<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT JANUARY 19, 1996
(DATE OF EARLIEST EVENT REPORTED) ----------------
BUFFTON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COMMISSION FILE NUMBER 1-9822
------
DELAWARE 75-1732794
- ---------------------------- ----------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION)
226 BAILEY AVENUE
SUITE 101
FORT WORTH, TEXAS 76107
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (817) 332-4761
--------------
- --------------------------------------------------------------------------------
<PAGE>
BUFFTON CORPORATION
INDEX
-----
Page No.
--------
Item 2. Acquisition or Disposition of Assets...................... 3
Item 7. Financial Statements and Exhibits......................... 4
Signature .......................................................... 5
-2-
<PAGE>
BUFFTON CORPORATION
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 19, 1996, Buffton Corporation (the "Company") purchased the
Stockyards Hotel located in Fort Worth, Texas, for a purchase price of
$3,014,000 consisting of the payment of $500,000 in cash, the payment and
refinancing of an existing mortgage loan in the amount of $1,600,000, the
payment of a Promissory Note in the original principal sum of $16,741 and the
issuance of 450,000 shares of the Company's common stock. Under the Asset
Purchase Agreement, the Company has guaranteed at $2.05 per share, for a limited
period of time, the sales price realized by the Sellers for shares of Company
stock they might sell. The acquisition is deemed effective January 1, 1996, and
will be accounted for under purchase accounting and the results of operations
will be consolidated commencing with the effective date.
The assets acquired consist of one tract of real estate upon which a 52
room hotel is situated and one tract of real estate used as a parking lot. The
Company also acquired all inventory, furniture, fixtures, equipment and other
property, both tangible and intangible, relating to the Stockyards Hotel and its
operations.
Prior to the consummation of such transaction, no material relationship
existed between any of such persons and the company or any of its affiliates,
directors or officers or any associate of any such director or officer.
The cash portion of the purchase price was paid from the cash reserves
of the company, and the existing $1.6 million mortgage loan was paid through a
new mortgage loan issued to the Company by Texas Commerce Bank in the original
principal amount of approximately $1.6 million, and the new mortgage loan is
secured by the two tracts of real estate acquired, together with all
improvements thereon. The new mortgage loan is payable in 59 monthly
installments of principal and interest of $13,350 with the remaining unpaid
principal and any accrued interest due January 18, 2001.
The loan bears interest at the bank's prime rate plus an adjustment
based on the Company's ratio of total liabilities to tangible net worth. This
adjustment is reevaluated quarterly.
-3-
<PAGE>
BUFFTON CORPORATION
ITEM 7. - FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements Page
----
Report of Independent Accountants F - 1
Combined Statement of Operations
for the year ended December 31, 1994 F - 2
Combined Balance Sheet
December 31, 1994 F - 3
Combined Statement of Cash Flows
for the year ended December 31, 1994 F - 4
Notes to Combined Financial Statements
December 31, 1994 F - 5
Pro Forma Statement of Operations
for the year ended September 30, 1995 F - 8
Pro Forma Balance Sheet
September 30, 1995 F - 9
Notes to Pro Forma Financial Statements
September 30, 1995 F - 10
(b) Exhibits
10 Asset Purchase Agreement dated January 19, 1996 between Y & Y
Property and Stockyards Hotel, Inc. (as Seller) and Buffton
Corporation (as Purchaser).
-4-
<PAGE>
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.
BUFFTON CORPORATION
Dated: February 5, 1996 /s/ Robert Korman
-------------------------------
Robert Korman
Vice President and
Chief Financial Officer
-5-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Buffton Corporation
In our opinion, the accompanying combined balance sheet and the related combined
statement of operations and of cash flows present fairly, in all material
respects, the financial position of Stockyards Hotel at December 31, 1994 and
the results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Fort Worth, Texas
January 9, 1996
F - 1
<PAGE>
STOCKYARDS HOTEL
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Revenues:
Room rental $ 1,088,369
Food and beverage 539,615
Other 143,124
------------
Total revenues 1,771,108
------------
Costs and expenses:
Cost of food and beverage sales 241,335
Labor costs 727,826
Hotel and restaurant operating expenses 358,258
General and administrative 189,070
Depreciation 190,860
Interest 132,985
------------
Total costs and expenses 1,840,334
------------
Net loss $ (69,226)
============
</TABLE>
The accompanying notes are an integral
part of these combined financial statements.
F - 2
<PAGE>
STOCKYARDS HOTEL
COMBINED BALANCE SHEET
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994
------------
<S> <C>
ASSETS
Current assets:
Cash $ 53,009
Accounts receivable 24,522
Inventories 31,104
------------
Total current assets 108,635
Property and equipment, net 1,092,272
Other assets 6,447
------------
$ 1,207,354
============
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 86,025
Accounts payable 67,679
Accrued liabilities:
Payroll 33,138
Other 35,056
------------
Total current liabilities 221,898
Long-term debt 1,594,609
Equity:
Common stock, $1 par value;
1,000,000 shares authorized;
1,000 shares issued and outstanding 1,000
Retained deficit (610,153)
------------
(609,153)
------------
------------
Contingencies (Note 5) $ 1,207,354
============
</TABLE>
The accompanying notes are an integral
part of these combined financial statements.
F - 3
<PAGE>
STOCKYARDS HOTEL
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $ (69,226)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 190,860
Change in components of current assets and
liabilities:
Accounts receivable (11,770)
Inventories (735)
Other assets (5,287)
Accounts payable and accrued liabilities 39,620
-----------
Net cash provided by operating activities 143,462
-----------
Cash flows from investing activities:
Additions to property and equipment, net (49,381)
-----------
Cash flows from financing activities:
Repayments of long-term debt (101,446)
-----------
Net decrease in cash (7,365)
Cash at beginning of year 60,374
-----------
Cash at end of year $ 53,009
===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 132,985
===========
Income taxes $ 1,695
===========
</TABLE>
The accompanying notes are an integral
part of these combined financial statements.
F - 4
<PAGE>
STOCKYARDS HOTEL
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
1. ORGANIZATION
These combined financial statements include the accounts of Stockyards
Hotel, Inc. and Y&Y Property, collectively referred to hereafter as the
"Company," and represent the operations of the Stockyards Hotel located at
109 E. Exchange in Fort Worth, Texas. All significant intercompany
accounts and transactions have been eliminated in combination.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents - For purposes of the Statement of Cash Flows,
cash includes currency on hand and demand deposits with banks or other
financial institutions. There are no cash equivalents.
Inventories - Inventories, which consist of food, beverages and supplies,
are stated at the lower of cost (first in, first out) or market.
Property and equipment - Property and equipment are recorded at cost and
depreciated by either the straight-line or 150% double declining balance
method over estimated useful lives of five to fifteen years.
Maintenance and repairs are charged to income as incurred. The Company
capitalizes renewals and betterments which significantly enhance the value
or extend the useful life of an asset. Upon the sale or retirement of
depreciable assets, the cost and related accumulated depreciation are
removed from the accounts and the resulting gain or loss is credited to or
charged against income.
Income taxes - Y&Y Property is a partnership and therefore does not pay
federal income tax. Rather, the income or loss from the partnership "flows
through" to the partners who are taxed in their individual capacities on
their distributive shares of partnership taxable income.
Stockyards Hotel, Inc. accounts for income taxes under an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the financial statements or tax returns. In estimating
future tax consequences, all expected future events other than enactments
of changes in the tax law or rates are considered. At December 31, 1994,
Stockyards Hotel, Inc. has a deferred tax benefit of $357,889 relating to a
net operating loss carryforward for which a valuation allowance was
established as it is more likely than not that the benefit will not be
realized before expiring at various times during 1999-2006.
F - 5
<PAGE>
STOCKYARDS HOTEL
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
3. PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
1994
------------
<S> <C>
Building and improvements $ 2,779,389
Furniture and fixtures 421,036
Equipment and vehicles 146,119
------------
3,346,544
Less accumulated depreciation 2,389,272
------------
957,272
Land 135,000
------------
Net property and equipment $ 1,092,272
============
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1994
------------
<S> <C>
Note payable to a bank, due in monthly
installments, including interest, of
$21,000, with a final balloon installment
due April 2, 1998. The note bears
interest at 10% and is secured by the
land and building located on 109 E.
Exchange in Fort Worth, Texas. $ 1,665,089
Note payable to a bank, due in monthly
installments, including interest, of $474,
with a final payment due March 2, 1998.
The note bears interest at 10% and is
secured by a vehicle. 15,545
------------
1,680,634
Less current portion of long-term debt 86,025
------------
$ 1,594,609
============
</TABLE>
F-6
<PAGE>
STOCKYARDS HOTEL
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
The aggregate principal maturities of long-term debt at December 31, 1994
are as follows:
<TABLE>
<S> <C>
1995 $ 86,025
1996 102,838
1997 113,607
1998 1,378,164
-----------
$ 1,680,634
===========
</TABLE>
Interest paid during 1994 was $132,985.
5. CONTINGENCIES
Due to the nature of the Company's business, it could be a party in legal or
administrative proceedings arising in the ordinary course of business. While
occasional adverse settlements or resolutions may occur and negatively
impact earnings in the year of settlement, it is the opinion of management
that their ultimate resolution will not have a material adverse effect on
the Company's financial position.
F-7
<PAGE>
BUFFTON CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
(in thousands)
FOR THE YEAR ENDED SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical
Combined
Historical Stockyards
Buffton Hotel Adjustments Pro Forma
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Net revenues $ 19,187 $ 1,850 $ $ 21,037
-------------- -------------- -------------
Costs and expenses:
Cost of goods sold 5,890 1,406 7,296
Selling, general and administrative 10,939 217 11,156
Depreciation and amortization 961 195 (79) (b) 1,077
Interest expense 124 156 (5) (c) 275
-------------- -------------- --------- -------------
Total costs and expenses 17,914 1,974 (84) 19,804
-------------- -------------- --------- -------------
Income (loss) from continuing operations
before income taxes 1,273 (124) 84 1,233
Income tax benefit (31) -- (14) (d) (45)
-------------- -------------- --------- -------------
Income (loss) from continuing operations $ 1,304 $ (124) $ 98 $ 1,278
============== ============== ========= =============
Income from continuing operations
per average common share $ .24 $ .22
============== =============
Weighted average common shares
outstanding 5,465 5,915
============== =============
</TABLE>
The accompanying notes are an integral
part of these pro forma financial statements.
F - 8
<PAGE>
BUFFTON CORPORATION
PRO FORMA BALANCE SHEET
(in thousands)
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Historical
Combined
Historical Stockyards
Buffton Hotel Adjustments(a) Pro Forma
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7 $ 143 $ (143) $ 7
Accounts receivable 2,893 57 2,950
Inventories 2,031 29 2,060
Prepaid assets 498 32 530
-------------- -------------- -------------- --------------
Total current assets 5,429 261 (143) 5,547
Property, plant and equipment, net 5,467 991 1,956 8,414
Patents, net 1,617 -- 1,617
Goodwill, net 3,503 -- 3,503
Other assets, net 1,208 9 1,217
-------------- -------------- -------------- --------------
$ 17,224 $ 1,261 $ 1,813 $ 20,298
============== ============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ -- $ 100 $ 294 $ 394
Accounts payable 1,001 144 1,145
Accrued liabilities 1,368 60 1,428
Income taxes 236 -- 236
-------------- -------------- -------------- --------------
Total current liabilities 2,605 304 294 3,203
Long-term debt -- 1,512 63 1,575
Stockholders' equity:
Common stock 284 1 4 289
Additional paid-in capital 12,571 -- 896 13,467
Retained earnings (deficit) 1,764 (556) 556 1,764
-------------- -------------- -------------- --------------
Net stockholders' equity 14,619 (555) 1,456 15,520
-------------- -------------- -------------- --------------
$ 17,224 $ 1,261 $ 1,813 $ 20,298
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral
part of these pro forma financial statements.
F - 9
<PAGE>
BUFFTON CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
The pro forma statement of operations assumes that Buffton Corporation
("Buffton" or the "Company") acquired the Stockyards Hotel as of the beginning
of fiscal 1995. The pro forma balance sheet assumes that Buffton acquired these
facilities as of September 30, 1995. The pro forma financial information
presented is not necessarily indicative of the results of operations that would
have occurred had the acquisition been effective at the beginning of the fiscal
year ended September 30, 1995, nor is it necessarily indicative of the results
of operations which can be expected for any subsequent period. The following
pro forma adjustments are based upon available information and certain
assumptions that Buffton believes are reasonable under the circumstances. The
pro forma financial information should be read in conjunction with Buffton's
Consolidated Financial Statements included in its Annual Report on Form 10-K for
the fiscal year ended September 30, 1995 and the audited financial statements of
Stockyards Hotel filed elsewhere within this Form 8-K dated January 19, 1996.
(a) To reflect the acquisition of the Hotel by the Company for a
purchase price of $3,014,000 consisting of the payment of $500,000 in
cash, the payment and refinancing of an existing mortgage loan in the
amount of $1,600,000, the payment of a promissory note in the
original principal sum of $16,741 and the issuance of 450,000 shares
of the Company's common stock. The estimated fair value of the stock
issued in connection with the acquisition is $2.00 per share and is
representative of the traded price of the Company's stock for a
reasonable period of time before and after the definitive agreement
was finalized.
(b) To reflect an adjustment in depreciation expense for the increased
asset basis of the Hotel and revised useful life of the building
and improvements to 30 years from 15 years.
(c) To reflect the adjustment in interest expense resulting from the
payment and refinancing of an existing mortgage loan in the amount of
$1,600,000.
(d) To increase the income tax benefit resulting from the adjustments
described in (a) through (c) above.
F - 10
<PAGE>
Exhibit 10
================================================================================
ASSET PURCHASE AGREEMENT
BETWEEN
Y & Y PROPERTY,
a Texas general partnership
and
STOCKYARDS HOTEL, INC.,
a Texas corporation
AS SELLERS
AND
BUFFTON CORPORATION,
a Delaware corporation
AS PURCHASER
pertaining to
STOCKYARDS HOTEL
situated
in
Tarrant County, Texas
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT (herein so called) is entered into this 19th day of
January, 1996, by and among Y & Y PROPERTY, a Texas general partnership (the
"Partnership"), STOCKYARDS HOTEL, INC., a Texas corporation (the "Hotel
Company") (the Partnership and the Hotel Company being herein collectively
called the "Sellers"), J. MARSHALL YOUNG ("Young"), TOLBERT F. YATER III
("Yater"), STOCKYARDS HOTEL JOINT VENTURE (the "Joint Venture") (Yater, Young
and the Joint Venture being herein collectively called the "Partners" or
individually called a "Partner") and BUFFTON CORPORATION, a Delaware
corporation, its successors and assigns ("Purchaser").
ARTICLE I
PURCHASE AND SALE
1.1 Agreement of Purchase and Sale. In consideration of their covenants
------------------------------
set forth in this Agreement, Sellers agree to sell (and the Partners agree to
cause Sellers to sell) to Purchaser, and Purchaser agrees to purchase from
Sellers, for the Purchase Price (as hereinafter defined) and on the terms and
conditions set forth herein, the following:
(a) All of the land situated in the City of Fort Worth, the County of
Tarrant and the State of Texas, more particularly described on Exhibit A
---------
attached hereto and made a part hereof, together with all right, title and
interest of Sellers and each Partner in and to all benefits, privileges,
easements, tenements, hereditaments and appurtenances thereon or
appertaining thereto, and together with all right, title and interest of
Sellers and each Partner in and to adjacent streets, alleys and rights-of-
way (the "Real Estate").
(b) All structures, buildings, improvements and fixtures, including
without limitation all equipment and appliances, used in connection with
the operation or occupancy thereof, such as heating and air-conditioning
systems and facilities used to provide any utility services, parking
services, refrigeration, ventilation, trash disposal or other services
owned by Sellers and each Partner and located on the Real Estate
("Improvements"). The Real Estate and Improvements are sometimes
collectively referred to herein as the "Hotel".
(c) All personal property ("Personal Property") owned by Sellers and
each Partner located on or in the Real Estate or Improvements and used in
connection with the ownership, operation and maintenance of the Hotel,
excluding specifically those items described on Exhibit B attached hereto
---------
and made a part hereof.
(d) Each Sellers' and each Partner's interest in all leases and other
agreements to occupy the Real Estate and/or the Improvements, or any
portion thereof, as amended from time to time, in effect on the Effective
Date (defined in Section 3.1) and/or the Closing Date (defined in Section
3.1) (all such leases and agreements being sometimes collectively referred
to herein as "Leases").
(e) All intangible property owned by Sellers and each Partner and used
in connection with the Real Estate, Improvements and Personal Property,
including specifically, without limitation, all right, title and interest
of Sellers and each Partner in and to the following: (i) all trademarks and
trade names used in connection with any
1
<PAGE>
part of the Hotel, including the name "Stockyards Hotel", (ii) all plans
and specifications, if any, in the possession of Sellers and each Partner
which were prepared in connection with the construction of any of the
Improvements, (iii) all assignable licenses, permits and warranties now in
effect with respect to the Real Estate, Improvements and Personal Property,
and (iv) all written contracts in effect on the Effective Date and/or the
Closing Date in any way relating to the Hotel, including without limitation
all equipment leases and all rights of Sellers and each Partner thereunder
relating to equipment or property located in or upon the Real Estate or
Improvements, which will survive Closing (defined in Section 3.1) and which
Purchaser elects to assume ("Intangible Property").
(f) Each Sellers' and each Partner's right, title and interest in and
to all opened and unopened food and beverage items (including alcoholic
beverages) located at the Hotel ("Consumables Inventory").
(g) All other assets of any type of Sellers, whether or not reflected
on the financial statements of Sellers, including, but not limited to, cash
(not including $200,000 in certificates of deposit pledged by Young and
Yater, individually, to secure a loan which will not be assumed by
Purchaser), securities, negotiable instruments, vehicles, machinery,
accounts receivable (other than accounts receivable between the Partnership
and the Hotel Company), business records, financial statements, reports,
files, computer programs, deposits, supplies, prepaid assets and any other
real, personal or intangible property owned by Sellers ("Interests").
1.2 Assets Defined. The Real Estate, Improvements, Personal Property,
--------------
Leases, Intangible Property, Consumables Inventory and Interests are sometimes
collectively referred to herein as the "Assets".
1.3 Purchase Price; Credit to Purchaser.
-----------------------------------
(a) The purchase price for the Assets (the "Purchase Price") shall be
the sum of THREE MILLION FOURTEEN THOUSAND DOLLARS ($3,014,000), subject to
any necessary adjustment at Closing pursuant to Section 1.3(b) below,
payable in accordance with Section 1.4 below.
(b) The Purchase Price is based on the assumption that on the
Effective Date the Net Assets (defined as cash, which will not include
$200,000 in certificates of deposit pledged by Young and Yater,
individually, to secure a loan which will not be assumed by the Purchaser,
plus accounts receivable, inventories, prepaid assets, and deposits, less
accounts payable and accrued liabilities) as reflected on the September 30,
1995 balance sheet of the Hotel Company (the "September 30 Balance Sheet")
equal $59,157. To the extent the Net Assets reflected on the December 31,
1995 balance sheet of the Hotel Company (the "December 31 Balance Sheet")
are more or less than $59,157, the Purchase Price will be adjusted at
Closing ("Purchase Price Adjustment"). To the extent the Net Assets are
greater on the September 30 Balance Sheet than they are on the December 31
Balance Sheet, the Purchase Price will be adjusted downward. To the extent
that the Net Assets are less on the September 30 Balance Sheet than they
are on the December 31 Balance Sheet, the Purchase Price will be adjusted
upward. The Purchase Price Adjustment calculation is shown on Exhibit M
---------
attached hereto and made a part hereof for all purposes. Purchaser, in
consultation with Sellers, will calculate the Purchase Price Adjustment on
the Closing Date, based upon the best information available to Purchaser.
If Sellers wish to contest Purchaser's calculation of the Purchase Price
Adjustment, they may do so within thirty (30) days after the
2
<PAGE>
Closing by utilizing the mediation and arbitration procedures stated in
Article VII hereof.
1.4 Payment of Purchase Price. The Purchase Price shall be payable at
-------------------------
Closing as follows:
(a) Subject to the Purchase Price Adjustment, Purchaser shall pay to
the Partnership, at Texas Commerce Bank, Fort Worth, cash or wire
transferred funds in the sum of $500,000.00, plus an amount of cash equal
to the amount by which $1,600,000 exceeds the principal balance of the
mortgage note described in Section 1.4(b) as of the Closing Date.
(b) Purchaser shall pay the outstanding principal balance of the
indebtedness, not to exceed $1,600,000, evidenced by that certain mortgage
note dated April 22, 1983, payable to the order of Texas Commerce Bank,
N.A. in the original principal sum of $2,500,000, as same may have been
subsequently modified.
(c) Purchaser shall pay the outstanding principal balance portion of
the indebtedness evidenced by that certain promissory note dated September
2, 1994, payable to the order of Brazos Bank, N.A. in the original
principal sum of $16,741.32, as same may have been subsequently modified;
provided, however, that Purchaser shall have no obligation hereunder for
the payment of any prepayment penalty, any accrued and unpaid interest as
of the Closing Date or any other past due sums under said note.
(d) Purchaser shall deliver to the Partners (which Sellers hereby
instruct Purchaser to so deliver) an aggregate of 450,000 shares (112,500
shares to Stockyards Hotel Joint Venture, 112,500 to Yater and 225,000 to
Young) (the "Subject Shares") of common stock of Buffton Corporation
("Buffton") in accordance with the following stipulations, restrictions and
conditions:
(i) Prior to Closing or within 60 days thereafter, Purchaser will
cause to be filed and will use its best efforts to cause to become
effective, at the expense of Purchaser, a Registration Statement with
the Securities and Exchange Commission ("SEC") on Form S-3 or other
appropriate form pursuant to the Securities Act of 1933, as amended
(the "1933 Act"), and cause the Subject Shares to be listed for
trading on the American Stock Exchange ("AMEX").
(ii) The Partners may not transfer or sell the Subject Shares
prior to May 1, 1996, and a legend will be placed on the stock
certificate(s) evidencing the Subject Shares so stating. As used
herein, "Target Price" means $2.05 ($2.00 plus a commission of $0.05).
During the period beginning at 8:00 a.m., C.S.T., on May 1, 1996 and
ending at 5:00 p.m., C.S.T., on March 31, 1997 (the "Measuring
Period"), the Partners agree that (A) they will not sell (in the
aggregate for all three Partners) more than 50,000 of the Subject
Shares in any one (1) calendar week, (B) the Subject Shares will be
placed in brokerage accounts and made ready for sale, subject to the
registration of the Subject Shares with the SEC and the listing of the
Subject Shares on the AMEX pursuant to Section 1.4(d)(i) above, (C)
prior to making any sale, each Partner and its designated agent shall
have received written notice from Buffton (which notice shall be
delivered via facsimile transmission to the selling Partner and shall
provide for the number of shares to be sold and the date on which the
sale is to occur), (D) the sale of the shares will occur no later than
the closing of AMEX trading on the day following the selling Partner's
receipt of notice to sell the shares from Buffton, and (E) in order to
have any sale for less than the
3
<PAGE>
Target Price included in the calculation in Subsection 1.4(d)(iii)
following, the selling Partner must have received a notice to sell
from Buffton. The parties hereto acknowledge that Addison Lee Pfluger
has expressed a desire to have the shares of Stockyards Hotel Joint
Venture liquidated in an orderly fashion during the Measuring Period.
The parties hereto acknowledge that Yater has expressed a desire to
have his shares liquidated in accordance with a schedule to be
delivered to Buffton at the Closing. The parties hereto acknowledge
that Young has indicated a desire to have up to 75,000 of his shares
liquidated prior to March 31, 1997. Buffton shall be obligated to
grant sufficient notices hereunder during the Measuring Period to
allow the Partners to achieve their above-expressed desires,
regardless of the Target Price.
(iii) With respect to all of the Subject Shares which are sold
during the Measuring Period, Buffton will pay to each Partner in cash,
on or before April 15, 1997, the amount, if any, by which the product
of the Subject Shares sold by such Partner during the Measuring Period
times the Target Price exceeds the aggregate amount of gross proceeds
(less a commission of $0.05) received by such Partner for the Subject
Shares so sold. If all of the Subject Shares owned by a Partner are
sold prior to March 15, 1997, Buffton will pay to such Partner in
cash, within thirty (30) days after the last sale, the amount, if any,
by which the product of the Subject Shares sold by such Partner times
the Target Price exceeds the aggregate amount of gross proceeds (less
a commission of $0.05) received by such Partner for the Subject Shares
so sold.
ARTICLE II
TITLE AND SURVEY
2.1 Title Commitment. Prior to the Closing Date, Sellers caused the Title
----------------
Company to deliver to Purchaser, at Sellers' expense, (a) a title commitment
("Commitment") for an Owner's Policy of Title Insurance ("Title Policy") on the
standard form promulgated by the Texas State Board of Insurance, issued by the
Title Company in the amount of the Purchase Price, and (b) legible copies of all
instruments referenced in Schedule B and Schedule C of the Commitment.
2.2 Survey. Prior to the Closing Date, Sellers caused to be delivered to
------
Purchaser, at Sellers' expense, a current as-built survey ("Survey") of the Real
Estate and Improvements, certified to have been made in accordance with Category
1A, Condition I standards by a land surveyor registered in the State of Texas.
2.3 Title Policy. On the Closing Date, Sellers shall cause the Title
------------
Company to issue the Title Policy, which shall include the modification or
deletion of the survey exception, at Sellers' cost, insuring fee simple title in
Purchaser as of the Closing Date, in accordance with the Commitment.
4
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ARTICLE III
CLOSING
3.1 Time and Place; Effective Date of Sale. The Closing of the
--------------------------------------
transaction contemplated by this Agreement is scheduled to take place at the
office of the Title Company on January 19, 1996, but shall be effective for
accounting and ownership purposes as of the 12:01 a.m., C.S.T., on January 1,
1996 (the "Effective Date"). For the purposes herein, the "Closing" shall occur
as Sellers and Purchaser perform the obligations set forth in, respectively,
Section 3.2 and Section 3.3 below, the satisfaction of which obligations shall
be a concurrent condition to Closing and shall be deemed to have occurred on the
"Closing Date."
3.2 Sellers' Obligations at Closing. At Closing, Sellers shall (and each
-------------------------------
Partner shall cause Sellers to):
(a) deliver to Purchaser a Special Warranty Deed (the "Deed") in the
form of Exhibit C attached hereto and made a part hereof for all purposes,
---------
executed and acknowledged by the Partnership and in recordable form, dated
as of the Closing Date but effective as of January 1, 1996, it being agreed
that the conveyance effected by the Deed shall be subject to the Permitted
Exceptions (but tenants under the Leases will not be specified);
(b) deliver to Purchaser a Blanket Bill of Sale and Assignment in the
form of Exhibit D attached hereto and made a part hereof for all purposes
---------
(the "Bill of Sale"), which shall contain an inventory of Assets, executed
by Sellers, dated as of the Closing Date but effective as of January 1,
1996;
(c) join with Purchaser in the execution of an Assignment of Leases
and Security Deposits in the form of Exhibit E attached hereto and made a
---------
part hereof for all purposes, dated as of the Closing Date but effective as
of January 1, 1996;
(d) join with Purchaser in the execution of an Assignment and
Assumption of Contracts and Accounts, Intangible Property and Other Rights
and Obligations (the "Assignment and Assumption Agreement") in the form of
Exhibit F attached hereto and made a part hereof for all purposes, pursuant
---------
to which (i) Purchaser will assume Sellers' obligations under the contracts
and other obligations specified therein (the "Assumed Contracts") (which
shall not include any amounts payable or other obligations or liabilities
of any Sellers each to the other, or to any Partner) and (ii) all contracts
and other obligations not specifically assumed will remain the obligations
of Sellers and Sellers and the Partners will indemnify Purchaser and hold
it harmless from any liability with respect thereto, dated as of the
Closing Date but effective as of January 1, 1996;
(e) deliver to Purchaser a warranty and indemnity in the form of
Exhibit G attached hereto and made a part hereof for all purposes, executed
---------
by Sellers and each Partner with respect to the accuracy of information
about the Assets and the financial statements of Sellers contained in the
registration statement filed pursuant to Section 1.4(d)(i) and the report
on SEC Form 8-K to be filed by Buffton in connection with the acquisition
of the Assets;
(f) join with Purchaser in the execution of a letter to Stockyards
Enterprises, Inc. notifying such tenant of the change of ownership of the
Hotel;
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(g) deliver to Purchaser an affidavit sworn by the Partners in the
form of Exhibit H attached hereto and made a part hereof for all purposes
---------
(the "FIRPTA Affidavit"), or in such other form as may be prescribed by
federal regulations;
(h) deliver to Purchaser possession of the Hotel and the Assets,
including all keys and access cards used with respect to the Hotel;
(i) deliver to Purchaser a copy of the Articles of Incorporation of
the Hotel Company and a copy of the partnership agreement of the
Partnership, and all amendments thereto, certified by the Secretary of
State of the state of incorporation with respect to the Hotel Company and
by the Secretary of the Hotel Company as being true, correct and complete,
and a copy of the bylaws of the Hotel Company and all amendments thereto,
certified by the Secretary of the Hotel Company as being true, correct and
complete;
(j) deliver to Purchaser resolutions duly adopted by the Board of
Directors and accompanied by a certificate of the Secretary of the Hotel
Company, each in form and substance satisfactory to Purchaser and its
counsel, authorizing the execution of this Agreement and the consummation
of the transactions contemplated hereby;
(k) deliver to Purchaser an opinion of McLean & Sanders, counsel to
the Partnership and the Hotel Company, in form and substance reasonably
satisfactory to Purchaser and its counsel, opining that the execution and
performance of this Agreement by the Partnership and the Hotel Company have
been duly authorized by all appropriate partnership and corporate action
and that this Agreement imposes valid and binding obligations on the
Partnership and the Hotel Company, enforceable in accordance with its
terms, subject to applicable debtor relief laws; and
(l) deliver to Purchaser an affidavit in the form of Exhibit I (the
---------
"Certificate As To Debts and Liens") attached hereto and made a part hereof
for all purposes; executed by Sellers, verifying that all bills and
accounts of Sellers with respect to the Hotel, except any bills or accounts
assumed by Purchaser pursuant to the Assignment and Assumption Agreement,
have been paid.
(m) deliver to Purchaser all documents pertaining to the continuation
of bar and restaurant operations on the Hotel premises, particularly with
respect to the sale and/or service of alcoholic beverages.
3.3 Purchaser's Obligations at Closing. At Closing, Purchaser shall:
----------------------------------
(a) pay to Sellers the Purchase Price in the manner described in
Section 1.4;
(b) join with Sellers in execution of the instruments described in
Sections 3.2(c), 3.2(d) and 3.2(f);
(c) deliver to Sellers and the Title Company such evidence as the
Title Company may reasonably require as to the authority of the person or
persons executing documents on behalf of Purchaser.
3.4 Credits and Prorations. There shall be no prorations at Closing
-----------------------
except as follows:
6
<PAGE>
(a) At Closing, Sellers shall credit to the account of Purchaser
against the cash portion of the Purchase Price or transfer to Purchaser any
security deposit, prepaid rentals or advance payments for functions
actually held by (or within the control of) Sellers and delivered pursuant
to any leases or contracts executed by Sellers or Sellers' predecessors-in-
interest, as lessor, if such leases or contracts will continue in effect
after Closing and only to the extent such security deposits or rentals
relate to a period of time on or after the Closing and are not otherwise
included in the calculation of the Purchase Price.
(b) Charges, or portions thereof, referred to in this Section 3.4
which are payable to third parties solely and directly by any tenants under
Leases shall not be apportioned hereunder, and Purchaser shall accept title
subject to any of such charges unpaid. Purchaser shall look solely to the
tenant responsible therefor for the payment of the same.
(c) Sellers and each Partner shall be responsible for the payment of
all sales taxes and other hotel and motel taxes attributable to the period
prior to the Effective Date if not otherwise included in the calculation of
the Purchase Price, and Purchaser shall be responsible for the payment of
all sales taxes and other hotel and motel taxes attributable to the period
on and after the Effective Date. The provisions of this Section 3.4 shall
survive the Closing.
3.5 Closing Costs. Sellers and each Partner shall pay (a) the fees of any
-------------
counsel representing it in connection with this transaction; (b) the premium for
the Title Policy to be issued to Purchaser by the Title Company at Closing
(including the additional premium chargeable for modification of the survey
exception); (c) the cost of the Survey (including any costs of modifying the
Survey to comply with the requirements of any lender to Purchaser); (d) the fees
for recording the Deed; (e) any sales tax which becomes payable by reason of the
transfer of the Assets; and (f) one-half (1/2) of any escrow fee which may be
charged by the Title Company. Purchaser shall pay (x) the fees of any counsel
representing Purchaser in connection with this transaction; and (y) one-half
(1/2) of any escrow fees charged by the Title Company. All other costs and
expenses incident to this transaction and the Closing shall be paid by the party
incurring same.
3.6 Delivery of Documents. Immediately after Closing, Sellers and each
---------------------
Partner shall make available at the offices of the manager of the Hotel the
Hotel Documents, including, without limitation, all books and records of
account, contracts, leases and leasing correspondence, receipts for deposits,
unpaid bills and other papers or documents which pertain to the Hotel together
with all advertising materials, booklets, keys, access cards and other items, if
any, used in the operation of the Hotel, which were not delivered to Purchaser
at Closing. Purchaser shall thereafter make the Hotel Documents available for
reasonable inspection by Sellers during Purchaser's normal business hours and
upon prior written notice to Purchaser.
ARTICLE IV
REPRESENTATIONS, COVENANTS, AND CONDITIONS
4.1. Representations and Warranties of Sellers and each Partner. Each
----------------------------------------------------------
Partner, to his actual knowledge, and Sellers jointly and severally represent
and warrant to Purchaser as follows, as of the Effective Date and as of the
Closing Date:
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(a) Sellers have received no notice from any governmental authority of
any pending or threatened (i) zoning, building, fire, or health code
violations or violations of other governmental requirements or regulations
with respect to the Hotel that have not been corrected as of the Closing
Date, including, without limitation, violation of any environmental laws or
any applicable provisions of the Americans With Disabilities Act, or (ii)
any condemnation of the Hotel. Sellers and each Partner further warrant
and represent that in the event any of them receives any such notice prior
to the Closing Date, it will provide to Purchaser copies of any such
notice. Sellers and each Partner agree to use best efforts to correct any
matters disclosed in such notice. If any such matter cannot be corrected
by Sellers by Closing, Purchaser may, at its option, deliver written notice
of termination of this Agreement to Sellers and this Agreement shall
thereupon terminate unless Sellers agree in writing to pay the excess
required to correct such matter.
(b) As of the Closing Date, all of the Assets of Sellers shall be
transferred to Purchaser, except for those items described on Exhibit B.
---------
(c) As of the Closing Date, there will be no Leases or other
agreements for occupancy in effect with respect to the Hotel except for the
retail lease by and between Y&Y Property and Stockyards Enterprises, Inc.
All leasing commissions due with regard to the currently existing lease
terms of existing tenants have been paid.
(d) Neither Sellers nor any Partner have received any notices from
insurers of defects in the Improvements which have not been corrected.
(e) All accounts receivable assigned to Purchaser will be collectible
in a reasonable period of time, and all Consumable Inventory transferred to
Purchaser will be usable in the ordinary course of business.
(f) The unaudited balance sheets of Sellers as of December 31, 1994,
and the related statements of income for the fiscal year ended on December
31, 1994, and the unaudited balance sheets of Sellers as of September 30,
October 31, and November 30, 1995, and the related statements of income for
the nine, ten and eleven months ended on such dates, are true, complete and
correct, were prepared in accordance with Sellers' customary accounting
principles, consistently applied, and fairly present the financial
condition of Sellers as of such dates and the results of their operations
for the periods then ended, and there are no material obligations,
liabilities or indebtedness (including, without limitation, contingent and
indirect liabilities and obligations, liabilities for income, franchise, ad
valorem and other taxes and long-term commitments) which are not reflected
in such financial statements or in the notes thereto.
(g) The execution and performance of this agreement by the Partnership
and the Hotel Company have been duly authorized by all appropriate
partnership and corporate action, this Agreement represents the valid and
binding obligations of the Partnership and the Hotel Company, enforceable
in accordance with the terms hereof, and the person signing this Agreement
on behalf of each has been properly authorized to do so.
(h) The execution and delivery of this Agreement, the consummation of
the transaction described herein and the compliance by Sellers with the
terms of this Agreement will not conflict with or constitute a default
under any agreement to which Sellers or any Partner is a party or by which
Sellers or any Partner is bound, or violate any court order, judgment or
decree applicable to Sellers or any Partner.
8
<PAGE>
(i) There are no assignments for the benefit of creditors, or
voluntary or involuntary proceedings under the Bankruptcy Code, 11 U.S.C.
(S)101, et seq., or under any other debtor relief laws pending against
-- ----
Sellers or any Partner or any affiliate of any of them.
(j) The Personal Property shall be conveyed to Purchaser free and
clear of all liens and encumbrances except the Permitted Exceptions and any
equipment leases which have been assumed by Purchaser at Closing.
(k) Except for those items described on the Schedule of Damaged and
Lost Furniture, Fixtures and Equipment attached hereto as Exhibit J and
---------
made a part hereof for all purposes, the heating, ventilation, air
conditioning, operating equipment and other mechanical systems, fixtures
and equipment located in the Improvements are in good working order and
condition and are free from defects or damage which would render them unfit
for their continued use in the manner in which they are presently used,
subject, however, to ordinary wear and tear. Sellers are paying to
Purchaser up to the amount of $10,000 at Closing (in the form of an escrow
deposit) in addition to the reserve on the books of the Hotel Company in
full satisfaction of any additional liability Sellers might have hereunder
for repair of the elevator in the Improvements, and Sellers shall have no
further liability with respect thereto.
(l) Neither Sellers nor any Partner have any knowledge of any material
defects or damage to the foundation, walls and structural components of the
Improvements.
(m) There has been no written demand by any mortgagee, insurance
underwriter or governmental authority for work to be done or other action
to be taken by Sellers or any Partner which has not been complied with to
the satisfaction of the entity making such demand. No defect or condition
exists with respect to the Improvements which would adversely affect the
insurability of the Hotel.
(n) There is no pending or threatened condemnation, expropriation,
eminent domain, litigation, administrative action or other legal proceeding
("Litigation") affecting all or any portion of the Hotel or its operations
which will have any effect whatsoever on Purchaser or the Hotel and its
operations after the Closing Date, and neither Sellers nor any Partner have
received any written or oral notice of any of the same and have no
knowledge that any Litigation which will have any effect whatsoever on
Purchaser or the Hotel and its operations after the Closing Date is
contemplated and are not aware of any state of facts which may give rise to
any such Litigation.
(o) Neither Sellers nor any Partner have any current actual knowledge
of any change contemplated in any applicable laws or any judicial or
administrative action, or any action by adjacent landowners, or any natural
or artificial conditions upon the Real Estate, which would prevent, limit,
impede or render more costly Purchaser's contemplated use of the Hotel.
(p) All obligations of Sellers and each Partner arising from the
ownership and operation of the Hotel, including but not limited to
salaries, taxes, charges, accrued operating expenses and the like, other
than Assumed Payables, have been paid as they became due or will be paid at
or prior to Closing. Except for obligations which are included in the
calculation of the Purchase Price or for which provisions are herein made
for proration or other adjustment at Closing, there will be no obligations
of Sellers or any Partner with respect to the Hotel outstanding as of the
Closing Date.
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<PAGE>
(q) Except as to any hydraulic fluids or other chemicals which may
have been released in, on or under the Real Estate or the Hotel as a result
of the operation of an elevator located in the Hotel, neither Sellers nor
any Partner have disposed of or otherwise released or allowed to be
released any hazardous or toxic substances, petroleum products, chemicals,
or wastes of any kind on, in, or under the Hotel, including any surface
waters or groundwater located on the Real Estate, nor have Sellers or any
Partner caused or allowed to be released or discharged any hazardous or
toxic substances, petroleum products, chemicals, or wastes of any kind on,
in, or under any tracts in proximity to the Real Estate, including the
surface or groundwaters thereof. To the best of Seller's and Partners'
knowledge, there are no hazardous or toxic substances, petroleum products,
chemicals, or wastes on, in, or under the Hotel, including surface or
groundwaters, regardless of source or cause, there are no underground
storage tanks on the Real Estate, and the Hotel, Real Estate and other
tangible Assets are in compliance with all applicable environmental,
occupational safety and health and other applicable laws, including,
without limitation, the Americans with Disabilities Act of 1990, 42 U.S.C
(S) 12101 et seq., as amended.
(r) Neither Sellers nor any Partner have any knowledge that any part
of the Real Estate constitutes a landfill within the meaning of Chapter 361
of the Texas Health and Safety Code.
(s) The Hotel and its operations are in compliance in all material
respects with all applicable laws, rules and regulations, including,
without limitation, laws relating to employee relations and benefits,
occupation safety and health and the sale of food and alcohol.
4.2 Covenants of Sellers and Partners. Sellers and each Partner hereby
---------------------------------
jointly and severally covenant and agree as follows:
(a) Sellers shall cause any existing lease and/or management
agreement(s) affecting the Hotel, other than those contracts and agreements
described on Exhibit E or Exhibit F attached hereto and incorporated herein
--------- ---------
for all purposes, to be terminated as of the Closing Date and shall pay any
and all fees and expenses associated with the termination of said
agreement(s).
(b) Sellers and each Partner shall be responsible for compensating the
employees involved in the management and operation of the Hotel for all
wages, salaries and medical insurance premiums which have accrued prior to
the Effective Date (the "Accrued Employee Benefits"), it being understood
and agreed that Sellers and each Partner shall and do hereby jointly and
severally indemnify Purchaser against any and all losses, costs and
liabilities incurred by Purchaser as a result of any failure to compensate
such employees for the Accrued Employee Benefits. Purchaser shall have no
obligation to continue the employment of any employee of Sellers, but, with
respect to any employees retained by Purchaser, Sellers and each Partner
agree that, prior to January 1, 1996, they will not directly or indirectly
induce or attempt to influence any employee, consultant, or advisor of
Sellers to terminate or modify his or its relationship with Sellers.
(c) Prior to Closing, Sellers shall deliver to Purchaser the Hotel
Documents and all other due diligence items listed on Exhibit K attached
---------
hereto and made a part hereof which are in the possession of Sellers and
have not been previously furnished to Purchaser.
10
<PAGE>
(d) Except for the Assumed Payables being assumed by Purchaser
pursuant to the Assignment and Assumption Agreement, Sellers have paid or
will pay in full, prior to Closing, all bills and invoices for labor,
goods, materials and services of any kind with respect to the Hotel and
utility charges relating to the period prior to Closing, and Sellers and
each Partner shall and do hereby jointly and severally indemnify Purchaser
against any and all losses, costs and liabilities incurred by Purchaser as
a result of any failure to do so. Without limiting the foregoing, any and
all leasing commissions or tenant concessions due or to become due with
respect to Leases in existence prior to Closing will be paid in full by
Sellers on or before the Closing Date.
(e) For a period beginning on the Closing Date and ending on December
31, 2001, each Seller and each Partner agrees that he and/or it will not
own or operate, nor will any of them directly or indirectly own any
interest in any entity which owns or operates, a hotel, restaurant, bar or
nightclub within two (2) miles of the Hotel and related restaurant and bar
being purchased hereunder by Purchaser. Sellers and each Partner recognize
and agree that any violation of the provisions of this Section 4.2(e) or of
the second sentence of Section 4.2(b) will cause irreparable damage or
injury to Purchaser, the exact amount of which may be difficult or
impossible to ascertain, and Purchaser shall be entitled to an injunction,
without the necessity of posting bond therefor, restraining any violation
of such sections. Such rights to an injunction shall be in addition to,
and not in limitation of, any other rights and remedies Purchaser may have
against Sellers and the Partners, including, but, not limited to, the
recovery of damages.
4.3 Survival. It is the intent of Purchaser, Sellers and each Partner
--------
that the representations, warranties and covenants made herein shall survive
Closing for a period of two (2) years after the date of Closing.
4.4 Representations, Warranties and Covenants of Purchaser. Purchaser
------------------------------------------------------
hereby represents and warrants that:
(a) The execution and performance of this Agreement by Purchaser have
been duly authorized by all appropriate corporate action, this Agreement
represents the valid and binding obligations of Purchaser, enforceable in
accordance with the terms hereof, and the person signing this Agreement on
behalf of Purchaser has been properly authorized to do so.
(b) All covenants of Purchaser hereunder shall be performed by
Purchaser, and the person signing this Agreement on behalf of Purchaser has
been authorized by Purchaser to do so.
(c) Purchaser has securities registered pursuant to either the 1933
Act or Section 12 of the 1934 Act.
(d) Purchaser has been subject to the reporting requirements of
Section 13 or 15(d) of the 1934 Act and will remain subject to such
reporting requirements through the Measuring Period.
(e) Purchaser has filed all reports required to be filed by it under
the 1934 Act during the preceding twelve (12) months and will file all
reports required to be filed by it under the 1934 Act during the Measuring
Period.
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4.5 Conditions Precedent.
--------------------
(a) In addition to any conditions to Closing set forth elsewhere in
this Agreement, the following shall be conditions precedent to the
obligations of Purchaser and Sellers to close the transaction contemplated
by this Agreement in the manner set forth below:
(i) It shall be a condition precedent to the obligation of
Sellers to close the transaction contemplated by this Agreement that,
with respect to each contract, lease or agreement relating to the
Hotel, other than those contracts and agreements described on Exhibit
-------
F, which has a term extending beyond the Closing Date, Sellers shall
-
have obtained either (A) a termination of such contract, lease or
agreement effective as of the Closing Date, or (B) a release of
liability under such contract, lease or agreement for any claims
accruing from and after the Closing Date;
(ii) It shall be a condition precedent to the obligation of
Sellers to close the transaction contemplated by this Agreement that
as of the Closing Date the representations and warranties made by
Purchaser herein shall be true and correct and Purchaser shall have
complied with its covenants contained herein; and
(iii) It shall be a condition precedent to the obligation of
Purchaser to close the transaction contemplated by this Agreement that
as of the Closing Date the representations and warranties made by
Sellers and each Partner herein shall be true and correct and Sellers
and each Partner shall have complied with their covenants contained
herein , including, without limitation, the delivery of the items
required by Section 3.2.
(b) The conditions precedent set forth in Sections 4.5(a)(i) and
4.5(a)(ii) above are for the sole benefit of Sellers, and the condition
precedent set forth in Section 4.5(a)(iii) above is for the sole benefit of
Purchaser. Upon the failure of any of the foregoing conditions precedent,
the party benefitted by such condition precedent may either (i) terminate
or rescind this Agreement by written notice to the other party, or (ii)
waive such condition precedent and proceed to close the transaction
contemplated by this Agreement. It is understood and agreed that (A) in
the event that Sellers terminate this Agreement by reason of the failure of
the condition set forth in Section 4.6(a)(ii) above, Sellers shall retain
the right to exercise the remedies, if any, to which it may be entitled
under Section 5.3 hereof, and (B) in the event that Purchaser terminates
this Agreement by reason of the failure of the condition set forth in
Section 4.6(a)(iii) above, Purchaser shall retain the right to exercise the
remedies, if any, to which it may be entitled under Section 5.3 hereof.
4.6 Environmental Indemnity. Notwithstanding anything contained herein to
-----------------------
the contrary, and except as to any hydraulic fluids or other chemicals which may
have been released in, on or under the Real Estate or the Hotel as a result of
the operation of an elevator located in the Hotel, Sellers, each Partner and
Purchaser recognize that the risks associated with environmental hazard or
damage on the Real Estate which are attributable to periods of time prior to the
date of Closing shall be borne by Sellers and each Partner. Accordingly,
Sellers and each Partner shall and hereby do agree to hold harmless and
indemnify Purchaser and its officers, employees, attorneys, consultants,
representatives and agents (collectively, the "Indemnified Parties") from any
and all liabilities, obligations, losses, damages, penalties, fines, claims,
suits, costs and damages required to be paid by any Indemnified Party arising in
any
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way from any of the following which occurred between April 22, 1983 and the
Closing Date or as a result of any actions or omissions by either Seller or any
Partner or which either Seller or any Partner has knowledge of and does not
disclose in writing to Purchaser prior to the Closing Date: (a) the disposal or
release, on or prior to the Closing, of any toxic or hazardous substances,
petroleum products, chemicals, or wastes of any kind in, on, or under the Hotel,
including any surface or groundwaters, regardless of source or cause, except any
hydraulic fluids or other chemicals which may have been released in, on or under
the Real Estate or the Hotel as a result of the operation of an elevator located
in the Hotel, and (b) any pollution, escape, seepage, trespass, exposure,
migration of any toxic or hazardous substances, petroleum products, chemicals,
or waste of any kind on or from the Real Estate in the subsurface, surface, or
in the air commencing or continuing after the Closing as a result of any
negligent or intentional act or omission of Sellers, any Partner or anyone else
prior to Closing; it being understood and agreed that the claims and causes of
action described in clauses (a) and (b) above shall be deemed to include, but
are not limited to, claims, demands and/or causes of action for negligence on
the part of Sellers, for strict liability in tort, or for strict liability, or
for other liability, under any present or future state or federal law or
regulation, including but not limited to the Solid Waste Disposal Act, TEX. REV.
CIV. STAT. ANN. 4477-7, the Texas Clean Water Act, TEX. WATER CODE ANN. Chaps.
26 and 27, the Resource Conservation and Recovery Act, 42 U.S. (S)6901 et seq.,
-------
and the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. (S)9601 et seq., Federal Water Pollution Control Act, 33 U.S.C.
-------
(S)1251 et seq., and such amendments as may be made to these statutes. The
-------
liabilities, obligations, losses, damages, penalties, fines, claims, suits,
costs, and damages required to be paid by Sellers and each Partner covered by
this indemnity include closure costs, cleanup costs, containment costs, damages
to persons, damage to property, damages to resources or to the environment,
diminution in the value of the Hotel, all legal expenses, all other reasonable
expenses incurred by the Purchaser for the defense of any claim or cause of
action covered by this indemnity, all engineering and expert fees, and expenses
for necessary surveys, testing and monitoring. The provisions of this Section
4.6 shall survive Closing for the maximum period of time allowed by applicable
law.
ARTICLE V
DEFAULT; REMEDIES
After the Closing, in the event that a party (the "Defaulting Party")
breaches an obligation or it is determined that an obligation was breached
hereunder which is expressly stated herein to survive the Closing, the
Defaulting Party shall be liable to the other party (the "Non-Defaulting Party")
for the actual damages incurred by the Non-Defaulting Party as a direct result
of such breach. In no event shall the Non-Defaulting Party be entitled to
recover from the Defaulting Party any punitive or exemplary damages.
ARTICLE VI
RISK OF LOSS/CONDEMNATION
6.1 Minor Damage. In the event of loss or damage to the Hotel or any
------------
portion thereof (the "premises in question") which is not "major" (as
hereinafter defined) on or prior to the Closing Date, this Agreement shall
remain in full force and effect provided Sellers, at Sellers' option, either (a)
assign to Purchaser at Closing all of Sellers' right, title and interest to any
claims and proceeds Sellers may have with respect to any casualty insurance
policies (in which event Sellers shall credit against the Purchase Price at
Closing the amount of any
13
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applicable deductible under such policies) or condemnation awards relating to
the premises in question, or (b) reduces the cash portion of the Purchase Price
in an amount equal to the cost of such repairs, Sellers thereby retaining all of
Sellers' right, title and interest to any claims and proceeds Sellers may have
with respect to any casualty insurance policies or condemnation awards relating
to the premises in question.
6.2 Major Damage. In the event of a "major" loss or damage on or prior to
------------
the Closing Date, Purchaser may terminate this Agreement by written notice to
Sellers. If Purchaser does not elect to terminate this Agreement, then
Purchaser shall be deemed to have elected to proceed with Closing, in which
event Sellers shall assign to Purchaser all of Sellers' right, title and
interest to any claims and proceeds Sellers may have with respect to any
casualty insurance policies (in which event Sellers shall credit against the
Purchase Price at Closing the amount of any applicable deductible under such
policies) or condemnation awards relating to the premises in question. For
purposes of Sections 6.1 and 6.2, "major" loss or damage refers to the
following: (i) loss or damage to the premises in question or any portion
thereof such that the cost of repairing or restoring the premises in question to
a condition substantially identical to that of the premises in question prior to
the event of damage would be, in the certified opinion of a mutually acceptable
architect, equal to or greater than $200,000; and (ii) any loss due to a
condemnation. After loss or damage to the premises in question, Sellers will
cooperate fully with Purchaser to enable Purchaser to ascertain the extent of
any damage and the applicable insurance coverage, including dialogue with the
applicable insurance company, and Sellers will not settle any claim with any
insurance company without the prior written consent of Purchaser.
6.3 Uniform Vendor and Purchaser Act Not Applicable. It is the express
-----------------------------------------------
intent of the parties hereto that the provisions of this Article VII govern the
rights of the parties in the event of damage to or condemnation of the Premises
and that the Uniform Vendor and Purchaser Act (Section 5.007 of the Texas
Property Code) not apply to this Agreement.
ARTICLE VII
ARBITRATION
Negotiation, Mediation and Arbitration. The parties will attempt in good
--------------------------------------
faith to resolve any controversy or dispute arising out of or relating to this
Agreement promptly by negotiations between or among the parties. If any party
reaches the conclusion that the controversy or dispute cannot be resolved by
unassisted negotiations, such party may notify CPR Institute for Dispute
Resolution, Inc. ("CPR"), 366 Madison Avenue, New York, New York 10017
[telephone (212) 949-6490; fax (212) 949-8859], CPR will promptly designate a
mediator who is independent and impartial, and CPR's decision about the identity
of the mediator will be final and binding. The parties agree to conduct at
least eight consecutive hours of mediated negotiations in Fort Worth, Texas,
within 30 days after the notice is sent. If the dispute is not resolved by
negotiation or mediation within 30 days after the first notice to CPR is sent,
then, upon notice by any party to the other affected parties and to CPR, the
controversy or dispute shall be submitted to a sole arbitrator who is
independent and impartial, selected by CPR, for binding arbitration in Fort
Worth, Texas, in accordance with CPR's Rules for Non-Administered Arbitration of
Business Disputes. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Sections 1-16 (or by the same principles enunciated by
such Act in the event it may not be technically applicable). The parties agree
that they will faithfully observe this Agreement and will abide by and perform
any award rendered by the arbitrator. The award or judgment of the arbitrator
shall be final and binding on all parties. No litigation or other proceeding
may be instituted in any court for the purpose of
14
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adjudicating, interpreting or enforcing any of the rights or obligations
relating to the subject matter hereof, whether or not covered by the express
terms of this Agreement, or for the purpose of adjudicating a breach or
determination of the validity of this Agreement, or for the purpose of appealing
any decision of an arbitrator, except a proceeding instituted for the sole
purpose of having the award or judgment of an arbitrator entered and enforced.
If any party becomes the subject of a bankruptcy, receivership or other similar
proceeding under the laws of the United States of America, any state or
commonwealth or any other nation or political subdivision thereof, then, to the
extent permitted or not prohibited by applicable law, any factual or substantive
legal issues arising in or during the pendency of any such proceeding shall be
subject to all of the foregoing mandatory mediation and arbitration provisions
and shall be resolved in accordance therewith. The agreements contained herein
have been given for valuable consideration, are coupled with an interest and are
not intended to be executory contracts.
ARTICLE VIII
MISCELLANEOUS
8.1. Allocation of Purchase Price. Sellers and Purchaser hereby agree
-----------------------------
that, for all accounting and federal income tax reporting purposes, Sellers and
Purchaser shall allocate the Purchase Price between (a) the Real Estate and (b)
the remainder of the Assets, as agreed upon in writing between Sellers and
Purchaser prior to or at Closing. Sellers and Purchaser agree to work and
cooperate with each other to coordinate their completion of Form 8594, Asset
Acquisition Statement ("Form"), under Section 1060 of the Internal Revenue Code
of 1986, as amended ("Code") and the regulations promulgated thereunder, or any
successor form, so that the amounts allocated as set forth on such Form will be
consistent. The provisions of this section shall survive Closing.
8.2 Assignment. Purchaser shall have the right to assign any or all of
----------
its rights under this Agreement to any affiliate or related entity without the
consent of Sellers; provided, however, that in the event of any such assignment
Buffton shall not be released of its payment obligation under Section
1.4(d)(iii) of this Agreement and the assignee shall have no liability with
respect to such payment obligation.
8.3 Notice. All notices required or permitted hereunder shall be in
------
writing and shall be served on the parties at the following address:
If to Sellers: Stockyards Hotel, Inc.
J. Marshall Young, President
1470 West Henderson
Cleburne, Texas 76031
Phone: 817-645-3711
Fax: 817-641-2538
Stockyards Hotel Joint Venture
c/o Stowaway Properties, Inc.
Addison Lee Pfluger, President
2133 Office Park Drive
San Angelo, Texas 76904
Phone: (915) _____________
Fax: (915) 949-8899
15
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Y & Y Property
c/o Tolbert F. Yater III
1650 Airport Boulevard, Box 110
Cleburne, Texas 76031
Phone: 817-641-2267
Fax:
With copies to: McLean & Sanders, P.C.
100 Main Street
Fort Worth, Texas 76102
Attn: Luther W. Ellis, Esq.
Phone: 817-338-1700
Fax: 817-870-2265
Holmes & Kline, P.C.
2911 Turtle Creek Blvd.
250 Park Place
Dallas, Texas 75219-6242
Attn: Ronald L. Holmes
Phone: 214-559-2299
Fax: 214-559-3115
If to Purchaser: Buffton Corporation
226 Bailey Avenue
Suite 101
Fort Worth, Texas 76107
Attn: Robert H. McLean
Phone: 817-332-4761
Fax: 817-877-0420
With a copy to: Fulbright & Jaworski L.L.P.
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201
Attn: Linton E. Barbee, Esq.
Phone: 214-855-8119
Fax: 214-855-8200
Any notices or other communications required or permitted to be given pursuant
to this Agreement must be (i) given in writing and personally delivered or
mailed by prepaid first class mail or (ii) made by facsimile transmission to the
party to whom such notice or communication is directed, to the address or
facsimile number of such party stated above (or otherwise provided to or
obtained by the sending party), with a copy to the other persons indicated.
Additionally, the party giving any notice shall be obligated to telephone the
persons indicated above (at the telephone number of such party stated beneath
its or his name above (or otherwise provided to or obtained by the sending
party)) on the same day the notice is sent and tell them (or leave them a
message) that a particular notice has been mailed or sent by facsimile. Any
such notice or other communication shall be deemed to have been given (whether
actually received or not) on the day it is mailed or personally delivered or, if
transmitted by facsimile, on the day that such notice is transmitted. Any party
may change its address, telephone number or facsimile number for purposes of
this Agreement by giving notice of such change to the other parties pursuant to
this Section.
8.4 Time of Essence. Time is of the essence of this Agreement.
---------------
16
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8.5 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.6 Captions. The captions in this Agreement are inserted for convenience
--------
of reference and in no way define, describe or limit the scope or intent of this
Agreement or any of the provisions hereof.
8.7 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
8.8 Entire Agreement; Modifications. This Agreement contains the entire
-------------------------------
agreement between the parties relating to the transactions contemplated hereby
and all prior or contemporaneous agreements, understandings, representations or
statements, oral or written, are superseded hereby. No waiver, modification
amendment, discharge or change of this Agreement shall be valid unless the same
is in writing and signed by the party against which the enforcement of such
modification, waiver, amendment discharge or change is sought.
8.9 Partial Invalidity. Any provision of this Agreement which is
------------------
unenforceable or invalid or the inclusion of which would affect the validity,
legality or enforcement of this Agreement shall be of no effect, but all the
remaining provisions of this Agreement shall remain in full force and effect.
8.10. No Third Party Rights. Nothing in this Agreement, express or
---------------------
implied, is intended to confer upon any person, other than the parties hereto
and their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
8.11 Further Assurances. Sellers, each Partner and Purchaser agree,
------------------
without further consideration, to execute and deliver such other documents and
take such other action, whether prior or subsequent to Closing, as may be
reasonably requested by the other party to consummate more effectively the
transactions contemplated hereby, including, but not limited to, a consulting
agreement by and between Tommy Yater and Purchaser. Accordingly, Sellers and
each Partner agree that they will use reasonable efforts to cooperate with
Purchaser in effecting an orderly transition of control over the Hotel;
provided, however, that Sellers shall not be required to incur any unreasonable
cost or expense in its cooperation with Purchaser.
8.12 Construction. The parties acknowledge that the parties and their
------------
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
8.13 Calculation of Time Periods. Unless otherwise specified, in computing
---------------------------
any period of time described in this Agreement, the day of the act or event
after which the designated period of time begins to run is not to be included
and the last day of the period so computed is to be included, unless such last
day is a Saturday, Sunday or legal holiday under the laws of the State of Texas,
in which event the period shall run until the end of the next day which is
neither a Saturday, Sunday or legal holiday. The final day of any such period
shall be deemed to end at 5 p.m., Fort Worth, Texas time.
8.14 Applicable Law. THIS AGREEMENT IS PERFORMABLE IN TARRANT COUNTY,
--------------
TEXAS, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE SUBSTANTIVE FEDERAL LAWS OF THE
17
<PAGE>
UNITED STATES AND THE LAWS OF THE STATE OF TEXAS. PURCHASER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN TARRANT
COUNTY, TEXAS, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN A STATE OR FEDERAL COURT
SITTING IN TARRANT COUNTY, TEXAS. IF EITHER PARTY SHALL EMPLOY AN ATTORNEY TO
ENFORCE OR DEFINE THE RIGHTS OF SUCH PARTY HEREUNDER, THE PREVAILING PARTY SHALL
BE ENTITLED TO RECOVER FROM THE NONPREVAILING PARTY ALL OF ITS REASONABLE
EXPENSES, INCLUDING REASONABLE ATTORNEYS' FEES. PURCHASER AND SELLERS AGREE
THAT THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING OF THE TRANSACTION
CONTEMPLATED BY THIS AGREEMENT.
8.15 Telephone Lines. Sellers and each Partner, at Closing, shall be
----------------
deemed to have relinquished and quitclaimed to Purchaser all of Sellers' and
each Partner's right, title and interest, if any, in and to the telephone
numbers currently used at and assigned to the Hotel. At Closing, Sellers and
each Partner will authorize Purchaser to change the account associated with such
telephone number to Purchaser's name effective on the Closing Date.
8.16 Liquor Licenses. Immediately following the execution of this
---------------
Agreement, Sellers or the Hotel Company shall turn in to the Tarrant County
Texas Alcoholic Beverage Commission Field Office all liquor licenses or permits
covering the premises of the Hotel and request a letter of authority on Form 4-
60 to operate under until Purchaser's permits and certificates are issued. In
addition, Sellers will use their best efforts to assist Purchaser in acquiring
both a mixed beverage and late hours permit, along with a food and beverage
certificate from the Texas Alcoholic Beverage Commission covering the premises
of the Hotel. In the event Purchaser desires to close the transaction
contemplated by this Agreement prior to the issuance of a mixed beverage and
late hours permit along with the food and beverage certificate to Purchaser,
then Sellers or the Hotel Company shall enter into a lease agreement and/or
management agreement (the "Lease and Management Agreement") in substantially the
form of Exhibit L attached hereto and made a part hereof, which will cover the
---------
period between the Closing and the issuance of a mixed beverage and late hours
permit and a food and beverage certificate to Purchaser, at which time said
Lease and Management Agreement shall automatically terminate.
8.17 Exhibits and Schedules. The following schedules or exhibits attached
----------------------
hereto (herein sometimes being referred to as "Exhibit") shall be deemed to be
an integral part of this Agreement:
A. Legal Description
B. Schedule of Excluded Property
C. Special Warranty Deed
D. Blanket Bill of Sale and Assignment
E. Assignment of Leases and Security Deposits
F. Assignment and Assumption of Contracts and Accounts, Intangible
Property and Other Rights and Obligations
G. Warranty and Indemnity Regarding Information in SEC Filings
H. FIRPTA Affidavit
I. Certificate as to Debts and Liens
J. Schedule of Damaged and Lost Furniture, Fixtures and Equipment of
Hotel
K. Hotel Documents
L. Lease and Management Agreement
18
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M. Purchase Price Adjustment
8.19 Confidentiality. Purchaser and Sellers recognize and acknowledge that
---------------
they will have access to certain confidential information consisting of
business, financial and other operating information related to the Assets or the
Hotel, and that after the consummation of the transaction contemplated hereby
such information will be valuable, special and unique property of Purchaser.
Purchaser, Sellers and Partners agree that they will not disclose, and they will
use best efforts to prevent disclosure by any other person of, any such
confidential information to any person for any purpose or reason whatsoever,
except (i) to authorized representatives of Sellers, Partners and Purchaser,
(ii) to accountants and attorneys who are providing services to the Sellers,
Partners and Purchaser and who have a legitimate business reason to know such
information and who have been advised of the confidential nature of such
information, (iii) as required by law and (iv) historical financial information
required to be disclosed in Sellers' financial statements. Purchaser, Sellers
and Partners recognize and agree that violation of any of the agreements
contained in this Section 8.19 will cause irreparable damage or injury to the
non-breaching party, the exact amount of which may be impossible to ascertain,
and that, for such reason, among others, the non-breaching party shall be
entitled to an injunction, without the necessity of posting bond therefor,
restraining any further violation of such agreements. Such rights to any
injunction shall be in addition to, and not in limitation of, any other rights
and remedies the non-breaching party may have against the non-breaching party
for a breach of the covenant set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SELLERS:
-------
STOCKYARDS HOTEL, INC.,
a Texas corporation
Dated: 1-19-96 By: /s/ J. Marshall Young
------------- ------------------------------------
Name: J. Marshall Young
Title: President
Y & Y PROPERTY,
a Texas general partnership
Dated: 1-19-96 By: /s/ J. Marshall Young
------------- ------------------------------------
Name: J. Marshall Young, Partner
Dated: 19 JAN 1996 By: /s/ Tolbert F. Yater
------------- ------------------------------------
Name: Tolbert F. Yater, III, Partner
19
<PAGE>
Stockyards Hotel Joint Venture,
a Texas Joint Venture
By Stowaway Properties, Inc.,
managing venturer
Dated: 19 JAN 96 By: /s/ Addison Lee Pfluger
------------ -------------------------
Name: Addison Lee Pfluger
Title: President
PARTNERS:
--------
Dated: 1-19-96 /s/ J. Marshall Young
------------ ----------------------
J. Marshall Young
STOCKYARDS HOTEL JOINT VENTURE,
a Texas Joint Venture
By: Stowaway Properties, Inc.,
managing venturer
Dated: 19 JAN 96 By: /s/ Addison Lee Pfluger
------------ ------------------------
Name: Addison Lee Pfluger
Title: President
Dated: 19 JAN 96 /s/ Tolbert F. Yater
------------ ----------------------
Tolbert F. Yater III
20
<PAGE>
PURCHASER:
---------
BUFFTON CORPORATION,
a Delaware corporation
Dated: 1-19-96 By: /s/ Robert H. McLean
------------ -----------------------
Name: /s/ Robert H. McLean
---------------------
Title: /s/ Pres.
--------------------
21
