with the laws of the State of North Carolina, without giving effect
to principles of conflicts of law.
12.9 Headings. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
12.10 Assignment. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but will not be assignable or delegable by any party without the prior
written consent of the other parties; provided, however, that nothing in the
Agreement is intended to limit Purchaser's ability to assign its rights or
delegate its responsibilities, liabilities and obligations under this Agreement
to any person at any time whether prior to or following the Closing without
consent, but no such assignment shall relieve Purchaser or Fortress of any of
its obligations, duties or liabilities hereunder.
12.11 Entire Agreement. This Agreement and all the Schedules and
Exhibits attached to the Agreement (which shall be deemed incorporated in the
Agreement and made a part hereof) set forth the entire understanding of the
parties and may be modified only by instruments assigned by both of the parties
hereto.
12.12 Third Parties. Nothing herein expressed or implied is intended
or shall be construed to confer upon or give to any person or entity, other than
the parties to this Agreement, any rights or remedies under or by reason of this
Agreement.
12.13 Interpretative Matters. Unless the context otherwise requires,
(i) all references to Articles, Sections, Schedules or Exhibits in this
Agreement, (ii) each accounting term not otherwise defined in this Agreement has
the meaning assigned to it in accordance with GAAP, and (iii) words in the
singular or plural include the singular and plural and pronouns stated in either
the masculine, feminine or neuter gender shall include the masculine, feminine
and neuter.
12.14 Termination. This Agreement may be terminated at any time prior
to the Closing.
(a) By the mutual written consent of Purchaser and Seller:
(b) By either Landmark or Purchaser in writing, without
liability to the terminating party on account of such termination
(providing the terminating party is not otherwise in default or in breach
of this Agreement), if the Closing shall not have occurred on or before
September 30, 1996.
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(c) By either Seller or Purchaser in writing, without liability to
the terminating party on account of such termination (provided the
terminating party is not otherwise in default or in breach of this
Agreement), if Purchaser or Seller, respectively, shall (i) fail to perform
in any material respect its agreements contained herein required to be
performed prior to the Closing, or (ii) materially breach any of its
representations, warranties or covenants contained herein; or
(d) Termination of this Agreement pursuant to this Section 11.16
shall terminate all obligations of the parties hereunder; provided,
however, that termination pursuant to clause (ii) or (iii) of Section
shall not relieve the defaulting party or breaching party from any
liabilities to the other party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PURCHASER:
FORTRESS ACQUISITION, INC.
By: /s/ JAMES J. MARTEL JR.
---------------------------
a duly authorized signatory
THE FORTRESS GROUP, INC.
By: /s/ JAMES J. MARTEL JR.
---------------------------
a duly authorized signatory
SELLER:
LANDMARK HOMES, INC.
By: /s/ ROBERT C.G. EXUM
---------------------------
a duly authorized signatory
PRINCIPALS:
/s/ BOBBY W. HARRELSON
-------------------------------
Bobby W. Harrelson
/s/ B. REX STEPHENS
-------------------------------
B. Rex Stephens
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INDEX OF SCHEDULES AND EXHIBITS
-------------------------------
SCHEDULES
Schedule 1.2(a) Assets of Balance Sheet
Schedule 1.2(b) Real Property Owned
Schedule 1.2(c) Acquired Contracts (Construction of Homes)
Schedule 1.2(d) Land Contracts
Schedule 1.2(g) Intellectual Property
Schedule 1.3 Excluded Assets
Schedule 2.4 Assumed Liabilities
Schedule 2.6 Purchase Price Allocation
Schedule 4.1 Other Seller Agreements
Schedule 4.2 Qualified Business Areas as a Foreign Corporation
Schedule 4.3 Authorized and Capital Stock Issued
Schedule 4.4 List of Officers and Directors
Schedule 4.6 Personal Property Claims, Liens, Charges,
Security Interests
Schedule 4.7 Required Consents
Schedule 4.8 Undisclosed Liabilities & Obligations
Schedule 4.9 Tax Matters
Schedule 4.10 Material Contracts
Schedule 4.12 Permits
Schedule 4.13 Liens
Schedule 4.13(i) Unpaid Obligations
Schedule 4.13(j) Developer Related Charges or Assessments for
Public Improvements that are Unpaid
Schedule 4.14 Permitted Exceptions
Schedule 4.15 Litigation
Schedule 4.16 Non-Compliance with Laws
Schedule 4.17 Exceptions to Government Law
Schedule 4.18 Listing of Insurance Policies
Schedule 4.19 Violations of Environmental Law & Permits, Etc.
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Schedule 4.20 Officers/Directors/Key Employee
Schedule 4.21 Employment Discrimination, Strikes, Etc.
Schedule 4.22 List of Employee Benefits Plans
Schedule 4.23 Adverse Changes in Operations, Etc.
EXHIBITS
Exhibit 2.1(c) Promissory Note
Exhibit 3.2(a) Bill of Sale and Assignment of Personal
Property
Exhibit 3.2(b)(ii) Assumption Agreement
Exhibit 7.1(i) Employment Agreements
Exhibit 7.1(j) Option Agreement
Exhibit I Subdivision Lot Prices
Exhibit II Sale and Purchase Agreement
Exhibit A Subdivision Lot Prices
Exhibit B Right of First Refusal
Exhibit C Seller-Purchaser Development
Responsibility Checklist
Exhibit D Landmark Organization, Inc.
Preparation and Landscape Prices
Exhibit 7.1(k) Right of First Refusal
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