Homes for America Holdings, Inc. Agreement
June 30, 2000
THIS AGREEMENT (this "Agreement") dated the 30th day of June, 2000 (the
"Effective Date"), is made by and between:
(i) HOMES FOR AMERICA HOLDINGS, INC., a Nevada corporation ("HFAH"),
BRIARMEADOWS / HOMES FOR AMERICA, INC., a Texas corporation ("Briarmeadows
HFA"), and ARLINGTON / HOMES FOR AMERICA, INC., a Texas corporation ("Arlington
HFA") (HFAH, Briarmeadows HFA, and Arlington HFA are together the "Company"),
and
(ii) WILLIAM KOPLOVITZ, JR., an individual residing in the State of New
York ("Koplovitz"), WILLIAM MAROVITZ, an individual residing in the State of
Illinois ("Marovitz"), DAVID SCHUTZ, an individual residing in the State of
Wisconsin ("Schutz"), WILLIAM TAYLOR ("Taylor"), an individual residing in the
State of New York, JON NIX, an individual residing in the State of New York
("Nix"), LITIGATION RESEARCH DEFINED BENEFIT PENSION TRUST, FARRALD G. BELOTE,
JR., TRUSTEE, a trust organized in the State of Texas ("Belote"), and STEPHEN T.
FROST, an individual residing in the State of Wisconsin ("Frost") (Koplovitz,
Marovitz, Schutz, Taylor, Nix, Belote, and Frost are together the "Investors").
RECITALS:
R.1. The Investors are the registered owners and/or holders respectively of
certain preferred stock, warrants, options and promissory notes issued or
made by HFAH (or required to be made or issued by HFAH), together with
certain separate agreements by and between HFAH with certain Investors, all
as more particularly described hereinbelow (together the "Financial
Instruments").
R.2. The common stock of HFAH is not listed on a public exchange and the parties
agree that the Financial Instruments are illiquid investments with no ready
market for sale.
R.3. The Investors have requested that HFAH assist the Investors in reducing the
Financial Instruments to a marketable investment, whether by repurchase,
payment at term, or substitution and exchange.
R.4. HFAH is the parent corporation and sole stockholder of its two subsidiaries
Briarmeadows HFA and Arlington HFA, and each of them is a special purpose
corporation holding marketable real property in the State of Texas more
particularly described herein (the "Texas Properties").
R.5. The parties have agreed upon a purchase by and sale to the Investors, as a
collective group, of the Texas Properties in consideration of (a) the
assumption or refinance of the mortgage obligations on the Texas Properties
by the Investor Company (as defined below), (b) the surrender and release
to HFAH all of the Financial Instruments, valued collectively, with (c)
HFAH issuing to the Investors in addition a new promissory note to balance
the exchange amounts (the "Balance Note").
R.6. As part of the implementation of this Agreement the Investors shall
organize and capitalize with the Financial Instruments a partnership,
corporation, limited liability company, escrow, trust, or other entity of
their choice (the "Investor Company") (a) to take their place as parties to
this Agreement, with power and authority to transfer, sell, and dispose of
the Financial Instruments, (b) to assume or refinance the respective
mortgage obligations of Briarmeadows HFA and Arlington HFA, (c) to take
title to the Texas Properties and the Balance Note at Closing (described
hereinbelow), and (d) to control among the Investors the tax treatment of
the conveyances contemplated hereby.
R.7. In the interim between the Effective Date and the Closing, the parties have
agreed that the Effective Date shall operate as the economic tolling date
for any obligations under the Financial Instruments, notwithstanding the
terms thereof or the retention of title thereto, and from and after the
Effective Date, the Investors (or their substitute the Investor Company) in
accordance with the terms hereof, (a) shall receive no income, interest,
dividends, contractual payments, charges, or any other consideration except
as provided in this Agreement and (b) shall be deemed to have no right to
vote, make elections, provide notices, or claim any other benefit accruing
under the title to such Financial Instruments.
Exhibit 10.24 - Page 1
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NOW, THEREFORE, in consideration of the foregoing recitals and the
representations, warranties, and covenants hereinafter set forth, the
undersigned parties, intending to be legally bound hereby, agree as follows:
1. Purchase and Sale.
(a) The Investor Company hereby agrees to purchase, and HFAH hereby agrees
to sell, the Texas Properties (each as defined in S 5 below). The
purchase price for the Texas Properties shall be Four Million Eight
Hundred Thousand Dollars ($4,800,000) (the "Purchase Price") upon the
terms and conditions set forth herein. The Purchase Price has been
allocated by the parties as follows: (i) Three Million Dollars
($3,000,000) for the Briarmeadows Property; and (ii) One Million Eight
Hundred Thousand Dollars ($1,800,000) for the Arlington Property.
(b) As a portion of the purchase price, the Investor Company shall assume
or refinance the outstanding first mortgage obligations of the Texas
Properties, being approximately One Million Five Hundred Thousand
Dollars ($1,500,000) for the Briarmeadows Property and approximately
One Million Two Hundred Thousand Dollars ($1,200,000) for the
Arlington Property, each a "Mortgage" and collectively the
"Mortgages". HFAH, Briarmeadows HFA and Arlington HFA shall cooperate
fully as requested by the Investor Company in causing the holders of
the Mortgages to agree to their assumption or refinancing by the
Investor Company on terms acceptable to the Investor Company.
(c) HFAH hereby agrees to accept as full and final payment of the purchase
price for the Texas Properties (i) the Mortgage assumptions or
refinancings required of the Investor Company under S 1(b) above as
further provided in S 7 below, (ii) delivery of all right, title, and
interest to the Financial Instruments (as tolled under S 4 below) at
Closing, and (iii) the amount of the Balance Note that HFAH shall
deliver to the order of the Investor Company pursuant to and in
accordance with the provisions of S 8 below.
2. Financial Instruments.
The Investors are the holders and owners of the respective Financial
Obligations identified on Exhibits A-1 through A-7 inclusive attached hereto and
hereby incorporated as if set forth herein (the "Financial Instruments"). Each
Investor acknowledges that the Financial Instrument(s) that relates to him set
forth the entirety of his interest in HFAH, except to the extent provided
herein. An attachment to each such exhibit shall include to the extent necessary
the respective Investor's name, notice address, and rights under Financial
Instruments that is or are owned and held by that Investor.
3. Investor Company.
(a) The Investor Company shall establish and designate to HFAH in advance
of Closing a single payee, whether the Investor Company Representative
or an escrow agent or attorney, to receive the payments required under
the Balance Note or otherwise due from the Company. From time to time
the Investor Company Representative may designate a successor payee
for subsequent payments. HFAH shall have no obligation to account to
the individual Investors for or to assure the later distribution to
the individual Investors of any sum due hereunder and the payment to
the designated payee by HFAH shall satisfy its payment obligations in
full.
(b) The Investor Company hereby designates Koplovitz and Schutz as its
joint representatives for required notices and communications
hereunder (both of whom must sign and receive notices) (jointly
referred to as the "Investor Company Representative"). The Investor
Company reserves the right to name a replacement or successor for
Koplovitz and/or Schutz, and shall promptly notify HFAH of any such
change. The Company shall be entitled to receive and rely upon notices
from the Investor Company Representative and to provide notices
thereto without the requirement to communicate with or obtain written
consents from each party hereto.
(c) Promptly after the Effective Date and in any event on or before August
31, 2000, the Investors shall organize the Investor Company and
capitalize it with the Financial Instruments. Upon organization and
election of officers or authorized representatives for the Investor
Company, the Investor Company Representative shall notify the Company
in writing and arrange for the Investor Company to execute and return
to HFAH a counterpart of this Agreement, with the Investor Company
Exhibit 10.24 - Page 2
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representing, warranting, and covenanting by such execution and
delivery that (i) it has title to the Financial Instruments sufficient
to surrender, convey, or release them to the order of HFAH and in
accordance with the terms of this Agreement, (ii) that it has assumed
all of the rights, titles, interests, and obligations of the Investors
under this Agreement, and (iii) that it will hold the Financial
Instruments subject to the terms of this Agreement and neither
hypothecate or transfer or suffer the assignment or transfer of any
interest therein except as provided in this Agreement. Upon
performance of the obligations of this provision, but subject to the
provisions of S 7(e) below, the Investors shall be released from all
further obligations hereunder.
4. Tolling Period.
(a) Subject to the terms and conditions for a termination of this
Agreement under S 7(e) below, the Effective Date shall operate as the
economic tolling date for any obligations under the Financial
Instruments, notwithstanding the terms thereof or the retention of
title thereto, and from and after the Effective Date the Investors (or
their substitute the Investor Company) (i) shall receive no income,
interest, dividends, contractual payments or other rights, charges,
proceeds, or any other consideration except as provided in this
Agreement and (ii) shall be deemed to have no right to vote, make
elections, provide notices, or claim any other benefit accruing under
the title to such Financial Instruments.
(b) The parties understand and acknowledge that the Financial Instruments
on the Effective Date have (in some instances) outstanding interest,
dividends, contractual rights, or other proceeds from the ownership
thereof which are due and payable or otherwise accrued as of the
Effective Date. All of such additional rights and proceeds are deemed
to be attached to and conveyed with the Financial Instruments on the
Effective Date and are subject to this tolling obligation.
5. Definition and Status of "Texas Properties".
(a) Briarmeadows HFA.
HFAH and Briarmeadows HFA each hereby represents and warrants to the
Investor Company as of the Effective Date and as of Closing that: (i) HFAH
is the sole stockholder of Briarmeadows HFA with power and authority to
transfer and convey all of the outstanding stock of Briarmeadows HFA,
except to the extent such stock is pledged to secure a Mortgage; and (ii)
Briarmeadows HFA is the fee simple title owner of the Texas Property more
fully described, with common address, legal description, outstanding
mortgage or deed of trust obligations, and owners title insurance policy,
in Exhibit B-1 attached hereto and hereby incorporated as if set forth
herein (the "Briarmeadows Property"); (iii) the financial statement for
Briarmeadows HFA attached hereto as Exhibit B-2 and hereby incorporated as
if set forth herein has been prepared in accordance with generally accepted
accounting practices and certified by an executive officer of the Company
and truly and correctly sets forth the financial condition of Briarmeadows
HFA as of the date of the statement; (iv) HFAH is authorized to cause
Briarmeadows HFA to undertake the conveyance contemplated hereunder of the
Briarmeadows Property with full power and authority to sell it to the
Investor Company without the consent of any other person or entity; and (v)
HFAH and Briarmeadows HFA, each by its respective and duly constituted
board of directors, have been authorized to consummate the execution,
delivery, and performance of this Agreement and the transactions
contemplated hereby.
(b) Arlington HFA. HFAH and Arlington HFA each hereby represents and warrants
to the Investor Company as of the Effective Date and as of Closing that:
(i) HFAH is the sole stockholder of Arlington HFA with power and authority
to transfer and convey all of the outstanding stock of Arlington HFA,
except to the extent such stock is pledged to secure a Mortgage; and (ii)
Arlington HFA is the fee simple title owner of the Texas Property more
fully described, with common address, legal description, outstanding
mortgage or deed of trust obligations, and owners title insurance policy,
in Exhibit B-3 attached hereto and hereby incorporated as if set forth
herein (the "Arlington Property"); (iii) the financial statement for
Arlington HFA attached hereto as Exhibit B-4 and hereby incorporated as if
set forth herein has been prepared in accordance with generally accepted
accounting practices and certified by an executive officer of the Company
and truly and
Exhibit 10.24 - Page 3
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correctly sets forth the financial condition of Arlington HFA as of the
date of the statement; (iv) HFAH is authorized to cause Arlington HFA to
undertake the conveyance contemplated hereunder of the Arlington Property
with full power and authority to sell it to the Investor Company without
the consent of any other person or entity; and (v) HFAH and Arlington HFA,
each by its respective and duly constituted board of directors, have been
authorized to consummate the execution, delivery, and performance of this
Agreement and the transactions contemplated hereby.
(c) Texas Properties Briarmeadows Property and Arlington Property are referred
to herein as the "Texas Properties" and each as a "Texas Property". The
Company further represents and warrants, as of the Effective Date and as of
Closing, that except as disclosed in Exhibits B-1 or B-3, there are no
liens, mortgages, deeds of trust, security interests, leases, covenants,
conditions, restrictions, easements, rights-of-way, licenses,
encroachments, judgments or encumbrances of any kind, except for the
following permitted exceptions (the "Permitted Exceptions"): (i) with
respect to Arlington Property, the leases of tenants in occupancy (all of
which are on a standard form residential lease incorporating commercially
reasonable rates); (ii) the lien of real estate taxes not yet due and
payable; (iii) matters of record affecting title to the respective Texas
Property, as presented to, reviewed, and approved by Investor Company in
its sole discretion before Closing; and (iv) zoning and building
restrictions (including any conditions of subdivision) and other laws,
ordinances, and regulations of governmental bodies having jurisdiction over
the Texas Properties, provided (x) the Texas Properties are in compliance
with all such restrictions, laws, ordinances, and regulations, and (y) all
such restrictions, laws, ordinances, and regulations do not prevent or
materially restrict the use of the Texas Properties for intended purposes
or render title unmarketable. As to both of the Texas Properties, the
Company further represents and warrants that, except as disclosed within
thirty days of execution of this Agreement, or thereafter on a timely basis
to the extent such circumstances or events become subsequently known, (i)
there are no litigations or actions pending against the Texas Properties,
(ii) there are no material tenant complaints, (iii) there are no tenant
rights to purchase any property or unit or to renew their lease on other
than standard renewal terms, (iv) all tenant leases are in full force and
effect, all tenants are current in their rent or not more than one month
past due, and no tenant had been notified that he is in default under his
lease, (v) there are no known environmental conditions that may have a
material adverse effect on the Texas Properties, and (vi) the Company has
not received notice of any building code violations, legal or zoning
violations, or insurance violations. To the extent any such circumstance or
condition has a material adverse effect on the financial condition or value
on one or both of the Texas Properties, the Investor Company shall have the
right to terminate this Agreement.
(d) The Company has provided the representations and warranties set forth above
to the best of its knowledge after reasonably diligent investigation. In
the event the Company determines a representation requires qualification,
as for example, to state that an additional third party consent is required
to transfer the Texas Properties, or that the attached exhibits B-1 through
B-4 require supplementation or correction, the Company will immediately
notify the Investor Company and shall obtain such consents or take such
other action reasonably required and acceptable to the Investor Company to
implement the transaction contemplated hereby.
6. Interim Operations.
(a) From and after the Effective Date through and including the date of
Closing, the Company shall continue to maintain, manage and operate the
Texas Properties in the manner managed on the Effective Date but in no
event less than customary industry standard for similarly situated
properties managed by their owners. In this regard, the Company shall enter
into, renew and/or terminate tenant leases on the same or comparable terms
as it has employed during the period of time when it operated the
properties for its own account.
Exhibit 10.24 - Page 4
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(b) With respect to each of the Texas Properties, the Company shall as of the
Effective Date establish a separate checking account reflecting all
financial transactions relating to each Texas Property, and shall pay all
reasonable and customary out-of-pocket expenses incurred in the regular
operation of the Texas Properties. Except for extraordinary expenses
required for public safety or other emergency protection of the Texas
Properties (for which the Company shall provide immediate notice to the
Investor Company), the Company shall not incur any capital or extraordinary
expense without prior notice to and authorization by the Investor Company.
Further, aside from payment of routine property management fees consistent
with prior practice (but excluding any incentive management fees or asset
management fees), all net cash flow shall remain in the checking accounts
established hereby and shall be transferred with the Texas Properties. The
property management fees for each Texas Property shall not exceed five
percent (5%) of cash receipts each month.
(c) From and after the Effective Date, the Company shall cause the operations
and financial management of the Texas Properties to prepare and provide to
the Investor Company customary statements of operations, income and
expense, and balance sheets for the Texas Properties to facilitate the
applications by the Investor Company under S 7 to assume or refinance the
Mortgages. A representative or designee of the Investor Company shall have
the right, on reasonable notice, to examine the checkbooks established
hereby, and related bank statements and cash receipts ledgers for each of
the Texas Properties, as well as their comparable books and records for the
twelve month period prior to the Effective Date.
(d) For the period through the date of Closing, the Company shall retain and
satisfy all of the debt, contractual, tax, insurance, and operational
obligations of the Texas Properties and the right to collect all income
from any sources therefor. The Company represents, warrants, and covenants
that at Closing it shall have timely paid, or set aside in an escrow
account for the benefit of the Investor Company sufficient funds to pay,
any and all obligations of the Texas Properties incurred through the date
of Closing and shall indemnify the Investor Company for any failure to
comply with this obligation.
(e) The Company shall bear all risk of loss to each Texas Property from fire or
other casualty and all liabilities arising from the Texas Property before
the Closing. The Company shall maintain all existing fire and casualty and
liability insurance on the respective Texas Property, and shall cooperate
in facilitating either the assignment of such policies to the Investor
Company or the procurement of suitable replacement insurance. The Company
shall further be responsible for correcting any violations of any zoning
and building codes (including any conditions of subdivision) or other laws,
ordinances, and regulations of governmental bodies having jurisdiction over
the Texas Properties that existed prior to Closing, whether or not such
violation is discovered before or after Closing.
(f) Except as may be otherwise expressly approved in writing by the Investor
Company Representative, from the Effective Date hereof to the Closing the
Company shall not cause or permit any change in the status of title to
either of the Texas Properties or any adverse change in the physical
condition thereof except for customary maintenance and operations and
except for reasonable wear and tear and damage by fire or other casualty.
In addition, the Company shall maintain and preserve all tenant security
deposits in a manner comparable to the manner employed when such security
deposits were held for the Company's own account.
7. Assumptions; Refinancings.
(a) The parties understand and acknowledge that as of the Effective Date and as
shown in Exhibits B-1 and B-3, each Texas Property is encumbered by an
existing first Mortgage obligation secured by a guaranty and other
collateral provided by the Company. In particular, the Mortgage obligation
on the Arlington Property matures in August 2000 and is secured in part by
the stock issued by Arlington HFA and Briarmeadows HFA held by HFAH.
Exhibit 10.24 - Page 5
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(b) It is a condition precedent to scheduling Closing hereunder that HFAH, and
its affiliates other than Arlington HFA and Briarmeadows HFA, and their
properties including any pledged or assigned collateral, be released from
any and all obligations to the respective first Mortgage lenders from and
after Closing.
(c) Promptly after the Effective Date, the Investor Company shall make
applications to the existing first Mortgage lenders to assume the guaranty
obligations of HFAH and its affiliates on those mortgages, or elect to
secure replacement financing from those lenders or other financial
institutions. Thereafter, the Investor Company shall use its best efforts
and diligently prosecute such applications to their closings and to provide
a release of HFAH and its affiliates (including Briarmeadows HFA and
Arlington HFA) and their pledged collateral as secured. Notwithstanding the
right in its reasonable discretion to negotiate and approve such financing
terms, the Investor Company represents and warrants that it will accept
such assumptions or refinancings so long as they are available from
institutional lenders on customary and commercially acceptable terms and
conditions then typical of the real estate market for properties such as
the Texas Properties. The Investor Company from time to time shall inform
HFAH of its progress in satisfying these obligations and the steps it has
taken in connection therewith.
(d) The parties understand that the Investor Company may be a special purpose
entity and will have no operating history or other financial statements or
credentials apart from those provided by the individual Investors. To
qualify for assumption or refinancing as required by this S 7, the Investor
Company may require, and the Investors shall provide to the proposed
assumption or refinancing lenders, as required, the requisite financial
statements, histories, and information and management or ownership
credentials typically required by institutional lenders, for the Investor
Company to satisfy its obligations under this S 7. The Company shall
provide to the Investor Company all the documents and other information it
has obtained on its own behalf from prospective lenders for the assumption
and/or refinancing of these mortgage obligations, introduce and/or refer
the Investor Company Representative to the representatives of those
prospective lenders, and provide the supporting information required from
the Texas Properties and otherwise cooperate in the processing of the
applications made by the Investors and/or the Investor Company.
(e) In the event the Investor Company after reasonably diligent application is
unable to obtain commercially acceptable assumption or refinancing terms
for both Texas Properties on or before December 1, 2000, either party may
terminate this Agreement by written notice to the other in which event the
tolling period (described in S 4 above) shall lapse upon termination, the
Investor Company shall surrender the Balance Note to the order of the
Company, and the rights of the parties in all respects shall revert to the
status quo ante, provided that the Company shall not be liable for any late
charges or default interest for any payments not made during and in
reliance upon the tolling period. With such termination, the Investor
Company shall credit against the accrued and future obligations of the
Company under the Financial Instruments (all of which shall be deemed due
and payable in accordance with their terms though without any penalties)
all payments received under the Balance Note. In recognition of this
potential result, the Company agrees that, pending Closing or termination
hereunder, it will not take any actions in derogation of the Investors'
rights under the Financial Instruments or that would otherwise have a
material adverse effect on the Company's financial condition and thereby
impair the Company's ability to meet its obligations under the Financial
Instruments. Notwithstanding the foregoing, if the Investor Company has
been unable to obtain commercially acceptable financing by December 1, 2000
for one or both of the Texas Properties, and assuming all other
requirements and conditions incident to Closing have been met and
satisfied, the Company shall have up to December 20, 2000 to present the
Investor Company with a commercially reasonable financing package (taking
into consideration rate of interest, points, costs and expenses, and other
usual terms) which the Investor Company shall be obligated to accept, and
thereafter proceed to Closing.
Exhibit 10.24 - Page 6
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8. Balance Note.
(a) HFAH shall execute and deliver to the Investor Company Representative
promptly, and within three (3) business days in any event after the
execution of this Agreement by all of the Investors, the promissory note of
HFAH in the amount of One Million Two Hundred Thousand Dollars ($1,200,000)
payable to the order of the Investor Company as described in this S 8 and
substantially in the form attached hereto as Exhibit C and hereby
incorporated as if set forth herein (the "Balance Note"), together with all
necessary documentation securing payment hereunder as provided for in S
8(f) below.
(b) From and after June 30, 2000, the principal outstanding under the Balance
Note shall bear interest at the per annum rate of Nine and one-half per
cent (9.5%). Interest shall be due and payable on a monthly basis, in
arrears, on the first day of each month, commencing on August 1, 2000, and
continuing until the entire outstanding balance is paid in full. Any such
payments that accrue prior to the execution of this Agreement shall be paid
at the time the parties execute this Agreement.
(c) HFAH shall make mandatory principal payments under the Balance Note as
follows: (i) in the amount of One Hundred Thousand Dollars ($100,000) on
September 15, 2000; (ii) in the amount of One Hundred Thousand Dollars
($100,000) on October 15, 2000; (iii) in the amount of Two Hundred Fifty
Thousand Dollars ($250,000) on November 15, 2000; (iv) in the amount of Two
Hundred Fifty Thousand Dollars ($250,000) on December 15, 2000; and (v) in
the amount of Two Hundred Fifty Thousand Dollars ($250,000) on January 15,
2001. The remaining balance of all obligations due under the Balance Note
shall be due and payable on February 15, 2001 (the "Maturity"). Time is of
the essence with respect to the dates set forth in this provision.
(d) HFAH shall also make mandatory principal prepayments on the Balance Note
from the proceeds from certain refinancing or sale transactions within
three (3) business days of receipt thereof. HFAH retains without limitation
the right to sell or refinance either or both of the Collateral Properties
(as defined below), whether or not a default is outstanding under the
Balance Note. With respect to the first refinancing or sale of Willow Pond
Apartments, HFAH shall pay to the Investor Company Two Hundred Thousand
Dollars ($200,000). With respect to any or all other or subsequent
refinancing or sale on any HFAH property (and not just with respect to the
Collateral Properties), HFAH shall pay to the Investor Company one hundred
per cent (100%) of the net refinancing or sale proceeds less all reasonable
and customary out-of-pocket financing and sale costs including pre-payment
penalties and premiums, closing, and settlement costs (including attorneys'
fees), and other payments required pursuant to law or pursuant to any
pre-existing arms' length agreement between HFAH and any non-affiliated
person or entity (but not including any commissions or fees paid or payable
to HFAH employees or affiliates including International Business Realty &
Consultants, LLC). Any payments made pursuant to this provision shall be
applied as follows: first, to any accrued and unpaid interest; second, to
the principal payment due under the Balance Note on February 15, 2001, and
thereafter to the principal payments due on January 15, 2001, December 15,
2000, and so on; and third, to any accrued and unpaid expenses incurred in
collecting any payment due hereunder, to the extent necessitated by the
Company's actions or inaction or by any default hereunder. The Company
further agrees to provide to the Investor Company an accounting and/or
closing statement that delineates the costs and expenses of any such sale
or refinancing, together with any supporting documentation as is reasonably
required, within five business days following the consummation thereof. Any
breach of this provision shall give the Investor Company the right to
terminate this Agreement.
(e) Notwithstanding the provisions of SS 8(c) and 8(d) above, and provided HFAH
is current on all obligations hereunder, if as a result of the refinancing
or sale of Willow Pond Apartments HFAH is able to pay Three Hundred
Thousand Dollars ($300,000) or more of principal as repayment of the
Balance Note to the Investor Company on or before September 15, 2000, then
the first three principal payments due under the Balance Note shall be
adjusted as follows: (i) the amount of
Exhibit 10.24 - Page 7
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Twenty Five Thousand Dollars ($25,000) will be due on September 15, 2000;
(ii) the amount of Fifty Thousand Dollars ($50,000) will be due on October
15, 2000; (iii) the amount of Two Hundred Twenty Five Thousand Dollars
($225,000) will be due on November 15, 2000. The amount of the principal
payments due on December 15, 2000 and January 15, 2001, and the requirement
to pay the remaining balance of all obligations due under the Balance Note
on February 15, 2001, shall remain unchanged. Moreover, notwithstanding the
provisions of SS 8(c) and 8(d) above, and provided HFAH is current on all
obligations hereunder, and further provided that HFAH shall have previously
paid the Investor Company Three Hundred Thousand Dollars ($300,000) of
principal as repayment of the Balance Note from a refinancing or sale of
Willow Pond Apartments, if as a result of the refinancing or sale of Lakes
Edge Apartments HFAH is able to pay Six Hundred Thousand Dollars ($600,000)
or more of principal as repayment of the Balance Note, such proceeds shall
be applied as follows: first, to any accrued and unpaid interest; second,
to principal payments due under the Balance Note in the order in which they
become due (i.e., applied to the payment due earliest in time, and so on);
and third, to any accrued and unpaid expenses incurred in collecting any
payment due hereunder, to the extent necessitated by the Company's actions
or inaction or by any default hereunder.
(f) HFAH is the general partner and/or the sole owner of the title-holder to
the apartment projects known as "Willow Pond Apartments" and "Lakes Edge
Apartments" more particularly described in Exhibits D-1 and D-2 attached
hereto and hereby incorporated (those properties being herein referred to
as the "Collateral Properties"). In the Balance Note, and by separate
assignment from HFAH with the delivery of the Balance Note, HFAH shall
pledge as additional security for its obligations under the Balance Note
(i) the excess refinancing proceeds described in S 8(e) above and (ii) the
Available Cash Flow, the latter only to be paid during the pendency of an
uncured default under the Balance Note, from each of the Collateral
Properties. "Available Cash Flow" shall mean cash proceeds available from
all operations (expressly excluding refinancing or other transfer proceeds
and excluding any casualty proceeds) at the Collateral Properties after the
payment of all reasonable and customary out-of-pocket operating expenses,
debt service and other financing charges or costs, taxes, insurance, and
actual property improvements (whether or not capital) made at the
Collateral Properties (with notice to and approval by the Investor Company,
which approval shall not be unreasonably withheld), and reserve for any
expense required by the incumbent financing on the Collateral Properties.
For purposes of this provision, operating expenses may include routine
property management costs consistent with prior practice up to five percent
(5%) of cash receipts each month, but shall exclude any incentive
management fees, asset management fees, or other payments to HFAH or HFAH
employees or affiliates. HFAH represents and warrants that it will operate
each of the Collateral Properties in the same manner as on the Effective
Date, so that (among other things) the amount set aside for reserves shall
be consistent with prior practice (which shall be understood to be not
greater that the average monthly reserve set aside during the preceding
twelve months), and that it will cooperate in the timely filing of all
necessary U.C.C. financing statements or other security interests (which
shall be filed at the Company's expense), and that it will afford the
Investor Company Representative or its designee reasonable opportunity to
review the books and records of the Collateral Properties to confirm
compliance with this provision. To the extent any of the Collateral
Properties are sold before the Balance Note is paid in full, the Company
shall within five business days after such sale has been consummated
designate substitution collateral reasonably acceptable to the Investor
Company and take all necessary steps to perfect an appropriate security
interest in such substitution collateral.
(g) To the extent any of the casualty proceeds referred to in S 8(f) are not
used for restoration of the Collateral Properties, they shall be deemed to
be proceeds from a sale or refinancing that are to be paid to the Investor
Company in accordance with the provisions of SS 8(d) and 8(e) hereof.
Exhibit 10.24 - Page 8
<PAGE>
(h) The Balance Note shall provide for events of default as follows: (i) for
failure to pay scheduled payments after a grace period of five (5) days;
(ii) for bankruptcy or other insolvency events; and (iii) for breach of any
other obligation hereunder, which breach shall not constitute a default
until after notice of breach has been provided and the Company fails to
cure the breach within thirty (30) days after receipt of notice. The
Company shall make the scheduled payments due under the Balance Note
without regard to the scheduled date for Closing. Notwithstanding the
existence of a default under the Balance Note, HFAH shall continue to
manage the Texas Properties and/or the Collateral Properties in a manner
consistent with the provisions hereof. Should the Investor Company be
required to expend any funds to collect any amount due hereunder following
a default, the Company shall be required to pay all such collection costs.
9. Company Reports.
HFAH shall from and after the Effective Date and so long as there is any
balance outstanding under the Balance Note prepare and supplement on a monthly
basis the operating budget for each Collateral Property (including any
substitution collateral), to be delivered to the Investor Company
Representative. On a quarterly and annual basis, HFAH shall also provide the
then current financial statements for the respective owner of each Collateral
Property. Notwithstanding the provision of such financial information, even
after default under the Balance Note, neither Investor nor the Investor Company
shall have any right to direct the management of the Collateral Property or HFAH
as to any income, expense, operation, or condition of the Collateral Property.
10. Investors' Representations.
Each Investor hereby represents to the Company that: (i) the Investor has
good and marketable title to all of the Financial Instruments shown on the
respective exhibit hereto for such Investor and except as shown the Financial
Instruments have not been otherwise amended, modified, or supplemented by any
other writing or obligation; (ii) the Investor is authorized to undertake the
conveyance contemplated hereunder of his Financial Instruments and has full
power and authority to sell those Financial Instruments to HFAH without the
consent of any other person or entity, (iii) those Financial Instruments are,
and will be at Closing, free, clear, unencumbered, and subject to no restraint
or restriction; (iv) to the extent there is outstanding any interest, dividend,
or contractual obligations due from HFAH under the Financial Instruments as of
the Effective Date, it is transferred with and assigned to HFAH at Closing; and
(v) from and after the Effective Date, except to transfer his Financial
Instruments to the Investor Company as contemplated by S 3(c) above, the
Investor represents, warrants, and covenants he shall not transfer any interest
in the Financial Instruments, directly or indirectly, nor hypothecate, pledge,
assign any such interest therein, or suffer the same to be established or
transferred, and shall require the same obligation from the Investor Company,
subject only to the transfer allowed hereunder to HFAH.
11. Party Due Diligence.
Each party acknowledges, represents, and warrants (the "Acknowledging
Party") to the other that, except as expressly set forth herein, the other party
has made no representation or warranty to the Acknowledging Party regarding the
financial condition or affairs of the other party or the title, condition,
feasibility, or use of the Texas Properties. The Acknowledging Party expressly
represents and warrants that it has conducted or it shall conduct prior to
Closing its own independent due diligence investigation of the Texas Properties
and all matters related thereto or any other matter material to the
Acknowledging Party in determining to proceed with the transactions contemplated
by this Agreement and the Acknowledging Party expressly has not relied upon any
information or production obtained from the other party (or any representative,
officer, or agent thereof) unless so stated in this Agreement. The Investor
Company shall obtain as a condition to Closing (a) a satisfactory survey of the
Texas Properties, (b) a satisfactory title report and title insurance on
commercially reasonable terms, and (c) an appropriate environmental report.
Should the Investor Company not be able to obtain any of the foregoing despite
exercising its best efforts, or should it become aware of any previously unknown
or undisclosed physical or environmental condition that substantially and
materially reduces the value of either of the Texas Properties (relative to the
approximate values set forth herein), it shall have the option to terminate this
Agreement.
Exhibit 10.24 - Page 9
<PAGE>
12. Closing.
(a) The purchase and sale (the "Closing") of the Briarmeadows Property and the
Arlington Property provided for in this Agreement will take place at the
offices of the Investor Company's counsel in New York City, New York, at a
time designated by the Investor Company Representative, with at least three
(3) business days notice to HFAH and in any event on or before at 3:00 p.m.
(local time) on December 1, 2000 (the "Closing Date"). To the extent
necessary to complete the Closing, and in accordance with customary
practices in the State of Texas, the parties may arrange to have certain
aspects of the Closing conducted on an escrow basis by and through the
title company which will be located in Texas. As such, the parties may
tender performance at Closing by delivering the requisite instruments and
documents on the Closing Date in escrow against the performance of the
other parties.
(b) At Closing, for each Texas Property, the parties shall pro-rate the rents
and other income and the obligations for all operating expenses, contracts,
vendors, real estate taxes, utility charges, and annual assessments arising
from the Property to the extent necessary to accomplish the intended
economic result of this transaction which includes the Investor Company
obtaining the economic benefits and burdens of ownership of the Texas
Properties as of the Effective Date. As a closing document, the parties
shall agree to indemnify and hold each other harmless for costs, claims,
and liabilities arising from the Texas Properties, with the Company
responsible for any and all matters or claims arising during the period
before Closing (or thereafter to the extent attributable to acts or
omissions of the Company prior to Closing) and the Investor Company
responsible otherwise for the period from the Closing date forward. The
Investor Company shall pay and be solely responsible for the costs of its
financings, including any title examination or insurance, surveys, mortgage
or deed of trust recording charges, lender charges, and the like, except to
the extent this requirement is inconsistent with customary practice in the
area in which the Texas Properties are located or with any other legal
requirement, in which case the party who customarily pays or is legally
obligated to pay shall be responsible for such payments. The Company shall
pay any grantor tax required by the State of Texas to be paid by the
grantor. Except as otherwise provided herein, the Company and the Investor
Company shall each pay half of the remaining costs of transfer and closing,
including the costs of any attorney or escrow agent conducting settlement,
and each party shall bear all its own attorneys' fees and expenses.
(c) At the Closing, the Company will deliver or cause to be delivered to the
Investor Company: (i) a special warranty deed to each Texas Property
conveying title thereto to the designee of the Investor Company; (ii) a
bill of sale and assignment of any and all leases, contracts, personal
properties, and accounts for the Texas Properties used in their operation
and management, including keys and trade-names; (iii) customary
certificates of Seller required by the title company issuing title
insurance on behalf of the Investor Company; (iv) certified resolutions
from the governing bodies of HFAH, Arlington HFA and Briarmeadows HFA
authorizing the execution, delivery, performance, and observance of this
Agreement and the instruments contemplated herein; and (v) in accordance
with the provisions set forth in S 29 below, a mutual limited release, to
be executed by HFAH, Arlington HFA and Briarmeadows HFA, the Investor
Company, and each Investor. Each party shall provide a representation that
shall include a schedule of all known claims and that it has exercised
reasonable due diligence to ascertain the existence of any other claims.
(d) At the Closing, the Investor Company will deliver or cause to be delivered
to HFAH: (i) evidence reasonably satisfactory to HFAH of the release of
HFAH and any of its affiliates (including Arlington HFA and Briarmeadows
HFA) and their respective properties from any and all obligations with
respect to the first mortgage financings on the Texas Properties; (ii) the
original executed counterpart of each Financial Instrument (together with
any amendment or addendum or exhibit thereto); and (iii) a general release
and waiver, in a form to be reasonably satisfactory to HFAH, by the
respective Investor of any right, title, or interest in, or any claim
arising from the respective Financial Instruments, including any cash or
non-cash proceeds, interest, dividends, income, revenues, profits,
accounts, and benefits from, under, and in connection with any of the
Financial Instruments.
Exhibit 10.24 - Page 10
<PAGE>
(e) The foregoing notwithstanding, in the event as of the Closing Date HFAH has
not yet made the mandatory payments due under the Balance Note on September
15, October 15, and November 15, 2000, the Investor Company shall retain
possession of all of the Financial Instruments until those payments are
made. Subject to the terms and conditions for a termination of this
Agreement under S 7(e) above, once those payments are made the Investor
Company shall surrender fifty-five per cent (55%) of those Financial
Instruments as identified in S 12(f) below. In the event HFAH has made
those payments but a balance remains outstanding under the Balance Note on
the Closing Date, the Investor Company shall retain possession of all of
the remaining Financial Instruments until the Balance Note is paid in full,
whereupon it shall surrender them as provided above.
(f) In determining which Financial Instruments shall be surrendered after the
mandatory payments due under the Balance Note on September 15, October 15,
and November 15, 2000, have been made, the parties shall identify the
Financial Instruments by classes as (i) common stock of HFAH, (ii)
preferred stock of HFAH, (iii) options from HFAH, (iv) warrants from HFAH,
(v) promissory notes from HFAH, and (vi) other obligations such as the
consulting agreement with Koplovitz. For each of the classes (i), (ii),
(iii), and (iv) above, the Financial Instruments to be surrendered shall be
the certificates or instruments evidencing such ownership, which shall be
surrendered to the stock register or the corporate Secretary of HFAH for
reissuance to reduce the outstanding number of each class by fifty-five per
cent (55%). For the promissory notes (class (v)), the Investor Company as
holder shall execute and deliver to HFAH a release of fifty-five per cent
(55%) of the outstanding principal balance of each such note.
13. Indemnification.
(a) Each party (the "Indemnitor") hereto agrees, in addition to any other
provision hereof, to indemnify, defend, and hold harmless the other party
and its affiliates, officers, principals, employees, agents, successors and
assigns, and each of their representatives, successors, and assigns (the
"Indemnitees") at all times from the Effective Date against and in respect
of Damages (defined in S 13(b)) suffered by them as a direct or indirect
result of any Claim (defined in S 13(b)) to the extent based upon any
breach of any representation or warranty by an Indemnitor in this
Agreement, or any breach or default by the Indemnitor under this Agreement,
or any debt, liability, obligation (including taxes) of the Indemnitor, or
any negligence or intentional or willful misconduct of the Indemnitor with
respect to this Agreement.
(b) "Damages" shall mean all amounts finally awarded or charged against, or
paid in settlement by, or paid pursuant to an indemnification agreement
with a third party by an Indemnitee, and all actual out of pocket expenses
or costs reasonably incurred by such Indemnitee to investigate, oppose,
settle, defend, or avoid a Claim, including reasonable professional and
attorney's fees and expenses. A "Claim" is any claim, action, proceeding,
demand, or assertion, whether judicial or otherwise, whether commenced or
threatened, and whether administrative, civil, or criminal, initiated by a
third party.
(c) With respect to the foregoing indemnification obligations: (i) the
indemnified party will notify the indemnifying party in writing promptly
upon learning of any claim or suit for which indemnification may be sought,
provided that failure to do so shall not affect the indemnity except to the
extent the indemnifying party is prejudiced thereby; (ii) the indemnifying
party shall have control of the defense or settlement, provided that the
indemnified party shall have the right to participate in such defense or
settlement with counsel of its own selection and at its sole expense; and
(iii) the indemnified party shall reasonably cooperate with the defense, at
the indemnifying party's expense.
14. Amendments.
No change or modification of this Agreement shall be valid unless the same
is in writing and signed by each party. No purported or alleged waiver of any of
the provisions of this Agreement shall be valid or effective unless in writing
signed by the party against whom enforcement is sought.
Exhibit 10.24 - Page 11
<PAGE>
15. Attorneys' Fees.
If a party incurs attorneys' fees or costs in connection with a dispute,
breach, default, or misrepresentation hereunder, and is the prevailing party in
a legal action or proceeding to enforce the terms of this Agreement, that party
shall be entitled to recover those fees and costs from the other party.
16. Notices.
Any notice required or permitted to be given hereunder shall be in writing
and shall be hand-delivered, delivered by overnight courier, sent by facsimile
transmission followed by mail copy, or mailed by certified or registered mail,
postage prepaid, return receipt requested, to the parties hereto at their
respective addresses set forth below, or at such other addresses of which either
party shall notify the other party in accordance with the provisions hereof, and
shall be deemed given as of the time of such mailing or delivery, as applicable.
17. Assignment; Binding Agreement.
No party may assign this Agreement without the prior written consent of the
other parties; provided, however, that the Investors may assign their rights
collectively to the Investor Company when organized. The terms and conditions of
this Agreement shall be binding upon, and shall inure to the benefit of, the
respective heirs, legal representatives, successors, and assigns of each party.
18. No Third Party Rights.
Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
19. Entire Agreement.
This Agreement (including the referenced exhibits and schedules, which are
incorporated herein by reference) contains the entire understanding between the
parties hereto with respect to the subject matter hereof and is intended to be
an integration of all prior or contemporaneous agreements, conditions, or
undertakings between the parties hereto. Notwithstanding the foregoing, the
parties acknowledge that not all of the exhibits referenced herein are attached
to this Agreement at the time of execution. To the extent such exhibits are not
attached at such time, they shall be delivered to the other party within ten
days of execution of this Agreement. This Agreement may be executed in multiple
counterparts, each of which shall be an original (including machine-duplicated
and/or facsimile copies of the Agreement), but all of which together shall
constitute but one instrument. If executed in duplicate, each duplicate copy
shall be as valid as an original copy. No distinction shall be made between an
originally typed document and machine-copies and/or facsimile documents,
provided that the copies disclose the signatures of the parties.
20. Governing Law; Interpretation.
This Agreement shall be governed, construed, and enforced in accordance
with the laws of the State of New York without regard to its laws on conflicts
of law. Captions herein are for convenience of reference only and in no way
define, limit, or expand the scope or intent of this Agreement. Whenever the
context hereof shall so require, the singular shall include the plural, the male
gender shall include the female, and vice versa.
21. Compliance with Applicable Law.
The parties shall comply with all applicable federal, state, county, and
local laws, ordinances, regulations, and codes and all applicable writs,
injunctions, decrees, and determinations of any governmental authority in the
performance of this Agreement, and shall upon request reasonably assist each
other in complying with such laws.
22. Recitals; Defined Terms.
The foregoing recitals are hereby incorporated as if set forth in full
herein. Capitalized terms used and not otherwise defined herein have the
meanings provided by the respective Financial Instruments as the context
requires.
23. Severability.
If any provision of this Agreement is held invalid for any reason, the
remaining provisions of this Agreement shall remain valid and enforceable, and
the parties shall substitute for the invalid provision a valid provision, which
most closely approximates the intent and economic effect of the invalid
provision.
Exhibit 10.24 - Page 12
<PAGE>
24. Time of the Essence.
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
25. Further Assurances.
The parties agree (a)- to furnish upon request to each other such further
information, (b)-to execute and deliver to each other such other documents, and
(c)-to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
26. Jurisdiction; Service of Process.
To the extent any party hereto alleges that the breach, default, or other
misconduct of any other party may result in irreparable injury for which there
may be no adequate remedy at law, such party shall be entitled to seek
injunctive relief or a decree for specific performance in the courts of the
State of New York, County of New York, or, if it has or can acquire
jurisdiction, in the United States District Court for the Southern District of
New York, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the preceding sentence may be served on any party anywhere in the
world.
27. Arbitration and Enforcement.
Subject to the provisions of S 26 above, any dispute arising out of the
terms of this Agreement shall be settled by arbitration in New York City, New
York, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, before the American Arbitration Association or any
comparable entity acceptable to all parties. In the event of any such
arbitration, there shall be three (3) arbitrators. The arbitrators shall
promptly obtain such information regarding the matter as they deem advisable and
shall decide with dispatch the matter and render a written award that shall be
delivered to the prevailing party. Any such award shall be a conclusive
determination of the matter and shall be binding upon each member (or his
successor in interest), and shall not be contested by any party. At the time of
rendering the award, the arbitrators shall establish their fees and expenses in
connection therewith. Such fees and expenses shall be allocable by the
arbitrators in their award. Judgment upon any arbitration award may be entered
and enforced in any court of competent jurisdiction. No dissolution or
termination of the Company or the Investor Company shall effect or impair any
party's rights to arbitrate a dispute under this S 27.
28. Submission to Jurisdiction.
Each party hereby (i) submits to the jurisdiction of the courts of the
State of New York, County of New York, or, if it has or can acquire
jurisdiction, the United States District Court for the Southern District of New
York, with respect to any suit, action, or proceeding relating to this
Agreement, (ii) waives any objection which it may now or hereafter have to the
laying of venue of any such suit, action, or proceeding brought in any such
court and any claim that any such suit, action, or proceeding brought in any
such court has been brought in an inconvenient forum, (iii) waives the right to
object that any such court does not have jurisdiction over it, and (iv) consents
to the service of process in any such suit, action, or proceeding by the mailing
of copies of such process to it by certified mail at the addresses indicated in
this Agreement. Nothing in this paragraph shall affect a party's right to serve
process in any other manner permitted by law or to bring proceedings against a
party in any other court having jurisdiction.
29. Survival; limited release.
Except as otherwise provided herein, the representations and warranties
provided for in this Agreement shall survive the Closing for 24 months from the
Closing Date for the benefit of the parties hereto and their successors and
assigns, and the covenants and agreements of the parties hereto shall survive
the Closing in accordance with their terms; provided, however, that (a) neither
party may assert a claim or initiate an action against the other party based on
any breach of warranty, representation, covenant, or agreement hereunder at any
time more than 24 months following the Closing Date, and (b) neither party may
assert any claim or initiate an action against the other party pursuant to S 13
hereof on or after the date that the statute of limitations relating to any such
underlying claim or action has expired.
(Signatures on following three pages)
Exhibit 10.24 - Page 13
<PAGE>
IN WITNESS WHEREOF each of the parties has executed and delivered this
Agreement under seal intending to be legally bound hereby as of the day and year
first above written.
HFAH:
HOMES FOR AMERICA HOLDINGS, INC.
(SEAL)
By: ----------------------------------
Its: ----------------------------------
Date:
----------------------------------
Address: ----------------------------------
----------------------------------
Fax: ----------------------------------
Briarmeadows HFA:
BRIARMEADOWS / HOMES FOR AMERICA, INC.
(SEAL)
By: ----------------------------------
Its: ----------------------------------
Date:
----------------------------------
Arlington HFA:
ARLINGTON / HOMES FOR AMERICA, INC.
(SEAL)
By: ----------------------------------
Its: ----------------------------------
Date:
----------------------------------
INVESTOR COMPANY:
LUCKY PUP ENTERPRISES, L.P.
By: ----------------------------------
Its: ----------------------------------
Date:
----------------------------------
Address: ----------------------------------
----------------------------------
Fax: ----------------------------------
INVESTORS:
----------------------------------
WILLIAM KOPLOVITZ, JR.
Date: ----------------------------------
----------------------------------
WILLIAM MAROVITZ
Date: ----------------------------------
Exhibit 10.24 - Page 14
<PAGE>
----------------------------------
DAVID SCHUTZ
Date: ----------------------------------
----------------------------------
WILLIAM TAYLOR
Date: ----------------------------------
----------------------------------
JON NIX
Date: ----------------------------------
LITIGATION RESEARCH DEFINED
BENEFIT PENSION TRUST
By: ----------------------------------
Farrald G. Belote, Jr., Trustee
Date: ----------------------------------
----------------------------------
STEPHEN T. FROST
Date: ----------------------------------
Exhibit 10.24 - Page 15
<PAGE>
Exhibits:
A. Financial Instruments
A.1 Financial Instruments (Koplovitz)
A.2 Financial Instruments (Marovitz)
A.3 Financial Instruments (Schutz)
A.4 Financial Instruments (Taylor)
A.5 Financial Instruments (Nix)
A.6 Financial Instruments (Belote)
A.7 Financial Instruments (Frost)
B. Texas Properties
B.1 Briarmeadows Property
B.2 Financial Statement (Briarmeadows HFA)
B.3 Arlington Property
B.4 Financial Statement (Arlington HFA)
C. Balance Note
D. Collateral Properties
D.1 Willow Pond Apartments
D.2 Lakes Edge Apartments
Exhibit 10.24 - Page 16
<PAGE>
