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): April 20, 1999
WASHINGTON HOMES, INC.
(Exact name of registrant as specified in its charter)
Maryland 1-7643 52-0818872
(State or other jurisdiction (Commission File No.) (IRS Employer
incorporation) Identification No.)
1802 Brightseat Road, Landover, Maryland 20785-4235
(Address of principal executive offices) (Zip
code)
Registrant's telephone number, including area code: (301) 772-8900
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 20, 1999, the registrant, through two newly formed wholly-
owned subsidiaries, acquired a substantial part of the assets and assumed
liabilities of Breland Homes Inc., Breland Properties Inc. and Breland
Homes of Mississippi LLC (collectively "Sellers"), entities owned by Louis
W. Breland. The Sellers operated a homebuilding and land development
business in the areas in and around Huntsville, Alabama and Gulfport and
Biloxi, Mississippi under the name "Breland Homes."
In the acquisition the registrant assumed approximately $9 million of
Sellers' bank debt and assumed liabilities of approximately $400,000 as of
the closing date and will pay Sellers a cash amount estimated to be
approximately $5.0 million. The cash amount will be calculated as $3
million plus the book value of the acquired assets less the book value of
assumed liabilities at December 31,1998 less the combined net income after
taxes of the Sellers for the period from January 1 to February 28, 1999.
The exact purchase price is to be based on a final accounting scheduled to
occur by May 20, 1999.
In the acquisition, the registrant acquired the inventory of finished
building lots, completed homes, model homes and houses in various stages of
construction and was assigned lot option contracts to acquire additional
building lots and customer contracts for the delivery of finished houses.
The registrant acquired control of approximately 2,600 building lots and a
backlog of 90 homes under construction which have been contracted for with
a delivery value of $12.1 million.
Other assets acquired, included the name "Breland Homes" and other
intellectual and personal property. The registrant did not acquire any
cash items or certain accounts receivable and inter-company obligations,
among other things.
The acquisition was made using in part the proceeds from a newly
established $15 million revolving line of credit from Compass Bank which is
based in Alabama. This line is intended to provide the operations in
Alabama and Mississippi with working capital. The line of credit matures
in two years but may be extended, and is secured by the assets of the newly
formed subsidiaries and guaranteed by the registrant. The interest on the
line is a floating rate based upon London Inter-Bank Offered Rate (LIBOR).
Other funds for the transaction were from internally generated cash
resources.
The registrant also entered into a newly formed venture with Louis W.
Breland to be owned 50% by each to develop building lots for the use by the
registrant in Alabama and Mississippi.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statement of businesses acquired.
The financial statements required by Item 7(a) will be filed
by an amendment to this Current Report on Form 8-K as soon as
practicable but no later than July 2, 1999.
(b) Pro forma financial information.
The pro forma financial information required by Item 7(b) will be
filed by an amendment to this Current Report on Form 8-K as soon
as practicable but no later than July 2, 1999.
(c) Exhibits
Exhibit No. Description of Exhibit
2(a) Asset Purchase Agreement #1 dated as of March 24, 1999
by and among the Registrant, Westminster Homes of
Alabama LLC, Westminster Homes of Mississippi, LLC,
Breland Homes of Mississippi, LLC, Breland Properties,
Inc., and Louis W. Breland.
2(b) Asset Purchase Agreement #2 dated as of March 24, 1999
by and among the Registrant, Westminster Homes of
Alabama LLC, Westminster Homes of Mississippi LLC,
Breland Homes, Inc. and Louis W. Breland.
Upon request of the Commission, omitted schedules to the above listed
documents will be furnished supplementary to the Commission.
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.
WASHINGTON HOMES, INC.
Date: May 4, 1999 By: /s/ GEATON A. DECESARIS, JR.
Geaton A. DeCesaris, Jr.
President and
Chief Executive Officer
46
#1
ASSET PURCHASE AGREEMENT
Dated as of March 24, 1999
By and Among
Westminster Homes of Alabama, LLC
Westminster Homes of Mississippi, LLC
Washington Homes, Inc.
Breland Homes of Mississippi, LLC
Breland Properties, Inc.
and
Louis W. Breland
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Recitals 6
1. Definitions 1
2. Basic Transaction 7
(a) Purchase and Sale of Assets 7
(b) Assumption of Liabilities 7
(c) Contracts 7
(d) Purchase Price 7
(e) The Closing 8
(f) Deliveries at the Closing 8
(g) Prorations 8
(h) Second Closing 9
(i) Allocation 9
(j) Employees 9
(k) Land Development Limited Liability Company 9
(l) Right of First Refusal on Future Developments 9
(m) Name Change 9
(n) Lease of Office Space 9
(o) Intellectual Property 10
3. Representations and Warranties of Breland 10
(a) Organization of Breland 10
(b) Authorization of Transaction 10
(c) Noncontravention 10
(d) Brokers' Fees 11
(e) Title to Assets 11
(f) Subsidiaries 11
(g) Financial Statements 11
(h) Events Subsequent to Year End 11
(i) Undisclosed Liabilities 12
(j) Legal Compliance 12
(k) Tax Matters 13
(l) Real Property 13
(m) Intellectual Property 15
(n) Tangible Personal Property 15
(o) Contracts 16
(p) Litigation 16
(q) Employees 16
(r) Employee Benefits 16
(s) Environment, Health, and Safety 17
(t) Third Party Consents 17
(u) Disclosure 17
4. Representations and Warranties of Buyer 17
(a) Organization of Buyer 17
(b) Authorization of Transaction 17
(c) Noncontravention 18
(d) Brokers' Fees 18
5. Pre-Closing Covenants 18
(a) General 18
(b) Notices and Consents 18
(c) Operation of Business 18
(d) Preservation of Business 19
(e) Full Access 19
(f) Notice of Development; Change in Disclosure Schedules 19
(g) Exclusivity 19
(h) Title Reports 20
(i) Surveys 20
(j) Press Releases and Public Announcements 20
6. Conditions to Obligation to Close 20
(a) Conditions to Obligation of Buyer 20
(b) Conditions to Obligation of Breland 21
7. Termination 22
(a) Termination of Agreement 22
(b) Effect of Termination 23
8. Post-Closing Covenants 23
(a) General 23
(b) Litigation Support 23
(c) Transition 24
(d) Confidentiality 24
(e) Access to Records 24
(f) Covenant Not to Compete 25
(g) Warranty Work on Recent Deliveries 25
(h) Marketing and Promotional Materials 26
(i) Use of Non-Transerred Assets 26
(j) Land Contracts 26
(k) Madison Employees 26
9. Remedies for Breaches of This Agreement 26
(a) Survival of Representations and Warranties 26
(b) Indemnification Provisions for Benefit of Buyer 26
(c) Indemnification Provisions for Benefit of Breland 27
(d) Matters Involving Third Parties 27
(e) Determination of Adverse Consequences 28
(f) Basket and Cap 28
(g) Insurance Coverage 29
(h) Contractor Indemnification 29
10. Miscellaneous 29
(a) No Third-Party Beneficiaries 29
(b) Entire Agreement 29
(c) Succession and Assignment 29
(d) Counterparts 30
(e) Headings 30
(f) Notices 30
(g) Governing Law 30
(h) Amendments and Waivers 30
(i) Severability 31
(j) Expenses 31
(k) Construction 31
(l) Incorporation of Exhibits and Disclosure Schedules 31
(m) Specific Performance 32
(n) Bulk Transfer Laws 32
(o) Dispute Resolution 32
Exhibits
A. Assumption of Liabilities by Buyer
B. Allocation of Purchase Price
C. Third Party Consents
D. Financial Statements
E. Opinion of Counsel for Breland
F. Joint VentureLimited Liability Company Term SheetCentury
Land Company, LLC
G. Lot Option Agreements
H. Opinion of Counsel for Buyer
Disclosure Schedule
Schedule 1A - Land Under Development
Schedule 1B - Inventory of Lots and Houses in Various
Stages of Completion, Work in Process,
Completed Homes, Model Homes
Schedule 2 - Tangible Personal Property
Schedule 3 - Intellectual Property
Schedule 4 - Leases
Schedule 5A - Land Contracts
Schedule 5B - Sales Contracts and Customer Deposits
Schedule 6 - Engineering and Environmental Studies
Schedule 7 - Contracts with Suppliers and Subcontractors
Schedule 8 - Plans, Permits and Budgets for Lots,
Subdivisions, Developments and Houses
Schedule 9 - Other Excluded Assets
Schedule 10 - Other Liabilities and Obligations Assumed
Schedule 11 - Exceptions to Representations and Warranties
Schedule 12 - Warranty Claims
Schedule 13 - Litigation
Schedule 14 - Employee Exceptions
Schedule 15 - Employee Agreements
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") entered
into as of March 24, 1999, by and among WESTMINSTER HOMES OF
ALABAMA, LLC, an Alabama limited liability company ("WHA"),
WESTMINSTER HOMES OF MISSISSIPPI, LLC, a Mississippi limited
liability company ("WHM"), WASHINGTON HOMES, INC., a Maryland
corporation ("WHI"), BRELAND HOMES OF MISSISSIPPI, L.L.C., an
Alabama limited liability company ("BHM"), BRELAND PROPERTIES,
INC., an Alabama corporation ("BP"), and Louis W. Breland
("LWB"). WHA, WHM and WHI are herein referred to collectively as
"Buyer" and BP, BHM, and LWB are herein referred to collectively
as "Breland". Buyer and Breland are referred to collectively as
the "Parties" and individually as a "Party". References to
Breland or Buyer shall be construed as including each of the
Persons individually which constitute Breland or Buyer.
WHEREAS, BHM and BP are entities wholly owned by LWB, and
are engaged in the design, construction and sale of single family
homes and the development of land in connection therewith in
Alabama and Mississippi; and
WHEREAS, WHA and WHM have been organized as wholly owned
subsidiaries of WHI for the purpose of entering the homebuilding
business in Alabama and Mississippi; and
WHEREAS, Breland wishes to sell its assets and Buyer wishes
to purchase certain assets owned by Breland; and
WHEREAS, LWB and WHI are joining in this Agreement for the
purposes, among other things, of providing post-closing
indemnification for the representations, warranties and covenants
contained herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises made herein, and in consideration of the
representations, warranties, and covenants contained herein, the
Parties agree as follows.
1. Definitions.
"Acquired Assets" means all right, title, and interest in
and to the following assets of Breland on the Closing Date: (a)
real property (Schedule 1A of the Disclosure Schedule sets forth
a listing of land under development and Schedule 1B sets forth a
listing of the inventory of lots and houses in various stages
ofthe real property set forth on Schedules 1A and 1B of the
Disclosure Schedule (Schedule 1A sets forth a listing of land
under development and Schedule 1B sets forth a listing of the
inventory of lots and completion, work in process, completed
homes and model homes as of the Effective Date) and any
Improvements, raw materials and supplies, manufactured and
purchased parts in connection therewith; (b) the tangible
personal property (including office furniture, fixtures and
equipment, computer equipment, model home furniture and fixtures,
automobiles, trucks, construction and other equipment) including
any manufacturer's warranties in connection therewith, the major
items of which as of the Effective Date are listed on Schedule 2
of the Disclosure Schedule, (c) the name "Breland Homes," the
trade marks and trade names listed on Schedule 3 of the
Disclosure Schedule, (d) leases, as listed on Schedule 4 of the
Disclosure Schedule, and rights thereunder, (e) the contracts and
option agreements for the purchase of lots or land in
development, and deposits in connection therewith (the "Land
Contracts"), which Land Contracts as of the Effective Date are
listed as Schedule 5A and the contracts for the sale of homes,
whether completed or under construction, (the "Sales Contracts")
and any deposits in connection therewith whether held directly or
in trust accounts (the "Customer Deposits"), including all rights
thereunder, (Schedule 5B of the Disclosure Schedule sets forth a
list of Sales Contracts along with the Customer Deposit for each
contract, loan status, and construction status as of the
Effective Date), (f) the engineering and environmental studies
relating to real property sold hereunder, as listed on Schedule 6
of the Disclosure Schedule, (g) lists of and contracts with
suppliers and subcontractors, including those listed on Schedule
7 of the Disclosure Schedule, which are in effect on the
Effective Date, (h) architectural and other plans, permits and
budgets for lots, subdivisions, developments and houses for the
real property listed in Schedule 1A and 1B, (i) to the extent
reflected in the calculation of the Purchase Price, all claims,
deposits, prepayments, refunds, causes of action, causes in
action, rights of recovery, rights of setoff, and rights of
recoupment (excluding any such item relating to the payment of
Taxes) relating to assets sold hereunder, (j) all franchises,
approvals, permits, licenses, orders, registrations,
certificates, and similar rights obtained from governments and
governmental agencies used in connection with any Acquired Asset,
and (k) the books, records, ledgers, files, electronic media
storage, computer software, documents, correspondence, customer
lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising, promotional and marketing
materials, studies, reports, and other printed or written
materials in connection with the Acquired Assets; (l) cash and
cash equivalents (including restricted cash and Customer
Deposits)., (m) all rights of Breland under all employee
agreements between employees and Breland, Madison or BH as
listedhouses in various stages of completion, work in process,
completed homes and model homes as of the Effective Date) and any
Improvements, raw materials and supplies, manufactured and
purchased parts in connection therewith; (b) the tangible
personal property (including office furniture, fixtures and
equipment, computer equipment, model home furniture and fixtures,
automobiles, trucks, construction and other equipment) including
any manufacturer's warranties in connection therewith, the major
items of which as of the Effective Date are listed on Schedule 2
of the Disclosure Schedule; (c) the name "Breland Homes," the
trade marks, trade names and copyrighted material listed on
Schedule 3 of the Disclosure Schedule; (d) leases, as listed on
Schedule 4 of the Disclosure Schedule, and rights thereunder; (e)
the contracts and option agreements for the purchase of lots or
land in development, and deposits in connection therewith (the
"Land Contracts"), which Land Contracts as of the Effective Date
are listed on Schedule 5A and the contracts for the sale of
homes, whether completed or under construction (the "Sales
Contracts") including all rights thereunder, (Schedule 5B of the
Disclosure Schedule sets forth a list of Sales Contracts along
with the Customer Deposit for each contract, loan status, and
construction status as of the Effective Date); (f) all
engineering and environmental studies relating to real property
sold hereunder, as listed on Schedule 6 of the Disclosure
Schedule; (g) lists of and contracts with suppliers and
subcontractors, including those listed on Schedule 7 of the
Disclosure Schedule, which are in effect on the Effective Date;
(h) architectural and other plans, permits and budgets for lots,
subdivisions, developments and houses for the real property
listed in Schedule 1A and 1B; (i) to the extent reflected in the
calculation of the Purchase Price, all claims, deposits,
prepayments, employee receivables, escrows, refunds, causes of
action, causes in action, rights of recovery, rights of setoff,
and rights of recoupment (excluding any such item relating to the
payment of Taxes) relating to assets sold or conveyed hereunder;
(j) to the extent transferable, all franchises, approvals,
permits, licenses, orders, registrations, certificates, and
similar rights obtained from governments and governmental
agencies used in connection with any Acquired Asset; (k) the
books, records, ledgers, files, electronic media storage,
computer software, documents, correspondence, customer lists,
plats, architectural plans, drawings, and specifications,
creative materials, advertising, promotional and marketing
materials, studies, reports, Intellectual Property and other
printed or written materials in connection with the Acquired
Assets; and (l) all rights of Breland under all employee
agreements between employees and Breland, Madison on Schedule 15
(the "Employment Agreements") and (n) all equity ownership
interest in Breland Realty Inc., an Alabama corporation.or BHI as
listed on Schedule 15 (the "Employment Agreements"). The
foregoing notwithstanding, the Acquired Assets shall not include
the Excluded Assets, as hereinafter defined.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations under the Securities Exchange Act of 1934.
"Assumed Liabilities" means liabilities of Breland as of the
Closing Date as follows: (a) liabilities and obligations of
Breland as listed on Schedule 10 including accounts payable,
construction debt, land acquisition and development debt, (b) all
obligations of Breland under the Sales Contracts (including
obligations to real estate brokers in connection therewith), and
under the Land Contracts (the Sales Contracts as of the Effective
Date are listed on Schedule 5A and the Land Contracts as of the
Effective Date are listed on Schedule 5B), (c) obligations under
leases (which as of the Effective Date are listed on Schedule 4),
(d) the obligation to perform warranty work for customers who
purchased homes from Breland prior to the Effective Date but only
to the extent set forth in section 8(g) and the obligation to
perform warranty work for customers who purchased homes after the
Effective Date, provided, however, that the Assumed Liabilities
shall not include (i) any Liability of Breland for income,
transfer, sales, use, and other Taxes whether or not arising in
connection with the consummation of the transactions contemplated
hereby (including any income Taxes arising because Breland is
transferring the Acquired Assets), (ii) any Liability of Breland
for the unpaid Taxes of any Person, as a transferee or successor,
by contract, or otherwise, (iii) any obligation of Breland to
indemnify any Person, unless contained in a contract assumed,
(iv) any Liability of Breland for costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby, (v) any Liability or obligation of Breland under this
Agreement, or (vi) any Liability or obligation to any current or
former employees of Breland to provide such persons with
employment or in connection with any Employee Benefit Plan.
"BHI" means Breland Homes, Inc., an Alabama corporation
wholly owned by LWB.
"BHM" has the meaning set forth in the preface above.
"BP" has the meaning set forth in the preface above.
"Breland" has the meaning set forth in the preface above.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in section 2(e) below.
"Closing Date" has the meaning set forth in section 2(e)
below.
"Confidential Information" means any business or technical
information used exclusively by Breland and which has economic
value to Breland because it has been deliberately maintained as
confidential by Breland. Confidential Information shall not
include general business or technical information of Breland,
even ifto the extent such information hasnot become generally
available to the public.
"Customer Deposits" means any deposit held by Breland in
connection with a Sales Contract whether held directly or in a
trust account.
"Disclosure Schedule" means the compilation of Schedules
described in this Agreement, which shall be certified by Breland
to be true and correct as of the date of execution of this
Agreement and at Closing.
"Effective Date" means December 31, 1998.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an
Employee Pension Benefit Plan, (b) qualified defined contribution
retirement plan or arrangement which is an Employee Pension
Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including
any Multiemployer Plan), (d) Employee Welfare Benefit Plan or (e)
any other material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
"Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Resource Conservation and Recovery Act of 1976,
and the Occupational Safety and Health Act of 1970, each as
amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof)
concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws
and regulations relating to (i) emissions, discharges, releases,
or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes into ambient
air, surface water, ground water, or lands or (ii) otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes, or (iii) laws and regulations relating
to the development of land, such as, storm water management,
erosion and sediment control, and use of wetlands.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" means (i) assets listed on Schedule 9
including notes receivable from affiliates and mortgage and note
receivable and a small aircraft owned by Breland, (ii) cash and
cash equivalents (including restricted cash and Customer
Deposits), (iii) the corporate stock, membership interests and
organizational documents of BP, and BHM, their qualifications to
conduct business as a foreign corporation, taxpayer and other
identification numbers, seals, minute books, stock transfer
books, blank stock certificates, tax returns and other documents
relating to the organization, maintenance, and existence of BP
and BHM, (iv) any of the rights of Breland under this Agreement,
and (v) any rights in or assets of the Employee Benefit Plans of
Breland.
Breland, (vi) any licenses or permits which are not transferable,
and (vii) Breland's insurance policies, but not including title
insurance to be provided to Buyer at Closing.
"Extremely Hazardous Substance" has the meaning set forth in
Sec. 302 of the Emergency Planning and Community Right-to-Know
Act of 1986, as amended.
"Final Disclosure Schedule" has the meaning set forth in
section 5(f)(iii) and which shall be certified by Breland to be
true and correct as of the Closing Date.
"Final Purchase Price" has the meaning set forth in section
2(d)(iv).
"Financial Statements" has the meaning set forth in section
3(g) below.
"Improvements" means individually and collectively
buildings, improvements, structures fixtures, raw materials and
supplies and other personal property owned by Breland and used in
connection with the real property sold hereunder.
"Indemnified Party" has the meaning set forth in section
9(d) herein.
"Indemnifying Party" has the meaning set forth in section
9(d) herein.
"Intellectual Property" means the following developed
byowned or licensed to and used by Breland: (a) all trademarks,
service marks, trade dress, logos, trade names, and corporate or
company names of Breland, together with all translations,
adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (b) all
copyrightable works of Breland, all copyrights of Breland, and
all applications, registrations, and renewals of Breland in
connection therewith, (c) all trade secrets and confidential
business information of Breland (including ideas, research and
development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and
proposals), (f)(d) all computer software of Breland (including
data and related documentation), and (g)(e) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" or "Breland's Knowledge" means the actual
knowledge of LWB or his knowledge of facts which upon reasonable
inquiry would lead to actual knowledge.
"Land Contracts" has the meaning set forth in this 1 under
the definition of "Acquired Assets".
"Liability" means any liability (whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
"LWB" has the meaning set forth in the preface above.
"Madison" means Madison Homes Holding Company, L.L.C., an
Alabama limited liability company, and its subsidiaries, all
wholly ownedof which are controlled by LWB and its subsidiaries.
"Multiemployer Plan" has the meaning set forth in ERISA Sec.
3(37).
"Operational Adjustment" means the net result obtained by
adjusting the amount of all"Net Worth" means the amount
determined by deducting the book value of Assumed Liabilities and
Acquired Assets to reflect differences between the Effective Date
and the Closing Date.from the book value of Acquired Assets.
"Ordinary Course of Business" means the ordinary course of
business for Breland consistent with past custom and practice
(including with respect to quantity and frequency).
"Other Agreements" means (a)Agreement" means the Asset
Purchase Agreement of even date with this Agreement between Buyer
and BHIand LWB and (b) the Agreement of even date herewith
between Buyer and LWB.
"Parties or Party" has the meaning set forth in the preface
above.
"Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Permitted Exceptions" means (a) mechanics', carriers',
workers', repairers' and other similar liens arising or incurred
in the Ordinary Course of Business relating to obligations as to
which there is no default on the part of Breland or its
subcontractors; (b) all liens for Taxes both general and special,
and other governmental charges which are not due and payable as
of the Closing; (c) all easements, rights-of-way, covenants,
conditions, restrictions, reservations, licenses, agreements and
other matters of record on the Effective Date; (d) all electric
power, telephone, gas, sanitary sewer, storm sewer, water and
other utility lines, pipelines, service lines and facilities of
any nature now located on, over or under the Acquired Assets, and
all licenses, easements, rights-of-way and other agreements
relating thereto but, with respect to the Acquired Assets, only
to the extent that such matters do not adversely affect, except
in insubstantial ways, Buyer's ability to use the Acquired Assets
in its business, for the purposes for which they were intended to
be used; (e) all exiting public and private roads and streets
(whether dedicated or undedicated) and all railroad lines and
rights-of-way affecting the Acquired Assets.
"Purchase Price" has the meaning set forth in section 2(d)
below.
"Right of First Refusal" means the right of Buyer (a) to be
offered building lots prior to their being offered to any other
Person and (b) the right for a 30 day period after written notice
to be offered lots on the same terms (including financing) as
would be available pursuant to a bonafide offer from an
independent third party. These rights shall not apply to the
offer and sale of individual residentialindividual lots to
customers.
"Sales Contracts" was the meaning set forth in this section
1 under the definition of "Acquired Assets".
"Security Interest" means any mortgage, pledge, deed of
trust, lien, encumbrance, charge, or other security interest,
other than (a) mechanic's, materialmen's, and similar liens, and
(b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate
proceedings.
"Subsidiary" means any corporation, limited liability
company or partnership with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or
has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"Survey" has the meaning set forth in 7(i)section 5(i)
below.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
"Title Reports" has the meaning set forth in section 5(h).
"Third Party Claim" has the meaning set forth in section
9(d) herein.
"WHA" has the meaning set forth in the preface above.
"WHI" has the meaning set forth in the preface above.
"WHM" has the meaning set forth in the preface above.
2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the
terms and conditions of this Agreement, Buyer agrees to purchase
from Breland, and Breland agrees to sell, transfer, convey, and
deliver to Buyer, all of the Acquired Assets at the Closing for
the consideration specified below in this 2.
section 2. Buyer shall specify prior to Closing, which assets
will be purchased by each of the entities constituting the Buyer.
(b) Assumption of Liabilities. On and subject to the
terms and conditions of this Agreement, Buyer agrees to assume
and become responsible for all of the Assumed Liabilities at the
Closing. Buyer will not assume or have any responsibility,
however, with respect to any other obligation or Liability of
Breland not included within the definition of Assumed
Liabilities. At the Closing, Breland will be released from any
further liability on the Assumed Liabilities, except as otherwise
provided herein.
(c) Contracts. On and subject to the terms and conditions
of this Agreement, the Parties agree to enter into, or, to the
extent within the power of the Parties, cause the appropriate
entities to enter into, the Lot Option Agreements as listed and
outlined on Exhibit G at the Closing in the form agreed to by the
Parties and the appropriate entities, as applicable.
(d) Purchase Price. (i) Buyer agrees to pay to Breland a
net purchase price (the "Purchase Price") which shall reflect the
assumption of the Assumed Liabilities but which shall be an
amount which is calculated as[$2,200,000] plus the difference
between (A) the depreciated book value of the Acquired Assets as
of the Closing Date, and (B) the book value of the Assumed
Liabilities as of the Closing(A) $2,700,000$3,000,000 plus (B)
the Net Worth of BHM and BP as of the Effective Date. The
Purchase Price will be adjusted to the Closing Date as set forth
in section 2(d)(iv) below to determine the final Purchase Price.
(ii) An estimate of the Purchase Price (the "Estimated
Purchase Price") has been determined to be $3,884,745$4,689,787
based upon the unaudited books and records of BHM and BP as of
December 31, 1998. This Estimated Purchase Price will be
adjusted for any changes resulting from an audit by independent
public accountants of the books and records of Breland, which
will be completed prior to Closing.
Closing. (iii) Prior to or at Closing, Breland
will inform Buyer of its best good faith estimate of the
Operational Adjustment. On the Closing Date, Buyer will transfer
by wire in immediately available funds for the account of
Breland80%If, as a result of the changes resulting from such
audit the combined Purchase Price under this and the otherOther
Agreement changes by more than $500,000 from the Estimated
Purchase Price, plus the estimated Operational Adjustment if it
isthen either Buyer or Breland may cancel this Agreement prior to
Closing by notice to the other a positive number or less the
estimated Operational Adjustment if it is a negative
number.Party.
(iii) On the Closing Date, Buyer will transfer by wire
in immediately available funds for the account of Breland 90% of
the Estimated Purchase Price.
(iv) On the Closing Date, Breland will be required to
have a Net Worth equal to its Net Worth as of the Effective Date
plus the amount of net income earned by BHM and BP subsequent to
December 31, 1998 less income or other applicable taxes payable
on such net income of BHM and BP. To the extent Net Worth at
Closing is determined to be below that amount,the amount
determined in accordance with the previous sentence, the Purchase
Price will be adjusted lower in an amount equal to the amount of
such shortfall of Net Worth which will determine the finalFinal
Purchase Price. In order to determine the Net Worth of BHM and
BP at Closing and the Final Purchase Price, following the
Closing. Closing, _____________________,McGriff, Dowdy and
Associates, the independent public accountants for Breland, will
certify to Buyer its determination of the final Purchase Price
and Operational Adjustment based upon financial statementsNet
Worth of BHM and BP as of theEffective Date, which have been
certified by independent public accountants,Closing, and the Vice
President of Finance of WHI will certify to Breland itsfinal
determination of such Net the Purchase Price and Operational
Adjustment which shall be madeWorth in consultation with Deloitte
& Touche. To the extent there are differences, they will be
promptly submitted and resolved by Ernst & Young, an independent
"Big Five" public accounting firm not affiliated with any
Party.Young whose fees shall be split evenly between the Parties.
(e) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of Breland in Madison, Alabama, commencing at 9:00
a.m. local time on the later of April 13, 1999 or the fifth
business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually
determine (the "Closing Date"); provided, however, that the
Closing Date shall not be later than May 15, 1999.
(f) Deliveries at the Closing. At the Closing, (i)
Breland will deliver to Buyer the various certificates,
instruments, and documents specified in section 6(a) herein; (ii)
Buyer will deliver to Breland the various certificates,
instruments, and documents specified in section 6(b) herein;
(iii) Breland will deliver to Buyer and record among land and
other records, as necessary, good and sufficient general warranty
deeds, assignments, certificates of title and bills of sale so as
to transfer or assign all of Breland's right, title toand
interest in the Acquired Assets to Buyer and such further
instruments of sale, transfer, conveyance, and assignment as
Buyer and its counsel may reasonably request, all in such form as
they shall reasonably approve and all at the sole cost and
expense of Breland; (iv) Buyer will execute and deliver to
Breland an assumption in the form attached hereto as Exhibit A
and such other instruments of assumption as Breland and its
counsel may reasonably request; (v) Buyer will deliver to Breland
by wire transfer in immediately available funds 90% of the
Estimated Purchase Price; and (vi) Buyer shall receive possession
and control of all other Acquired Assets.
(g) Prorations. At Closing, real property taxes, personal
property taxes, rent and utilities will be prorated between Buyer
and Breland as of the ClosingEffective Date in the manner
customarily used in real estate transactions in the jurisdictions
where the properties are located.
(h) Second Closing. A second closing shall occur at such
time as the finalFinal Purchase Price has been determined. Buyer
shall deliver to Breland by wire transfer in immediately
available funds the balance of the Final Purchase Price plus
interest at the rate of 6% per annum on any amount owing over 30
days from the Closing Date commencing 30 days following the
Closing Date. If the Final Purchase Price is determined to be
lower than the funds previously remitted to Breland pursuant to
section 2(d)(iii), Breland will refund the difference to Buyer at
the secondClosing.
InClosing. In the event pursuant to 2(c)section 2(d)
there are differences between Breland and Buyer'sfinal
determination of the Final Purchase Price, Buyer will pay (by
wire transfer of immediately available funds) all undisputed
amounts, and only amounts in dispute will be submitted to Ernst &
Young for determination.
(i) Allocation. The consideration for the Acquired Assets
shall be allocated by the Parties pursuant to Exhibit B attached
hereto. Such allocation and the form of the transaction as set
forth in this Agreement and the other documents and agreements
referred to in this Agreement shall be used for preparation and
filing of Internal Revenue Service Form 8594 with respect to the
transaction contemplated hereby, and no Party hereto shall take
or assert any position inconsistent therewith. Prior to the
Closing, the Parties shall cooperate in connection with the
preparation, execution and filing with the Internal Revenue
Service of all necessary information returns required by Section
1060 of the Internal Revenue Code of 1986, as amended, relating
to the allocation of the consideration for the Acquired Assets.
(j) Employees. At the time of Closing, Buyer may, but
shall be under no obligation to, provide employment to employees
of Breland and establish arrangements with independent
contractors who serve as sales representatives. Buyer shall have
no obligation to employees or former employees of Breland and
shall not adopt or become liable for any obligation under any
Employee Benefit Plan of Breland. At the time of Closing,
Breland shall and LWB shall cause BHI and Madison to assign to
Buyer all interest in the Employee Agreements listed on Schedule
15.
(k) Land Development Joint Venture.Limited Liability
Company.Company For a period of five (5) years following the
Closing, LWB shall conduct all land development activities (with
only specified exceptions) for residential building lots through
a joint venture to be formed with WHI,limited liability company,
50% owned by LWB and 50% owned by WHI or its Affiliate,
tentatively named Century Land Company, L.L.C. ("Century"), which
shall be organized and operated in accordance with Exhibit H.F.
(l) Right of First Refusal on Future
Developments.Developments For a period of five (5) years
following the Closing or within a reasonable time thereafter,
Buyer is hereby granted a Right of First Refusal to purchase all
residential building lots developed by LWB and his
affiliates.Affiliates.
(m) Name Change. (m) Name Change BHM and BP shall at the
time of Closing or within a reasonable time thereafter, change
their names to no longer use the name "Breland" or a similar
name.
(n) Lease of Office Space.Space At the time of Closing,
Buyer shall have the right to lease a portion of office space
sufficient for the conduct of its business from Breland on a
month to monthnet net basis at the rate of $_____ten dollars
($10) per square foot per year in the building located at 103
Mountain Brook Boulevard, Madison Alabama.
Madison, Alabama. Such lease shall be cancelable on 30 days
advance notice.
(o) Intellectual Property At the time of Closing, LWB shall
cause Madison to license on an exclusive or nonexclusive basis as
indicated on Schedule 3 certain Intellectual Property owned by
Madison and BHI and Madison shall cancel the Licensing Agreement
between them for use of such property.
3. Representations and Warranties of Breland. BP, BHM and LWB
jointly and severally represent and warrant to Buyer that the
statements contained in this section 3 are true and correct as of
the date of this Agreement and will be true and correct as of the
Closing Date as though then made and as though the Closing Date
were substituted for the Effective Date throughout this section
3, except as set forth in Schedule 11 to the Disclosure Schedule
accompanying this Agreement.
(a) Organization of Breland. BP is a corporation, and BHM
is a limited liability company, both of which are duly organized,
validly existing, and in good standing under the laws of Alabama.
BHM is duly authorized to operate in the state of Mississippi as
a foreign limited liability company. BP is wholly-owned by LWB
and BHM is wholly owned by LWB and LWB as custodian for his minor
child and no other person owns or holds any equity interest in or
rights to acquire any equity interest in BP or BHM. LWB is an
individual, resident in the state of Alabama.
(b) Authorization of Transaction. BP, BHM, and LWB have
full power and authority to execute and deliver this Agreement,
and to perform their respective obligations hereunder and to own
or lease their respective properties as now owned or leased and
conduct their businesses as now being conducted. Without
limiting the generality of the foregoing, the board of directors
and stockholders of BP, and the members of BHM have approved and
all other necessary corporate or company action has been taken to
authorize the execution, delivery, and performance of this
Agreement by BP and BHM respectively. This Agreement constitutes
the legal, valid and binding obligation of BP, BHM and LWB,
enforceable in accordance with its terms and conditions except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights generally and by judicial application of general equitable
principles.
(c) Noncontravention. Subject to obtaining the consents
listed on Exhibit C, and subject to any restriction on the
transfer of licenses and permits, neither the execution and
delivery of this Agreement nor the consummation of the
transactions contemplated hereby including the assignments,
transfers and assumptions, referred to in section 2 above, will
(i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to
which BP, BHM or LWB is subject or any provision of the charter
or bylaws of BP or the organizational documents and operating
agreement of BHM or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which any of
BP, BHM or LWB is a party or by which any of them is bound or to
which any of their assets (including the Acquired Assets) is
subject or result in the imposition of any Security Interest upon
any of their assets (including the Acquired Assets). None of BP,
BHM or LWB is required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to
consummate in any material respect the transactions contemplated
by this Agreement (including the assignments, transfer and
assumptions referred to in section 2 above) except for filings
among the various land records to transfer the real property sold
hereunder, and transfer of the titles of vehicles sold hereunder,
all as contemplated by this Agreement.
(d) Brokers' Fees. Breland has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement
for which Buyer could become liable or obligated. The foregoing
is not intended to cover obligations to real estate brokers under
the Sales Contracts, which obligations shall be assumed by Buyer.
(e) Title to Assets. Subject to the Permitted Exceptions
and any restriction on the transfer of licenses and permits, and
except as disclosed in the Title Reports, Breland has good and
marketable title to, valid license to use, or a valid leasehold
interest in, the properties and assets that constitute the
Acquired Assets, free and clear of all Security Interests or
restrictions on transfer.
(f) Subsidiaries. BP and BHM have no Subsidiaries.
BrelandBP and BHM do not own or control directly or indirectly or
have any direct or indirect capital stock ownership or equity
participation in any corporation, partnership, trust, joint
venture or other business association.
(g) Financial Statements. Attached hereto as Exhibit D are
the unaudited balance sheets of BHI, BP and BHM on a combined and
combining basis at December 31, 1998 (collectively the "Financial
Statements"): auditedwhich have been prepared in accordance with
generally accepted accounting principles, and as adjusted, to
exclude assets which are not Acquired Assets and to exclude
liabilities which are not Assumed Liabilities. The Financial
StatementsPrior to the Closing, Breland will provide financial
statements for BHI, BP and BHM in a combined and combining basis
and which shall include a balance sheet, statement of income,
changes in stockholders' equity and cash flow at and for the year
ended December 31, 1998 (including the notes thereto) which shall
be audited and certified by an independent public
accountantDeloitte & Touche LLP to be correct and complete in all
material respects and present fairly the financial condition of
BHI, BP and BHM as of such dates and the results of operations of
BP and BHM for such periods, and have been prepared in accordance
with generally accepted accounting principles and are consistent
with the books and records of BHI, Breland.
BP and BHM and as adjusted in the manner set forth in the first
sentence of this paragraph (the "Financial Statements"). The
audited financial statements as provided by Breland shall replace
the unaudited financial statements for all purposes of this
Agreement including the calculation of the Purchase Price in
section 2(d)(ii).
(h) Events Subsequent tofiscal Year End. Since December
31, 1998, there has not been any material adverse change in the
business, financial condition, operations, results of operations,
or to Breland's Knowledge the future prospects of BP and BHM.
Without limiting the generality of the foregoing, since that
date:
(i) Breland, has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than
for a fair consideration in the Ordinary Course of Business;
(ii) No party has, in any material way, accelerated,
terminated, modified, or cancelled any material agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) to which BP or BHM is a party or
by which it is bound except for changes, modifications and
cancellations of Sales Contracts and other agreements in the
Ordinary Course of Business;
(iii) Neither BP nor BHM has imposed or permitted to
exist any Security Interest upon any of its assets, tangible or
intangible;
(iv) Neither BP nor BHM has experienced any material
damage, destruction, or loss (whether or not covered by
insurance) to its property; and
(v) There has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside
the Ordinary Course of Business involving Breland.
(vi) PaidNeither BP nor BHM has paid or declared any
dividend, redeemed any capital stock or membership interest, or
made any distribution to its shareholders or holders of any
membership interest.
(vii) EngagedNeither BP nor BHM has engaged in any
transaction with any Affiliate of Breland.
(viii) Neither BP nor BHM has paid any bonus or made
similar compensation payments which were not accrued for prior to
the Effective Date, or adjusted any salary to a rate greater than
that paid prior to the Effective Date.
(i) Undisclosed Liabilities. Breland does not have any
Liability (and to its Knowledge there is no basis for any present
or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against Breland giving rise
to any Liability) which would affect the Acquired Assets, except
for (i) Liabilities set forth in the Financial Statements
(including any notes thereto) and (ii) Liabilities which have
arisen after the Effective Date in the Ordinary Course of
Business (none of which results from, arises out of, relates to,
is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law) and
except on Schedule 11.
(j) Legal Compliance. Breland, to its Knowledge,, has
complied in all material respects with all applicable laws
(including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, and local governments (and all agencies thereof),
and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced
against it alleging any failure so to comply which would
materially and adversely affect Buyer, Breland, the Acquired
Assets or the Assumed Liabilities.
(k) Tax Matters. Breland has filed with the appropriate
governmental agencies all required Tax Returns and paid all
amounts required to have been shown thereon. There is no Tax,
which has not or will not be paid by Breland or its Affiliates
whichas a result of, could give rise to any Liability which would
affect the Acquired Assets or which could otherwise be imposed
upon Buyer.
(l) Real Property.
(i) Schedules 1A and 1B of the Disclosure Schedule (and
as updated by the Final Disclosure Schedule) lists and describes
briefly all real property and Improvements that Breland
owns.being conveyed to Buyer. With respect to each parcel of
owned real property which constitutes part of the Acquired
Assets, except as specifically set forth on the Disclosure
Schedule or disclosed in the Title Reports:
(A) Breland has good and marketable title to the
parcel of real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for the
Permitted Exceptions and except for security interestsSecurity
Interests relating to debt which will be paid off at Closing or
is an Assumed Liability;
(B) there are no pending, or to its Knowledge,
threatened condemnation proceedings, lawsuits, or administrative
actions relating to the property or other matters adversely
affecting the current use, occupancy, or value thereof;
(C) the legal description for the parcel contained
in the deed delivered at Closing and Title Report therefor
describes such parcel fully and adequately, the buildings and
Improvements thereon are located within the boundary lines of the
described parcels of land, are not in violation of any applicable
setback requirements, zoning laws, and ordinancesrequirement,
zoning law, or ordinance and none of the properties or buildings
or improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications, and
do not encroach on any easement which may burden the land, and
the land does not serve any adjoining property for any purpose
inconsistent with the use of the land, and the property is not
located within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the
use thereof have not been obtained;
(D) Breland has received or applied for all
material approvals of governmental authorities including such
licenses and permits as are required at the stage of development
of the particular parcel and such parcel has been operated and
maintained in accordance with applicable laws, rules, and
regulations;
(E) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to
any party or parties the right of use or occupancy of any portion
of the parcel of real property;
(F) there are no outstanding options or rights of
first refusal to purchase the parcel of real property, or any
portion thereof or interest therein;
(G) there are no parties, other than Breland, in
possession of the parcel of real property;
(H) all subdivisions or communities under
development are or can be supplied with utilities including,
electricity, water, telephone, sanitary sewer or septic tank (in
conformity with Health Department regulations), and storm sewer,
and other services necessary for the operation of such
communities, including, to the extent generally available in such
area, gas, cable television, all of which services are adequate
in accordance with all applicable laws, ordinances, rules, and
regulations and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefiting the parcel of real
property;
(I) each parcel of developed real property abuts
on and has direct vehicular access to a public road, or has
access to a public road via a permanent, irrevocable, appurtenant
easement benefiting the parcel of real property, and access to
the property is provided by paved public right-of-way;
(J) all Improvements have been constructed in a
workmanlike fashion, capable of passing inspection by appropriate
authorities and with respect to completed homes, capable of being
warranted to home purchasers under the homebuilding warranties
offered by Breland;
(K) all material obligations of Breland to
homeowner associations required by law or by covenant have been
complied with;
(L) all payment and performance bonds or
guaranties issued at the request of any party including but not
limited to any state, federal or municipal authority for purposes
of bonding any on-site or off-site work in connection with the
construction of residential structures have been obtained; and
(M) to Breland's Knowledge all lots are buildable
in the Ordinary Course of Business, without extraordinary cost.
(N) no moritoriammoratorium is in effect and there
has been no loss of zoning or imposition of impact fees with
respect to any land parcel.
(ii) Schedule 4 of the Disclosure Schedule lists and
describes briefly all leases with Breland. Breland has made
available to Buyer correct and complete copies of such leases as
amended to the date. With respect to each lease listed:
(A) the lease is legal, valid, binding,
enforceable, and in full force and effect and, subject to
obtaining any required consents to assignment, will continue to
be so following assignment and transfer to Buyer;
(B) Breland is not and to its Knowledge no other
party is in breach or default, and, to its Knowledge, no event
has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination,
modification, or acceleration under such lease;
(C) Breland has not and to its Knowledge no other
party to the lease has repudiated any provision thereof;
(D) to Breland's Knowledge there are no disputes,
oral agreements, or forbearance programs in effect as to such
lease;
(E) Breland has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest
in the leasehold; and
(F) to Breland's Knowledge, all facilities leased
thereunder have received all approvals of governmental
authorities (including licenses and permits) required in
connection with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and
regulations and all facilities leased thereunder are supplied
with utilities and other services necessary for the operation of
said facilities.
(m) Intellectual Property.
(i) Breland or Madison owns or has a valid license to
use all Intellectual Property listed on Schedule 3 which
constitutes all Intellectual Property used in the operation of
the businesses of BP and BHM as presently conducted.
(ii) With respect to each item of Intellectual Property
listed on Schedule 3 of the Disclosure Schedule:
(A) Breland or Madison possesses all right, title,
and interest in andor has a valid license to use the item, free
and clear of any Security Interest, license, or other
restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or
to Breland's Knowledge is threatened which challenges the
legality, validity, enforceability, use, or ownership of the
item; and
(D) Breland has never agreed to indemnify any Person
for or against any interference, infringement, misappropriation,
or other conflict with respect to the item.
(n) Tangible Personal Property. Schedule 2 of the
Disclosure Schedule lists as of the Effective Date the major
items of office furniture, fixtures and equipment, computer
equipment, model home furniture and fixtures, automobiles,
trucks, construction and other equipment used in the conduct of
the business of BP and BHM as presently conducted. Each item of
personal property listed is conveyed to Buyer in reasonably good
operating"as is" condition(subject to normal wear and tear),.
(o) Contracts. Schedules 5A, 5B, 7 and 15 of the
Disclosure Schedule lists and as updated by the Final Disclosure
Schedule, will list the contracts and other agreements to which
Breland is a party and which will be assumed by Buyer. Other
than as listed in such schedules there are no agreements
necessary or desirable for the operation of BP and BHM which are
not being assigned to and assumed by Buyer. Breland has made
available to Buyer a correct and complete copy of each Land
Contract and Sales Contract and a written summary setting forth
the terms and conditions of each oral agreement referred to in
Schedules 5A and 5B of the Disclosure Schedule. With respect to
each Land Contract and Sales Contract which is an Acquired Asset:
(A) the agreement is legal, valid, binding, enforceable, and in
full force and effect; (B) subject to obtaining any required
consents to assignment as listed on Exhibit C, the agreement will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments
and assumptions referred to in section 2 above) and is fully
assignable by Breland to Buyer; (C) no party is in material
breach or default, and no event has occurred which with notice or
lapse of time would constitute a material breach or default, or
permit termination, modification, or acceleration, under the
agreement; (D) no party has repudiated any provision of the
agreement and (E) there has been no moritoriam,moratorium, loss
of zoning or imposition of impact fees with respect to any parcel
which is subject of a Land Contract.
(p) Litigation. Schedule 13 sets forth each instance in
which Breland (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or,
is to its Knowledge threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
None of the actions, suits, proceedings, hearings, and
investigations described could result in any material adverse
change in the business, financial condition, operations, results
of operations, or, to its Knowledge, future prospects of Breland.
Breland has no reason to believe that any such action, suit,
proceeding, hearing, or investigation may be brought or
threatened against Buyer.
(q) Employees. Other than as set forth on Schedule 14, to
its Knowledge no executive, key employee, or group of employees
has any plans to terminate employment with BP or BHM and no sales
representative who is an independent contractor plans to
terminate its relationship with BP or BHM. Breland is not a
party to or bound by any collective bargaining agreement, has not
experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. Breland has
not committed any unfair labor practice. To Breland's Knowledge,
no organizational efforts are presently being made or threatened
by or on behalf of any labor union with respect to employees of
Breland. Schedule 15 of the Disclosure Schedule lists all
employees of BP, BHM and BHI and all sales representatives for
BP, BHM and BHI and specifies all who have employment contracts
with BHI, Breland and/or Madison. Breland has obtained the
assignment by BHI and Madison of all rights under the employment
contracts to Buyer as listed on Schedule 15.
(r) Employee Benefits.
Breland has furnished to Buyer copies of each Employee
Benefit Plan that Breland maintains or to which Breland
contributes or to which its employees are subject.
(s) Environment, Health, and Safety.
(i) To its Knowledge, Breland has complied in all
material respects with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or
commenced against it alleging any failure so to comply. Without
limiting the generality of the preceding sentence, Breland to its
Knowledge, has obtained and been in material compliance with all
of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has materially
complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental, Health,
and Safety Laws.
(ii) To its Knowledge, Breland hasno
Liability and has not handled or disposed of any substance,
arranged for the disposal of any substance, exposed any employee
or other individual to any substance or condition, or owned or
operated any property or facility in any manner that could form
the basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand
against Breland giving rise to any Liability for damage to any
site, location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health,
and Safety Law.
Law and to its Knowledge has no Liability in connection
therewith.
(t) Third Party Consents. Exhibit C sets forth a list of
all consents necessary for the assignment and transfer to Buyer
of the Acquired Assets at Closing.
(u) Disclosure. The representations and warranties
contained in this section 3 do not contain any untrue statement
of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this
section 3 not misleading.
4. Representations and Warranties of Buyer. Buyer
represents and warrants to Breland that the statements contained
in this section 4 are true and correct in all material respects
as of the date of this Agreement and will be true and correct in
all material respects as of the Closing Date (as though then made
and as though the Closing Date were substituted for the date of
this Agreement throughout this section 4).
(a) Organization of Buyer. WHA and WHM are limited
liability companies and WHI is a corporation duly organized,
validly existing, and in good standing under the laws of Alabama,
Mississippi and Maryland, respectively.
(b) Authorization of Transaction. Buyer and WHI have full
company or corporate power and authority to execute and deliver
this Agreement and to perform their respective obligations
hereunder. Without limiting the generality of the foregoing, the
members or board of directors of WHA, WHM and WHI have approved
and all other necessary corporate or company action has been
taken to authorize the execution, delivery and performance of
this Agreement by WHA, WHM and WHI. This Agreement constitutes
the legal, valid and binding obligation of WHA, WHM and WHI,
enforceable in accordance with its terms and conditions, except
as such enforceability may be limited by bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally
or by the judicial application of general equitable principles.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, including the assignments and
assumptions referred to in section 2 above, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Buyer is
subject or any provision of their charters, bylaws or
organizational documents, or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to
which Buyer is a party or by which any of WHA, WHM or WHI is
bound or to which any of their assets is subject. Buyer does not
need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the
assignments and assumptions referred to in section 2 above).
(d) Brokers' Fees. Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this
Agreement.payable to Robert Berma The foregoing is not intended
to cover obligations to real estate brokers under the Sales
Contracts.
5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and
the Closing.
(a) General. Each of the Parties will use its best efforts
to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the Closing conditions set forth
in section 6 herein).
(b) Notices and Consents. Each of the Parties will give
any notices to, make any filings with, and use its best efforts
to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the
matters referred to in section 3(c) and section 4(c) above and
will use its best efforts to obtain any necessary consent as
listed in Exhibit C to the assignment of any contracts,
agreements, leases, licenses, permits, bonding and
authorizations.
(c) Operation of Business. Prior to Closing, Breland will
not engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, Breland will not (i)
undertake or enter into any material transaction without the
prior written approval of Buyer or (ii) otherwise engage in any
practice, take any action, or enter into any transaction which
would result in a distribution or transfer of a substantial
portion of the assets of Breland provided, however, that Breland
may engage in the normal sale of homes and purchases of materials
and supplies without approval by Buyer.
(d) Preservation of Business. Breland will use its best
efforts to keep its business and properties substantially intact,
including its present operations, physical facilities, working
conditions, and relationships with developers, lessors,
subcontractors, suppliers, customers, and employees.
(e) Full Access. Breland will permit representatives of
Buyer to have full access at all reasonable times and upon
reasonable advance notice, and in a manner so as not to interfere
with the normal business operations of Breland, to all premises,
properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to Breland and its
business.
(f) Notice of Development; Change in Disclosure Schedules.
(i) Each Party will give the other Parties prompt
written notice of any material adverse development which could
cause a breach of any of the warranties and representations of
the disclosing Party. In the event such disclosure is reasonably
deemed by the Party to whom the disclosure is made to materially
and adversely affect the transaction contemplated by this
Agreement, such Party may terminate this Agreement on written
notice.
(ii) In the event a Party knows or has reason to
believe that a representation or warranty made by another Party
is incorrect or untrue, such Party shall so notify the other
Parties in writing. A Party shall have no claim against any
other Party for breach of this Agreement (including any
representation or warranty), including indemnification, where
such claim is based on a representation or warranty of a Party
which the claiming Party knew was incorrect or untrue and did not
so notify the Party against whom the claim is made.
(iii) Two business days prior to Closing Breland shall
deliver to Buyer a Final Disclosure Schedule updating the
Disclosure Schedule of Breland attached hereto as of the Closing
Date. The Final Disclosure Schedule may involve updating of
Schedules 1A, 1B, 5A, 5B, 7, 10, 11, 12 and 13 only for matters
occurring subsequent to the Effective Date. Such updated
Disclosure Schedule shall be substituted for the Disclosure
Schedule at the date of this Agreement for all purposes under
this Agreement; provided, however, in the event such Final
Disclosure Schedule indicates matters which are materially and
adversely different than the matters in the original Disclosure
Schedule, Buyer may terminate the Agreement and in the event of
such termination, the Parties shall have no further obligation or
liability to one another. In the event the Final Disclosure
Schedule reveals material changes with respect to any asset,
Buyer may elect to have such asset and any related liability
excluded from being an Acquired Asset or an Assumed Liability,
provided, however, that if Buyer elects to exclude any asset, the
covenant not to compete set forth in section 8(f) shall not apply
to activities with respect to such asset.
(g) Exclusivity. Breland will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person
relating to the acquisition of any substantial portion of the
assets of Breland (including any acquisition structured as a
merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any
Person to do or seek the foregoing. Breland will notify Buyer
immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing and will furnish
Buyer with copies of any written material in connection
therewith.
(h) Title Reports. Breland will obtain title insurance
commitments or binders (the "Title Reports"), at its sole
expense, with respect to each parcel of real estate that
constitutes part of the Acquired Assets, on a policy form
reasonably acceptable to Buyer, issued by a title insurer
satisfactory to Buyer in an amount equal to the depreciated book
value, which could insure title to such real property to be in
Buyer as of the Closing, subject only to exceptions which are
satisfactory to Buyer and which could be issued without survey
exceptions.
(i) Surveys. With respect to each parcel of real property
as to which a Title Report is to be procured pursuant to section
5(h) above (except where platted),and which has not been platted,
Breland will procure, at its sole expense, in preparation for the
Closing a current survey of the real property certified to Buyer,
prepared by a licensed surveyor and conforming to current ALTA
Minimum Detail Requirements for Land Title Surveys, disclosing
the location of all improvements, easements, party walls,
sidewalks, roadways, utility lines, and other matters shown
customarily on such surveys, and showing access affirmatively to
public streets and roads (the "Survey"). The Survey shall not
disclose any survey defect or encroachment from or onto the real
property which has not been cured or insured over prior to the
Closing.
(j) Press Releases and Public Announcements. No Party
shall issue any press release or make any public announcement
relating to the subject matter of this Agreement prior to the
Closing without the prior written approval of the other Parties;
provided, however, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded
securities in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making
the disclosure.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
(i) The representations and warranties set forth in 3
above shall be true and correct in all material respects at and
as of the Closing Date;
(ii) Breland shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) Breland shall have procured all of the third
party consents specified in Exhibit C, all of the Title Reports
specified in section 5(h) above and a title insurance policy in
connection therewith shall be issued to Buyer, and all of the
Surveys specified in section 5(i) above;
(iv) No action, suit, or proceeding shall be pending or
to Breland's Knowledge threatened before any court or
quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by
this Agreement, (B) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation, (C)
affect adversely the right of Buyer to own, license or lease the
Acquired Assets or, to operate the former business of Breland
(and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect); Breland shall have delivered to Buyer
a certificate to the effect that each of the conditions specified
above in section 6(a)(i)-(iv) has been satisfied in all respects;
(v) All applicable waiting periods (and any extensions
thereof) under HSR shall have expired or otherwise been
terminated, no "second request" for information under HSR shall
have been received and Breland and Buyer shall have received all
other authorizations, consents, and approvals of governments and
governmental agencies referred to in section 3(c) and section
4(c) above;
(vi) Buyer shall have received from counsel to Breland an
opinion in form and substance as set forth in Exhibit E attached
hereto, addressed to Buyer, and dated as of the Closing Date;
(vii) Buyer shall have received audited balance sheet and
statement of income, changes in stockholders' equity and cash
flow at and for the year ended December 31, 1998 for BHI, BHM and
BP on a combined basis, meeting the requirements of Regulation S-
X of the Securities and Exchange Commission all as audited and
certified by independent certified public accountants,Deloitte &
Touche LLP, and such financial statements shall not differ
materially and adversely from the Financial Statements for such
period attached to this Agreement as Exhibit D;
(viii) All actions to be taken by Breland in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby (including but not
limited to certified resolutions approving the transaction,
certificates of good standing, and certified organizational
documents) will be reasonably satisfactory in form and substance
to Buyer and its counsel; and
(ix) Buyer shall have received an affidavit from
Breland that it is not a "foreign person" for withholding
purposes under Sec. 1445 of the Internal Revenue Code of 1986, as
amended. Buyer may waive any condition specified in this section
6(a) if it executes a writing so stating at or prior to the
Closing.
(x) WHI and LWB shall have entered into the
organizational and operating agreements for the land development
limited liability company as outlined on Exhibit F, and Buyer
shall have entered into the Lot Option Agreements with such
company as listed on Exhibit G.
(b) Conditions to Obligation of Breland. The obligation
of Breland to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the
following conditions:
(i) The representations and warranties set forth in 4
above shall be true and correct in all material respects at and
as of the Closing Date;
(ii) Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) No action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or (B) cause
any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(iv) Buyer shall have delivered to Breland a
certificate to the effect that each of the conditions specified
above in section 6(b)(i)-(iii) is satisfied in all respects;
(v) All applicable waiting periods (and any extensions
thereof) under HSR shall have expired or otherwise been
terminated and no second request for information under HSR shall
have been received and Breland and Buyer shall have received all
other authorizations, consents, and approvals of governments and
governmental agencies referred to in section 3(c) and section
4(c) above;
(vi) All actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby (including but not
limited to certified resolutions approving the transaction,
certificates of good standing, and certified organizational
documents) will be reasonably satisfactory in form and substance
to Breland. Breland may waive any condition specified in this
section 6(b) if it executes a writing so stating at or prior to
the Closing.
(vii) Breland shall be released from all liabilities
being assumed or paid off by Buyer at Closing.
(viii) Breland shall have received from counsel to
Buyer an opinion in form and substance as set forth in Exhibit H
attached hereto, addressed to Breland, and dated the Closing
Date.
(ix) WHI and LWB shall have entered into the
organizational and operating agreements for the land development
limited liability company outlined in Exhibit F and Buyer shall
have entered into the Lot Option Agreements with such company as
listed on Exhibit G.
7. Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) The Parties may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) Buyer or WHI may terminate this Agreement prior to
Closing by giving written notice to Breland following review by
Buyer of the Title Reports, the Surveys, and the Final Disclosure
Schedule, and other information concerning the business and
operations of Breland if they areBuyer in its sole discretion is
not satisfied with the disclosures contained therein or the
information obtained.
(iii) Buyer or WHI may terminate this Agreement by
giving written notice to Breland at any time prior to the
Closing (A) in the event Breland or LWB has breached any
representation, warranty, or covenant contained in this Agreement
in any material respect, Buyer has notified Breland or LWB of
the breach, and the breach has continued without cure for a
period of 14 days after the notice of breach or (B) if the
Closing shall not have occurred on or before May 15, 1999, by
reason of the failure of any condition precedent under 6(a)
hereof.
hereof (unless the failure results primarily from Buyer itself
breaching any representation, warranty or covenant contained in
this Agreement).
(iv) Breland or LWB may terminate this Agreement by
giving written notice to Buyer at any time prior to the Closing
(A) in the event Buyer or WHI has breached any representation,
warranty, or covenant contained in this Agreement in any material
respect, Breland has notified Buyer or WHI of the breach, and the
breach has continued without cure for a period of 14 days after
the notice of breach or (B) if the Closing shall not have
occurred on or before May 15, 1999, by reason of the failure of
any condition precedent under section 6(b) hereof (unless the
failure results primarily from Breland itself breaching any
representation, warranty, or covenant contained in this
Agreement).
(v) Buyer or Breland may terminate this Agreement
pursuant to section 2 (d)(ii).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to section 7 (a)(i) or (ii)(a)(i), (ii) or (v)
above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party.
If any partyParty terminates pursuant to section 7 (a)(iii) or
(iv) the other partyParty shall be liable for damages in
connection therewith.
therewith, provided, however, that if this Agreement is
terminated because Deloitte & Touche are unable to complete their
audit of the financial statements required by section 3(g) and
6(a)(vii) by May 15, 1999, the Parties shall have no further
obligation to each other hereunder. Termination of this
Agreement shall also constitute a termination of the Other
Agreement and termination of the Other Agreement shall constitute
termination of this Agreement; both terminations shall be
considered to result from the same cause.
8. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
(a) General. In case at any time after the Closing any
further action is necessary or desirable to carry out the
purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably
may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification
therefor under section 9 below).
(b) Litigation Support. In the event and for so long as
any Party actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand (other than by a Party against another Party to
this Agreement) in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving Breland,
each of the other Parties will cooperate with the contesting or
defending Party and its counsel in the contest or defense, make
available its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under section 9
below).
(c) Transition. Breland will not take any action that is
designed or intended to have the effect of discouraging any
developer, lessor, licensor, customer, supplier, or other
business associate of Breland from maintaining the same business
relationships with Buyer after the Closing as it maintained with
Breland prior to the Closing. Breland will refer all customer
inquiries relating to the business of Breland to Buyer from and
after the Closing.
(d) Confidentiality. Breland will treat and hold as such
all of the Confidential Information, refrain from using any of
the Confidential Information except in connection with this
Agreement, and deliver promptly to Buyer or destroy, at the
request and option of Buyer, all tangible embodiments (and all
copies) of the Confidential Information which are in its
possession other than that which Breland is required by law to
keep or is necessary in connection with Tax matters. In the
event that Breland is requested or required by oral question or
request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar
process to disclose any Confidential Information, Breland will
notify Buyer promptly of the request or requirement so that Buyer
may seek an appropriate protective order or waive compliance with
the provisions of this section 8(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, Breland
is, on the advice of counsel, compelled to disclose any
Confidential Information or else stand liable for contempt, then
Breland may disclose the Confidential Information; provided,
however, that the disclosing person shall use its reasonable best
efforts to obtain, at the reasonable request of Buyer, an order
or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be
disclosed as Buyer shall designate.
(e) Access to Records. After the Closing Date, Buyer
shall preserve the records, files and papers of Breland which are
transferred to it and shall, on reasonable notice, allow Breland
and its representatives reasonable access thereto and the right
to make copies and extracts therefrom during normal business
hours for the preparation of such Tax returns as Breland or its
parent companiesAffiliates may be required to file and the
disposition of any claim that may be made against it, or other
reasonable purpose and Buyer shall use its best efforts not to
dispose of any item thereof without giving 90 days' prior written
notice to Breland of its intention of disposing of same,
specifying the items to be disposed of in reasonable detail.
Breland shall, within the period of 60 days from receipt of such
notice, notify Buyer of Breland's desire to retain one or more
items to be disposed of. Buyer shall, upon receipt of such
notice from Breland, deliver to Breland, at Breland's expense
including reimbursement for personal and out-of-pocket expenses,
the items requested by Breland. All records, files and papers
reviewed or delivered pursuant to this Section shall be held
confidential. Notwithstanding the foregoing, Buyer shall not be
liable for any inadvertent disposal of any such records, files
and papers.
(f) Covenant Not to Compete. LWB shall make himself
available for consultation with Buyer as needed for one (1) year
following the Closing provided such consultation does not
unreasonably interfere with other business activities. ForIn
view of the sale of goodwill by Breland under this Agreement, for
a period of five years from and after the Closing Date, LWB will
not engage directly or indirectly through BHI, BHM, BP, or
otherwise in the construction and sale of single family homes in
Alabama and Mississippi,the Alabama counties ofall Alabama and
Mississippi,Alabama counties, including specifically Madison,
Limestone, Jefferson, Morgan, Jefferson and Morgan and theMobile,
and Baldwin, and all Mississippi counties ofcounties, including
specifically Jackson and Harrison, except that the foregoing
restriction shall not apply (i) to the development of land for
single family homes in a joint venturelimited liability company
jointly owned with WHI as outlined in 2(j),section 2(k), (ii)
the construction and/or sale of homes on scattered lots (owned
by customers) by Madison, or LWB's(iii) the development by LWB
directly or through Affiliates of rural properties (without
availability of sanitary sewer systems)service other than
individual septic tanks) provided however, that Buyer shall have
for five years after Closing a Right of First Refusal to purchase
all lots on such rural properties upon completion of development.
LWB will not use the name "Breland""Breland," "BHI," or a
variation thereof on any entity with which he is associated and
for two years after Closing will not hire directly or through any
business with which he is associated, including Madison, any
person who has been an employee of Breland, BHI, WHA, WHM or WHI
during the preceding twenty four (24) months, except that LWB or
an Affiliate may employ the persons listed on Schedule 14. If
the final judgment of a court of competent jurisdiction declares
that any term or provision of this section 8(f) is invalid or
unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be
appealed.
(g) Warranty Work on Recent Deliveries. Buyer will provide
warranty repair work to purchasers of single family homes from
Breland who purchased their homes within one year prior to
Effective Date for one year subsequent to date of the home
purchase. In the event that such warranty repair work undertaken
pursuant to this Agreement and the Other Agreement entails costs
to Buyer which exceed $35,000 in the aggregate, or relates to
houses purchased more than one (1) year prior to Closing,the
Effective Date, Breland will reimburse Buyer for its costs in
connection therewith; provided, however, Buyer shall bill Breland
for the warranty repair work at cost without mark-up, and Buyer
will not charge for supervision, handyman labor and
administrative support. Breland shall be responsible for all
other warranty work on deliveries by Breland prior to the
Effective Date. During the one year period after Closing, Buyer
will furnish Breland with a monthly report on warranty repair
work performed on deliveries by Breland. Schedule 1612 is a list
of outstanding warranty claims as of the Effective Date.
Date. Breland reserves the right to enforce any claim for
warranty work or indemnification from a subcontractor or supplier
notwithstanding any contract assignment to Buyer contained
herein.
(h) Marketing and Promotional Materials. Buyer will
receive Breland's existing supply of marketing and promotional
materials, including brochures, pamphlets and other printed
materials.
(i) Use of Non-Transferred Assets. Following Closing,
Breland will permit Buyer,to the extent permitted by law, to use
licenses, permits, and bonding in place with respect to the
Acquired Assets, so that there is no disruption in the
homebuilding operations acquired or the development of land in
connection therewith.
therewith. Buyer will use its best efforts to become a licensed
general contractor in Alabama and Mississippi.
(j) Land Contracts. With respect to any Land Contract
which cannot be transferred to Buyer as contemplated by this
Agreement, Breland will pursuant to the direction of Buyer take
down lots under such contract on behalf of Buyer and immediately
transfer them to Buyer at cost.
(k) Madison Employees. For two years subsequent to
Closing, Buyer will not hire any employee who has been an
employee of Madison subsequent to Closing. LWB will cause any
Madison employee who was previously an employee of Breland to
fully train any person, holding a comparable position and
function with WHA and WHM.
9. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of Buyer and
Breland contained in this Agreement shall survive the Closing,
and continue in full force and effect thereafter for a period of
three years following Closing.
(b) Indemnification Provisions for Benefit of Buyer.
(i) In the event Breland breaches, or in the event
any third party alleges facts that, if true, would mean Breland
has breached any of their representations, warranties, and
covenants contained in this Agreement, and, provided that Buyer
makes a written claim for indemnification against Breland
pursuant to section 10(f) herein, then Breland agrees to
indemnify Buyer from and against the entirety of any Adverse
Consequences Buyer may suffer through and after the date of the
claim for indemnification including any Adverse Consequences
Buyer may suffer, arising out of, relating to, in the nature of,
or caused by the breach or the alleged breach.
(ii) Breland agrees to indemnify Buyer from and
against the entirety of any Adverse Consequences Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by:
(A) any Liability of Breland which is not an
Assumed Liability;
(B) any Liability of Buyer arising by operation
of law, including under any bulk transfer law of any jurisdiction
or under any common law doctrine of de facto merger or successor
liability, which is not an Assumed Liability; or
(C) any Liability of Breland for the unpaid
Taxes of Breland, LWB or any Person controlled by LWB as a
transferee or successor, by contract, or otherwise.
(D) any Liability resulting from the operation
of a business by Breland prior to the Closing Date except for
the Assumed Liabilities.
(iii) Breland agrees to indemnify Buyer from and
against the entirety of any Adverse Consequences Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by claims for severance pay arising as a result of an
employee's status as an employee of Breland or arising under
Employee Benefit Plans of Breland, or applicable to employees or
former employees.
(c) Indemnification Provisions for Benefit of Breland.
(i) In the event Buyer breaches, or in the event any
third party alleges facts that, if true, would mean Buyer has
breached, any of its representations, warranties, and covenants
contained in this Agreement, including those contained in the
assumption attached as Exhibit A and, provided that Breland makes
a written claim for indemnification against Buyer pursuant to
section 10(f) herein, then Buyer agrees to indemnify Breland from
and against the entirety of any Adverse Consequences Breland may
suffer through and after the date of the claim for
indemnification including any Adverse Consequences Breland may
suffer, arising out of, relating to, in the nature of, or caused
by the breach or the alleged breach.
(ii) Buyer agrees to indemnify Breland from and against
the entirety of any Adverse Consequences Breland may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by any Assumed Liability.
(iii) Any Liability for Taxes which because they
relate to matters occurring subsequent to Closing are rightfully
the obligations of Buyer, except for real estate taxes prorated
under section 2(g).
(iv) Except as otherwise provided in this Agreement,
any Liability resulting from the operation of a business by Buyer
or relating to the Acquired Assets for occurrences subsequent to
Closing.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification
against any other Party (the "Indemnifying Party") under this
section 9, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless and then solely to the extent the
Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified
Party so long as (A) the Indemnifying Party notifies the
Indemnified Party in writing within 15 days after the Indemnified
Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with reasonable
evidence that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, and (C) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with section
9(d)(ii), (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (B) the Indemnified Party will
not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party, not to be
withheld unreasonably, and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written
consent of the Indemnified Party, not to be withheld
unreasonably.
(iv) In the event any of the conditions in section
9(d)(ii) is or becomes unsatisfied, however, (A) the Indemnified
Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third
Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith),
(B) the Indemnifying Parties will reimburse the Indemnified Party
promptly and periodically for the costs of defending against the
Third Party Claim including reasonable attorneys' fees and
expenses, and (C) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest
extent provided in this section 9.
(e) Determination of Adverse Consequences. The Parties
shall take into account the time cost of money in determining
Adverse Consequences for purposes of this section 9.
(f) Basket and Cap. An Indemnified Party shall have no
right to indemnification unless and until the aggregate of all
claims of the Indemnified Party pursuant to this Agreement and
the Other Agreements exceeds $ _________Agreement exceeds One
Hundred Thousand Dollars ($100,000) above any applicable
insurance coverage and further an Indemnifying Party's liability
for indemnification pursuant to this Agreement and the other
AgreementsOther Agreement shall in no event exceed $________
million.$3 million above any applicable insurance coverage. The
foregoing limitations on liability shall not apply, however, to
(a) Third Party claims arising in connection with homes delivered
by Breland prior to Effective Date including any product
liability or warranty claims in connection therewith or (b)
payment of the balance of the Purchase Price pursuant to section
2(h). The foregoing shall not limit the amount which may be
recoverable pursuant to applicable insurance coverage.
(g) Insurance Coverage. It shall not be necessary for an
Indemnified Party to first attempt to recover any Adverse
Consequences from a third party before seeking indemnity
hereunder. The Adverse Consequences which an Indemnifying Party
is liable to, for or on behalf of the Indemnified Party pursuant
to this (9),section 9, shall be reduced (including, without
limitation, retroactively) through subsequent repayment as
described below by an amount equal to any insurance proceeds
including, but not limited to, proceeds from title insurance,
actually received by or on behalf of such Indemnified Party
relating to the Adverse Consequences. If an Indemnified Party
shall have received or shall have been paid on its behalf an
indemnity payment in respect of any Adverse Consequences and
insurance proceeds in respect of such Adverse Consequences are
also received by the Indemnified Party, then such Indemnified
Party shall pay Indemnifying Party any excess amount received.
The Indemnified Party covenants and agrees to use all reasonable
efforts to collect all such sums as are available to it under its
existing insurance policies including, but not limited to, title
insurance policies, which would be applicable to any such Adverse
Consequences. All insurance policies shall contain waiver of
subrogation endorsements.
(h) Contractor Indemnification. Breland shall retain the
right to be indemnified by contractors and subcontractors as
provided in section 8(g).
10. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
(b) Entire Agreement. This Agreement (including
instruments referred to herein) and the Other Agreement
constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or
representations by or between the Parties, written or oral, to
the extent they related in any way to the subject matter hereof.
Except as specifically set forth herein, Breland makes no
representation or warranty to Buyer, express or implied,
including any implied warranty of future profitability of its
business.
(c) Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein
and their respective successors and permitted assigns. No Party
may assign either this Agreement or any of its rights, interests,
or obligations hereunder without the prior written approval of
the other Party; provided, however, that Buyer may (i) assign any
or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates
to perform its obligations hereunder (in any or all of which
cases Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(d) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
(e) Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
(f) Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall be
deemed duly given if sent by facsimile transmission and confirmed
by United States mail or sent by reputable overnight delivery
service and addressed to the intended recipient as set forth
below:
If to Breland to: Copy to:
103 Mountain Brook Boulevard John R. Wynn
Madison, Alabama 35758 Lanier, Ford, Shaver & Payne
Attention: Louis Breland P.O. Box 2087
Telephone: 256-461-8900 Huntsville, Alabama 35804
Fax: 256-461-7744 Fax: 256-935-1135
If to Buyer: Copy to:
Washington Homes, Inc. Washington Homes, Inc.
1802 Brightseat Road 1802 Brightseat Road
Landover, Maryland 20785 Landover, Maryland 20785
Attention: Geaton A. DeCesaris, Jr. Attention: Laurence R.
Jaffe
Telephone: 301-772-8900 Telephone: 301-772-8900
Fax: 301-772-1380
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address
set forth above using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the
intended recipient. Any Party may change the address to which
notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of
Alabama without giving effect to any choice or conflict of law
provision or rule whether of the State of Alabama or any other
jurisdiction that would cause the application of the laws of any
jurisdiction other than the State of Alabama.
(h) Amendments and Waivers. Except as specifically
provided in this Agreement, no amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by the parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(i) Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) Expenses. Buyer and Breland will each bear their own
costs and expenses (including legal fees and expenses) incurred
in connection with this Agreement and the transactions
contemplated hereby. Breland shall be responsible for payment of
the following in connection with the transactions contemplated by
the Agreement: (i) title report fees and title insurance
premiums, (ii) survey fees, (iii) transfer taxes, (iv) sales
taxes, (v) recording fees, and (vi) expense of environmental
reports, and such fees and expenses shall not be reflected in the
determination of Net Worth at the Closing Date as set forth in
section 2(d)(iv) above. Buyer shall be responsible for payment
of the following in connection with the transactions contemplated
by this Agreement: (i) audit fees of Deloitte and Touche for
auditing financial statements, and (ii) any fees or costs with
respect to licenses, permits, authorizations, bonds or the like
Buyer is required to obtain.
(k) Construction. The Parties have participated jointly
in the negotiation and drafting of this Agreement. In the event
an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean
including without limitation. Nothing in the Disclosure Schedule
shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure
Schedule identifies the exception with particularity and
describes the relevant facts in reasonable detail or cross
references detail.another schedule. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the
existence of the document or other item itself). The Parties
intend that each representation, warranty, and covenant contained
herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity)
which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first
representation, warranty or covenant.
(l) Incorporation of Exhibits and Disclosure Schedules. The
Exhibits and Disclosure Schedules identified in this Agreement
are incorporated herein by reference and made a part hereof.
(m) Specific Performance. Each of the Parties acknowledges
and agrees that the other Parties would be damaged irreparably in
the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the
other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions
hereof in any action instituted inany court of the United States
or any state thereof having jurisdiction over the Parties and the
matter, accordance with section 10(o) below, in addition to any
other remedy to which it may be entitled, at law or in equity.
(n) Bulk Transfer Laws. Buyer acknowledges that Breland
will not comply with the provisions of any bulk transfer laws of
any jurisdiction in connection with the transactions contemplated
by this Agreement, and hereby waives such compliance subject to
the agreements of Breland to indemnify Buyer pursuant of section
9(b).
(o) Dispute Resolution. The Parties recognize that
disputes may arise in the future concerning the Agreement or any
ancillary document executed in connection with this Agreement (a
"Dispute). Therefore, the parties shall resolve any and all such
Disputes of any nature whatsoever in the following manner:
(i) Negotiation. In the event of a Dispute, the
Parties shall attempt to settle such Dispute through informal
negotiations. To this effect, they shall consult and negotiate
with each other, in good faith and, recognizing their mutual
interests, attempt to reach a just and equitable solution
satisfactory to both Parties. Notwithstanding the foregoing,
nothing in this subsection 10(o)(i) shall preclude any Party from
commencing arbitration at any time.
(ii) Arbitration. Any Dispute which remains unresolved
shall be submitted to binding arbitration in accordance with
Chapter 1, Title 9 of the United States Code (United States
Arbitration Act). Arbitration shall be administered by the
American Arbitration Association ("AAA") in accordance with its
Commercial Arbitration Rules as supplemented by its Supplementary
Procedures for Complex Cases.
(iii) Situs. The situs of the arbitration shall be
Huntsville, Alabama.Nashville, Tennessee.
(iv) Number and Qualification of Arbitrators. The
arbitrators shall be decided by a panel of three neutral
arbitrators. AAA shall recommend arbitrators from its commercial
panel, giving due regard to the Parties' desire to have
arbitrators with experience in hearing commercial arbitrations.
From such AAA recommended list of arbitrators Breland shall
appoint an arbitrator and the Buyer shall appoint an arbitrator.
The two party-appointed arbitrators shall jointly and promptly
appoint the third arbitrator who must be an attorney licenses to
practice and in good standing in Alabama, who shall act as
chairperson of the panel. Recognizing the intent of the Parties
to obtain impartial, independent decisions and rulings, each
arbitrator shall disclose to the Parties and to the other Parties
of the panel, any professional, familial or social relationships,
present or past, with any party or counsel. Any Party may
challenge in writing the appointment or continued service of any
arbitrator for lack of independence, partiality or any other case
likely to impair such arbitrator's ability to render a fair and
equitable decision. Where such challenge is made to an
arbitrator, the AAA shall uphold or dismiss the challenge. In
the event the challenge is upheld, such arbitrator shall cease to
be a member of the panel. Any arbitrator may be removed upon
agreement of the Parties.
(v) Remedies. All decisions or rulings of the panel,
as well as any interim or final award, shall be pursuant to the
majority vote of the three (3) arbitrators comprising the panel.
Except as limited in this Section 10(o), the arbitrators shall
have authority to award a remedy or relief that a court of
Alabama could award or grant, including, without limitation,
specific performance of any obligation created under the
Agreement, the issuance of an injunction, pre-judgment or post-
judgment interest or the imposition of sanctions for abuse or
frustration of the arbitration process.
(vi) Fees and Expenses. The arbitrators shall have
the discretion and authority to award to the prevailing Party, if
any, as determined by the arbitrators, all of its costs and fees,
in such amounts as the arbitrators deem just. "Costs and Fees"
means all reasonable pre-award expenses of the arbitration,
including the arbitrators' fees, administrative fees, travel
expenses, other out-of-pocket expenses, witness fees and
attorneys'and witness fees, except each Party shall be
responsible for its own attorney's fees.
(vii) Finality and Enforcement. Any decision or award
rendered by the arbitrators shall be final, binding and
conclusive. The Parties hereby agree to submit to the personal
jurisdiction of the courts of the States of Maryland, Alabama, or
Mississippi for the enforcement of the award. The decision or
award may also be enforced in any other court of competent
jurisdiction.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
WESTMINSTER HOMES OF ALABAMA, L.L.C.
By:____________________________________
Name: ___________________________
Title: ___________________________
WESTMINSTER HOMES OF MISSISSIPPI, L.L.C.
By:____________________________________
Name: ___________________________
Title: ___________________________
WASHINGTON HOMES, INC.
By:____________________________________
Name: ___________________________
Title: ___________________________
BRELAND HOMES OF MISSISSIPPI, L.L.C.
By:____________________________________
Name: ___________________________
Title: ___________________________
BRELAND PROPERTIES, INC.
By:____________________________________
Name: ___________________________
Title: ___________________________
_______________________________________
LOUIS W. BRELAND
21
#2
ASSET PURCHASE AGREEMENT
Dated as of March 24, 1999
By and Among
Westminster Homes of Alabama, LLC
Westminster Homes of Mississippi, LLC
Washington Homes, Inc.
Breland Homes, Inc.
and
Louis W. Breland
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
1.Definitions 3
2.Basic Transaction 3
(a) Purchase and Sale of Assets 3
(b) Assumption of Liabilities 3
(c) Contracts 3
(d) Purchase Price 3
(e) The Closing 3
(f) Deliveries at the Closing 3
(g) Prorations 3
(h) Second Closing 3
(i) Allocation 3
(j) Employees 3
(k) Land Development Limited Liability Company 3
(l) Right of First Refusal on Future Developments 3
(m) Name Change 9
(n) Lease of Office Space 9
(o) Intellectual Property 3
3.Representations and Warranties of Breland 3
(a) Organization of Breland 3
(b) Authorization of Transaction 3
(c) Noncontravention 3
(d) Brokers' Fees 3
(e) Title to Assets 3
(f) Subsidiaries 3
(g) Financial Statements 3
(h) Events Subsequent to Year End 11
(i) Undisclosed Liabilities 3
(j) Legal Compliance 12
(k) Tax Matters 12
(l) Real Property 3
(m) Intellectual Property 3
(n) Tangible Personal Property 15
(o) Contracts 15
(p) Litigation 3
(q) Employees 3
(r) Employee Benefits 16
(s) Environment, Health, and Safety 16
(t) Third Party Consents 3
(u) Disclosure 3
4.Representations and Warranties of Buyer 3
(a) Organization of Buyer 17
(b) Authorization of Transaction 17
(c) Noncontravention 17
(d) Brokers' Fees 3
5. Pre-Closing Covenants 3
(a) General 3
(b) Notices and Consents 18
(c) Operation of Business 18
(d) Preservation of Business 18
(e) Full Access 18
(f) Notice of Development; Change in Disclosure Schedules 3
(g) Exclusivity 19
(h) Title Reports 19
(i) Surveys 3
(j) Press Releases and Public Announcements 3
6.Conditions to Obligation to Close 20
(a) Conditions to Obligation of Buyer 20
(b) Conditions to Obligation of Breland 21
7.Termination 22
(a) Termination of Agreement 22
(b) Effect of Termination 23
8. Post-Closing Covenants 23
(a) General 23
(b) Litigation Support 23
(c) Transition 3
(d) Confidentiality 24
(e) Access to Records 24
(f) Covenant Not to Compete 24
(g) Warranty Work on Recent Deliveries 25
(h) Marketing and Promotional Materials 25
(i) Use of Non-Transerred Assets 25
(j) Land Contracts 26
(k) Madison Employees 3
9.Remedies for Breaches of This Agreement 26
(a) Survival of Representations and Warranties 26
(b) Indemnification Provisions for Benefit of Buyer 26
(c) Indemnification Provisions for Benefit of Breland 27
(d) Matters Involving Third Parties 27
(e) Determination of Adverse Consequences 28
(f) Basket and Cap 28
(g) Insurance Coverage 28
(h) Contractor Indemnification 29
10. Miscellaneous 29
(a) No Third-Party Beneficiaries 29
(b) Entire Agreement 29
(c) Succession and Assignment 29
(d) Counterparts 29
(e) Headings 29
(f) Notices 29
(g) Governing Law 30
(h) Amendments and Waivers 30
(i) Severability 30
(j) Expenses 31
(k) Construction 31
(l) Incorporation of Exhibits and Disclosure Schedules 31
(m) Specific Performance 31
(n) Bulk Transfer Laws 32
(o) Dispute Resolution 32
Exhibits
A. Assumption of Liabilities by Buyer
B. Allocation of Purchase Price
C. Third Party Consents
D. Financial Statements
E. Opinion of Counsel for Breland
F. Century Land Company, LLC
G. Lot Option Agreements
H. Opinion of Counsel for Buyer
Disclosure Schedule
Schedule 1A - Land Under Development
Schedule 1B - Inventory of Lots and Houses in Various Stages of
Completion, Work in Process, Completed Homes, Model Homes
Schedule 2 - Tangible Personal Property
Schedule 3 - Intellectual Property
Schedule 4 - Leases
Schedule 5A - Land Contracts
Schedule 5B - Sales Contracts and Customer Deposits
Schedule 6 - Engineering and Environmental Studies
Schedule 7 - Contracts with Suppliers and Subcontractors
Schedule 8 - Plans, Permits and Budgets for Lots, Subdivisions,
Developments and Houses
Schedule 9 - Other Excluded Assets
Schedule 10 - Other Liabilities and Obligations Assumed
Schedule 11 - Exceptions to Representations and Warranties
Schedule 12 - Warranty Claims
Schedule 13 - Litigation
Schedule 14 - Employee Exceptions
Schedule 15 - Employee Agreements
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") entered into as of March
24, 1999, by and among WESTMINSTER HOMES OF ALABAMA, LLC, an Alabama limited
liability company ("WHA"), WESTMINSTER HOMES OF MISSISSIPPI, LLC, a Mississippi
limited liability company ("WHM"), WASHINGTON HOMES, INC., a Maryland
corporation ("WHI"), BRELAND HOMES, INC., an Alabama corporation ("BHI"), and
Louis W. Breland ("LWB"). WHA, WHM and WHI are herein referred to collectively
as "Buyer" and BHI, and LWB are herein referred to collectively as "Breland".
Buyer and Breland are referred to collectively as the "Parties" and individually
as a "Party". References to Breland or Buyer shall be construed as including
each of the Persons individually which constitute Breland or Buyer.
WHEREAS, BHI is an entity wholly owned by LWB, and are engaged in the
design, construction and sale of single family homes and the development of land
in connection therewith in Alabama; and
WHEREAS, WHA and WHM have been organized as wholly owned subsidiaries of
WHI for the purpose of entering the homebuilding business in Alabama and
Mississippi; and
WHEREAS, Breland wishes to sell its assets and Buyer wishes to purchase
certain assets owned by Breland; and
WHEREAS, LWB and WHI are joining in this Agreement for the purposes, among
other things, of providing post-closing indemnification for the representations,
warranties and covenants contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
made herein, and in consideration of the representations, warranties, and
covenants contained herein, the Parties agree as follows.
1. Definitions.
"Acquired Assets" means all right, title, and interest in and to the
following assets of Breland on the Closing Date: (a) real property (Schedule 1A
of the Disclosure Schedule sets forth a listing of land under development and
Schedule 1B sets forth a listing of the inventory of lots and houses in various
stages ofthe real property set forth on Schedules 1A and 1B of the Disclosure
Schedule (Schedule 1A sets forth a listing of land under development and
Schedule 1B sets forth a listing of the inventory of lots and completion, work
in process, completed homes and model homes as of the Effective Date) and any
Improvements, raw materials and supplies, manufactured and purchased parts in
connection therewith; (b) the tangible personal property (including office
furniture, fixtures and equipment, computer equipment, model home furniture and
fixtures, automobiles, trucks, construction and other equipment) including any
manufacturer's warranties in connection therewith, the major items of which as
of the Effective Date are listed on Schedule 2 of the Disclosure Schedule, (c)
the name "Breland Homes," the trade marks and trade names listed on Schedule 3
of the Disclosure Schedule, (d) leases, as listed on Schedule 4 of the
Disclosure Schedule, and rights thereunder, (e) the contracts and option
agreements for the purchase of lots or land in development, and deposits in
connection therewith (the "Land Contracts"), which Land Contracts as of the
Effective Date are listed as Schedule 5A and the contracts for the sale of
homes, whether completed or under construction, (the "Sales Contracts") and any
deposits in connection therewith whether held directly or in trust accounts (the
"Customer Deposits"), including all rights thereunder, (Schedule 5B of the
Disclosure Schedule sets forth a list of Sales Contracts along with the Customer
Deposit for each contract, loan status, and construction status as of the
Effective Date), (f) the engineering and environmental studies relating to real
property sold hereunder, as listed on Schedule 6 of the Disclosure Schedule, (g)
lists of and contracts with suppliers and subcontractors, including those listed
on Schedule 7 of the Disclosure Schedule, which are in effect on the Effective
Date, (h) architectural and other plans, permits and budgets for lots,
subdivisions, developments and houses for the real property listed in Schedule
1A and 1B, (i) to the extent reflected in the calculation of the Purchase Price,
all claims, deposits, prepayments, refunds, causes of action, causes in action,
rights of recovery, rights of setoff, and rights of recoupment (excluding any
such item relating to the payment of Taxes) relating to assets sold hereunder,
(j) all franchises, approvals, permits, licenses, orders, registrations,
certificates, and similar rights obtained from governments and governmental
agencies used in connection with any Acquired Asset, and (k) the books, records,
ledgers, files, electronic media storage, computer software, documents,
correspondence, customer lists, plats, architectural plans, drawings, and
specifications, creative materials, advertising, promotional and marketing
materials, studies, reports, and other printed or written materials in
connection with the Acquired Assets; (l) cash and cash equivalents (including
restricted cash and Customer Deposits)., (m) all rights of Breland under all
employee agreements between employees and Breland, Madison or BH as listedhouses
in various stages of completion, work in process, completed homes and model
homes as of the Effective Date) and any Improvements, raw materials and
supplies, manufactured and purchased parts in connection therewith; (b) the
tangible personal property (including office furniture, fixtures and equipment,
computer equipment, model home furniture and fixtures, automobiles, trucks,
construction and other equipment) including any manufacturer's warranties in
connection therewith, the major items of which as of the Effective Date are
listed on Schedule 2 of the Disclosure Schedule; (c) the name "Breland Homes,"
the trade marks, trade names and copyrighted material listed on Schedule 3 of
the Disclosure Schedule; (d) leases, as listed on Schedule 4 of the Disclosure
Schedule, and rights thereunder; (e) the contracts and option agreements for the
purchase of lots or land in development, and deposits in connection therewith
(the "Land Contracts"), which Land Contracts as of the Effective Date are listed
on Schedule 5A and the contracts for the sale of homes, whether completed or
under construction (the "Sales Contracts") including all rights thereunder,
(Schedule 5B of the Disclosure Schedule sets forth a list of Sales Contracts
along with the Customer Deposit for each contract, loan status, and construction
status as of the Effective Date); (f) all engineering and environmental studies
relating to real property sold hereunder, as listed on Schedule 6 of the
Disclosure Schedule; (g) lists of and contracts with suppliers and
subcontractors, including those listed on Schedule 7 of the Disclosure Schedule,
which are in effect on the Effective Date; (h) architectural and other plans,
permits and budgets for lots, subdivisions, developments and houses for the real
property listed in Schedule 1A and 1B; (i) to the extent reflected in the
calculation of the Purchase Price, all claims, deposits, prepayments, employee
receivables, escrows, refunds, causes of action, causes in action, rights of
recovery, rights of setoff, and rights of recoupment (excluding any such item
relating to the payment of Taxes) relating to assets sold or conveyed hereunder;
(j) to the extent transferable, all franchises, approvals, permits, licenses,
orders, registrations, certificates, and similar rights obtained from
governments and governmental agencies used in connection with any Acquired
Asset; (k) the books, records, ledgers, files, electronic media storage,
computer software, documents, correspondence, customer lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising, promotional and marketing materials, studies, reports, Intellectual
Property and other printed or written materials in connection with the Acquired
Assets; and (l) all rights of Breland under all employee agreements between
employees and Breland, Madison on Schedule 15 (the "Employment Agreements") and
(n) all equity ownership interest in Breland Realty Inc., an Alabama
corporation.or BHI as listed on Schedule 15 (the "Employment Agreements"). The
foregoing notwithstanding, the Acquired Assets shall not include the Excluded
Assets, as hereinafter defined.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
under the Securities Exchange Act of 1934.
"Assumed Liabilities" means liabilities of Breland as of the Closing Date
as follows: (a) liabilities and obligations of Breland as listed on Schedule 10
including accounts payable, construction debt, land acquisition and development
debt, (b) all obligations of Breland under the Sales Contracts (including
obligations to real estate brokers in connection therewith), and under the Land
Contracts (the Sales Contracts as of the Effective Date are listed on Schedule
5A and the Land Contracts as of the Effective Date are listed on Schedule 5B),
(c) obligations under leases (which as of the Effective Date are listed on
Schedule 4), (d) the obligation to perform warranty work for customers who
purchased homes from Breland prior to the Effective Date but only to the extent
set forth in 8(g) and the obligation to perform warranty work for customers who
purchased homes after the Effective Date, provided, however, that the Assumed
Liabilities shall not include (i) any Liability of Breland for income, transfer,
sales, use, and other Taxes whether or not arising in connection with the
consummation of the transactions contemplated hereby (including any income Taxes
arising because Breland is transferring the Acquired Assets), (ii) any Liability
of Breland for the unpaid Taxes of any Person, as a transferee or successor, by
contract, or otherwise, (iii) any obligation of Breland to indemnify any Person,
unless contained in a contract assumed, (iv) any Liability of Breland for costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby, (v) any Liability or obligation of Breland under this
Agreement, or (vi) any Liability or obligation to any current or former
employees of Breland to provide such persons with employment or in connection
with any Employee Benefit Plan.
"BHI" has the meaning set forth in the preface above.
"BHM" means Breland Homes of Mississippi, L.L.C. an Alabama limited
liability company wholly owned by LWB and LWB as custodian for his minor child.
"BP" means Breland Properties, Inc., an Alabama corporation.
"Breland" has the meaning set forth in the preface above.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in section 2(e) below.
"Closing Date" has the meaning set forth in section 2(e) below.
"Confidential Information" means any business or technical information used
exclusively by Breland and which has economic value to Breland because it has
been deliberately maintained as confidential by Breland. Confidential
Information shall not include general business or technical information of
Breland, even ifto the extent such information hasnot become generally available
to the public.
"Customer Deposits" means any deposit held by Breland in connection with a
Sales Contract whether held directly or in a trust account.
"Disclosure Schedule" means the compilation of Schedules described in this
Agreement, which shall be certified by Breland to be true and correct as of the
date of execution of this Agreement and at Closing.
"Effective Date" means December 31, 1998.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), (d) Employee Welfare Benefit Plan or (e) any other material
fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws and regulations
relating to (i) emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or (ii)
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes, or (iii) laws and
regulations relating to the development of land, such as, storm water
management, erosion and sediment control, and use of wetlands.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means (i) assets listed on Schedule 9 including notes
receivable from affiliates and mortgage and note receivable and a small aircraft
owned by Breland, (ii) cash and cash equivalents (including restricted cash and
Customer Deposits), (iii) the corporate stock, membership interests and
organizational documents of BHI, its qualification to conduct business as a
foreign corporation, taxpayer and other identification numbers, seals, minute
books, stock transfer books, blank stock certificates, tax returns and other
documents relating to the organization, maintenance, and existence of BHI, (iv)
any of the rights of Breland under this Agreement, and (v) any rights in or
assets of the Employee Benefit Plans of Breland.
Breland, (vi) any licenses or permits which are not transferable, and (vii)
Breland's insurance policies, but not including title insurance to be provided
to Buyer at Closing.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Final Disclosure Schedule" has the meaning set forth in section 5(f)(iii)
and which shall be certified by Breland to be true and correct as of the Closing
Date.
"Final Purchase Price" has the meaning set forth in section 2(d)(iv).
"Financial Statements" has the meaning set forth in section 3(g) below.
"Improvements" means individually and collectively buildings, improvements,
structures fixtures, raw materials and supplies and other personal property
owned by Breland and used in connection with the real property sold hereunder.
"Indemnified Party" has the meaning set forth in section 9(d) herein.
"Indemnifying Party" has the meaning set forth in section 9(d) herein.
"Intellectual Property" means the following developed byowned or licensed
to and used by Breland: (a) all trademarks, service marks, trade dress, logos,
trade names, and corporate or company names of Breland, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (b) all copyrightable works of Breland, all
copyrights of Breland, and all applications, registrations, and renewals of
Breland in connection therewith, (c) all trade secrets and confidential business
information of Breland (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f)(d) all computer software of Breland (including data and related
documentation), and (g)(e) all copies and tangible embodiments thereof (in
whatever form or medium).
"Knowledge" or "Breland's Knowledge" means the actual knowledge of LWB or
his knowledge of facts which upon reasonable inquiry would lead to actual
knowledge.
"Land Contracts" has the meaning set forth in this section 1 under the
definition of "Acquired Assets".
"Liability" means any liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.
"LWB" has the meaning set forth in the preface above.
"Madison" means Madison Homes Holding Company, L.L.C., an Alabama limited
liability company, and its subsidiaries, all wholly ownedof which are controlled
by LWB and its subsidiaries.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Operational Adjustment" means the net result obtained by adjusting the
amount of all"Net Worth" means the amount determined by deducting the book value
of Assumed Liabilities and Acquired Assets to reflect differences between the
Effective Date and the Closing Date.from the book value of Acquired Assets.
"Ordinary Course of Business" means the ordinary course of business for
Breland consistent with past custom and practice (including with respect to
quantity and frequency).
"Other Agreements" means (a)Agreement" means the Asset Purchase Agreement
of even date with this Agreement between Buyer, BHM, BPand LWB and (b) the
Agreement of even date herewith between Buyer and LWB.
"Parties or Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Permitted Exceptions" means (a) mechanics', carriers', workers',
repairers' and other similar liens arising or incurred in the Ordinary Course of
Business relating to obligations as to which there is no default on the part of
Breland or its subcontractors; (b) all liens for Taxes both general and special,
and other governmental charges which are not due and payable as of the Closing;
(c) all easements, rights-of-way, covenants, conditions, restrictions,
reservations, licenses, agreements and other matters of record on the Effective
Date; (d) all electric power, telephone, gas, sanitary sewer, storm sewer, water
and other utility lines, pipelines, service lines and facilities of any nature
now located on, over or under the Acquired Assets, and all licenses, easements,
rights-of-way and other agreements relating thereto but, with respect to the
Acquired Assets, only to the extent that such matters do not adversely affect,
except in insubstantial ways, Buyer's ability to use the Acquired Assets in its
business, for the purposes for which they were intended to be used; (e) all
exiting public and private roads and streets (whether dedicated or undedicated)
and all railroad lines and rights-of-way affecting the Acquired Assets.
"Purchase Price" has the meaning set forth in section 2(d) below.
"Right of First Refusal" means the right of Buyer (a) to be offered
building lots prior to their being offered to any other Person and (b) the right
for a 30 day period after written notice to be offered lots on the same terms
(including financing) as would be available pursuant to a bonafide offer from an
independent third party. These rights shall not apply to the offer and sale of
individual residentialindividual lots to customers.
"Sales Contracts" was the meaning set forth in this section 1 under the
definition of "Acquired Assets".
"Security Interest" means any mortgage, pledge, deed of trust, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, and (b) liens for Taxes not yet due and
payable or for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings.
"Subsidiary" means any corporation, limited liability company or
partnership with respect to which a specified Person (or a Subsidiary thereof)
owns a majority of the common stock or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors.
"Survey" has the meaning set forth in section 7(i)5(i) below.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Title Reports" has the meaning set forth in section 5(h).
"Third Party Claim" has the meaning set forth in section 9(d) herein.
"WHA" has the meaning set forth in the preface above.
"WHI" has the meaning set forth in the preface above.
"WHM" has the meaning set forth in the preface above.
2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from Breland, and Breland
agrees to sell, transfer, convey, and deliver to Buyer, all of the Acquired
Assets at the Closing for the consideration specified below in this 2.
section 2. Buyer shall specify prior to Closing, which assets will be purchased
by each of the entities constituting the Buyer.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, Buyer agrees to assume and become responsible for all of the
Assumed Liabilities at the Closing. Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
Breland not included within the definition of Assumed Liabilities. At the
Closing, Breland will be released from any further liability on the Assumed
Liabilities, except as otherwise provided herein.
(c) Contracts. On and subject to the terms and conditions of this
Agreement, the Parties agree to enter into, or , to the extent within the power
of the Parties, cause the appropriate entities to enter into, the Lot Option
Agreements as listed and outlined on Exhibit G at the Closing in the form agreed
to by the Parties and the appropriate entities, as applicable.
(d) Purchase Price. (i) Buyer agrees to pay to Breland a net purchase
price (the "Purchase Price") which shall reflect the assumption of the Assumed
Liabilities but which shall be an amount which is calculated as[$2,200,000] plus
the difference between (A) the depreciated book value of the Acquired Assets as
of the Closing Date, and (B) the book value of the Assumed Liabilities as of the
Closingthe Net Worth of BHI as of the Effective Date. The Purchase Price will
be adjusted to the Closing Date as set forth in section 2(d)(iv) below to
determine the final Purchase Price.
(ii) An estimate of the Purchase Price (the "Estimated Purchase
Price") has been determined to be $3,884,745$577,441 based upon the unaudited
books and records of BHI as of December 31, 1998. This Estimated Purchase Price
will be adjusted for any changes resulting from an audit by independent public
accountants of the books and records of Breland, which will be completed prior
to Closing.
Closing. (iii) Prior to or at Closing, Breland will inform Buyer
of its best good faith estimate of the Operational Adjustment. On the Closing
Date, Buyer will transfer by wire in immediately available funds for the account
of Breland80%If, as a result of the changes resulting from such audit the
combined Purchase Price under this and the otherOther Agreement changes by more
than $500,000 from the Estimated Purchase Price, plus the estimated Operational
Adjustment if it isthen either Buyer or Breland may cancel this Agreement prior
to Closing by notice to the other a positive number or less the estimated
Operational Adjustment if it is a negative number.Party.
(iii) On the Closing Date, Buyer will transfer by wire in
immediately available funds for the account of Breland 90% of the Estimated
Purchase Price.
(iv) On the Closing Date, Breland will be required to have a Net Worth
equal to its Net Worth as of the Effective Date plus the amount of net income
after taxes earned by BHI subsequent to December 31, 1998. To the extent Net
Worth at Closing is determined to be below that amount,the amount determined in
accordance with the previous sentence, the Purchase Price will be adjusted lower
in an amount equal to the amount of such shortfall of Net Worth which will
determine the finalFinal Purchase Price. In order to determine the Net Worth of
BHI at Closing and the Final Purchase Price, following the Closing. Closing,
_____________________,McGriff, Dowdy and Associates, the independent public
accountants for Breland, will certify to Buyer its determination of the final
Purchase Price and Operational Adjustment based upon financial statementsNet
Worth of BHI as of theEffective Date, which have been certified by independent
public accountants,Closing, and the Vice President of Finance of WHI will
certify to Breland itsfinal determination of such Net the Purchase Price and
Operational Adjustment which shall be madeWorth in consultation with Deloitte &
Touche. To the extent there are differences, they will be promptly submitted
and resolved by Ernst & Young, an independent "Big Five" public accounting firm
not affiliated with any Party.Young whose fees shall be split evenly between the
Parties.
(e) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Breland in Madison,
Alabama, commencing at 9:00 a.m. local time on the later of April 13, 1999 or
the fifth business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as the Parties may mutually
determine (the "Closing Date"); provided, however, that the Closing Date shall
not be later than May 15, 1999.
(f) Deliveries at the Closing. At the Closing, (i) Breland will deliver
to Buyer the various certificates, instruments, and documents specified in
section 6(a) herein; (ii) Buyer will deliver to Breland the various
certificates, instruments, and documents specified in section 6(b) herein; (iii)
Breland will deliver to Buyer and record among land and other records, as
necessary, good and sufficient general warranty deeds, assignments, certificates
of title and bills of sale so as to transfer or assign all of Breland's right,
title toand interest in the Acquired Assets to Buyer and such further
instruments of sale, transfer, conveyance, and assignment as Buyer and its
counsel may reasonably request, all in such form as they shall reasonably
approve and all at the sole cost and expense of Breland; (iv) Buyer will execute
and deliver to Breland an assumption in the form attached hereto as Exhibit A
and such other instruments of assumption as Breland and its counsel may
reasonably request; (v) Buyer will deliver to Breland by wire transfer in
immediately available funds 90% of the Estimated Purchase Price; and (vi) Buyer
shall receive possession and control of all other Acquired Assets.
(g) Prorations. At Closing, real property taxes, personal property taxes,
rent and utilities will be prorated between Buyer and Breland as of the
ClosingEffective Date in the manner customarily used in real estate transactions
in the jurisdictions where the properties are located.
(h) Second Closing. A second closing shall occur at such time as the
finalFinal Purchase Price has been determined. Buyer shall deliver to Breland
by wire transfer in immediately available funds the balance of the Final
Purchase Price plus interest at the rate of 6% per annum on any amount owing
over 30 days from the Closing Date commencing 30 days following the Closing
Date. If the Final Purchase Price is determined to be lower than the funds
previously remitted to Breland pursuant to section 2(d)(iii), Breland will
refund the difference to Buyer at the secondClosing.
InClosing. In the event pursuant to 2(c)section 2(d) there are
differences between Breland and Buyer'sfinal determination of the Final Purchase
Price, Buyer will pay (by wire transfer of immediately available funds) all
undisputed amounts, and only amounts in dispute will be submitted to Ernst &
Young for determination.
(i) Allocation. The consideration for the Acquired Assets shall be
allocated by the Parties pursuant to Exhibit B attached hereto. Such allocation
and the form of the transaction as set forth in this Agreement and the other
documents and agreements referred to in this Agreement shall be used for
preparation and filing of Internal Revenue Service Form 8594 with respect to the
transaction contemplated hereby, and no Party hereto shall take or assert any
position inconsistent therewith. Prior to the Closing, the Parties shall
cooperate in connection with the preparation, execution and filing with the
Internal Revenue Service of all necessary information returns required by
Section 1060 of the Internal Revenue Code of 1986, as amended, relating to the
allocation of the consideration for the Acquired Assets.
(j) Employees. At the time of Closing, Buyer may, but shall be under no
obligation to, provide employment to employees of Breland and establish
arrangements with independent contractors who serve as sales representatives.
Buyer shall have no obligation to employees or former employees of Breland and
shall not adopt or become liable for any obligation under any Employee Benefit
Plan of Breland. At the time of Closing, Breland shall and LWB shall cause BHI
and Madison to assign to Buyer all interest in the Employee Agreements listed on
Schedule 15.
(k) Land Development Joint Venture.Limited Liability Company.Company For
a period of five (5) years following the Closing, LWB shall conduct all land
development activities (with only specified exceptions) for residential building
lots through a joint venture to be formed with WHI,limited liability company,
50% owned by LWB and 50% owned by WHI or its Affiliate, tentatively named
Century Land Company, L.L.C. ("Century"), which shall be organized and operated
in accordance with Exhibit H.F.
(l) Right of First Refusal on Future Developments.Developments For a
period of five (5) years following the Closing or within a reasonable time
thereafter, Buyer is hereby granted a Right of First Refusal to purchase all
residential building lots developed by LWB and his affiliates.Affiliates.
(m) Name Change. (m) Name Change BHI shall at the time of Closing or
within a reasonable time thereafter, change its name to no longer use the name
"Breland" or a similar name.
(n) Lease of Office Space.Space At the time of Closing, Buyer shall have
the right to lease a portion of office space sufficient for the conduct of its
business from Breland on a month to monthnet net basis at the rate of $_____ten
dollars ($10) per square foot per year in the building located at 103 Mountain
Brook Boulevard, Madison Alabama.
Madison, Alabama. Such lease shall be cancelable on 30 days advance notice.
(o) Intellectual Property At the time of Closing, LWB shall cause Madison
to license on an exclusive or nonexclusive basis as indicated on Schedule 3
certain Intellectual Property owned by Madison and BHI and Madison shall cancel
the Licensing Agreement between them for use of such property.
3. Representations and Warranties of Breland. BHI and LWB jointly and
severally represent and warrant to Buyer that the statements contained in this
section 3 are true and correct as of the date of this Agreement and will be true
and correct as of the Closing Date as though then made and as though the Closing
Date were substituted for the Effective Date throughout this section 3, except
as set forth in Schedule 11 to the Disclosure Schedule accompanying this
Agreement.
(a) Organization of Breland. BHI is a corporation, duly organized,
validly existing, and in good standing under the laws of Alabama. BHI is wholly
- -owned by LWB and no other person owns or holds any equity interest in or
rights to acquire any equity interest in BHI. LWB is an individual,
resident in the state of Alabama.
(b) Authorization of Transaction. BHI and LWB have full power and
authority to execute and deliver this Agreement, and to perform their respective
obligations hereunder and to own or lease their respective properties as now
owned or leased and conduct their businesses as now being conducted. Without
limiting the generality of the foregoing, the board of directors and
stockholders of BHI have approved and all other necessary corporate or company
action has been taken to authorize the execution, delivery, and performance of
this Agreement by BHI. This Agreement constitutes the legal, valid and binding
obligation of BHI and LWB, enforceable in accordance with its terms and
conditions except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and by judicial application of general equitable principles.
(c) Noncontravention. Subject to obtaining the consents listed on Exhibit
C, and subject to any restriction on the transfer of licenses and permits,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby including the assignments, transfers and
assumptions, referred to in section 2 above, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
BHI or LWB is subject or any provision of the charter or bylaws of BHI or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which BHI or LWB is a party or by which any
of them is bound or to which any of their assets (including the Acquired Assets)
is subject or result in the imposition of any Security Interest upon any of
their assets (including the Acquired Assets). Neither BHI nor LWB is required
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate in any material respect the transactions contemplated by
this Agreement (including the assignments, transfer and assumptions referred to
in section 2 above) except for filings among the various land records to
transfer the real property sold hereunder, and transfer of the titles of
vehicles sold hereunder, all as contemplated by this Agreement.
(d) Brokers' Fees. Breland has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Buyer could become liable or obligated.
The foregoing is not intended to cover obligations to real estate brokers under
the Sales Contracts, which obligations shall be assumed by Buyer.
(e) Title to Assets. Subject to the Permitted Exceptions and any
restriction on the transfer of licenses and permits, and except as disclosed in
the Title Reports, Breland has good and marketable title to, valid license to
use, or a valid leasehold interest in, the properties and assets that constitute
the Acquired Assets, free and clear of all Security Interests or restrictions on
transfer.
(f) Subsidiaries. BHI has no Subsidiaries. BrelandBHI does not own or
control directly or indirectly or have any direct or indirect capital stock
ownership or equity participation in any corporation, partnership, trust, joint
venture or other business association.
(g) Financial Statements. Attached hereto as Exhibit D are the unaudited
balance sheets of BHI, BP and BHM on a combined and combining basis at December
31, 1998 (collectively the "Financial Statements"): auditedwhich have been
prepared in accordance with generally accepted accounting principles, and as
adjusted, to exclude assets which are not Acquired Assets and to exclude
liabilities which are not Assumed Liabilities. The Financial StatementsPrior to
the Closing, Breland will provide financial statements for BHI, BP and BHM in a
combined and combining basis and which shall include a balance sheet, statement
of income, changes in stockholders' equity and cash flow at and for the year
ended December 31, 1998 (including the notes thereto) which shall be audited and
certified by an independent public accountantDeloitte & Touche LLP to be correct
and complete in all material respects and present fairly the financial condition
of BHI, BP and BHM as of such dates and the results of operations of BHI, BP and
BHM for such periods, and have been prepared in accordance with generally
accepted accounting principles and are consistent with the books and records of
BHI, Breland.
BP and BHM and as adjusted in the manner set forth in the first sentence of this
paragraph (the "Financial Statements"). The audited financial statements as
provided by Breland shall replace the unaudited financial statements for all
purposes of this Agreement including the calculation of the Purchase Price in
section 2(d)(ii).
(h) Events Subsequent tofiscal Year End. Since December 31, 1998, there
has not been any material adverse change in the business, financial condition,
operations, results of operations, or to Breland's Knowledge the future
prospects of BHI. Without limiting the generality of the foregoing, since that
date:
(i) Breland, has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;
(ii) No party has, in any material way, accelerated, terminated,
modified, or cancelled any material agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) to which BHI is a
party or by which it is bound except for changes, modifications and
cancellations of Sales Contracts and other agreements in the Ordinary Course of
Business;
(iii) BHI has not imposed or permitted to exist any Security
Interest upon any of its assets, tangible or intangible;
(iv) BHI has not experienced any material damage, destruction, or
loss (whether or not covered by insurance) to its property; and
(v) There has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary Course of
Business involving Breland.
(vi) PaidBHI has not paid or declared any dividend, redeemed any
capital stock or membership interest, or made any distribution to its
shareholders or holders of any membership interest.
(vii) EngagedBHI has not engaged in any transaction with any
Affiliate of Breland.
(viii) BHI has not paid any bonus or made similar compensation
payments which were not accrued for prior to the Effective Date, or adjusted any
salary to a rate greater than that paid prior to the Effective Date.
(i) Undisclosed Liabilities. Breland does not have any Liability (and to
its Knowledge there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
Breland giving rise to any Liability) which would affect the Acquired Assets,
except for (i) Liabilities set forth in the Financial Statements (including any
notes thereto) and (ii) Liabilities which have arisen after the Effective Date
in the Ordinary Course of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement, or violation of law) and except on Schedule 11.
(j) Legal Compliance. Breland, to its Knowledge,, has complied in all
material respects with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, and local governments (and all agencies thereof), and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against it alleging any failure so
to comply which would materially and adversely affect Buyer, Breland, the
Acquired Assets or the Assumed Liabilities.
(k) Tax Matters. Breland has filed with the appropriate governmental
agencies all required Tax Returns and paid all amounts required to have been
shown thereon. There is no Tax, which has not or will not be paid by Breland or
its Affiliates whichas a result of, could give rise to any Liability which would
affect the Acquired Assets or which could otherwise be imposed upon Buyer.
(l) Real Property.
(i) Schedules 1A and 1B of the Disclosure Schedule (and as updated by
the Final Disclosure Schedule) lists and describes briefly all real property and
Improvements that Breland owns.being conveyed to Buyer. With respect to each
parcel of owned real property which constitutes part of the Acquired Assets,
except as specifically set forth on the Disclosure Schedule or disclosed in the
Title Reports:
(A) Breland has good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement, covenant, or other
restriction, except for the Permitted Exceptions and except for security
interestsSecurity Interests relating to debt which will be paid off at Closing
or is an Assumed Liability;
(B) there are no pending, or to its Knowledge, threatened
condemnation proceedings, lawsuits, or administrative actions relating to the
property or other matters adversely affecting the current use, occupancy, or
value thereof;
(C) the legal description for the parcel contained in the deed
delivered at Closing and Title Report therefor describes such parcel fully and
adequately, the buildings and Improvements thereon are located within the
boundary lines of the described parcels of land, are not in violation of any
applicable setback requirements, zoning laws, and ordinancesrequirement, zoning
law, or ordinance and none of the properties or buildings or improvements
thereon are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications, and do not encroach on any easement
which may burden the land, and the land does not serve any adjoining property
for any purpose inconsistent with the use of the land, and the property is not
located within any flood plain or subject to any similar type restriction for
which any permits or licenses necessary to the use thereof have not been
obtained;
(D) Breland has received or applied for all material approvals
of governmental authorities including such licenses and permits as are required
at the stage of development of the particular parcel and such parcel has been
operated and maintained in accordance with applicable laws, rules, and
regulations;
(E) there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of real property;
(F) there are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or interest
therein;
(G) there are no parties, other than Breland, in possession of
the parcel of real property;
(H) all subdivisions or communities under development are or can
be supplied with utilities including, electricity, water, telephone, sanitary
sewer or septic tank (in conformity with Health Department regulations), and
storm sewer, and other services necessary for the operation of such communities,
including, to the extent generally available in such area, gas, cable
television, all of which services are adequate in accordance with all applicable
laws, ordinances, rules, and regulations and are provided via public roads or
via permanent, irrevocable, appurtenant easements benefiting the parcel of real
property;
(I) each parcel of developed real property abuts on and has
direct vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefiting the parcel of real
property, and access to the property is provided by paved public right-of-way;
(J) all Improvements have been constructed in a workmanlike
fashion, capable of passing inspection by appropriate authorities and with
respect to completed homes, capable of being warranted to home purchasers under
the homebuilding warranties offered by Breland;
(K) all material obligations of Breland to homeowner associations
required by law or by covenant have been complied with;
(L) all payment and performance bonds or guaranties issued at the
request of any party including but not limited to any state, federal or
municipal authority for purposes of bonding any on-site or off-site work in
connection with the construction of residential structures have been obtained;
and
(M) to Breland's Knowledge all lots are buildable in the Ordinary
Course of Business, without extraordinary cost.
(N) no moritoriammoratorium is in effect and there has been no
loss of zoning or imposition of impact fees with respect to any land parcel.
(ii) Schedule 4 of the Disclosure Schedule lists and describes briefly
all leases with Breland. Breland has made available to Buyer correct and
complete copies of such leases as amended to the date. With respect to each
lease listed:
(A) the lease is legal, valid, binding, enforceable, and in full
force and effect and, subject to obtaining any required consents to assignment,
will continue to be so following assignment and transfer to Buyer;
(B) Breland is not and to its Knowledge no other party is in
breach or default, and, to its Knowledge, no event has occurred which, with
notice or lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration under such lease;
(C) Breland has not and to its Knowledge no other party to the
ease has repudiated any provision thereof;
(D) to Breland's Knowledge there are no disputes, oral
agreements, or forbearance programs in effect as to such lease;
(E) Breland has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold; and
(F) to Breland's Knowledge, all facilities leased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules, and
regulations and all facilities leased thereunder are supplied with utilities and
other services necessary for the operation of said facilities.
(m) Intellectual Property.
(i) Breland or Madison owns or has a valid license to use all
Intellectual Property listed on Schedule 3 which constitutes all Intellectual
Property used in the operation of the business of BHI as presently conducted.
(ii) With respect to each item of Intellectual Property listed on
Schedule 3 of the Disclosure Schedule:
(A) Breland or Madison possesses all right, title, and interest
in andor has a valid license to use the item, free and clear of any Security
Interest, license, or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or to Breland's Knowledge is threatened
which challenges the legality, validity, enforceability, use, or ownership of
the item; and
(D) Breland has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other conflict with
respect to the item.
(n) Tangible Personal Property. Schedule 2 of the Disclosure Schedule
lists as of the Effective Date the major items of office furniture, fixtures and
equipment, computer equipment, model home furniture and fixtures, automobiles,
trucks, construction and other equipment used in the conduct of the business of
BHI as presently conducted. Each item of personal property listed is conveyed
to Buyer in reasonably good operating"as is" condition(subject to normal wear
and tear),.
(o) Contracts. Schedules 5A, 5B, 7 and 15 of the Disclosure Schedule
lists and as updated by the Final Disclosure Schedule, will list the contracts
and other agreements to which Breland is a party and which will be assumed by
Buyer. Other than as listed in such schedules there are no agreements necessary
or desirable for the operation of BHI which are not being assigned to and
assumed by Buyer. Breland has made available to Buyer a correct and complete
copy of each Land Contract and Sales Contract and a written summary setting
forth the terms and conditions of each oral agreement referred to in Schedules
5A and 5B of the Disclosure Schedule. With respect to each Land Contract and
Sales Contract which is an Acquired Asset: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect; (B) subject to obtaining any
required consents to assignment as listed on Exhibit C, the agreement will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in section 2
above) and is fully assignable by Breland to Buyer; (C) no party is in material
breach or default, and no event has occurred which with notice or lapse of time
would constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreement; (D) no party has repudiated
any provision of the agreement and (E) there has been no moritoriam,moratorium,
loss of zoning or imposition of impact fees with respect to any parcel which is
subject of a Land Contract.
(p) Litigation. Schedule 13 sets forth each instance in which Breland
(i) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (ii) is a party or, is to its Knowledge threatened to be made a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. None of the
actions, suits, proceedings, hearings, and investigations described could result
in any material adverse change in the business, financial condition, operations,
results of operations, or, to its Knowledge, future prospects of Breland.
Breland has no reason to believe that any such action, suit, proceeding,
hearing, or investigation may be brought or threatened against Buyer.
(q) Employees. Other than as set forth on Schedule 14, to its Knowledge
no executive, key employee, or group of employees has any plans to terminate
employment with BHI and no sales representative who is an independent contractor
plans to terminate its relationship with BP or BHM. Breland is not a party to
or bound by any collective bargaining agreement, has not experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. Breland has not committed any unfair labor practice. To
Breland's Knowledge, no organizational efforts are presently being made or
threatened by or on behalf of any labor union with respect to employees of
Breland. Schedule 15 of the Disclosure Schedule lists all employees of BHI and
all sales representatives for BHI and specifies all who have employment
contracts with BHI, Breland and/or Madison. Breland has obtained the assignment
by BHI and Madison of all rights under the employment contracts to Buyer as
listed on Schedule 15.
(r) Employee Benefits.
Breland has furnished to Buyer copies of each Employee Benefit Plan
that Breland maintains or to which Breland contributes or to which its employees
are subject.
(s) Environment, Health, and Safety.
(i) To its Knowledge, Breland has complied in all material respects
with all Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against it alleging any failure so to comply.
Without limiting the generality of the preceding sentence, Breland to its
Knowledge, has obtained and been in material compliance with all of the terms
and conditions of all permits, licenses, and other authorizations which are
required under, and has materially complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all Environmental, Health, and
Safety Laws.
(ii) To its Knowledge, Breland hasno Liability and has not
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could form the basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against Breland
giving rise to any Liability for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to any employee
or other individual, or for any reason under any Environmental, Health, and
Safety Law.
Law and to its Knowledge has no Liability in connection therewith.
(t) Third Party Consents. Exhibit C sets forth a list of all consents
necessary for the assignment and transfer to Buyer of the Acquired Assets at
Closing.
(u) Disclosure. The representations and warranties contained in this 3
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this section 3 not misleading.
4. Representations and Warranties of Buyer. Buyer represents and warrants
to Breland that the statements contained in this 4 are true and correct in all
material respects as of the date of this Agreement and will be true and correct
in all material respects as of the Closing Date (as though then made and as
though the Closing Date were substituted for the date of this Agreement
throughout this section 4).
(a) Organization of Buyer. WHA and WHM are limited liability companies
and WHI is a corporation duly organized, validly existing, and in good standing
under the laws of Alabama, Mississippi and Maryland, respectively.
(b) Authorization of Transaction. Buyer and WHI have full company or
corporate power and authority to execute and deliver this Agreement and to
perform their respective obligations hereunder. Without limiting the generality
of the foregoing, the members or board of directors of WHA, WHM and WHI have
approved and all other necessary corporate or company action has been taken to
authorize the execution, delivery and performance of this Agreement by WHA, WHM
and WHI. This Agreement constitutes the legal, valid and binding obligation of
WHA, WHM and WHI, enforceable in accordance with its terms and conditions,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally or by the
judicial application of general equitable principles.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
including the assignments and assumptions referred to in section 2 above, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of
their charters, bylaws or organizational documents, or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which Buyer is a party or by which any of WHA, WHM or
WHI is bound or to which any of their assets is subject. Buyer does not need to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in section 2 above).
(d) Brokers' Fees. Buyer has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.payable to Robert Berma The foregoing is not
intended to cover obligations to real estate brokers under the Sales Contracts.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the Closing conditions set forth in
section 6 herein).
(b) Notices and Consents. Each of the Parties will give any notices to,
make any filings with, and use its best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in section 3(c) and section 4(c) above and will use
its best efforts to obtain any necessary consent as listed in Exhibit C to the
assignment of any contracts, agreements, leases, licenses, permits, bonding and
authorizations.
(c) Operation of Business. Prior to Closing, Breland will not engage in
any practice, take any action, or enter into any transaction outside the
Ordinary Course of Business. Without limiting the generality of the foregoing,
Breland will not (i) undertake or enter into any material transaction without
the prior written approval of Buyer or (ii) otherwise engage in any practice,
take any action, or enter into any transaction which would result in a
distribution or transfer of a substantial portion of the assets of Breland
provided, however, that Breland may engage in the normal sale of homes and
purchases of materials and supplies without approval by Buyer.
(d) Preservation of Business. Breland will use its best efforts to keep
its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
developers, lessors, subcontractors, suppliers, customers, and employees.
(e) Full Access. Breland will permit representatives of Buyer to have
full access at all reasonable times and upon reasonable advance notice, and in a
manner so as not to interfere with the normal business operations of Breland, to
all premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to Breland and its business.
(f) Notice of Development; Change in Disclosure Schedules.
(i) Each Party will give the other Parties prompt written notice of
any material adverse development which could cause a breach of any of the
warranties and representations of the disclosing Party. In the event such
disclosure is reasonably deemed by the Party to whom the disclosure is made to
materially and adversely affect the transaction contemplated by this Agreement,
such Party may terminate this Agreement on written notice.
(ii) In the event a Party knows or has reason to believe that a
representation or warranty made by another Party is incorrect or untrue, such
Party shall so notify the other Parties in writing. A Party shall have no claim
against any other Party for breach of this Agreement (including any
representation or warranty), including indemnification, where such claim is
based on a representation or warranty of a Party which the claiming Party knew
was incorrect or untrue and did not so notify the Party against whom the claim
is made.
(iii) Two business days prior to Closing Breland shall deliver to
Buyer a Final Disclosure Schedule updating the Disclosure Schedule of Breland
attached hereto as of the Closing Date. The Final Disclosure Schedule may
involve updating of Schedules 1A, 1B, 5A, 5B, 7, 10, 11, 12 and 13 only for
matters occurring subsequent to the Effective Date. Such updated Disclosure
Schedule shall be substituted for the Disclosure Schedule at the date of this
Agreement for all purposes under this Agreement; provided, however, in the event
such Final Disclosure Schedule indicates matters which are materially and
adversely different than the matters in the original Disclosure Schedule, Buyer
may terminate the Agreement and in the event of such termination, the Parties
shall have no further obligation or liability to one another. In the event the
Final Disclosure Schedule reveals material changes with respect to any asset,
Buyer may elect to have such asset and any related liability excluded from being
an Acquired Asset or an Assumed Liability, provided, however, that if Buyer
elects to exclude any asset, the covenant not to compete set forth in section
8(f) shall not apply to activities with respect to such asset.
(g) Exclusivity. Breland will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of any substantial portion of the assets of Breland (including any
acquisition structured as a merger, consolidation, or share exchange) or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek the foregoing.
Breland will notify Buyer immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing and will furnish Buyer
with copies of any written material in connection therewith.
(h) Title Reports. Breland will obtain title insurance commitments or
binders (the "Title Reports"), at its sole expense, with respect to each parcel
of real estate that constitutes part of the Acquired Assets, on a policy form
reasonably acceptable to Buyer, issued by a title insurer satisfactory to Buyer
in an amount equal to the depreciated book value, which could insure title to
such real property to be in Buyer as of the Closing, subject only to exceptions
which are satisfactory to Buyer and which could be issued without survey
exceptions.
(i) Surveys. With respect to each parcel of real property as to which a
Title Report is to be procured pursuant to section 5(h) above (except where
platted),and which has not been platted, Breland will procure, at its sole
expense, in preparation for the Closing a current survey of the real property
certified to Buyer, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey shall not
disclose any survey defect or encroachment from or onto the real property which
has not been cured or insured over prior to the Closing.
(j) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Parties; provided, however, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) The representations and warranties set forth in section 3 above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) Breland shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) Breland shall have procured all of the third party consents
specified in Exhibit C, all of the Title Reports specified in section 5(h) above
and a title insurance policy in connection therewith shall be issued to Buyer,
and all of the Surveys specified in section 5(i) above;
(iv) No action, suit, or proceeding shall be pending or to Breland's
Knowledge threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of Buyer to own, license
or lease the Acquired Assets or, to operate the former business of Breland (and
no such injunction, judgment, order, decree, ruling, or charge shall be in
effect); Breland shall have delivered to Buyer a certificate to the effect that
each of the conditions specified above in section 6(a)(i)-(iv) has been
satisfied in all respects;
(v) All applicable waiting periods (and any extensions thereof)
under HSR shall have expired or otherwise been terminated, no "second request"
for information under HSR shall have been received and Breland and Buyer shall
have received all other authorizations, consents, and approvals of governments
and governmental agencies referred to in section 3(c) and section 4(c) above;
(vi) Buyer shall have received from counsel to Breland an opinion
in form and substance as set forth in Exhibit E attached hereto, addressed to
Buyer, and dated as of the Closing Date;
(vii) Buyer shall have received audited balance sheet and statement
of income, changes in stockholders' equity and cash flow at and for the year
ended December 31, 1998 for BHI, BHM and BP on a combined basis, meeting the
requirements of Regulation S-X of the Securities and Exchange Commission all as
audited and certified by independent certified public accountants,Deloitte &
Touche LLP, and such financial statements shall not differ materially and
adversely from the Financial Statements for such period attached to this
Agreement as Exhibit D;
(viii) All actions to be taken by Breland in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby (including but not limited to certified resolutions
approving the transaction, certificates of good standing, and certified
organizational documents) will be reasonably satisfactory in form and substance
to Buyer and its counsel; and
(ix) Buyer shall have received an affidavit from Breland that it
is not a "foreign person" for withholding purposes under Sec. 1445 of the
Internal Revenue Code of 1986, as amended. Buyer may waive any condition
specified in this section 6(a) if it executes a writing so stating at or prior
to the Closing.
(x) WHI and LWB shall have entered into the organizational and
operating agreements for the land development limited liability company as
outlined on Exhibit F, and Buyer shall have entered into the Lot Option
Agreements with such company as listed on Exhibit G.
(b) Conditions to Obligation of Breland. The obligation of Breland to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) The representations and warranties set forth in section 4 above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(iii) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(iv) Buyer shall have delivered to Breland a certificate to the
effect that each of the conditions specified above in section 6(b)(i)-(iii) is
satisfied in all respects;
(v) All applicable waiting periods (and any extensions thereof)
under HSR shall have expired or otherwise been terminated and no second request
for information under HSR shall have been received and Breland and Buyer shall
have received all other authorizations, consents, and approvals of governments
and governmental agencies referred to in section 3(c) and section 4(c) above;
(vi) All actions to be taken by Buyer in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby (including but not limited to certified resolutions
approving the transaction, certificates of good standing, and certified
organizational documents) will be reasonably satisfactory in form and substance
to Breland. Breland may waive any condition specified in this section 6(b) if
it executes a writing so stating at or prior to the Closing.
(vii) Breland shall be released from all liabilities being assumed
or paid off by Buyer at Closing.
(viii) Breland shall have received from counsel to Buyer an opinion
in form and substance as set forth in Exhibit H attached hereto, addressed to
Breland, and dated the Closing Date.
(ix) WHI and LWB shall have entered into the organizational and
operating agreements for the land development limited liability company outlined
in Exhibit F and Buyer shall have entered into the Lot Option Agreements with
such company as listed on Exhibit G.
7. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) The Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) Buyer or WHI may terminate this Agreement prior to Closing by
giving written notice to Breland following review by Buyer of the Title
Reports, the Surveys, and the Final Disclosure Schedule, and other information
concerning the business and operations of Breland if they areBuyer in its sole
discretion is not satisfied with the disclosures contained therein or the
information obtained.
(iii) Buyer or WHI may terminate this Agreement by giving written
notice to Breland at any time prior to the Closing (A) in the event Breland or
LWB has breached any representation, warranty, or covenant contained in this
Agreement in any material respect, Buyer has notified Breland or LWB of the
breach, and the breach has continued without cure for a period of 14 days after
the notice of breach or (B) if the Closing shall not have occurred on or before
May 15, 1999, by reason of the failure of any condition precedent under 6(a)
hereof.
hereof (unless the failure results primarily from Buyer itself breaching any
representation, warranty or covenant contained in this Agreement).
(iv) Breland or LWB may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (A) in the event Buyer or WHI
has breached any representation, warranty, or covenant contained in this
Agreement in any material respect, Breland has notified Buyer or WHI of the
breach, and the breach has continued without cure for a period of 14 days after
the notice of breach or (B) if the Closing shall not have occurred on or before
May 15, 1999, by reason of the failure of any condition precedent under section
6(b) hereof (unless the failure results primarily from Breland itself breaching
any representation, warranty, or covenant contained in this Agreement).
(v) Buyer or Breland may terminate this Agreement pursuant to
section2 (d)(ii).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to section 7 (a)(i) or (ii)(a)(i), (ii) or (v) above, all rights and
obligations of the Parties hereunder shall terminate without any Liability of
any Party to any other Party. If any partyParty terminates pursuant to section
7 (a)(iii) or (iv) the other partyParty shall be liable for damages in
connection therewith.
therewith, provided, however, that if this Agreement is terminated because
Deloitte & Touche are unable to complete their audit of the financial statements
required by section 3(g) and 6(a)(vii) by May 15, 1999, the Parties shall have
no further obligation to each other hereunder. Termination of this Agreement
shall also constitute a termination of the Other Agreement and termination of
the Other Agreement shall constitute termination of this Agreement; both
terminations shall be considered to result from the same cause.
8. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under section 9 below).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand (other than by a
Party against another Party to this Agreement) in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving Breland, each of the other Parties will cooperate with the contesting
or defending Party and its counsel in the contest or defense, make available its
personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under 9 below).
(c) Transition. Breland will not take any action that is designed or
intended to have the effect of discouraging any developer, lessor, licensor,
customer, supplier, or other business associate of Breland from maintaining the
same business relationships with Buyer after the Closing as it maintained with
Breland prior to the Closing. Breland will refer all customer inquiries
relating to the business of Breland to Buyer from and after the Closing.
(d) Confidentiality. Breland will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to Buyer or
destroy, at the request and option of Buyer, all tangible embodiments (and all
copies) of the Confidential Information which are in its possession other than
that which Breland is required by law to keep or is necessary in connection with
Tax matters. In the event that Breland is requested or required by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process to
disclose any Confidential Information, Breland will notify Buyer promptly of the
request or requirement so that Buyer may seek an appropriate protective order or
waive compliance with the provisions of this section 8(d). If, in the absence
of a protective order or the receipt of a waiver hereunder, Breland is, on the
advice of counsel, compelled to disclose any Confidential Information or else
stand liable for contempt, then Breland may disclose the Confidential
Information; provided, however, that the disclosing person shall use its
reasonable best efforts to obtain, at the reasonable request of Buyer, an order
or other assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as Buyer shall
designate.
(e) Access to Records. After the Closing Date, Buyer shall preserve the
records, files and papers of Breland which are transferred to it and shall, on
reasonable notice, allow Breland and its representatives reasonable access
thereto and the right to make copies and extracts therefrom during normal
business hours for the preparation of such Tax returns as Breland or its parent
companiesAffiliates may be required to file and the disposition of any claim
that may be made against it, or other reasonable purpose and Buyer shall use its
best efforts not to dispose of any item thereof without giving 90 days' prior
written notice to Breland of its intention of disposing of same, specifying the
items to be disposed of in reasonable detail. Breland shall, within the period
of 60 days from receipt of such notice, notify Buyer of Breland's desire to
retain one or more items to be disposed of. Buyer shall, upon receipt of such
notice from Breland, deliver to Breland, at Breland's expense including
reimbursement for personal and out-of-pocket expenses, the items requested by
Breland. All records, files and papers reviewed or delivered pursuant to this
Section shall be held confidential. Notwithstanding the foregoing, Buyer shall
not be liable for any inadvertent disposal of any such records, files and
papers.
(f) Covenant Not to Compete. LWB shall make himself available for
consultation with Buyer as needed for one (1) year following the Closing
provided such consultation does not unreasonably interfere with other business
activities. ForIn view of the sale of goodwill by Breland under this Agreement,
for a period of five years from and after the Closing Date, LWB will not engage
directly or indirectly through BHI, BHM, BP, or otherwise in the construction
and sale of single family homes in Alabama and Mississippi,the Alabama counties
ofall Alabama and Mississippi,Alabama counties, including specifically Madison,
Limestone, Jefferson, Morgan, Jefferson and Morgan and theMobile, and Baldwin,
and all Mississippi counties ofcounties, including specifically Jackson and
Harrison, except that the foregoing restriction shall not apply (i) to the
development of land for single family homes in a joint venturelimited liability
company jointly owned with WHI as outlined in section 2(j),2(k), (ii) the
construction and/or sale of homes on scattered lots (owned by customers) by
Madison, or LWB's(iii) the development by LWB directly or through Affiliates of
rural properties (without availability of sanitary sewer systems)service other
than individual septic tanks) provided however, that Buyer shall have for five
years after Closing a Right of First Refusal to purchase all lots on such rural
properties upon completion of development. LWB will not use the name
"Breland""Breland," "BHI," or a variation thereof on any entity with which he
is associated and for two years after Closing will not hire directly or through
any business with which he is associated, including Madison, any person who has
been an employee of Breland, BHI, WHA, WHM or WHI during the preceding twenty
four (24) months, except that LWB or an Affiliate may employ the persons listed
on Schedule 14. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this section 8(f) is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(g) Warranty Work on Recent Deliveries. Buyer will provide warranty
repair work to purchasers of single family homes from Breland who purchased
their homes within one year prior to Effective Date for one year subsequent to
date of the home purchase. In the event that such warranty repair work
undertaken pursuant to this Agreement and the Other Agreement entails costs to
Buyer which exceed $35,000 in the aggregate, or relates to houses purchased more
than one (1) year prior to Closing,the Effective Date, Breland will reimburse
Buyer for its costs in connection therewith; provided, however, Buyer shall bill
Breland for the warranty repair work at cost without mark-up, and Buyer will not
charge for supervision, handyman labor and administrative support. Breland
shall be responsible for all other warranty work on deliveries by Breland prior
to the Effective Date. During the one year period after Closing, Buyer will
furnish Breland with a monthly report on warranty repair work performed on
deliveries by Breland. Schedule 1612 is a list of outstanding warranty claims
as of the Effective Date.
Date. Breland reserves the right to enforce any claim for warranty work or
indemnification from a subcontractor or supplier notwithstanding any contract
assignment to Buyer contained herein.
(h) Marketing and Promotional Materials. Buyer will receive Breland's
existing supply of marketing and promotional materials, including brochures,
pamphlets and other printed materials.
(i) Use of Non-Transferred Assets. Following Closing, Breland will
permit Buyer,to the extent permitted by law, to use licenses, permits, and
bonding in place with respect to the Acquired Assets, so that there is no
disruption in the homebuilding operations acquired or the development of land in
connection therewith.
therewith. Buyer will use its best efforts to become a licensed general
contractor in Alabama.
(j) Land Contracts. With respect to any Land Contract which cannot be
transferred to Buyer as contemplated by this Agreement, Breland will pursuant to
the direction of Buyer take down lots under such contract on behalf of Buyer and
immediately transfer them to Buyer at cost.
(k) Madison Employees. For two years subsequent to Closing, Buyer will
not hire any employee who has been an employee of Madison subsequent to Closing.
LWB will cause any Madison employee who was previously an employee of Breland to
fully train any person, holding a comparable position and function with WHA and
WHM.
9. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
All of the representations and warranties of Buyer and Breland
contained in this Agreement shall survive the Closing, and continue in full
force and effect thereafter for a period of three years following Closing.
(b) Indemnification Provisions for Benefit of Buyer.
(i) In the event Breland breaches, or in the event any third party
alleges facts that, if true, would mean Breland has breached any of their
representations, warranties, and covenants contained in this Agreement, and,
provided that Buyer makes a written claim for indemnification against Breland
pursuant to section 10(f) herein, then Breland agrees to indemnify Buyer from
and against the entirety of any Adverse Consequences Buyer may suffer through
and after the date of the claim for indemnification including any Adverse
Consequences Buyer may suffer, arising out of, relating to, in the nature of, or
caused by the breach or the alleged breach.
(ii) Breland agrees to indemnify Buyer from and against the entirety
of any Adverse Consequences Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by:
(A) any Liability of Breland which is not an Assumed Liability;
(B) any Liability of Buyer arising by operation of law, including
under any bulk transfer law of any jurisdiction or under any common law doctrine
of de facto merger or successor liability, which is not an Assumed Liability; or
(C) any Liability of Breland for the unpaid Taxes of Breland,
LWB or any Person controlled by LWB as a transferee or successor, by contract,
or otherwise.
(D) any Liability resulting from the operation of a business by
Breland prior to the Closing Date except for the Assumed Liabilities.
(iii) Breland agrees to indemnify Buyer from and against the
entirety of any Adverse Consequences Buyer may suffer resulting from, arising
out of, relating to, in the nature of, or caused by claims for severance pay
arising as a result of an employee's status as an employee of Breland or arising
under Employee Benefit Plans of Breland, or applicable to employees or former
employees.
(c) Indemnification Provisions for Benefit of Breland.
(i) In the event Buyer breaches, or in the event any third party
alleges facts that, if true, would mean Buyer has breached, any of its
representations, warranties, and covenants contained in this Agreement,
including those contained in the assumption attached as Exhibit A and, provided
that Breland makes a written claim for indemnification against Buyer pursuant to
10(f) herein, then Buyer agrees to indemnify Breland from and against the
entirety of any Adverse Consequences Breland may suffer through and after the
date of the claim for indemnification including any Adverse Consequences Breland
may suffer, arising out of, relating to, in the nature of, or caused by the
breach or the alleged breach.
(ii) Buyer agrees to indemnify Breland from and against the entirety
of any Adverse Consequences Breland may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any Assumed Liability.
(iii) Any Liability for Taxes which because they relate to matters
occurring subsequent to Closing are rightfully the obligations of Buyer, except
for real estate taxes prorated under section 2(g).
(iv) Except as otherwise provided in this Agreement, any Liability
resulting from the operation of a business by Buyer or relating to the Acquired
Assets for occurrences subsequent to Closing.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this section 9, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless and then
solely to the extent the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
reasonable evidence that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, and (C) the Indemnifying Party conducts
the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with section 9(d)(ii), (A) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party, not to be withheld unreasonably, and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party, not to be withheld unreasonably.
(iv) In the event any of the conditions in section 9(d)(ii) is or
becomes unsatisfied, however, (A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim including reasonable attorneys' fees and
expenses, and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this section 9.
(e) Determination of Adverse Consequences. The Parties shall take
into account the time cost of money in determining Adverse Consequences for
purposes of this section 9.
(f) Basket and Cap. An Indemnified Party shall have no right to
indemnification unless and until the aggregate of all claims of the Indemnified
Party pursuant to this Agreement and the Other Agreements exceeds $
_________Agreement exceeds One Hundred Thousand Dollars ($100,000) above any
applicable insurance coverage and further an Indemnifying Party's liability for
indemnification pursuant to this Agreement and the other AgreementsOther
Agreement shall in no event exceed $________ million.$3 million above any
applicable insurance coverage. The foregoing limitations on liability shall not
apply, however, to (a) Third Party claims arising in connection with homes
delivered by Breland prior to Effective Date including any product liability or
warranty claims in connection therewith or (b) payment of the balance of the
Purchase Price pursuant to section 2(h). The foregoing shall not limit the
amount which may be recoverable pursuant to applicable insurance coverage.
(g) Insurance Coverage. It shall not be necessary for an Indemnified
Party to first attempt to recover any Adverse Consequences from a third party
before seeking indemnity hereunder. The Adverse Consequences which an
Indemnifying Party is liable to, for or on behalf of the Indemnified Party
pursuant to this (9),section 9, shall be reduced (including, without
limitation, retroactively) through subsequent repayment as described below by an
amount equal to any insurance proceeds including, but not limited to, proceeds
from title insurance, actually received by or on behalf of such Indemnified
Party relating to the Adverse Consequences. If an Indemnified Party shall have
received or shall have been paid on its behalf an indemnity payment in respect
of any Adverse Consequences and insurance proceeds in respect of such Adverse
Consequences are also received by the Indemnified Party, then such Indemnified
Party shall pay Indemnifying Party any excess amount received. The Indemnified
Party covenants and agrees to use all reasonable efforts to collect all such
sums as are available to it under its existing insurance policies including, but
not limited to, title insurance policies, which would be applicable to any such
Adverse Consequences. All insurance policies shall contain waiver of
subrogation endorsements.
(h) Contractor Indemnification. Breland shall retain the right to be
indemnified by contractors and subcontractors as provided in section 8(g).
10. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(b) Entire Agreement. This Agreement (including instruments referred to
herein) and the Other Agreement constitutes the entire agreement between the
Parties and supersedes any prior understandings, agreements, or representations
by or between the Parties, written or oral, to the extent they related in any
way to the subject matter hereof. Except as specifically set forth herein,
Breland makes no representation or warranty to Buyer, express or implied,
including any implied warranty of future profitability of its business.
(c) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided, however, that Buyer may (i) assign any or all of
its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if sent by
facsimile transmission and confirmed by United States mail or sent by reputable
overnight delivery service and addressed to the intended recipient as set forth
below:
If to Breland to: Copy to:
103 Mountain Brook Boulevard John R. Wynn
Madison, Alabama 35758 Lanier, Ford, Shaver & Payne
Attention: Louis Breland P.O. Box 2087
Telephone: 256-461-8900 Huntsville, Alabama 35804
Fax: 256-461-7744 Fax: 256-935-1135
If to Buyer: Copy to:
Washington Homes, Inc. Washington Homes, Inc.
1802 Brightseat Road 1802 Brightseat Road
Landover, Maryland 20785 Landover, Maryland 20785
Attention: Geaton A. DeCesaris, Jr. Attention: Laurence R. Jaffe
Telephone: 301-772-8900 Telephone: 301-772-8900
Fax: 301-772-1380
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Alabama without giving effect
to any choice or conflict of law provision or rule whether of the State of
Alabama or any other jurisdiction that would cause the application of the laws
of any jurisdiction other than the State of Alabama.
(h) Amendments and Waivers. Except as specifically provided in this
Agreement, no amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by the parties. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(i) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) Expenses. Buyer and Breland will each bear their own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. Breland shall be responsible
for payment of the following in connection with the transactions contemplated by
the Agreement: (i) title report fees and title insurance premiums, (ii) survey
fees, (iii) transfer taxes, (iv) sales taxes, (v) recording fees, and (vi)
expense of environmental reports, and such fees and expenses shall not be
reflected in the determination of Net Worth at the Closing Date as set forth in
section 2(d)(iv) above. Buyer shall be responsible for payment of the following
in connection with the transactions contemplated by this Agreement: (i) audit
fees of Deloitte and Touche for auditing financial statements, and (ii) any fees
or costs with respect to licenses, permits, authorizations, bonds or the like
Buyer is required to obtain.
(k) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with particularity and describes the relevant facts in reasonable
detail or cross references detail.another schedule. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The Parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty or covenant.
(l) Incorporation of Exhibits and Disclosure Schedules. The Exhibits and
Disclosure Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(m) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted inany
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, accordance with section 10(o) below, in addition to any
other remedy to which it may be entitled, at law or in equity.
(n) Bulk Transfer Laws. Buyer acknowledges that Breland will not comply
with the provisions of any bulk transfer laws of any jurisdiction in connection
with the transactions contemplated by this Agreement, and hereby waives such
compliance subject to the agreements of Breland to indemnify Buyer pursuant of
section 9(b).
(o) Dispute Resolution. The Parties recognize that disputes may arise in
the future concerning the Agreement or any ancillary document executed in
connection with this Agreement (a "Dispute). Therefore, the parties shall
resolve any and all such Disputes of any nature whatsoever in the following
manner:
(i) Negotiation. In the event of a Dispute, the Parties shall
attempt to settle such Dispute through informal negotiations. To this effect,
they shall consult and negotiate with each other, in good faith and, recognizing
their mutual interests, attempt to reach a just and equitable solution
satisfactory to both Parties. Notwithstanding the foregoing, nothing in this
subsection 10(o)(i) shall preclude any Party from commencing arbitration at any
time.
(ii) Arbitration. Any Dispute which remains unresolved shall be
submitted to binding arbitration in accordance with Chapter 1, Title 9 of the
United States Code (United States Arbitration Act). Arbitration shall be
administered by the American Arbitration Association ("AAA") in accordance with
its Commercial Arbitration Rules as supplemented by its Supplementary Procedures
for Complex Cases.
(iii) Situs. The situs of the arbitration shall be Huntsville,
Alabama.Nashville, Tennessee.
(iv) Number and Qualification of Arbitrators. The arbitrators shall
be decided by a panel of three neutral arbitrators. AAA shall recommend
arbitrators from its commercial panel, giving due regard to the Parties' desire
to have arbitrators with experience in hearing commercial arbitrations. From
such AAA recommended list of arbitrators Breland shall appoint an arbitrator and
the Buyer shall appoint an arbitrator. The two party-appointed arbitrators
shall jointly and promptly appoint the third arbitrator who must be an attorney
licenses to practice and in good standing in Alabama, who shall act as
chairperson of the panel. Recognizing the intent of the Parties to obtain
impartial, independent decisions and rulings, each arbitrator shall disclose to
the Parties and to the other Parties of the panel, any professional, familial or
social relationships, present or past, with any party or counsel. Any Party may
challenge in writing the appointment or continued service of any arbitrator for
lack of independence, partiality or any other case likely to impair such
arbitrator's ability to render a fair and equitable decision. Where such
challenge is made to an arbitrator, the AAA shall uphold or dismiss the
challenge. In the event the challenge is upheld, such arbitrator shall cease to
be a member of the panel. Any arbitrator may be removed upon agreement of the
Parties.
(v) Remedies. All decisions or rulings of the panel, as well as any
interim or final award, shall be pursuant to the majority vote of the three (3)
arbitrators comprising the panel. Except as limited in this Section 10(o), the
arbitrators shall have authority to award a remedy or relief that a court of
Alabama could award or grant, including, without limitation, specific
performance of any obligation created under the Agreement, the issuance of an
injunction, pre-judgment or post-judgment interest or the imposition of
sanctions for abuse or frustration of the arbitration process.
(vi) Fees and Expenses. The arbitrators shall have the discretion
and authority to award to the prevailing Party, if any, as determined by the
arbitrators, all of its costs and fees, in such amounts as the arbitrators deem
just. "Costs and Fees" means all reasonable pre-award expenses of the
arbitration, including the arbitrators' fees, administrative fees, travel
expenses, other out-of-pocket expenses, witness fees and attorneys'and witness
fees, except each Party shall be responsible for its own attorney's fees.
(vii) Finality and Enforcement. Any decision or award rendered by
the arbitrators shall be final, binding and conclusive. The Parties hereby
agree to submit to the personal jurisdiction of the courts of the States of
Maryland, Alabama, or Mississippi for the enforcement of the award. The
decision or award may also be enforced in any other court of competent
jurisdiction.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
WESTMINSTER HOMES OF ALABAMA, L.L.C.
By:____________________________________
Name: ___________________________
Title: ___________________________
WESTMINSTER HOMES OF MISSISSIPPI, L.L.C.
By:____________________________________
Name: ___________________________
Title: ___________________________
WASHINGTON HOMES, INC.
By:____________________________________
Name: ___________________________
Title: ___________________________
BRELAND HOMES, INC.
By:____________________________________
Name: ___________________________
Title: ___________________________
_______________________________________
LOUIS W. BRELAND
