FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 1, 1997
CALTON, INC.
(Exact name of registrant as specified in its charter)
New Jersey 1-8846 22-2433361
(State or other jurisdiction(Commission (IRS Employer
of incorporation) File Number) Identification Number)
500 Craig Road
Manalapan, New Jersey 07726
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (732) 780-1800
Item 2. Acquisition or Disposition of Assets
------------------------------------
On December 1, 1997, Calton, Inc. ("Calton" or the "Company") announced that it
had sold its Orlando, Florida homebuilding operations to Beazer Homes USA, Inc.
(NYSE - BZH), a national homebuilder headquartered in Atlanta, Georgia. The
purchase price for the Florida assets, which was paid in cash, was
approximately $16.7 million and is subject to a post-closing adjustment to
reflect transactions and operating results during November 1997. Approximately
$15.8 million of the proceeds of the transaction were used to reduce
outstanding borrowings under the Company's ongoing $45.0 million revolving
credit facility to $17.5 million, leaving approximately $27.0 million of
borrowing commitment. As a result, Calton estimates that it will record a pre-
tax gain from this transaction of approximately $500,000 in the fourth quarter
of fiscal 1997.
The sale of the Orlando, Florida division resulted from management's
determination that the Company's assets could be more profitably invested in
New Jersey, the Company's primary market. In addition, this transaction
significantly improves the Company's financial position, including a debt-to-
equity ratio of significantly less than one to one.
- ------------------------------------------------------------------------------
Certain information included in this report and other Company filings
(collectively, "SEC filings") under the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended (as well as information
communicated orally or in writing between the dates of such SEC filings)
contains or may contain forward looking information that is subject to certain
risks, trends and uncertainties that could cause actual results to differ
materially from expected results. Among these risks, trends and uncertainties
are matters related to national and local economic conditions, the effect of
governmental regulation on the Company, the competitive environment in which
the Company operates, changes in interest rates, home prices, availability and
cost of land for future growth, the timing of land acquisition and project
development, and the availability and cost of labor and materials.
- -------------------------------------------------------------------------------
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(b) Pro Forma Financial Statements
The following unaudited pro forma statements of operations for the nine
months ended August 31, 1997 and the year ended November 30, 1996, and
the unaudited pro forma balance sheet as of August 31, 1997 give effect
to the sale of the net assets of the Orlando, Florida homebuilding
operation. The statements of operations were prepared assuming the sale
occurred December 1, 1995 and the balance sheet was prepared assuming
the sale occurred on August 31, 1997.
The unaudited pro forma financial statements presented do not purport to
represent what the results of operations or financial condition would
actually have been if the transaction had occurred on the dates referred
to above or to be indicative of the future results of operations or
financial position of Calton, Inc. The unaudited pro forma financial
statements should be read in conjunction with the audited financial
statements and notes thereto as included in the Calton, Inc. 1996 Annual
Report on Form 10-K/A and are not necessarily indicative of the results
or financial position that may be expected for the periods presented.
(c) Exhibits
Exhibit 2. Agreement for Sale and Purchase of Assets dated as of
November 26, 1997 between Beazer Homes Corp., Beazer Homes USA, Inc. and
Calton Homes of Florida, Inc. and Calton Homes, Inc.
-2-
CALTON, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended August 31, 1997
(Unaudited)
As Pro Forma
Reported Adjustments Pro Forma
----------- ------------- -----------
Revenues. . . . . . . . $75,241,000 $(27,267,000) (a) $47,974,000
----------- -----------
Costs and expenses
Cost of revenues . . . 65,684,000 (23,319,000) (a) 42,365,000
Selling, general
and administrative. . 10,580,000 (3,690,000) (a) 6,890,000
Impairment of assets . 350,000 350,000
----------- -----------
76,614,000 49,605,000
----------- -----------
Loss from operations. . (1,373,000) (1,631,000)
Other charges (credits)
Interest expense, net. 1,086,000 (326,000) (b) 760,000
Other (income)
expense . . . . . . . (871,000) (871,000)
----------- -----------
Loss before income
taxes and extraordinary
gain . . . . . . . . . (1,588,000) (1,520,000)
Benefit in lieu of
income taxes . . . . . (794,000) 34,000 (c) (760,000)
----------- -----------
Loss before
extraordinary gain . . (794,000) (760,000)
Extraordinary gain from
extinguishment of debt,
net of $842,000 of
income taxes . . . . . 1,263,000 1,263,000
----------- -----------
Net income (loss) . . . $ 469,000 $ 503,000
=========== ===========
Income (loss) per share
Loss before
extraordinary gain. . $ (.03) $ (.03)
Extraordinary gain,
net . . . . . . . . . .05 .05
----------- -----------
Net income (loss)
per share . . . . . . $ .02 $ .02
=========== ===========
Weighted average number
of shares outstanding. 26,554,000 26,554,000
=========== ===========
See accompanying notes to proforma consolidated financial statements.
-3-
CALTON, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended November 30, 1996
(Unaudited)
As Pro Forma
Reported Adjustments Pro Forma
----------- ------------- -----------
Revenues. . . . . . . . $122,435,000 $(37,829,000) (a) $84,606,000
----------- -----------
Costs and expenses
Cost of revenues . . . 105,645,000 (32,472,000) (a) 73,173,000
Selling, general
and administrative. . 14,953,000 (4,646,000) (a) 10,307,000
----------- -----------
120,598,000 83,480,000
----------- -----------
Income from operations. 1,837,000 1,126,000
Other charges (credits)
Interest expense, net. 1,266,000 (465,000) (b) 801,000
Other (income)
expense . . . . . . . (460,000) (460,000)
----------- -----------
Income before
income taxes . . . . . 1,031,000 785,000
Provision in lieu of
income taxes . . . . . 578,000 (186,000) (c) 392,000
----------- -----------
Net income. . . . . . . $ 453,000 $ 393,000
=========== ===========
Net income per share. . $ .02 $ .01
=========== ===========
Weighted average number
of shares outstanding. 26,491,000 26,491,000
=========== ===========
See accompanying notes to proforma consolidated financial statements.
-4-
CALTON, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AT AUGUST 31, 1997
(Unaudited)
As Pro Forma
Reported Adjustments Pro Forma
----------- ------------- -----------
ASSETS
Cash and cash
equivalents . . . . . $ 2,537,000 $ (28,000) (d) $ 2,509,000
Receivables. . . . . . 4,243,000 (496,000) (d) 3,747,000
Inventories. . . . . . 67,655,000 (17,230,000) (d) 50,425,000
Commercial land. . . . 7,412,000 7,412,000
Prepaid expenses and
other assets. . . . . 4,767,000 (239,000) (d) 4,528,000
----------- -----------
Total assets. . . . . $86,614,000 $68,621,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Revolving credit
agreement . . . . . . $36,808,000 $(16,541,000) (e) $20,267,000
Mortgages payable. . . 4,112,000 4,112,000
Accounts payable . . . 3,050,000 (502,000) (d) 2,548,000
Accrued expenses and
other liabilities . . 11,964,000 (1,200,000) (d) 10,764,000
----------- -----------
Total liabilities . . 55,934,000 37,691,000
----------- -----------
Commitments and contingencies
Shareholders' equity
Common stock . . . . . 266,000 266,000
Paid in capital. . . . 25,565,000 25,565,000
Retained earnings. . . 4,849,000 250,000 (f) 5,099,000
----------- -----------
Total shareholders'
equity . . . . . . . 30,680,000 30,930,000
----------- -----------
Total liabilities
and shareholders'
equity . . . . . . . $86,614,000 $68,621,000
=========== ===========
See accompanying notes to proforma consolidated financial statements.
-5-
CALTON, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(a) Adjustments to exclude the operations of the Orlando, Florida,
homebuilding operation.
(b) Adjustment for the estimated interest savings resulting from the reduction
in bank debt, net of amounts impacting capitalized interest, using the net
proceeds from the sale of the Orlando, Florida homebuilding operation.
(c) Reflects the tax impact of the proforma adjustments at the incremental tax
rate.
(d) Reflects asset and liabilities sold to the buyer as adjusted for the
amounts in the period presented.
(e) Adjustment to reduce the amount outstanding under the revolving credit
facility utilizing the net cash proceeds received from the buyer as
adjusted for the amounts in the period presented.
(f) Reflects the estimated net gain from the sale transaction. This amount is
subject to a post-closing adjustment to reflect transactions and operating
results during November 1997.
-6-
SIGNATURES
==========
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has fully caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Calton, Inc.
-----------------------------
(Registration)
By: /s/ Bradley A. Little
-----------------------------
Bradley A. Little
Senior Vice President-Finance
of Calton, Inc.
Date: December 15, 1997
-7-
EXHIBITS
========
EXHIBIT DESCRIPTION OF EXHIBIT
- ------- ----------------------------
A Description of real property
B Excluded Assets
C Other Assumed Liabilities
D Existing Purchase Agreements
E Contracts
F Credit Liabilities
G Accrual Schedule
H Leases
I Options
J Legal Description of Commercial Land
K Speculative Units
L Estimate of the November 30, 1997 Balance Sheet
M Letters of Credit and Guaranties
N October 31 Balance Sheet
O Projects
P Post Cut Off Date Closing Units
Q Estimated Determination of the Net Operating Profit Adjustment
EXHIBITS WILL BE PROVIDED TO THE
SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.
-8-
AGREEMENT FOR SALE AND
PURCHASE OF ASSETS
THIS AGREEMENT FOR SALE AND PURCHASE OF ASSETS (this "Agreement"), made
this 26th day of November, 1997, between BEAZER HOMES CORP., a Tennessee
corporation ("Purchaser"), BEAZER HOMES U.S.A., INC., a Delaware corporation
("Beazer"), and CALTON HOMES OF FLORIDA, INC., a Florida corporation
("Seller"), and CALTON HOMES, INC., a New Jersey corporation ("Calton");
W I T N E S S E T H: That,
The Purchaser and the Seller desire to implement the terms outlined in
their letter of intent dated November 6, 1997 (the "Letter of Intent"), and
acknowledge and recognize that the following recitals are true and correct:
RECITALS
1. The Seller is engaged in the business of residential construction,
development and sales in the State of Florida ("Seller's Business").
2. The Seller wishes to sell and transfer and the Purchaser wishes to acquire
certain assets of the Seller which are used or usable in the operation of
Seller's Business pursuant to the terms and conditions hereof.
3. The Seller wishes to sell and the Purchaser wishes to purchase all of the
Land, and Improvements and certain other assets of the Seller.
4. Calton is in this Agreement for the purposes of providing post-closing
indemnification for the representations, warranties and covenants of the
Seller contained herein and to guarantee the performance of the obligation
of the Seller herein and to guarantee the performance of the obligations
of the Seller hereunder.
5. Beazer has executed this Agreement in order to guaranty the performance of
the obligations of Purchaser hereunder.
NOW, THEREFORE, incorporating the foregoing recital of facts and in
consideration of TEN DOLLARS ($10.00) in hand paid by the Purchaser to the
Seller and the mutual promises contained herein, the Seller and the Purchaser
agree as follows:
1. DEFINITIONS.
In addition to any other terms which are defined in this Agreement,
each of the following terms shall have the meaning given it below:
1.1. "Accrual Schedule" means that list of accrued expenses and
payables included as Credit Liabilities more particularly described on Exhibit
G attached hereto and made a part hereof.
1.2. "Adverse Consequences" shall mean all losses, costs, damages,
fees, or liabilities incurred by the indemnified party arising from the matter
indemnified under this Agreement.
1.3. "Arthur Andersen" shall mean Arthur Andersen LLP.
1.4. "Assumed Liabilities" shall mean liabilities of the Seller as of
the Closing Date but not before as follows:
(A) all obligations of the Seller under the Existing Purchase
Agreements;
(B) obligations of the Seller remaining under the Options;
(C) obligations under leases identified for assumption by the
Purchaser listed on Exhibit H for which consents to assignment have been or
will be obtained;
(D) the obligation to perform warranty work for customers who
purchased and closed homes from the Seller prior to the Closing Date but only
to the extent set forth in Section 3.3 hereof;
(E) obligations under the Contracts;
(F) trade payables supported by invoices or other back-up
satisfactory to the Purchaser for units closing after the Closing Date and for
units closing on or prior to the Closing
Date if provided on the Accrual Schedule;
(G) all other Liabilities and obligations relating to the
Included Assets listed on Exhibit C; and
(H) obligations of the Seller remaining to be performed on or
after the Closing Date under all permits and approvals related to the Included
Assets.
1.5. "Backlog Units" shall mean the residential housing units which
are the subjects of Existing Purchase Agreements, but which are not scheduled
to close as of or prior to the Closing Date.
1.6. "Book Value" shall mean the book value of the Included Assets as
determined in accordance with the GAAP.
1.7. "Business" shall mean the operation of a land development,
residential construction and sales operation.
1.8. "Closing" shall mean the consummation of the purchase and sale
contemplated by this Agreement by the deliveries required under Section 9.2 as
of the Closing Date.
1.9. "Closing Date" shall mean 11:59 p.m. on November 30, 1997.
1.10. "Commercial Land" shall mean the two parcels of property
owned by the Seller as set forth on Exhibit J.
1.11. "Contracts" shall mean the contracts, leases, licenses and
agreements which relate to Seller's Business and the Land, the material ones
being identified in Exhibit E.
1.12. "Confidential Information" shall mean any business or
technical information used by the Seller exclusively in connection with the
Included Assets and which has economic value to the Seller because it has been
deliberately maintained as confidential by the Seller.
1.13. "Credit Liabilities" shall mean the portion of the Assumed
Liabilities for which the Purchaser receives a credit against the Purchase
Price as set forth on Exhibit F.
1.14. "Cut Off Date" shall mean 11:59 p.m. November 25, 1997.
1.15. "Earnest Money" shall mean the amount of $25,000.00 paid to
Seller upon execution of this Agreement.
1.16. "Effective Date" shall mean the date on which an unaltered
counterpart of this Agreement, has been duly executed by the Purchaser and the
Seller.
1.17. "Escrow Agent" shall mean Chicago Title Insurance Company.
1.18. "Escrow Agreement" see Section 3.2.
1.19. "Excluded Assets" shall mean the assets set forth on
Exhibit B attached hereto and made a part hereof.
1.20. "Existing Purchase Agreements" shall mean the existing
purchase and sale agreements between the Seller and third party purchasers of
portions of the Land and Improvements as of October 31, 1997, and updated to
and through the Cut Off Date. A complete list of the Existing Purchase
Agreements is set forth as Exhibit D.
1.21. "Final Purchase Price" see Section 3.2.
1.22. "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.23. "Holdback" shall mean the deferred portion of the Purchase
Price deducted from the Purchase Price and paid to the Escrow Agent as part of
the Closing process for further disbursement in accordance with the terms
hereof and the Escrow Agreement.
1.24. "Improvements" shall mean all improvements of any nature
located on or appurtenant to the Land which shall include all residential
housing units, model homes, speculative homes, infrastructure and all related
property affixed to or permanently located on the Land.
1.25. "Included Assets" shall include all Land and Improvements,
Leases, Contracts, Intangible Property, Options, Existing Purchase Agreements
and Personal Property and all assets of the Seller designated on the October 31
Balance Sheet as updated through the Closing Date except as may be excluded by
the Purchaser prior to Closing including the Excluded Assets.
1.26. "Intangible Property" shall mean all intangible or
intellectual property used by the Seller which is used in the Seller's Business
and relates to the Included Assets including data, files, books and records,
customer lists, warranties, computer software and programs, plans and
specifications, or copyrights.
1.27. "Knutson" shall mean Donald W. Knutson, an individual
resident of the State of Florida.
1.28. "Land" shall mean the improved or unimproved real property
and more particularly described on Exhibit A.
1.29. "Leases" shall include the real and personal property
leases of the Seller which are identified in Exhibit H.
1.30. "Licenses, Entitlements, and Permits" shall mean all
licenses, entitlements, permits, governmental rights, development of regional
impact approvals, zoning rights, paid impact fees and tap in rights, utility
capacity and all other rights, approvals and permits associated with the
Included Assets or otherwise owned by the Seller or Calton with respect to the
operation of the Business in the Restricted Area.
1.31. "Net Operating Profit Adjustment" shall mean the variable
contribution margin realized from deliveries during the period after
October 31, 1997 through the Closing Date, less all costs incurred in the
normal course of business determined in accordance with GAAP and consistent
with past practice as illustrated by the estimated determination set forth on
Exhibit Q. Any internal interest charged to the Seller during the period after
October 31, 1997 through the Closing Date (whether capitalized or expensed
directly) shall be excluded from the calculation of the Net Operating Profit
Adjustment.
1.32. "Net Premium" shall mean the Premium designated in Section
3.1 minus the Net Operating Profit Adjustment.
1.33. "October 31 Balance Sheet" shall mean the balance sheet of
the Seller as of October 31, 1997, a true and exact copy of which is attached
hereto as Exhibit N.
1.34. "Options" shall mean the option agreements and purchase and
sale agreements between the Seller and certain third party land sellers, a
complete list of which are set forth on Exhibit I attached hereto and made a
part hereof.
1.35. "Peat Marwick" shall mean KPMG Peat Marwick, LLP.
1.36. "Permitted Exceptions" shall mean collectively any title
exception set forth on the Title Commitment which is not a Title Objection.
1.37. "Personal Property" shall include all equipment, tools,
furniture, office equipment, marketing materials, cash, deposits with community
associations or community development districts and other tangible personal
property used in connection with the development of residential homes or
improved lots located in the Land or otherwise related to the Included Assets.
1.38. "Permit Projects" see Section 6.1.16.
1.39. "Post Cut Off Date Closing Units" shall mean the Units to
be conveyed to third party homeowners after the Cut Off Date through the
Closing Date pursuant to bona fide third party contracts as more particularly
designated on Exhibit P attached hereto and made a part hereof.
1.40. "Price Waterhouse" shall mean Price Waterhouse, LLP.
1.41. "Projects" shall mean the projects located in the State of
Florida and listed on Exhibit O hereto.
1.42. "Purchase Price" shall mean the amount, set forth in
Section 3.1, that the Purchaser shall pay to consummate the purchase and sale
of the Included Assets.
1.43. "Reference Date" shall mean October 31, 1997.
1.44. "Reserve" see Section 3.3.
1.45. "Restricted Area" shall mean the Orlando, Florida
metropolitan statistical area.
1.46. "Restricted Party" shall mean the Seller and entities in
which the Seller, Calton or any of their principal shareholders has a direct or
indirect interest, and the officers, directors and shareholders of the Seller
or Calton and all related corporate entities of the Seller and Calton.
1.47. "Road Bond" see Section 3.3.
1.48. "Speculative Units" shall mean the residential housing
units currently under construction by the Seller or models constructed and
owned by the Seller which are the not the subject of an Existing Purchase
Agreement all of which are more particularly described in Exhibit K.
1.49. "Surveys" shall mean any existing surveys of the Land in
the possession of the Seller or readily accessible by the Seller.
1.50. "Title Commitment" shall mean the title insurance
commitment issued by Escrow Agent with respect to the Land issued in favor of
the Purchaser.
1.51. "Title Objection" shall mean any deed of trust, lien,
financing statement, security agreement, security interest or other monetary
encumbrance encumbers the Seller's title to the Land.
2. AGREEMENT TO SELL AND ASSUMPTION OF CERTAIN LIABILITIES.
2.1. Agreement to Sell. On the terms and conditions hereinafter set
forth, the Seller agrees to sell the Included Assets to the Purchaser and the
Purchaser agrees to purchase the Included Assets from the Seller.
2.2. Assumption of Certain Liabilities. The Purchaser agrees to
assume at the Closing the Assumed Liabilities and agrees to perform the
obligations incident thereto. The assumption shall include those Options that
meet the requirements set forth in Section 6.1.26 of this Agreement on and as
of the Closing Date. The Assumed Liabilities shall not include any obligation
or liability arising from any default, breach, misfeasance, malfeasance or
nonfeasance by the Seller prior to the Closing. Nothing contained in this
Section 2 or in any instrument or assumption executed by the Purchaser at the
Closing shall be deemed to release or relieve the Seller from its respective
representations, warranties, covenants and agreements contained in this
Agreement or any certificate, schedule, instrument or document executed
pursuant hereto or in connection herewith, including, without limitation, the
obligations of the Seller to indemnify the Purchaser in accordance with the
provisions of this Agreement. The Assumed Liabilities shall not include any
liability or obligation of the Seller arising out of or relating to (a) any
actual or alleged tortious conduct of the Seller or any of its employees or
agents, (b) except as set forth in Section 3.3, any product liability claim
related to a home delivered to a home buyer prior to Closing, (c) any claim for
breach of warranty or contract by the Seller except as provided in Section 3.3,
(d) any claim predicated on strict liability, (e) the violation of any law,
ordinance or regulation in effect prior to the Closing, (f) any business or
business activities of the Seller which are not part of the Seller's Business,
(g) any liability for expenses or taxes, if any, in connection with, resulting
from or arising out of this Agreement or the transactions contemplated hereby,
(h) any liability of the Seller for any federal, state or local taxes of any
kind or character (other than taxes assumed under this Agreement), (i) any
liability of the Seller under or arising by reason of this Agreement, or
(j) any liability for any amounts payable under the Contracts or under any
other agreement to which the Seller is a party for the period prior to the
Closing Date except as shown on the Accrual Schedule. In particular, Seller
shall pay and remain solely responsible for all trade payables under the
Contracts or otherwise which apply to units closed prior to the Closing Date
except as shown on the Accrual Schedule. The Seller hereby indemnifies and
holds harmless the Purchaser against any losses, costs, damages, fees arising
or related to the period on or before Closing or other amounts payable for any
liabilities or obligations of the Seller relating to the Included Assets
arising or related to the period on or before Closing other than the Assumed
Liabilities. The indemnification contained in this section shall be subject to
the provisions of Section 14. The obligations of the Seller pursuant to this
Section shall survive the Closing and the transactions contemplated by this
Agreement.
3. PURCHASE PRICE PAYMENT AND PERFORMANCE.
3.1. Purchase Price. The Purchase Price shall be the sum of:
A. The Book Value of the Included Assets on the October 31 Balance
Sheet,
B. plus, $1,500,000.00,
C. minus, the Credit Liabilities,
D. plus the net increase, or minus the net decrease, in the
Included Assets after October 31, 1997 through the Closing Date,
E. plus the net decrease, or minus the net increase, in the Credit
Liabilities after October 31, 1997 through the Closing Date,
F. minus the Net Operating Profit Adjustment.
All of the above items shall be determined in accordance with GAAP as disclosed
by Seller to Purchaser prior to Closing and contained in the Seller's
accounting manual (except as described in the following paragraph) and the net
changes in Included Assets and Credit Liabilities shall include only those
changes in the ordinary course of business.
Any internal interest charged to the Seller during the period after
October 31, 1997 through the Closing Date (whether capitalized or expensed
directly) shall be excluded from the calculation of both Net Operating Profit
Adjustment and net increase or decrease in the Included Assets and Credit
Liabilities for the period after October 31, 1997 through the Closing Date.
An example of the calculation of the Purchase Price follows:
10/31/97 Closing Date Net Change
----------- ------------ ------------
Book Value of Included Assets $20,000,000 $17,000,000 $(3,000,000)
Book Value of Credit Liabilities $2,500,000 $2,000,000 $(500,000)
Net operating profit after
October 31, 1997 to Closing Date $400,000
The Purchase Price would be determined as follows:
Book Value of Included Assets at 10/31/97 $20,000,000
Plus premium 1,500,000
Minus Book Value of Credit Liabilities at 10/31/97 (2,500,000)
Minus decrease in Included Assets (3,000,000)
Plus decrease in Credit Liabilities 500,000
Minus Net Operating Profit Adjustment after
10/31/97 to Closing Date (400,000)
-----------
Purchase Price $16,100,000
===========
The Purchase Price shall be allocated to the Included Assets pursuant
to the Book Value thereof with the Net Premium allocated to goodwill.
All prorations, calculations, and price credit or liability
determinations shall be made as of November 30, 1997. For purposes of these
calculations and determinations, the Seller shall retain all benefits and
burdens of the Seller's Business until 11:59 p.m. on November 30, 1997. All
employees of the Seller shall remain employees of the Seller until 11:59 p.m.
on November 30, 1997. Thereafter, all benefits and burdens of the Included
Assets and Assumed Liabilities shall be of the Purchaser. Purchaser and Seller
acknowledge and recognize that the Purchaser intends to prepay the Purchase
Price on November 28, 1997 and shall execute certain closing documents on
November 26, 1997. Nevertheless, the Closing shall be effective on the Closing
Date. In the event that, on or prior to the Closing Date, the Closing is
enjoined or otherwise prevented by any third party or occurrence, then upon
such occurrence, the Seller shall repay to Purchaser all amounts so prepaid and
shall hold in trust such sums for the benefit of the Purchaser for the period
prior to such repayment. Except for the Assumed Liabilities, Seller hereby
indemnifies the Purchaser for all liabilities whatsoever arising from the
operation of the Seller's Business on or prior to the Closing Date.
3.2. Manner of Payment and Post Closing Adjustment.
(A) Upon the reasonable satisfaction of the conditions set
forth in Sections 9 and 15 herein and subject to the provisions of Section 3.1,
the Purchase Price shall be payable as follows:
(1) Earnest Money: The Purchaser shall receive a credit
for the Earnest Money which shall be payable on November 26,
1997;
(2) Holdback: The Purchaser shall receive a credit in the
amount of the Holdback as paid to the Escrow Agent.
(3) Remainder of the Purchase Price: The Purchaser shall
prepay the remainder of the Purchase Price by wire transfer on
November 28, 1997.
On November 26, 1997, Purchaser shall deliver to the wiring bank
its instructions to wire transfer the sum established at 3. above at its
earliest available time but in no event later than 10:00 a.m. on November 28,
1997. Seller hereby designates the following wiring information for all wire
transfers to it hereunder:
Calton Homes, Inc.
BankBoston, N.A.
Account Number 522-35690
ABA: 011000390
Calton Homes Inc.
Account by BKB Secured Party
Advise upon receipt: Bradley A. Little
Telephone: (723)780-1800 x9203
As soon as practicable, but no later than forty-five (45) days
following the Closing Date, an Officer of the Seller or Calton will certify to
the Purchaser (the "Calculation") his determination of the final purchase price
due under Section 3.1 reflecting all of the changes in Book Value of the
Included Assets and the Credit Liabilities, the Net Operating Profit
Adjustment, any prorations provided in this Agreement; and the balance of the
Holdback as recalculated on the basis of such Calculation.
Should the Seller and the Purchaser be unable to agree on the
amount due pursuant to such Calculation, Purchaser may submit the dispute to
the head of the real estate practice section of Peat Marwick in Atlanta,
Georgia who shall resolve the dispute or designate another non-partial
professional at Peat Marwick of reasonably equal competence to the resolve the
dispute. Prior to submitting such a dispute and no later than 30 days from the
date the Seller has delivered its Calculation each party shall state in writing
in reasonable detail the basis for its disagreement and the amount in dispute.
Expenses of such arbitration shall be paid by Purchaser if the calculation of
the Final Purchase Price by Peat Marwick differs by less than $80,000.00 from
the Calculation. Otherwise, the costs shall be paid by Seller. The amounts
owed by either party pursuant to such arbitration shall bear interest due at
the rate of 15 percent per annum from the date the payment was originally due
until paid.
In the event that either the Purchaser or the Seller disputes
the findings of Peat Marwick, the disputing party may refer the dispute to the
head of the real estate section of Price Waterhouse in Atlanta, Georgia for
resolution. If Price Waterhouse determines that the Final Purchase Price is
within $80,000.00 of the calculation of the Final Purchase Price as determined
by Peat Marwick, then in such event, the determination of Peat Marwick shall
govern and the disputing party shall pay all costs associated with such appeal.
Otherwise, the costs shall be paid by non-disputing party. If the
determination is outside of the foregoing parameter, and in the event that
Price Waterhouse and Peat Marwick cannot agree to a Final Purchase Price within
the foregoing $80,000.00 number, then the dispute shall be forwarded by either
party to the head of the real estate practice of Arthur Andersen in Atlanta,
Georgia whose determination shall be final. In such event, all costs shall be
paid equally between the two parties. All determinations by any arbitrator
shall occur within forty-five (45) days of submission. Otherwise, the decision
of Peat Marwick shall be deemed conclusive. In the event Purchaser agrees with
the Calculation or Purchaser and Seller subsequently agree to modifications
thereof, then the payment of the Holdback shall occur in accordance with
Subsection (C). The Purchase Price established either by agreement by the
parties or pursuant to the foregoing procedures is hereby defined as the Final
Purchase Price.
Upon the unappealable determination (as provided above) of the
Final Purchase Price or the agreement of the parties as to the Final Purchase
Price, then the Holdback shall be disbursed in the amounts and to the payees
designated in such determination or agreement. The payment shall be made
pursuant to the terms of the Escrow Agreement. In the event that the Holdback
is insufficient to pay to the designated payee the amounts owed to such payee,
then the party responsible for payment pursuant to the determination or
agreement shall pay in good funds to the designated payee the amount necessary,
when taken into account with the sums to be disbursed to the payee from the
Holdback, in order to pay in full the amount determined or agreed to be due to
such payee. Any amounts payable under this paragraph shall be payable within
five (5) business days of the date of determination or agreement.
(B) Credit Liabilities. The Purchaser and the Seller shall
establish a list and calculation of the Credit Liabilities at Closing. The
Credit Liabilities set forth on Exhibit F is a list of the Credit Liabilities
as of October 31, 1997 together with an estimate of the Credit Liabilities
thereafter through the Closing Date. The actual calculation and designation of
the Credit Liabilities shall be those accrued liabilities payable by the
Purchaser on behalf of the Seller after Closing. The Purchaser shall receive a
credit against the Purchase Price in the amount of the Credit Liabilities as of
the Closing Date.
(C) Holdback. A portion of the Purchase Price in the amount of
$800,000.00 shall be delivered by the Purchaser to Escrow Agent on November 28,
1997, and shall be held in escrow until the Final Purchase Price is
established. The Holdback shall be held in escrow pursuant to an Escrow
Agreement between the Purchaser and Seller executed and delivered at Closing
("Escrow Agreement"). The Holdback as adjusted to reflect the adjustments
required in order to cause the payment of the Holdback to equal the Final
Purchase Price, shall be paid to the payees designated by the joint
instructions of the Purchaser and the Seller or as determined by the procedure
set forth at Subsection (A). Any amount payable by Calton with respect to such
recalculation shall be deducted from the Holdback. The Holdback shall also be
adjusted to: compensate Purchaser for (i) any amounts expended by Purchaser
or necessary to cause the truth and accuracy of the warranties and
representations contained herein, including any amounts in excess of the
Reserve for warranty claims that are required to be paid by the Purchaser; and
(ii) any amount paid by the Purchaser arising from liabilities of Seller or its
Business not designated as Assumed Liabilities. Except for the amounts payable
with respect to the calculation of the Final Purchase Price, any amounts
payable from the Holdback for reasons designated in (i) and (ii) shall be
subject to (a) five (5) days' prior notice to Seller prior to payment; and (b)
solely as to the amounts set forth in (i) but not as to amounts set forth in
(ii), a "de minimis" standard so that no amount shall be deducted until the
aggregate amount of deductions from the Holdback exceeds $20,000.00. The
foregoing "de minimis" amount shall not apply to any amounts required to pay or
discharge a Title Objection. The Holdback shall be placed in an interest
bearing account with the prior approval of Purchaser and Seller. The interest
earned shall be disbursed proportionately to the payee or payees of the
Holdback. Seller's tax payer identification number is 55-2319621.
Purchaser and Seller agree that the Escrow Agent shall be authorized
to rely upon the determination of the accounting firm which determines the
Final Purchase Price, if any, in making payments of the Holdback as to the
payment of the Final Purchase Price.
3.3. Construction and Warranty Matters. The Purchaser shall perform
all work caused by any warranty claim determined to be covered by an existing
warranty by the Seller and relating to any residential housing units (i) closed
by the Seller between December 1, 1996 and November 30, 1997; (ii) located in
the Restricted Areas and (iii) which are covered by the one (1) year warranty
period granted by Seller to third party home purchasers from Seller. Any claim
that the Purchaser determines to be outside an applicable warranty or the
foregoing three categories shall be referred to the Seller for remedy. The
Purchaser reserves the right to forward any claims made under a third party
warranty program such as HOW, HBW, PWC, and RWC warranty programs to such
warranty providers after providing adequate notice to Seller and shall inform
the Seller of such disposition. Subject to the following paragraph, the Seller
shall promptly reimburse the Purchaser for any work performed by the Purchaser.
The amount to be reimbursed shall include out-of-pocket costs not to exceed the
normal and customary costs of such work prevailing in the industry.
The Purchaser shall assume the warranty reserve of the Seller in the
amount as designated on the October 31 Balance Sheet as updated on the Closing
Date which shall be approximately $35,000.00 ("Reserve"). The amount of the
Reserve shall constitute a Credit Liability. The Reserve shall be reduced by
the amount of all of the warranty work that the Purchaser undertakes on behalf
of the Seller as provided in this Section. Within thirty (30) days of the
first anniversary of the Closing Date, the Purchaser shall pay to Seller in
cash the amount that the unused balance of the Reserve exceeds amounts deducted
therefrom as provided herein. In the event that the Reserve has been
completely used at any time during the one year period, then the Seller shall
promptly pay to the Purchaser upon periodic billing the amounts due and payable
with respect to the warranty work described herein. The Purchaser shall not be
obligated to pay to the Seller any amounts claimed by Seller to be due with
respect to the Reserve during the pendency of any dispute with respect to
obligations of warranty work hereunder or in the event that a claim is pending
for indemnification as provided in Section 13. Purchaser shall be liable for
its gross negligence in the conduct of the warranty work. Purchaser shall
cause all warranty work subcontracts entered into by Purchaser to run to the
benefit of the Seller as well as to the benefit of the Purchaser in order to
permit the Seller to have recourse to the subcontractors for below standard
warranty work.
The Purchaser agrees to provide estimates to the Seller for any
warranty work items in excess of $1,000 for the Seller's review before the
Purchaser performs such work. If the Seller elects to proceed, the Seller
shall authorize the recommended work within three (3) business days of
notification by the Purchaser or otherwise the proposed action by the Purchaser
shall be deemed approved. If the Seller elects, the Seller may provide to the
Purchaser a recommendation of an alternative work procedure. In the event that
the Seller does not so respond within the applicable period, the Purchaser
shall proceed with the repair work. In the event that the Seller provides an
alternative recommendation, the Purchaser shall determine if the alternative
work order is appropriate. In the event of a dispute between the Purchaser and
the Seller as to this repair work, then: (i) the Seller shall be responsible
for the repair work; (ii) the Seller shall and does hereby indemnify the
Purchaser for all losses, costs, damages, fees, or liabilities with respect to
any claim made against the Purchaser with respect to the Seller's failure to
perform such repair work; and (iii) the Seller, and in the absence of prompt
compliance by the Seller, the Purchaser on behalf of the Seller, shall send a
letter advising the claimant that warranty work is the Seller's responsibility.
The provisions of this Section shall not operate as an assumption by
the Purchaser of any liability of the Seller for any warranty or other product
liability claims. In particular, the Purchaser shall not be responsible for or
assume any obligations with respect to structural claims or implied warranties
with respect to any residences or other improvements constructed by or on
behalf of the Seller and closed prior to November 30, 1997. Rather, the
provisions of this section shall operate as a mechanism for the performance of
work on behalf of the Seller by the Purchaser under certain circumstances.
Furthermore, the Seller shall remain liable for the warranty claims by third
party homeowners and the Seller hereby indemnifies the Purchaser against all
losses, costs, damages, fees, or liability to any third party home owner
arising under home owner warranty claims on homes closed prior to Closing. The
Purchaser hereby indemnifies the Seller against Adverse Consequences on homes
closed after the Closing Date including Adverse Consequences arising from
homeowner warranty claims with respect to such homes.
The Assumed Liabilities shall include the obligation of Seller under
the cash bond in the approximate amount of $14,831.00 for the maintenance of a
roadway at the Cypress Lakes Project ("Road Bond"). In the event that any
repair work is required with respect to the roadway affected by the Road Bond
during the term thereof, the Purchaser shall undertake such warranty work and
all monies expended with respect thereto shall be governed by the provisions of
this Section. Any amounts returned from the Road Bond shall be the exclusive
property of the Purchaser.
4. EARNEST MONEY.
The Purchaser shall deliver to Seller on November 26, 1997 the sum of
$25,000.00 as the Earnest Money. If the Purchaser shall lawfully exercise any
right or option under this Agreement to rescind, cancel or terminate this
Agreement, then Seller shall immediately refund the Earnest Money to the
Purchaser, whereupon this Agreement shall terminate and the parties to this
Agreement shall have no further rights, duties or obligations under this
Agreement.
5. TITLE EXAMINATION, SURVEYS AND OBJECTIONS.
5.1. Title Examination. The Purchaser shall cause the Seller's title
to the Land and Improvements to be examined and may have surveys prepared or
updated at any time and from time to time up to and through the Closing Date
and may at, any time prior to Closing, give the Seller written notice of any
Title Objections disclosed by such examination of title or updated survey that
were not disclosed by the Purchaser's initial title examination. The Seller
shall (i) satisfy or commit to satisfy at Closing, at the Seller's expense, any
mortgages, liens or other monetary encumbrances, including assessments or
homeowner's association fees affecting the Land or Improvements, judgment and
lien affecting the Included Assets, (ii) satisfy or correct, at the Seller's
expense, any Title Objection arising in breach of the Seller's covenants,
representations or warranties under this Agreement including bonding off any
materialmen liens or other bondable Title Objections and (iii) use reasonable
efforts to cure and correct all other Title Objections. The Seller shall not
be obligated to cure any Title Objections other than those described in clauses
(i) and (ii) above, and shall not be obligated to expend more than $200,000.00
prior to the Effective Date to release any judgment or lis pendens affecting
the Property but the cure of any such additional Title Objections shall be a
condition to the Purchaser's obligation hereunder and the Purchaser shall have
the right to terminate this Agreement, as more particularly provided in Section
5.2 below, if the Seller fails to cure any Title Objection.
5.2. Failure to Correct Title Objections. If the Seller fails to
satisfy or correct any Title Objection known to the Purchaser on or prior to
the Effective Date, the Purchaser shall by written notice to the Seller elect
one of the following:
5.2.1. To waive such Title Objection and to close the
transaction in accordance with the terms of this Agreement; nothing contained
in this section shall waive or terminate the obligations of the Seller with
respect to the removal of certain Title Objections set forth in the preceding
section.
5.2.2. For Title Objections for which the Seller is not
obligated to remove as provided in Section 5.1, the Purchaser may terminate
this Agreement and to receive a complete refund of all Earnest Money, in which
event neither the Seller nor the Purchaser shall have any further rights,
duties or obligations under this Agreement.
5.2.3. The Purchaser shall have the right to offset from the
Purchase Price such amounts as are necessary in order to cause the removal of
any taxes, liens, judgments, or monetary encumbrances affecting the Land which
the Seller is obligated to terminate and satisfy and remove pursuant to the
provisions of Section 5.1.
5.2.4. The matters set forth on Schedule B Section 2 of the
Owner's Title Insurance Policy delivered to Purchaser at Closing shall be
deemed accepted by Purchaser.
5.2.5. Any monetary encumbrance, judgment, lien, lis pendens
or other monetary matter affecting title to the Property and not known to the
Purchaser on the Effective Date shall be subject to the warranty of title
contained in the closing document and other representations and warranties
contained herein.
5.3. Surveys. The Seller shall provide to the Purchaser all Surveys
at or prior to Closing.
6. REPRESENTATIONS AND WARRANTIES.
6.1. Representations and Warranties of the Seller. As a material
inducement to the Purchaser to enter into this Agreement and to purchase the
Included Assets, the Seller hereby represents and warrants to the Purchaser as
follows:
6.1.1. Organization of the Seller. The Seller is a
corporation duly organized and validly existing under the laws of the State of
Florida; is in good standing and is qualified to do business under the laws of
the State of Florida; and has the power to own, dispose of and execute
agreements to sell the Included Assets, and to engage in the transactions
contemplated in this Agreement and to perform and observe the terms and
provisions of this Agreement.
6.1.2. Authorization. This Agreement has been duly
authorized by all necessary action other part of the Seller.
6.1.3. Due Execution. This Agreement has been duly autho-
rized, executed and delivered by the Seller, is legal, valid binding upon the
Seller and is enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other laws of general application affecting the
enforcement of the rights or remedies of creditors generally.
6.1.4. Status under the Internal Revenue Code. The Seller is
not a "foreign person" as that term is defined in Section 1445 of the Internal
Revenue Code of 1986, as amended.
6.1.5. Litigation. There is no action, suit, proceeding or
to the best of the Seller's knowledge, claim (other than third party warranty
claims in the normal course of business) affecting the Seller or the Included
Assets which would create a material adverse effect to the Included Assets or
any portion thereof pending or being prosecuted in any court or by or before
any federal, state, county or municipal department, commission, board, bureau,
agency or other governmental instrumentality which could prevent consummation
by the Seller of the sale of the Included Assets or the performance of the
Seller's obligations hereunder.
6.1.6. Title to Assets. The Seller presently has good and
indefeasible fee simple title to the Lands and owns the Included Assets subject
to the Permitted Exceptions.
6.1.7. Material Deterioration. As of Closing, the Included
Assets have not suffered, in the aggregate or on a per Project basis, material
deterioration subject to the provisions of Paragraph 10 herein.
6.1.8. Rights to Purchase Land. There are no outstanding
contracts, options or rights of first refusal by the Seller to any other person
or entity outstanding to purchase the Land or any of the Included Assets other
than the Existing Purchase Agreements.
6.1.9. Compliance with Laws. To the best of the Seller's
knowledge, with respect to the Included Assets, the Seller 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 to its knowledge been filed, commenced
or threatened against it alleging any failure so to comply which would
materially and adversely affect the Included Assets. To the best of its
knowledge, the Seller has complied with respect to the Included Assets, 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. To the best of the Seller's knowledge, neither the Included
Assets nor any portion thereof violates any zoning, building, fire, health,
pollution, subdivision, environmental protection or waste disposal ordinance,
code, law or regulation or any requirement contained in any hazard insurance
policy covering the Included Assets. The Seller shall give prompt notice to
the Purchaser of any such violation which shall be received by the Seller prior
to Closing. Without limitation to the foregoing, to the best of the Seller's
knowledge, the Land is in compliance in all material respects with and the
Seller has received no notice and knows of no fact or condition which could
give rise to a violation of any environmental law, rule, ordinance or
regulation or any zoning or other land use law, rule, ordinance or regulation
including, but not limited to, any of the foregoing that may affect the Land in
the nature of a plan, permit, or any land use or environmental law as to
endangered species. To the best knowledge of the Seller, the Seller is in full
compliance with local, state and federal ordinances, statutes, laws or
regulations governing the sale of residential lots to individuals.
6.1.10. Environmental Warranty. (i) The Seller has not
disposed of, generated from or dumped on any of the Land any toxic or hazardous
substance as defined under any Environmental, Health and Safety Laws, nor, to
the best of its knowledge, has any such property been used at any time for the
disposal, generation or dumping of any such toxic or hazardous substance; (ii)
to the best of the knowledge of the Seller, no underground storage tanks are
presently or an any time were located on the Land and subsequently removed or
filled except as may have been disclosed in the environmental Phase I reports
with respect to the Land delivered by the Seller to the Purchaser; (iii) to the
best knowledge of the Seller, the Land has not been used as a landfill or as a
dump for garbage or refuse. For purposes herein, the term Environmental Law
shall mean any federal, state or local law, statute, ordinance, code, rule,
regulation, license, authorization, decision, order, injunction, decree, or
rule of common law, and any judicial interpretation of any of the foregoing,
which pertains to health, safety, any hazardous material, or the environment
(including but not limited to ground or air or water or noise pollution or
contamination, and underground or above ground tanks) and shall include without
limitation, the Solid Waste Disposal Act, 42 U.S.C. S 6901 et seq.; the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. S 9601 et seq. ("CERCLA"), as amended by the Superfund Amendments
and
Reauthorization Act of 1986 ("SARA"); the Hazardous Materials Transportation
Act, 49 U.S.C. S 1801 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. S 1251 et seq.; the Clean Air Act, 42 U.S.C. S 7401 et seq.; the Toxic
Substances Control Act, 15 U.S.C. S 2601 et seq.; the Safe Drinking Water Act,
42 U.S.C. S 300f et seq. The Seller hereby indemnifies and holds harmless the
Purchaser from and against the breach or alleged breach of any of the foregoing
Environmental Laws. Seller shall provide existing Phase I environmental
reports and reliance letters for all such environmental reports to Purchaser at
Seller's cost; and (iv) the Phase I environmental reports delivered by Seller
to Purchaser affect all of the Land.
6.1.11. Condemnation. There are no pending and to the best of
the Seller's knowledge there are no threatened or contemplated eminent domain
proceedings affecting the Land or any part thereof. The Seller shall give
prompt notice to the Purchaser of any such proceedings which occur or, to the
best of the Seller's knowledge, are threatened prior to Closing.
6.1.12. Public Rights of Way. The Land is served by publicly
dedicated public way(s); and the rights of ingress and egress to and from the
Land and to the best of the Seller's knowledge such adjoining public way(s) are
not restricted or limited in any manner.
6.1.13. Proceedings Affecting Development. To the best
knowledge of the Seller, there are no pending or threatened proceedings that
could have the effect of changing any zoning of the Land or impairing or
restricting access between the Land and adjacent public roads which would
materially impair the ability of the Purchaser to develop the portion of the
Land affected as a single family residential project consistent with the
Seller's development plans for that portion of the Land.
6.1.14. Use Restrictions. Except for the Permitted Title
Exceptions, neither the Seller, nor any predecessor in title to the Seller, has
any agreement currently in effect with any entity, public or private, which
would be binding upon the Purchaser and would prevent the use of the Land for
any of the uses allowed for single family residential development.
6.1.15. Bankruptcy. The Seller is not the subject of any
bankruptcy, reorganization or insolvency proceeding or to the best of the
Seller's knowledge threatened against the Seller.
6.1.16. Contracts. The list of Contracts set forth on Exhibit
E attached hereto is a true and exact list of all contracts affecting the Land
or the Seller as of the Date of Closing. No amount remains unpaid thereunder
except for amounts shown on the Accrual Schedule.
6.1.17. Agreements. Except for the Permitted Exceptions,
there are no service contracts, management agreements, or other agreements or
instruments in force and effect, oral or written, that grant to any person
whomsoever or any entity whatsoever any right, title, interest, or benefit in
or to all or any part of the Land or Improvements other than the Existing
Purchase Agreements, or any rights relating to the use, operation, management,
maintenance, or repair of all or any part of the Land or Improvements, which
will survive the Closing or be binding upon the Purchaser. The list of the
Existing Purchase Agreements set forth on Exhibit E is a true and exact list of
all purchase agreements affecting the Included Assets.
6.1.18. Utilities. To the best knowledge of the Seller, all
portions of the Land are served by utilities (which may include water, sewer,
storm sewer, electricity and gas) all in accordance with the development plans
of the Seller which have been provided to the Purchaser on or before Closing.
6.1.19. Financial Information. The Seller has delivered to
the Purchaser copies of the October 31 Balance Sheet. The October 31 Balance
Sheet is complete and accurate in all material respects and was prepared from
the books and records of the Seller in accordance with GAAP, except for the
absence of footnotes thereto. The October 31 Balance Sheet is fairly stated as
of such date. The estimate of the November 30, 1997 Balance Sheet of the
Seller attached hereto as Exhibit L and made a part hereof is a fairly stated,
good faith estimate by Seller of the matters shown thereon.
6.1.20. Licenses, Entitlements, and Permits. The Seller is in
material compliance in all respects with all Licenses, Entitlements, and
Permits and has received no notification that it is not in compliance with any
of the foregoing. No transfer fee is payable with respect to the transfer of
such permits and licenses. The Licenses, Entitlements, and Permits are
sufficient in all respects to conduct the Business in the Restricted Area
including the completion of the Projects in the manner currently under
construction and development.
6.1.21. Restrictive Covenants. The Seller, the Improvements,
and the Included Assets are in material compliance with all restrictive
covenants affecting the Land.
6.1.22. Access to Material Information. To the best of the
Seller's knowledge, the Seller has not withheld from the Purchaser any material
information, books, records, files or other matters in the possession of the
Seller related to the Included Assets.
6.1.23. Leases. The Leases described in Exhibit H are in full
force and effect, all obligations of the Seller are current and the Seller is
in compliance, in all material respects, with all material terms and conditions
thereof and the Seller has provided to the Purchaser complete copies of the
Leases. The Purchaser shall designate the Leases to be assumed on or before
Closing and the obligations of either party with respect to the transfer shall
be conditioned upon the receipt of all required approvals. Except for the
Leases, there are no parties in possession of the Land or entitled to
possession thereof other than the Seller, except for existing month to month
leases which are subject to termination on thirty days notice.
6.1.24. Backlog Units and Speculative Units. The list of the
Backlog Units and the Speculative Units on Exhibit D respectively are a true
and complete list of the respective items.
6.1.25. Warranty Programs. All residential housing units
constructed by the Seller or on behalf of or at the direction of the Seller
prior to Closing Date are covered by a home buyer warranty program which is in
full force and effect with all premiums paid in a timely manner.
6.1.26. Options. The list of the Options is a true and exact
list of the Options. The Options are in full force and effect and no event of
default or event that but for the passage of time or giving of notice would
constitute an event of default exists thereunder. All approvals required under
the Options have been obtained in order to permit the transfer and assignment
thereof to the Purchaser. The Schedule attached hereto as Exhibit I is a true
and correct statement of certain of the terms and conditions of the Options
including the amount of property remaining to be purchased thereunder as of
October 31 and November 30, 1997. The warranty contained herein as to the
existence of defaults by the grantor, seller or optionor shall be limited to
the knowledge of the Seller.
6.1.27. Truth and Accuracy of the Representations and
Warranties. At the Closing, no representation, warranty or covenant of the
Seller contained in this Agreement or in any other written statement or
certificate delivered by the Seller pursuant to this Agreement or in connection
with the transactions contemplated herein contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
6.1.28. Change Orders and Cost Overruns with Respect to
Speculative Units. To the best of the Seller's knowledge there are no cost
overruns or change orders with respect to the Speculative Units that modify the
estimates delivered to the Purchaser.
6.1.29. Post Cut Off Date Closing Units. The Post Cut Off
Date Closing Units are the only Units or parcels of Land that are to be
conveyed to any entity during the period after November 25, 1997 to and through
midnight, November 30, 1997. The list of the Post Cut Off Date Closing Units
set forth on Exhibit P is a true and exact and comprehensive list of the Units
expected to be conveyed during such period.
6.1.30. Camden Club. Seller hereby represents and warrants
unto Purchaser that the Camden Club Project is subject to : (i) the granting of
certain of the required permits from the applicable governmental authorities;
and (ii) upon the granting of such permits, the Camden Club Project will be
fully entitled and legally authorized for the construction of residential
improvements in the manner projected by the Purchaser. Seller has received no
notice and has no reason to believe that the applicable permits to meet the
warranty set forth in (ii) above will not be issued to the Purchaser with
respect to Camden Club in the normal course of business.
The Seller agrees that the warranties and representations
contained in Section 6.1 are true in all material respects, and are in full
force and binding on the Seller as of the Effective Date and shall be in full
force and shall be reaffirmed and restated in their entirety in writing by the
Seller as of the date and time of The Closing Date as if given on the date of
Closing, except for any change in any such warranty or representation that
occurs and is disclosed by the Seller to the Purchaser expressly, in writing
and promptly upon its occurrence, which disclosures shall thereafter be updated
by the Seller to the Closing Date. If such representations and warranties are
not true or satisfied, in any material respect, at Closing, then, subject to
the provisions of Section 13.5, the Purchaser shall be entitled, at its option,
(i) to close the transaction in accordance with the terms of this Agreement; or
(ii) to terminate this Agreement by giving the Seller written notice of such
termination. The Purchaser shall also have the right to the remedy of specific
performance against the Seller to cause compliance with the representations and
warranties. Upon any termination of this Agreement pursuant to this Section
6.1, Seller shall refund the Earnest Money to the Purchaser, in which event
neither the Seller nor the Purchaser shall have any further rights, duties or
obligations under this Agreement.
Purchaser hereby acknowledges that the closing documents
contained herein establish certain information as of the Closing Date which
necessarily causes certain of the representations and warranties to be
estimated for the period from the Effective Date to the Closing Date.
Accordingly the representations and warranties contained herein shall be
absolute as of the Effective Date but shall be to the best knowledge and belief
of the Seller from the Effective Date to the Closing Date. To the extent any
of such matters subject to representation and warranty contained herein are
inaccurate because of occurrences between the Effective Date and the Closing
Date, then the Purchaser shall have the rights established under Section 3.2
(C) as to deduction from the Holdback, as well as other rights established
hereunder for events prior to the Closing. Seller shall remain liable,
however, for any intentional acts undertaken by the Seller which cause the
representations and warranties to be untrue in a material respect as of the
Closing Date other than the closing of the Post Cut Off Date Closing Units.
6.2. Representations and Warranties of the Purchaser. As a material
inducement to the Seller to enter into this Agreement and to sell the Included
Assets, the Purchaser hereby represents and warrants to the Seller as follows:
6.2.1. The Purchaser is a corporation duly organized and
validly existing under the laws of the State of Tennessee, is in good standing
under the laws of the State of Tennessee and has full and lawful right, power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
6.2.2. This Agreement has been duly authorized, executed and
delivered by the Purchaser, is binding upon the Purchaser and is enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization
and other laws of general application affecting the enforcement of the rights
or remedies of creditors generally.
6.2.3. The Purchaser is not the subject of any bankruptcy,
reorganization or insolvency proceeding or, to the best of the Purchaser's
knowledge, threatened against the Purchaser.
6.2.4. Neither the execution and delivery of this Agreement
by the Purchaser nor its performance will create in any party the right to
accelerate, terminate or modify any agreement that would materially and
adversely affect its ability to perform this Agreement nor is any notice,
consent or approval of any governmental body required for the Purchaser to
consummate the transaction contemplated herein.
6.2.5. At the Closing, no representation, warranty or
covenant of the Purchaser contained in this Agreement or in any other written
statement or certificate delivered by the Purchaser pursuant to this Agreement
or in connection with the transactions contemplated herein contains or will
contain any untrue statement of a material fact or omits or will omit to state
a material fact necessary to make the statements contained herein or therein
not misleading.
6.3. Representations and Warranties of Calton.
6.3.1. Calton is a corporation duly organized and validly
existing under the laws of the State of New Jersey; and has the power and the
authority to guaranty the obligations of the Seller hereunder. The execution
and delivery of such Guaranty has been properly authorized by all necessary
corporate action and does not contravene any instrument or document to which
Calton is a party.
6.3.2. Calton is not the subject of any bankruptcy,
reorganization or insolvency proceeding or to the best of its knowledge
threatened against Calton.
7. ADDITIONAL AGREEMENTS.
7.1. Agreements Affecting the Included Assets. So long as this
Agreement remains in full force, the Seller shall not sell, contract to sell,
option, assign, rent, lease, convey (absolutely or as security), grant a
security interest in or otherwise encumber or dispose of all or any part of the
Included Assets (or any interest or estate in the Included Assets), nor take
any action that would change or affect the zoning of the Included Assets or
restrict the development of the Included Assets, materially or adversely affect
the Licenses and Permits or the Options except for the sale of residential
housing units and the acquisition of lots in the normal course of business.
The Seller shall be entitled to retain the title to the Post Cut Off Date
Closing Units from the Included Assets provided that the Seller conveys the
Post Cut Off Date Closing Units to third parties for fair market value pursuant
to existing third party, bona fide sales contracts on November 28, 1997. In
the event that the Seller does not close on such sales for any reason on
November 28, 1997, then the Seller shall immediately convey such portion of the
Post Cut Off Date Closing Units to the Purchaser and such Units shall be taken
into account in the calculation of the Final Purchase Price. Seller shall hold
the unclosed Units in trust for the benefit of the Purchaser during the period
November 28, 1997 through the date of conveyance. The Seller agrees to make
all material decisions with respect to the Included Assets only with the prior
approval of the Purchaser which shall include significant price discounts,
owner concessions or promotions. The term significant in this instance shall
mean a material departure from the pricing structure, discounts and promotions
as of the Reference Date. The Seller shall not make any additional
acquisitions including any land acquisitions in the Restricted Area without
prior approval of the Purchaser. The Purchaser shall not incur any expenses or
make any payments outside of the normal course of business prior to the
Closing.
7.2. The Purchaser's Access and Inspection. Upon the Purchaser's
reasonable request, the Seller shall provide the Purchaser and its authorized
representatives full access during normal business hours from and after the
date hereof until the Closing to the Included Assets and the books and records
of the Seller relating to the Seller's Business for the purpose of making such
investigation as the Purchaser may desire, and the Seller shall furnish the
Purchaser such information concerning the Seller's Business or the Included
Assets as the Purchaser may request. The Seller shall assist the Purchaser in
making such investigation and shall cause its counsel, accountants, engineers,
consultants and other non-employee representatives to be reasonably available
to the Purchaser for such purposes. Purchaser shall undertake the foregoing
inspections in accordance with the confidentiality provisions of the
confidentiality agreement between the Seller and the Purchaser dated
October 16, 1997.
7.3. Cooperation. The parties shall cooperate fully with each other
and with their respective counsel and accountants in connection with any steps
required to be taken as part of their respective obligations under this
Agreement, and all parties shall use their best efforts to consummate the
transactions contemplated herein and to fulfill their obligations hereunder,
including, without limitation, causing to be fulfilled at the earliest
practical date the conditions precedent to the obligations of the parties to
consummate the transactions contemplated hereby. Without the prior written
consent of the other parties, no party hereto may take any intentional action
that would cause the conditions precedent to the obligations of the parties
hereto to effect the transactions contemplated hereby not to be fulfilled,
including, without limitation, taking or causing to be taken any action which
would cause the representations and warranties made by such party herein not to
be true, correct and complete as of the Closing.
7.4. Expenses. All expenses incurred by the Purchaser in connection
with the authorization, preparation, execution and performance of this
Agreement, including, without limitation, all fees and expenses of agents,
representatives, counsel and accountants for the Purchaser, shall be paid by
the Purchaser. All expenses incurred by the Seller in connection with the
authorization, preparation, execution and performance of this Agreement,
including, without limitation, all fees and expenses of agents,
representatives, counsel and accountants for the Seller shall be paid by the
Seller.
7.5. Covenant Against Competition. In order to induce the Purchaser
to enter into this Agreement and purchase the Included Assets as provided
herein, and for the consideration specified in Section 3, the Seller agrees
that, for a period of two (2) years beginning on the Closing Date and ending on
the second anniversary date thereof, the Seller shall not and the Seller shall
cause the remaining Restricted Parties not, without the prior written consent
of the Purchaser, for its own account or jointly with another, directly or
indirectly, for or on behalf of any individual, partnership, corporation or
other legal entity, as principal, agent or otherwise (i) to engage in
residential development or sales in the Restricted Area; (ii) within one year
from the Closing Date, solicit the employment of any of the employees of the
Seller unless the Purchaser has not offered such employee a position with the
Purchaser within three (3) months of the Closing Date or unless the Purchaser
has terminated such employee; or (iii) use in any manner whatsoever, any of the
plans and specifications, or designs included in the Included Assets for
residential housing units constructed in the Restricted Area. The provisions
of this Section shall not preclude (i) the development or sale of the
Commercial Land for residential purposes by the Seller, and (ii) the employees
of Calton if they are no longer employed by or affiliated with Calton or other
entity included in the Restricted Parties being employed by a homebuilder in
the Restricted Area; or (iii) solicitations for employment by general
advertisement.
7.6. Waiver of Bulk Sales Law Compliance. Compliance with the bulk
sales laws of the State of Florida and in any other jurisdiction where the
Seller conducts its business is hereby waived by the Purchaser, and the Seller
hereby jointly and severally agree to defend, indemnify and hold harmless the
Purchaser and its affiliates from and against any claims by any Person arising
out of or due to the failure to comply with such bulk sales laws, including,
without limitation, any claims by any Person against all or any part of the
Included Assets.
7.7. Employees. The Purchaser and the Seller agree that the
Purchaser is acquiring certain but not all of the assets of the Seller. The
Purchaser has made no commitment and has no obligation to employ any of the
current employees of the Seller. The Seller shall remain responsible for all
compensation and other obligations to such employees including any accrued
bonuses or other deferred compensation that have been earned through the
Closing Date. The employees of Seller that are employed by Purchaser will
receive credit for time in service with Seller for purposes of employee
benefits and vacation, receive benefits of Purchaser with no denial of benefits
because of preexisting conditions provided that such hired employees shall be
provided benefits consistent with existing Purchaser employee benefit plans in
effect as of the date hereof.
The Seller will provide to the Purchaser a list of its current
employees. The Seller hereby authorizes the Purchaser with the Seller's prior
approval to negotiate, without obligation, to employ any of the foregoing
employees without liability to the Seller provided each party shall be
responsible for its own violations of any applicable employment laws.
The Seller shall be responsible for the payment of all severance
payments to the employees and shall pay all benefits and accrued payments that
the employees may be entitled except for those accrued benefits included on the
October 31 Balance Sheet and included in the Credit Liabilities. The Seller
shall be responsible for the payment of all severance amounts for the period up
to and including the Closing Date, payable to any of the Seller's employees
(other than amounts payable with respect to wrongful termination) that may be
hired by the Purchaser and terminated by the Purchaser within sixty (60) days
from the Closing. Seller shall not be responsible for payment of any severance
payments of the Purchaser other than those set forth in the preceding sentence.
Purchaser and Seller hereby acknowledge and recognize that each shall
make independent arrangements with Knutson and, accordingly, he shall be
excluded from the provisions of this Section.
7.8. Transition Period. The Seller hereby grants to the Purchaser
the use of certain aspects of the Seller's business operation in the Restricted
Area from through the Closing Date first anniversary of the Closing Date.
The rights granted hereunder shall include the exclusive right to use the
tradename "Calton Homes" in the Restricted Area with respect to Projects in
existence at Closing for such period; Seller shall also provide assistance as
to the use and operation of the software included in the Included Assets during
this period.
7.9. Post Closing Wind Up. Seller may retain copies of records
transferred to the Purchaser. Purchaser agrees to cooperate with the Seller in
order to permit the Seller to prepare its tax returns, financial statements and
other financial information.
7.10 Knutson. In the event that Purchaser employs Knutson,
then the Purchaser shall permit Knutson to advise and consult with Seller
concerning the Commercial Land in order to permit the Seller to obtain an
orderly transition of the Commercial Land. Seller agrees to use Knutson as an
advisor but shall recognize that Knutson's primary responsibility shall be the
duties assigned to him by Beazer.
7.11. Right of First Offer. Seller agrees to provide to the
Purchaser the right of first offer to buy the parcels of property contained in
the Commercial Land. In the event that the Seller intends to sell all or
either parcel of the Commercial Land, Seller shall so notify the Purchaser in
writing submitting to the Purchaser the terms of the proposed offering
including the purchase price, monetary terms if a deferred payment of the
purchase price is contemplated, the portions of the Commercial Land to be
included, and the representations and warranties that the Seller will include
in the offering. Purchaser shall thereafter have fifteen (15) days in which to
notify the Seller of its intention to purchase the offered property on the
terms set forth in the notification. If the Purchaser rejects the offer or
does not respond within the foregoing period, the Seller shall be entitled to
sell the property so offered on the same terms and conditions as offered to the
Purchaser provided that the Seller may reduce the purchase price for any amount
of 10% of the offered purchase price without the requirement of an additional
offer to the Purchaser. If the Seller has not entered into a contract of
purchase and sale permitted under the terms of this section within 180 days of
the date of the rejection or deemed rejection by the Purchaser, then the Seller
must reoffer the property to be sold to the Purchaser pursuant to the terms and
conditions set forth above. This right of first offer shall terminate on
November 30, `1999 except for any notices of intention to purchase the
Commercial Land pending as of such date.
8. INSPECTION PERIOD. The Purchaser shall have until the Closing Date
to
review the Included Assets. In the event that the Purchaser determines, in its
sole discretion, that the Included Assets are not satisfactory, then the
Purchaser shall notify the Seller in writing on or before the Closing Date that
the Purchaser is terminating this Agreement whereupon this Agreement shall
terminate, Seller shall promptly return the Earnest Money and any other amounts
paid to it hereunder to the Purchaser. Whereupon this Agreement shall
terminate and the parties to this Agreement shall have no further rights,
duties or obligations under this Agreement. Purchaser hereby discloses to the
Seller that it has no knowledge of any matter relating to the Included Assets
which would cause it to terminate this Agreement as of the Effective Date.
9. CLOSING.
9.1. Closing Date and Place. The pre-closing of the transaction
contemplated hereby shall occur on November 26, 1997 at the offices of Paul,
Hastings, Janofsky & Walker in Atlanta, Georgia. The Purchaser and Seller
shall satisfy the conditions contained herein including the execution and
delivery of the documents required to be executed and delivered hereunder on
November 26, 1997. All documents shall be dated as of the Closing Date and the
Closing shall be deemed to have occurred as of 11:59 p.m on the Closing Date.
9.2. Closing Transactions. The following shall occur on November 26,
1997 and, as to the closing documents, shall be deemed delivered on the Closing
Date, each being a condition precedent to the others and all being considered
as occurring simultaneously:
9.2.1. The Seller shall execute in recordable form and
deliver to the Purchaser a warranty deed conveying title to the Land and
Improvements.
9.2.2. The Purchaser shall prepay to the Seller the Purchase
Price for the Included Assets in the amount and the manner specified in
Section 3 hereof.
9.2.3. The Seller shall execute and deliver an assignment of
the Leases in a form approved by the Purchaser and the Purchaser shall execute
and deliver its assumption thereof at Closing.
9.2.4. The Seller shall execute and deliver an assignment of
the Options in a form approved by the Purchaser and the Purchaser shall execute
and deliver its assumption thereof of the Options.
9.2.5. The Seller shall cause to be executed and delivered to
the Purchaser an affidavit of the Seller stating that: (i) there are no
boundary disputes affecting the Land, (ii) improvements or repairs have been
made on the Land by the Seller within ninety-five (95) days prior to Closing
and all costs with respect thereto have been paid in full or will be paid in
full at Closing, (iii) the Seller is not a "foreign person" within the meaning
of Section 1445 of the Internal Revenue Code of 1986, as amended, (iv) no party
other than the Seller has possession or rights to possession of the Land, and
(v) such other information as the Purchaser's title insurer may reasonably
require in order to delete the standard printed exceptions in the Purchaser's
policy of owner's title insurance.
9.2.6. The Seller and the Purchaser shall execute and/or
deliver, as applicable, such other documents, certificates and the like, as may
be required pursuant to this Agreement or necessary or desirable to carry out
their respective obligations under this Agreement.
9.2.7. Subject to the provisions of the last paragraph of
Section 6.1, Parties shall reaffirm to each that the warranties and
representations set forth in Section 6 hereof are true and correct in all
material respects as of the Closing Date, except for such matters as the
certifying party has advised the other pursuant to such Section.
9.2.8. The Seller shall deliver to the Purchaser possession
of the Included Assets as herein contemplated.
9.2.9. Escrow Agent shall deliver to the Purchaser an ALTA
owner's policy showing title to the Land vested in the Purchaser subject only
to Permitted Exceptions with an effective date of the date of recording of the
conveyance documents.
9.2.10. The Seller shall execute and deliver to the Purchaser
a warranty bill of sale conveying the Personal Property and Intellectual
Property to the Purchaser.
9.2.11. The Purchaser shall deliver to the Seller an assumption
of the Assumed Liabilities.
9.2.12. Such other documents as either party may reasonably
require to consummate the transaction contemplated hereby.
The performance by each party hereto of its obligations as set
forth in this Section 9.2 shall constitute an express condition to the perfor-
mance by the other party hereto of its obligations under this Section 9.2, and
the failure of either party to perform its respective obligations as set forth
in this Section 9.2 shall excuse performance by the other party of its
respective obligations set forth in this Section 9.2. Nothing contained in
this Section, however, shall release or discharge the nonperforming party from
its obligations and liabilities under this Agreement.
9.3. Prorations; Expenses of Closing.
9.3.1. Ad valorem taxes for the Land for the year of the
Closing shall be prorated as of the Closing Date based on the most current tax
bill for the Land and on the basis of the fiscal year for which such taxes are
levied or assessed, i.e., January 1 through December 31. The Seller shall be
responsible for all "roll back" taxes applicable to any period of ownership
other than that of the Purchaser. The Purchaser shall be responsible for the
ad valorem real estate taxes attributable to the Land for the period December
1, 1997 to December 31, 1997. If any of the Land is treated as part of a
larger tract for ad valorem real estate tax purposes, then the ad valorem real
estate taxes attributable to such Land shall be equal to the taxes assessed
against such larger tract (land only) multiplied by a fraction, the numerator
of which is the acreage in the Land and the denominator of which is the acreage
in the larger tract. If the actual tax bill for the year of Closing differs
from the tax bill upon which the proration is based, the parties agree that
the deferred portion of the Purchase Price will be adjusted to conform to the
actual bill when received.
9.3.2. The Seller shall pay all transfer, sales, franchise
and documentary stamp taxes as well as any assumption or assignment fees or
charges in connection with the purchase and sale contemplated in this
Agreement, including any amounts necessary in order to transfer the Options to
the Purchaser and the Seller's attorneys' fees. The Purchaser shall pay its
attorneys' fees. All escrow expenses, recording costs, and other costs
associated with the transfer of the Land in the State of Florida shall be paid
by the Seller. The Purchaser shall pay its title insurance costs.
10. CONDEMNATION OR DESTRUCTION.
10.1. Taking or Destruction of the Included Assets. If, between
the Effective Date and the Closing, any portion of the Land or interest therein
that is of such size and configuration or character to interfere with the
development of the Land for the Purchaser's intended use is taken in
condemnation or is materially damaged or destroyed, the Purchaser shall have
the right by written notice given to the Seller to terminate this Agreement, or
to exclude that particular portion of the Land or the Project affected by the
condemnation and receive a corresponding reduction in the Purchase Price (which
shall apply to the Cash Portion of the Purchase Price) and in the event of such
termination, the Purchaser shall be entitled to the return of the Earnest
Money, after which return the Purchaser and the Seller shall have no further
liability or obligation to each other or to anyone else under this Agreement.
The right to terminate this Agreement for a material condemnation shall be
subject to the same materiality test as established for Title Objections.
11. BROKERS. Each party represents to the other that there is no broker
or other person entitled to a commission or similar fee in connection with this
transaction except Michael Kahn & Associates ("Seller's Broker") which has
acted as broker to Seller and shall be paid a fee by Seller. In no event shall
Purchaser have any obligation to Seller's Broker, regardless of whether the
transaction contemplated hereby is closed. Each party covenants and agrees to
defend, indemnify and save harmless the other from and against any claim for
brokerage or other commission or similar fee or compensation for any service
rendered at its instance in connection with this transaction. The foregoing
indemnification shall survive any termination of this Agreement.
12. RIGHT OF ENTRY.
12.1. Tests, Borings and Examinations. Following the Effective
Date and prior to the Closing, the Purchaser and its representatives may enter
upon the Land for purposes of conducting soil and environmental tests,
engineering studies, land planning and other testing and exploration work
deemed necessary or appropriate by the Purchaser to formulate plans for the
intended use. The Purchaser shall restore the Land for any invasive tests
conducted by the Purchaser.
12.2. Indemnification. The Purchaser shall indemnify and hold
the Seller harmless from and against any and all claims, demands, actions,
causes of action, losses and expenses (including, without limitation,
reasonable attorneys' fees, both at trial and appellate levels, and court
costs) which are asserted against the Seller and which shall or may arise by
reason of the Purchaser's exercise of its rights under Section 12.1 hereof.
The indemnification contained in this Section 12.2 shall survive the Closing
and any termination, expiration or lapse of this Agreement.
13. DEFAULT.
13.1. The Purchaser's Default. If after notice and the
expiration of the applicable cure period, the Purchaser shall default in the
performance of its obligations hereunder prior to or on the Closing Date, the
Seller shall have the right to treat this Agreement as null and void and to
retain the Earnest Money from as full liquidated damages suffered by the Seller
by virtue of the Purchaser's default. The Purchaser and the Seller acknowledge
and agree that actual damages to be suffered by the Seller in the event of a
default by the Purchaser are in their nature difficult or impossible to
determine with exactness and because the Purchaser would not have entered into
this Agreement unless the Purchaser were exculpated from personal liability as
provided herein. Accordingly, the Seller and the Purchaser acknowledge and
agree that liquidated damages in the amount of the Earnest Money is a
reasonable estimate of the Seller's loss in the event of the Purchaser's
default under this Agreement on or prior to the Closing Date, is not a penalty
and is intended to be full liquidated damages in lieu of any other remedy as
permitted by law or equity. The Seller hereby waives the right to pursue any
other damages against the Purchaser or Beazer and the remedy of specific
performance against the Purchaser or Beazer.
13.2. The Seller's Default. If the Seller shall default in the
performance of its obligations hereunder, or breaches any representation or
warranty, then the Purchaser shall have the right to treat this Agreement as
null and void and to obtain the Earnest Money, or to treat this Agreement as
being in full force and effect and to seek the remedy of specific performance
against the Seller.
13.3. Post Closing Remedies. After the Closing, the Purchaser
and the Seller shall have the right to either remedy set forth at (i) or (ii):
(i) seek specific performance of the obligation,
representation, or warranty alleged to be breached hereunder; or
(ii) pursue all other remedies allowed under law.
13.4. Required Notice and Cure Period. Neither party shall
declare a default or breach of the obligations of the other hereunder or
exercise any right or remedy with respect to such alleged breach or default
until that party provides the other notice of the alleged event of default and
a detailed statement of the actions required to cure such event of default.
Thereafter, the alleged defaulting party shall have a period of seven days from
the date of receipt of such notice in which to cure the alleged event of
default in the manner designated in such notice.
The commencement of and continuation of the cure period shall be
conditioned upon the alleged defaulting party consistently and in good faith
attempting to cure the alleged breach or event of default during the cure
period and the communication by the alleged defaulting party of its intent to
undertake curative action within three days of the date of receipt of the
notice of the alleged event of default.
13.5. Effect of Termination; Liquidated Damages. Upon
termination of this Agreement in the manner set forth in either Section 13.1 or
13.2, neither party shall have any further obligations or liabilities to the
other or to anyone else hereunder except for the indemnity provisions hereof
and as otherwise specifically provided herein. If the Seller elects to
terminate this Agreement in accordance with Section 13.1, the liquidated
damages are intended not as a penalty, but for liquidation of damages, the
parties declaring and agreeing that the Earnest Money is and represents the
reasonable damages of the Seller in the event of the Purchaser's breach.
13.6. Termination of Agreement. This Agreement may be
terminated as provided below:
13.6.1. The parties may terminate this Agreement by mutual
written consent at any time prior to the Closing:
(A) The Purchaser may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing: in the event
(i) the Seller or Calton has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Purchaser has
notified the Seller of the breach, and the breach has continued without cure
during the applicable cure period, or (ii) if the Closing shall not have
occurred on or before the Closing Date, unless the failure results primarily
from the Purchaser breaching any representation, warranty, or covenant
contained in this Agreement, or (iii) pursuant to any other specific provision
set forth in this Agreement.
(B) The Seller may terminate this Agreement by giving
written notice to the Purchaser at any time prior to the Closing: in the event
(i) the Purchaser has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Seller has
notified the Purchaser of the breach, and the breach has continued without cure
during the applicable cure period, or (ii) if the Closing shall not have
occurred on or before the Closing Date, unless the failure results primarily
from the Seller breaching any representation, warranty or covenant contained in
this Agreement, or (iii) pursuant to any other specific provision set forth in
this Agreement.
13.6.2. Effect of Termination. If any party terminates this
Agreement pursuant to Section 13.6 above, all rights and obligations of the
parties hereunder shall terminate without any Liability of any party to any
other party and the Earnest Money shall be returned to the Purchaser, provided,
however, if the Seller terminates this Agreement pursuant to Section
13.6.1(B)(i) above, the Seller shall be entitled to retain the Earnest Money.
No termination of this Agreement shall waive or otherwise terminate any
indemnification provisions hereof.
14. INDEMNIFICATIONS.
14.1. Indemnification Provisions for Benefit of the Purchaser.
(A) In the event the Seller or Calton breaches, or in the
event any third party alleges facts that, if true, would mean either Calton or
the Seller has breached, any of its representations, warranties or covenants
contained in this Agreement, provided that the Purchaser makes a written claim
for indemnification against Calton and the Seller as provided in this Section,
then Calton and the Seller each jointly and severally agree to indemnify the
Purchaser from and against the entirety of any Adverse Consequences the
Purchaser may suffer through and after the date of the claim for
indemnification resulting from, arising out of or caused by the breach or the
alleged breach.
(B) The Seller and Calton each jointly and severally agree to
indemnify the Purchaser from and against the entirety of any Adverse
Consequences the Purchaser may suffer resulting from, arising out of, relating
to, in the nature of or caused by:
(1) any liability of the Seller which is not an Assumed
Liability or in any way arising out of an act or omission of the Seller prior
to Closing (other than an Assumed Liability);
(2) any liability of the Seller that is imposed on the
Purchaser 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;
(3) any liability of the Seller or Calton for the unpaid
taxes which are not an Assumed Liability of any person as a transferee or
successor, by contract, or otherwise;
(4) any claims by third party homeowners with respect to
structural or other repair work required under any residential housing unit
sold by Calton or by the Seller, except as contemplated by Section 3.3; and
(5) any other indemnity under this Agreement.
The indemnification provisions by the Seller and Calton are
joint and several. Calton has executed and delivered this indemnity for the
purpose of evidencing its obligations to be liable for any indemnification by
the Seller hereunder. Accordingly, the Purchaser shall not be obligated to:
(i) join the Seller in any action under any indemnity hereunder; (ii) satisfy
any actions or judgments against Seller; or (iii) pursue any available remedies
against the Seller, prior to pursuing remedies against and satisfying judgments
or other collection rights against Calton.
The indemnification provisions hereof by Seller and Calton shall
be further subject to the following limitations: (i) Purchaser shall not make
a claim with respect to such indemnification until the aggregate amount of
claims hereunder is equal to or exceeds $20,000.00; and (ii) the total amount
of liability under such indemnification shall be limited to an aggregate of the
amount of the Purchase Price.
14.2. Indemnification Provisions for Benefit of Calton and the
Seller. Purchaser and Beazer jointly and severally agree to indemnify the
Seller for the following:
(A) In the event the Purchaser breaches, or in the event any
third party alleges facts that, if true, would mean the Purchaser has breached,
any of its representations, warranties, and covenants contained in this
Agreement, provided that the Seller or Calton makes a written claim for
indemnification against the Purchaser as provided in this Section 14, then the
Seller shall be indemnified from and against the entirety of any Adverse
Consequences the Seller may suffer through and after the date of the claim for
indemnification including any Adverse Consequences the Seller may suffer after
the end of any applicable survival period resulting from, arising out of,
relating to, in the nature of or caused by the breach or the alleged breach;
(B) from and against, the entirety of any Adverse Consequences
Calton or the Seller may suffer resulting from, arising out of, relating to, in
the nature of or caused by any Assumed Liability or in any way arising out of
an act or omission of the Purchaser following Closing;
(C) Adverse Consequences under other indemnities under this
Agreement; and
(D) The Purchaser and Beazer each jointly and severally agree
to indemnify the Seller from and against the entirety of any Adverse
Consequences the Purchaser may suffer resulting from, arising out of, relating
to any indemnity of Seller under this Agreement.
The indemnification provisions by the Purchaser and Beazer are
joint and several. Beazer has executed and delivered this indemnity for the
purpose of evidencing its obligations to be liable for any indemnification by
the Purchaser hereunder. Accordingly, the Seller shall not be obligated
to: (i) join the Purchaser in any action under any indemnity hereunder; (ii)
satisfy any actions or judgments against Purchaser; or (iii) pursue any
available remedies against the Purchaser prior to pursuing remedies against and
satisfying judgments or other rights against Beazer.
The indemnification provisions hereof by Purchaser and Beazer
shall be further subject to the following limitations: (i) Seller shall not
make a claim with respect to such indemnification until the aggregate amount of
claims hereunder is equal to or exceeds $20,000.00; and (ii) the total amount
of liability under such indemnification shall be limited to an aggregate of the
amount of the Purchase Price.
14.3. Matters Involving Third Parties. 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 14, then the Indemni-
fied 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.
(A) 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:
(1) 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, without qualification or reservation, 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;
(2) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the
Third Party Claim and fulfill its indemnification obligations hereunder;
(3) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief;
(4) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice materially adverse
to the continuing business interests of the Indemnified Party;
(5) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently; and
(6) the counsel selected at the time of selection and
continuously has, in the reasonable judgment of the Indemnified Party, no
conflict of interest with respect to each action and its appearance therein.
In addition to the foregoing, in the event that the Indemnified
Party is the Purchaser, as a condition to undertaking the defense of the
indemnified claim, the Seller must provide to the Purchaser the unconditional
agreement by Calton agreeing to be primarily liable and responsible to the
Purchaser without defense or claim as to the Indemnified Claim.
(B) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 14.3 hereof:
(1) the Indemnified Party may retain separate co-counsel
at its sole cost and expense and participate in the defense of the Third Party
Claim;
(2) 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
(3) 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.
(C) In the event any of the conditions in Section 14.3 hereof
are not satisfied at any time, however:
(1) 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);
(2) 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;
(3) 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 14.; and
(4) the remaining restrictions set forth at Section (ii)
shall no longer be applicable.
15. CONDITIONS PRECEDENT IN FAVOR OF PURCHASER.
15.1. Conditions to Obligation of the Purchaser. The
obligations of the Purchaser hereunder are subject in all respects to the
complete satisfaction of the following conditions precedent in favor of the
Purchaser:
(A) The approval of all required parties for the assignment of
the Options;
nta The receipt by the Purchaser of the documents and
instruments set forth in Section 9;
(C) The truth and accuracy of all representations and
warranties of the Seller in all material respects as of the Closing Date,
subject to the last paragraph of Section 6.1;
(D) The receipt by the Purchaser of the owners' policy of
title insurance without exception to the Title Objections or the waiver of the
remaining Title Objections by the Purchaser;
(E) 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 could:
(1) prevent consummation of any of the transactions
contemplated by this Agreement; or
(2) 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);
(F) All certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Seller; and
(G) Purchaser enters into an employment agreement with Knutson
on terms and conditions acceptable to Purchaser.
15.2. Conditions to Obligation of the Seller. The obligation of
the Seller to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(A) the representations and warranties set forth in Section
6.3 above shall be true and correct in all material respects at and as of the
Closing Date;
(B) The Purchaser shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
(C) 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 could:
(1) prevent consummation of any of the transactions
contemplated by this Agreement; or
(2) 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);
(D) all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Seller;
(E) Release of the Mortgage and Security Agreement currently
held by BankBoston, N.A. and any other required consents for the Options and
the office space Lease of Seller in the Restricted Area;
(F) Receipt of an assumption of the Assumed Liabilities from
the Purchaser, to reflect the adjustments required in order to cause the
payment of the Holdback to equal the Final Purchase Price; and
(G) The receipt of the consent of BankBoston, N.A. for the
transaction contemplated hereby.
In the event that any of the consents are not obtained with respect to (E)
above, then the Purchaser shall have the right to exclude the Assets affected
thereby from the Included Assets.
16. NOTICE. All notices to be given to either party hereunder shall be
deemed given if made in writing and deposited in the United States registered
or certified mail, postage prepaid, or by recognized overnight delivery
service, addressed to the parties at the following addresses:
If to the Seller: Calton Homes of Florida, Inc.
500 Craig Road
Manalapan, New Jersey 07726-7257
Attn: Mr. Bradley A. Little
and to: Calton Homes, Inc.
500 Craig Road
Manalapan, New Jersey 07726-7257
Attn: Mr. Bradley A. Little
If to the Purchaser: Beazer Homes Corp.
5775 Peachtree Dunwoody Road
Suite C-550
Atlanta, Georgia 30342
Attn: Peter H. Simons
Vice President of Corporate Development
With a copy to: Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, N.E., Suite 2400
Atlanta, Georgia 30308
Attn: Charles T. Sharbaugh, Esq.
17. ASSIGNMENT. The Purchaser shall have the right to assign its rights
under this Agreement, without the Seller's consent, to any subsidiary or
related entity of the Purchaser so long as the Purchaser shall not be released
from its obligations hereunder.
18. MISCELLANEOUS.
18.1. No Waiver. No waiver by the Seller or the Purchaser of any
breach by the other party of any of its obligations, agreements or covenants
hereunder shall be deemed to be a waiver of any subsequent breach of the same
or any other covenants, agreements or obligations, nor shall any forbearance by
either party to seek a remedy for any breach by the other party be deemed a
waiver by such first party of its rights or remedies with respect to such
breach or any similar breach in the future.
18.2. Captions; Pronouns. The captions of the Sections and
paragraphs of this Agreement and the particular pronouns used herein, whether
masculine, feminine, or neuter, singular or plural, are for convenience only
and in no way define, limit or describe the scope of this Agreement or the
intent of any provision hereof.
18.3. Severability. In the event that any provision of this
Agreement violates any applicable law, such provision shall be invalid to the
extent of such violation without affecting the validity or enforceability of
any other provision hereof; provided, however, that if such invalidity
materially adversely affects the rights of the Seller or the Purchaser, then
the party so affected may, by written notice given to the other party terminate
this Agreement.
or th Survival. The covenants, reservations and agreements of
the Seller and the Purchaser contained herein shall survive the Closing and
shall not merge into the various documents executed and delivered at Closing.
The representations and warranties made by the Seller to the Purchaser
hereunder shall be true and correct as of the Closing Date subject to the
provisions of the last paragraph of Section 6.1. The covenants, reservations
and agreement and representations and warranties shall survive for the period
of two years from the date of Closing; provided that the compliance of the
Seller shall be reviewed as of conditions in existence as of the Closing Date
and, no later than the Closing Date.
18.5. Entire Agreement. This Agreement constitutes the entire
agreement between the Seller and the Purchaser and no change in this Agreement
may be made except by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought. To the
extent the provisions thereof are not inconsistent herewith, this Agreement
supersedes and replaces the Letter of Intent between the Purchaser and the
Seller dated November 6, 1997.
18.6. Extension of Time. Whenever under this Agreement
performance is to be made on a Saturday, Sunday or a public holiday under the
laws of the State of Florida, such performance may be made on the next
succeeding day which is not a Saturday, Sunday or public holiday under the laws
of the State of Florida.
18.7. Time of Essence. Time is of the essence of this Agreement.
18.8. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Florida.
18.9. Cumulative Rights. Except as otherwise expressly set forth
in this Agreement, all rights, powers and privileges conferred hereunder upon
the parties shall be cumulative but not restricted to those given by law.
18.10. Binding Effect. The provisions of this Agreement shall be
binding upon and shall inure to the benefit of the Seller, the Purchaser, their
respective successors and, to the extent permitted hereunder, assigns.
18.11. Counterparts. This Agreement may be executed in any number
of counterparts which together shall constitute one and the same instrument,
and the signature of any party to any counterpart of this Agreement may be
appended to any other counterpart of this Agreement.
18.12. Construction. The Seller and the Purchaser acknowledge
each to the other that both they 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 amendments or exhibits hereto.
18.13. 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.
18.14. 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 parties prior to making the disclosure.
18.15. Confidentiality Before Closing. Between the date hereof
and the Closing Date, the Purchaser will treat and hold as confidential all of
the Confidential Information and other information it has obtained from the
Seller refrain from using any of such except in connection with this Agreement
and, in the event this Agreement terminates for any reason, will promptly
return to the Seller all information it has received from the Seller and
destroy all documents it has created that reflect any of the information it has
received from the Seller.
19. GUARANTY BY CALTON. Calton hereby guarantees the performance of all
obligations of the Seller hereunder including all representations and
warranties and all indemnities by the Seller hereunder. Calton hereby agrees
that it has received good and adequate consideration for the execution and
delivery of this Guaranty as well as the performance of its obligations
hereunder in that it is the principal and majority shareholder of the Seller.
Calton agrees that the Seller may administer this Agreement so as to make
modifications and amendments in its discretion and such modifications and
amendments shall not impair or diminish the binding and enforceability of this
guaranty. Calton agrees that the Seller may enforce any term, condition,
representation, warranty or indemnity of the Seller hereunder without first
filing suit or otherwise attempting to enforce or exhaust any remedies
available to the Seller hereunder.
20. GUARANTY BY BEAZER. Beazer hereby guarantees the performance of all
obligations of the Purchaser hereunder including all representations and
warranties and all indemnities by the Purchaser hereunder. Beazer hereby
agrees that it has received good and adequate consideration for the execution
and delivery of this Guaranty as well as the performance of its obligations
hereunder in that it is the principal and majority shareholder of the
Purchaser. Beazer agrees that the Purchaser may administer this Agreement so
as to make modifications and amendments in its discretion and such modifica-
tions and amendments shall not impair or diminish the binding and
enforceability of this guaranty. Beazer agrees that the Purchaser may enforce
any term, condition, representation, warranty or indemnity of the Purchaser
hereunder without first filing suit or otherwise attempting to enforce or
exhaust any remedies available to the Purchaser hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal on
the day first written above.
SELLER:
CALTON HOMES OF FLORIDA, INC., a Florida
corporation
By: /s/ Bradley A. Little
Bradley A. Little
Its: Senior Vice President
CALTON HOMES, INC., a New Jersey corporation
By: /s/ Bradley A. Little
Bradley A. Little
Its: Senior Vice President
PURCHASER:
BEAZER HOMES CORP., a Tennessee corporation
By: /s/ Ian McCarthy
Ian McCarthy
Its: President
BEAZER HOMES U.S.A., INC., a Delaware corporation
By: /s/ Ian McCarthy
Ian McCarthy
Its: President
EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
A Description of real property
B Excluded Assets
C Other Assumed Liabilities
D Existing Purchase Agreements
E Contracts
F Credit Liabilities
G Accrual Schedule
H Leases
I Options
J Legal Description of Commercial Land
K Speculative Units
L Estimate of the November 30, 1997 Balance Sheet
M Letters of Credit and Guaranties
N October 31 Balance Sheet
O Projects
P Post Cut Off Date Closing Units
Q Estimated Determination of the Net Operating Profit Adjustment
EXHIBITS WILL BE PROVIDED UPON REQUEST.
